Item 1.01 Entry into a Material Definitive Agreement.
Term Loan Agreement
On March 13, 2019, PHI, Inc.
(the Company) entered into a Loan Agreement, dated the same date (the Term Loan Agreement), by and among the Company, as borrower, certain subsidiaries of the Company as guarantors party thereto, the lenders from time to time
party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent, for a first lien term loan of $70 million (the Term Loan). Immediately upon entering into the Term Loan Agreement, and prior to the Petition
Date (as defined below), the Company borrowed $70 million thereunder, the net proceeds of which (after the payment of transaction expenses and fees thereunder) are expected to be used to fund the working capital and liquidity requirements of
the Company during the pendency of the Chapter 11 Cases (as defined below) and thereafter. The full principal amount of the Term Loan is due March 13, 2023. At the Companys election, borrowings under the Term Loan will bear interest at
either (x) the LIBOR Rate (as defined in the Term Loan Agreement) plus 6% or (y) the Base Rate (as defined in the Term Loan Agreement) plus 5%. The Term Loan is secured by a first lien on 91 aircraft registered and located in Antarctica,
Australia, Canada, and the United States (which are currently deployed primarily in PHIs oil and gas and technical services operations), the related spare parts for such aircraft, and certain other
non-working
capital assets, as well as a second lien on all working capital assets (second in priority to the liens granted under the Loan Agreement, dated as of September 28, 2018, by and among Thirty
Two, L.L.C., as lender, the Company, as borrower, and the guarantors party thereto (the 2018 Loan Agreement)). The Term Loan Agreement contains customary
pre-payment
requirements. In addition, the
Company has paid a funding fee, which is subject to forgiveness based on certain future events.
The Term Loan Agreement contains certain customary
negative covenants that, among other things, restrict, subject to certain exceptions, the Companys and each guarantors incurrence of additional indebtedness or liens, mergers, dispositions of assets, investments, restricted payments,
modifications to material agreements, sale and leasebacks, transactions with affiliates, fundamental changes, locations of certain aircraft and acquisitions of assets. In addition, the financial covenants under the Term Loan Agreement require the
Company to maintain (a) minimum liquidity of the Company, the guarantors and their respective subsidiaries, as of the last day of any calendar month, of at least $20 million of unrestricted cash and cash equivalents (
provided
that
at least $10 million of such cash and cash equivalents shall, as of any date of determination, be held solely by the Company and the guarantors); (b) a minimum fixed charge coverage ratio, as of the last day of the following test periods,
commencing with the first full fiscal quarter following the effective date of the plan of reorganization in the Chapter 11 Cases, of at least (i) 0.0000:1.00 for quarters ending on or prior to March 31, 2020, (ii) 0.1875:1.00 for quarters
ending from June 30, 2020 through September 30, 2020, (iii) 0.3750:1.00 for quarters ending from December 31, 2020 through March 31, 2021, (iv) 0.9125:1.00 for quarters ending from June 30, 2021 through
September 30, 2021, and (v) 1.2000:1.00 for quarters ending on December 31, 2021 and thereafter; (c) a secured leverage ratio, as of the last day of each of the following test periods, commencing with the first full fiscal
quarter ending following the effective date of the plan of reorganization in the Chapter 11 Cases (as defined below), of no greater than (i) 4.50:1.00 on or prior to September 30, 2020, (ii) 4.25:1.00 from December 31, 2020 through
September 30, 2021, (iii) 4.00:1.00 from December 31, 2021 through December 30, 2022 and (iv) 3.75:1.00 on December 31, 2022 and thereafter; and (d) a total appraisal ratio of the aircraft collateral (less dispositions
permitted under the Term Loan Agreement) to borrowings outstanding under the Term Loan, as of the last day of any calendar month, of at least 4.00:1.00. The Term Loan Agreement also contains customary affirmative covenants and customary
representations and warranties.
The Term Loan Agreement specifies certain customary events of default, including, among others, failure to pay principal
or interest on the Term Loan when due, the breach of representations or warranties in any material respect,
non-performance
of other covenants and obligations, judgments in excess of $2.5 million, the
occurrence of certain ERISA events resulting in liability in excess of $2.5 million, impairments of more than $2.5 million of the collateral securing the Term Loan, and certain change of control events. The filings of the Chapter 11 Cases
referred to in Item 1.03 below neither constitute an event of default nor accelerate payment of the Companys indebtedness under the Term Loan Agreement.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Term Loan Agreement, which is filed herewith as
Exhibit 10.1 and is incorporated by reference herein.
Related Agreements
See Item 8.01 below for certain related agreements entered into in connection with the Term Loan Agreement.
2