Item 1.01 Entry into a Material Definitive Agreement.
As previously reported, on May 5, 2016, CHC
Group Ltd. (the “
Company
”), and certain of its subsidiaries, affiliates and related parties (together with the
Company, the “
Debtors
”) filed voluntary petitions in the United States Bankruptcy Court for the Northern District
of Texas (the “
Bankruptcy Court
”), seeking relief under Chapter 11 of Title 11 of the United States Code (the
“
Bankruptcy Code
”).
Amendment to Plan Support Agreement
As previously reported, on October 11, 2016,
the Debtors entered into a plan support agreement (as amended in accordance with its terms, the “
PSA
”) with
respect to the terms of a restructuring to be implemented through a chapter 11 plan of reorganization to be proposed by the Debtors
(the “
Plan
”) with (1) The Milestone Aviation Group Limited (“
Milestone
”) and certain of its
affiliates (the “
Milestone Parties
”), (2) holders (the “
Plan Sponsors
”) representing or holding
approximately 67.56% of the outstanding principal amount of the Company’s 9.25% Senior Secured Notes due 2020, (3) the Official
Committee of Unsecured Creditors (the “
UCC
”) and (4) holders (the “
Individual Creditor Parties
”
and together with the Milestone Parties, the Plan Sponsors and the UCC, the “
Consenting Creditor Parties
”) of
the Company’s 9.375% Senior Notes due 2021 (the “
Unsecured Notes
”), that, together with the other Consenting
Creditor Parties represent or hold approximately 73.56% of the outstanding principal amount of Unsecured Notes.
On December 20, 2016, the Debtors and the Consenting
Creditor Parties entered into the Amendment to Plan Support Agreement (the “
PSA Amendment
”) in order to amend
the PSA to extend the deadline to obtain the entry by the Bankruptcy Court of the Final Cash Collateral Order (as defined in the
PSA) to January 9, 2017. A copy of the form of the PSA Amendment is filed herewith as
Exhibit 10.1
and incorporated herein
by reference, and the foregoing description is qualified in its entirety by reference to the PSA Amendment.
Amendment to Backstop Agreement
As previously reported, the Company entered
into a backstop agreement (as amended in accordance with its terms, the “
Backstop Agreement
”) on October 11,
2016, pursuant to which certain of the Plan Sponsors and the Individual Creditor Parties (each an “
Investor
”
and collectively, the “
Investors
”) have agreed to backstop (the “
Backstop Commitment
”) the
rights offering (the “
Rights Offering
”), which contemplates a new money investment of $300 million to purchase
new second lien convertible notes (the “
New Second Lien Convertible Notes
”) which will be issued by the new
entity formed for purposes of the Plan. Pursuant to the Backstop Commitment, each of the Investors, severally and not jointly,
has agreed to fully participate in the Rights Offering and purchase the New Second Lien Convertible Notes in accordance with the
percentages set forth in the Backstop Agreement (the “
Investor Percentages
”) to the extent unsubscribed under
the Rights Offering.
On December 20, 2016, the Company and the Investors
entered into the Amendment to Backstop Agreement (the “
Backstop Amendment
”) in order to amend the Backstop Agreement
to extend the deadline to obtain the entry by the Bankruptcy Court of the Final Cash Collateral Order (as defined in the PSA) to
January 9, 2017. A copy of the form of the Backstop Amendment is filed herewith as
Exhibit 10.2
and incorporated herein
by reference, and the foregoing description is qualified in its entirety by reference to the Backstop Amendment.
