Originally Posted by
Mitchaa
Rotor Rooter, are you a pilot, engineer or someone that works in the legal departments of a leasing company?
CHC have confirmed that they are returning upto 100 airframes over the next couple of months due to their inability to drive down costs with their lessors. Chapter 11 allows them to do this with full protection so a fleet reduction to around 140 aircraft. They also said they will transfer $1bn of their long term debt into equity in their company. CHC have also confirmed that CHC Scotia / Ireland and Den Helder are companies within their own right and in the event of the main group entering Ch7 Bankruptcy they will survive.
You know better?
I am certainly no lawyer (or accountant, for that matter) and have no association with the leasing business. I have been trained, licenced and involved with just about everything you could possibly do in the global helicopter business and in every role from top to bottom. I can't imagine anything I've ever done as a career that could be more satisfying.
Chapter 11, Section 1110 of the bankruptcy law contains specific provisions dealing with aircraft leasing and financing. I am neither qualified or intending to interpret the law or the applicable case law that might determine the outcome in this particular instance. Chapter 11 is a relatively simple concept, but an extremely complicated, detailed and expensive process. It keeps an incredible number of highly qualified lawyers and accountants in work for their entire lives. Everyday somebody new is going broke!
Of course, without seeing the actual lease contracts, we have no idea what additional remedies or conditions may have been agreed to within the contract. What has been disclosed is that in the covenants, a default automatically triggers cross defaults consisting of accelerated payments, or other payment demands on all then other secured assets. Unleashing that Tsunami of cash demand will simply destroy the company, as none of it is immediately visible or on the books. In business you often have to assign just about everything you own to secure financing or credit - only a really tough deal if it all goes wrong.
I know nothing better, but I am confident that the law is neither simplistic nor a get out of jail free card.
A lot more will become apparent once the filings are completed. They are huge packages and make interesting reading. This filing wasn't written in the last week, everyone involved has been busy for a long time.
CHC have taken the only option open. They have a plan, they have excellent advisors and a strong leadership team and board support. They also have great employees who want the company to survive, and so long as they keep it all together and keep the support of the workforce, they may well succeed.
As you noted, it may be a very different organization at the end of the process.