What's happening in CHC?
Join Date: Jan 2005
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As a young First Officer in 1978, about to get my command, I was fortunate to attend a dinner where Alan Bristow presided. He look down the large table at me and said "If I was a young man now I would not be setting out in helicopters - the golden years are over" Those words rang in my ears as the margins got smaller and smaller and the competition more various and fierce. Every product has a financial cycle. Innovation is the lifeblood of progress, no major player in the O+G field has realised this and more of the same is no recipe for financial security. Nobody owes you a living. you have to adapt or die.UG 
Join Date: Oct 2002
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https://m.moodys.com/research-preview/Moodys-downgrades-CHC-to-Caa3-outlook-negative--PR_345821?
This gives a very blunt assessment of the state of the organization through the eyes of the financial and investment world.
This is now falling into the very lowest ratings on the entire investing scale. Rated as poor quality and extremely high credit risk.
This gives a very blunt assessment of the state of the organization through the eyes of the financial and investment world.
This is now falling into the very lowest ratings on the entire investing scale. Rated as poor quality and extremely high credit risk.
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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.
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.
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Moodys is a US Corporation and the introduction in the report refers to debt in USD. CHC reports all financials in USD, unless referred to anywhere else in another curewncy, this would infer that all numbers are in USD.
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Money coming in does not equal money going out. All Moody's have done is put a formal label on this and calculate the time at which the company is likely to go bust if things don't change. To be honest, anyone with a calculator and access to the quarterly reports could have done this (as many on this forum already have).
In my opinion such a poor re-rating will negatively impact CHC in two ways:
First is that they are now completely un-investable and any financial bail out would only come from someone who already has money in the hole. Professional investors have a saying for this "never try to catch a falling knife" and they will need to see the business model fixed before putting any more cash in.
Second is that I have seen helicopter contracts where minimum credit ratings are a contractual requirement. Typically these are the lucrative long term government funded ones like SAR and HEMS and essential to a helicopter operator trying to ride out a downturn in the offshore industry. CHC will now be unable to bid on such contracts.
I feel like I am watching the movie 'perfect storm' where CHC are bravely trying everything they can against hopeless odds.
I think the survival of CHC will come down to whether the aircraft lessors are prepared to accept something in the bank rather than have the aircraft sat off-contract back in their hangars.
In my opinion such a poor re-rating will negatively impact CHC in two ways:
First is that they are now completely un-investable and any financial bail out would only come from someone who already has money in the hole. Professional investors have a saying for this "never try to catch a falling knife" and they will need to see the business model fixed before putting any more cash in.
Second is that I have seen helicopter contracts where minimum credit ratings are a contractual requirement. Typically these are the lucrative long term government funded ones like SAR and HEMS and essential to a helicopter operator trying to ride out a downturn in the offshore industry. CHC will now be unable to bid on such contracts.
I feel like I am watching the movie 'perfect storm' where CHC are bravely trying everything they can against hopeless odds.
I think the survival of CHC will come down to whether the aircraft lessors are prepared to accept something in the bank rather than have the aircraft sat off-contract back in their hangars.
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Someone mentioned to me that maybe CHC could sell off some portions of the company to generate cash, but this statement from Moodys tells me that there is nothing to sell.
CHC's assets are pledged under the revolver and secured notes.
CHC's assets are pledged under the revolver and secured notes.
Join Date: Aug 2013
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I gather bonuses are being paid early, with a retention time bar attached. Curious....
26500,
My thoughts are thus:
CHC wants to keep the business going but cannot tell the world what options are being looked at beyond the last filing with the SEC. In order to handcuff people to the business to secure them come what may, you use the bonus as the tool.
If the company filed for Ch 11 (Protection from Creditors) and the staff were not handcuffed to the business, most of them would just walk away, I know I would. The bonus means that people have to stay and therefore anyone looking to buy it once the restructuring is complete would have a business. With no people there is no business, esp as CHC owns almost no assets.
If it's a Ch 7 then all bets are off and there will be no bonus anyway. No salaries etc, what the Americans would call a disorderly default.
There is probably an element of buying some loyalty in these turbulent times and I suspect that Mgmt have probably thought that they've fired enough people so some morale wouldn't go amiss..!
My thoughts are thus:
CHC wants to keep the business going but cannot tell the world what options are being looked at beyond the last filing with the SEC. In order to handcuff people to the business to secure them come what may, you use the bonus as the tool.
If the company filed for Ch 11 (Protection from Creditors) and the staff were not handcuffed to the business, most of them would just walk away, I know I would. The bonus means that people have to stay and therefore anyone looking to buy it once the restructuring is complete would have a business. With no people there is no business, esp as CHC owns almost no assets.
If it's a Ch 7 then all bets are off and there will be no bonus anyway. No salaries etc, what the Americans would call a disorderly default.
There is probably an element of buying some loyalty in these turbulent times and I suspect that Mgmt have probably thought that they've fired enough people so some morale wouldn't go amiss..!
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Whatever happens, based on the Moody's report, it's going to take a lot of magic money to pull this off, and that's based on the creditors approving any reorganization plan as being credible.
Does the CHC lease fleet and commitments potentially have the ability to take out any of the leasing companies in the event of a default?
Does the CHC lease fleet and commitments potentially have the ability to take out any of the leasing companies in the event of a default?
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I believe you all shouldn't discuss about financial technicalities but focus your attention on operational scenarios. Operations will survive, companies may change. And only companies focused on assets and new markets, and diversifying their own activities will survive and will occupy the spaces left by CHC and Bristow. I suggest to have a look to Inaer operations market and growth.