Cautionary Note Regarding Forward-Looking
Statements
This Form 8-K, accompanying exhibits,
and other statements that we may make, contain forward-looking statements. Forward-looking statements are statements that are
not historical facts and include statements about our expectations for the timing and execution of our restructuring plan,
our future financial condition and future business plans and expectations, the effect of, and our expectations with respect
to, the operation of our business, adequacy of financial resources and commitments and operating expectations during the
pendency of our court proceedings. Such forward-looking statements are based upon the current beliefs and expectations of our
management, but are subject to risks and uncertainties, which could cause actual results and/or the timing of events to
differ materially from those set forth in the forward-looking statements, including, among others: we filed for protection
under Chapter 11 of the Bankruptcy Code and are subject to risks and uncertainties; our ability to implement the Plan and to
obtain Bankruptcy Court approval with respect to motions in the Chapter 11 proceedings prosecuted from time to; operating
under Chapter 11 may restrict our ability to pursue our business strategies; our employees face considerable uncertainty due
to the Chapter 11 proceedings; we may suffer from a protracted restructuring; our ability to emerge from Chapter 11 and
operate profitably thereafter will depend on increasing our revenue, lowering our costs, and obtaining sufficient financing
or other capital to operate successfully; we have substantial liquidity needs and, due to our current Chapter 11 proceedings,
may not be able to obtain any equity or debt financings in the capital markets for the foreseeable future; we may be subject
to claims that will not be discharged in the Chapter 11 proceedings; our restructuring efforts through the Chapter 11
proceedings may be expensive, take resources and distract management; we are in the process of rejecting and abandoning a
significant portion of our helicopter fleet through Chapter 11 proceedings, which may result in an inability to quickly
respond to new opportunities and a significant loss of market share and profit margins; our consolidated financial statements
have been prepared assuming that we will continue as a going concern, our independent registered public accounting firm has
raised substantial doubts about our ability to continue as a going concern, and we have not included any adjustments that
might result from the outcome of this uncertainty; we have a history of net losses; our substantial level of indebtedness,
operating lease commitments, purchase and other commitments could materially adversely affect our ability to fulfill our
obligations under our debt agreements, our ability to react to changes in our business and our ability to incur additional
debt to fund future needs; all flights with the aircraft type H225 and AS332 L2 have been temporarily grounded which may
cause a material and adverse impact to our financial viability; operating helicopters involves a degree of inherent risk and
we are exposed to the risk of losses from safety incidents; if we are unable to mitigate potential losses through a robust
safety management and insurance coverage program, our financial condition would be jeopardized in the event of a safety or
other hazardous incident; failure to maintain standards of acceptable safety performance could have an adverse impact on our
ability to attract and retain customers and could adversely impact our reputation, operations and financial performance; our
operations are largely dependent upon the level of activity in the offshore oil and gas industry; the oil and gas industries
on which we are largely dependent are suffering through a severe downturn, resulting in significant negative impact on demand
for our services, and no assurance can be given that the downturn will not continue to be prolonged; many of the markets in
which we operate are highly competitive, and if we are unable to effectively compete, it may result in a loss of market share
or a decrease in revenue or profit margins; we rely on a limited number of large offshore helicopter support contracts with a
limited number of customers. If any of these are terminated early or not renewed, our revenues could decline; negative
publicity may adversely impact us; our fixed operating expenses and long-term contracts with customers could adversely affect
our business under certain circumstances; we depend on a small number of helicopter manufacturers and any safety issues can
severely limit our ability to continue operating helicopters already in our fleet; we depend on a limited number of
third-party suppliers for helicopter parts and subcontract services; restructuring of our operations and organizational
structure may lead to significant costs; our business requires substantial capital expenditures, lease and working capital
financing, which we are currently blocked from accessing through the capital markets and banks. Any further deterioration of
current industry or business conditions, the capital and banking markets or a prolonged period in Chapter 11 proceedings
generally could adversely impact our business, financial condition and results of operations; we rely on the secondary used
helicopter market to dispose of our older helicopters and parts due to our ongoing fleet modernization efforts; our
operations are subject to extensive regulations which could increase our costs and adversely affect us; our maintenance,
repair and overhaul (MRO) business, Heli-One, could suffer if licenses issued by original equipment manufacturers (OEMs)
and/or governmental authorities are not renewed or we cannot obtain additional licenses; we derive significant revenue from
non-wholly owned variable interest entities. If we are unable to maintain good relations with the other owners of such
