The story is pretty clear here and I'm afraid it doesn't look good.
CHC's Caa3 CFR reflects its weak liquidity evident by Moody's expectation of an imminent covenant breach with its lessors in the first quarter of its FY2017 (July 31, 2016), which could force the company to repay the remaining lease commitments of $258 million. The company has also fully drawn its revolver and will continue to have negative free cash flow in FY2017, leading to leverage of about 7.5x and EBITDA to interest under 2x. We expect that CHC will not have the ability to meet its basic cash obligations in FY2017, absent an amendment to its lessor covenants.
CHC's SGL-4 reflects weak liquidity through FY2017. At January 31, 2016 and pro forma the full revolver draw down, CHC had about $340 million in cash. CHC has no availability under its $375 million revolver due 2019 and has $34 million available under its $145 million ABL that can only be used to finance helicopters. We expect negative free cash flow of about $300 million over the next five quarters ending FY2017 plus $280 million in payments to lessors if CHC cannot amend covenants. We expect CHC will breach lessor covenants in early FY2017 (July 31, 2016). CHC's assets are pledged under the revolver and secured notes.