non-wholly owned entities, our business, financial condition or results of operations could be adversely affected; our
operations may suffer due to political, regulatory, commercial and economic uncertainty; our business in countries with a
history of corruption and transactions with foreign governments increases the compliance risks associated with our
international activities; we are subject to extensive federal, state, local and foreign environmental, health and
safety laws, rules, regulations and ordinances that could have an adverse impact on our business; we are subject to many
different forms of taxation in various jurisdictions throughout the world, which could lead to disagreements with tax
authorities regarding the application of tax laws; the offshore helicopter services industry is cyclical; we are exposed to
foreign currency risks; our failure to hedge exposure to fluctuations in foreign currency exchange rates effectively could
unfavorably affect our financial performance; we are exposed to credit risks; our customers may seek to shift risk to us; if
oil and gas companies undertake cost reduction methods, there may be an adverse effect on our business; reductions in
spending on helicopter services by government agencies could lead to modifications of search and rescue (SAR) and emergency
medical services (EMS) contract terms or delays in receiving payments, which could adversely impact our business, financial
condition and results of operations; failure to develop or implement new technologies and disruption to our systems could
affect our results of operations; we rely on information technology, and if we are unable to protect against service
interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted and our
business could be negatively affected; the loss of key personnel could affect our growth and future success; labor problems
could adversely affect us; if the assets in our defined benefit pension plans are not sufficient to meet the plans’
obligations, we could be required to make substantial cash contributions and our liquidity could be adversely affected;
adverse results of legal proceedings could materially and adversely affect our business, financial condition or results of
operations; in the event we are or become treated as a passive foreign investment company, or PFIC, for U.S. federal
income tax purposes, our U.S. shareholders could be subject to adverse U.S. federal income tax consequences; we are
controlled by a shareholder group,
which might have interests that conflict with ours or the interests of our other
shareholders; due to our Chapter 11 bankruptcy proceedings, our ordinary shares may have no value and any investment in our
shares is highly speculative; the market for our ordinary shares historically has experienced significant price and volume
fluctuations; we have not paid dividends on our ordinary shares historically and may not pay any cash dividends on our
ordinary or preferred shares for the foreseeable future; pursuant to the terms of the preferred shares, which rank senior to
our ordinary shares, we are required to pay regular cash dividends or issue shares in respect of amounts accrued as dividends
on the preferred shares, and we may be required under certain circumstances to repurchase the preferred shares; we are
currently unable to pay such obligations while we are in Chapter 11 proceedings and are likely not to pay any cash dividends
for the foreseeable future; our preferred shares have rights, preferences and privileges that are not held by, and are
preferential to the rights of, holders of our ordinary shares. Such preferential rights could adversely affect our liquidity
and financial condition, and may result in the interests of the holders of our preferred shares differing from those of the
holders of our ordinary shares; we are a holding company and, accordingly, are dependent upon distributions from our
subsidiaries to generate the funds necessary to meet our financial obligations and pay dividends; the requirements of being a
public company may strain our resources and distract our management; provisions of our articles of association and
Cayman Islands corporate law may discourage or prevent an acquisition of us which could adversely affect the value of our
ordinary shares; our organizational documents contain a variety of anti-takeover provisions that could delay, deter or
prevent a change in control; shareholder rights under Cayman Islands law may differ materially from shareholder rights in the
United States, which could adversely affect the ability of us and our shareholders to protect our and their interests; as a
shareholder, you might have difficulty obtaining or enforcing a judgment against us because we are incorporated under the
laws of the Cayman Islands; our major investors, Clayton, Dubilier & Rice and First Reserve Management, L.P., may compete
with us, and our articles of association contain a provision that expressly permits our non-employee directors to compete
with us; and other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange
Commission, including the Company’s Annual Report on Form 10-K for the year ended April 30, 2016. The Company’s
filings with the Securities and Exchange Commission are available at www.sec.gov. You are urged to consider these factors
carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such
forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking
statements speak only as of the date on which they are made and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances. No assurances can be given that our efforts to
effectively reorganize under Chapter 11 of the Bankruptcy Code will ultimately be successful or that we will succeed in
strengthening our balance sheet or increase our financial flexibility. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.