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What's happening in CHC?

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What's happening in CHC?

Old 5th May 2016, 20:13
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Never feel sorry for the lessors!
They have calculated the risks into their lease tarif.
I bet Bristows could get a better lease than CHC!
The lessors are better in reading fiscal Year reports than us and saw it coming a long way.
The writing was on the wall for CHC for how long?
By not giving in for the last 6-9 months they have been given not only the lease terms of CHC but also of all idle aircraft of all other companies.
Now they have to give in on the CHC aircraft but can still wave off all others until they go into Ch 11.

Why would they not sell or re-lease again to CHC?
They set the tarifs with higher risk margin, and they get some more money out of an aircraft they already had covered in payment insurance and have sitting idle. It gives them even a handle to barter on some compensation for the other airframes.

If you still feel sorry for lessors then i advice to post on the Lliar forum.
(Lousy lessors in aviation rumours)

SLB
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Old 5th May 2016, 20:18
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Originally Posted by Mitchaa
CHC still have cashflow, they still have major control of their business and it's running costs.

There are A LOT of idle aircraft around, if CHC have 100 or so that they want to get rid of, then how many do the other big players in the market have? The leasing companies of course won't want these aircraft back but under Chapter 11, they have no choice, CHC are protected and they will have to take their goods back.

With regards to buy back, the market is flooded with unused helicopters with supply far outstripping demand. Leasing companies have a couple of choices, receive the airframes back under chapter 11 and receive no payment or sell the airframe at a discounted market value price and get shot of it? If they go down the 1st path, they may have a helicopter sitting there depreciating for years until there is demand to re-lease it on. If they go down the 2nd path, they cut their losses, sign over ownership of the aircraft and get cash in the bank. CHC will have the upper hand here I would imagine?

Finance in future may be a little more difficult but CHC's balance sheet will improve significantly with upto 100 airframes going over the next few months.

I forgot to mention, CHC also plan to exchange $1bn worth of debt for equity in their company.

Never Fretter, I was a CHC employee many years ago, although I never quite managed to get myself into a suit and tie there. I just have a keen interest in a company I hold high regards for. These steps are positive in my eyes and from what I hear, the staff at the town hall meeting today were satisfied and somewhat relieved with the answers CHC management gave them.
Thanks Mitchaa. I see the logic. But....where will CHC get the $$$ to buyback a/c? Especially after filing ch11?? They can't leverage future contract work as their is none. Can't take hope for new contracts, to the bank!
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Old 5th May 2016, 23:30
  #563 (permalink)  
 
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Originally Posted by donut king
Thanks Mitchaa. I see the logic. But....where will CHC get the $$$ to buyback a/c? Especially after filing ch11?? They can't leverage future contract work as their is none. Can't take hope for new contracts, to the bank!


Almost every airline has gone bankrupt recently and yet the money keeps rolling in. Investors have the best forgetting skills of anyone on the planet.
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Old 6th May 2016, 03:57
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Marvelous! Everyone else has to continue to pay their bills... but after years of financial mismanagement, CHC gets a free kick?! I understand its more complex than that but its still pretty galling!

Shall we pay that creditor... na... judge says we don't have to!? WTF?

For the sake of the guys at the coal face, I hope its resolved soon. Lots of great pilots and engineers must be getting pretty tired of the roller coaster.
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Old 6th May 2016, 06:24
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CHC gets a free kick
Welcome to the US version of the Free Market Economy.
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Old 6th May 2016, 08:37
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If you read the statement they only intend to pay creditors after 5th May.
So ALL the other creditors are hung out to dry.... Not just the lessor. So that includes Contract agencies who pay contractors. How many Contract pilots and engineers are there?
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Old 6th May 2016, 08:39
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Hope things work out for all; I have a couple of mates who fly and work for CHC around the world.

On the topic of MRO -I take it is still business as usual, especially with major upgrade contracts such as the recent contract to upgrade the RMAF S-61 with Airod. Also noticed Heli-One does not appear to advertising their airframe leasing services like what they used to.

Cheers
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Old 6th May 2016, 11:42
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It's a smart if inevitable move on CHC's part. The greedy lessors won't negotiate. Current lease prices on new aircraft are lower than prices CHC, Bristow and Babcock are paying for older aircraft.

Pilot and Engineer Union agreements may also have to be re negotiated to reduce operating costs. Within 6-12 months, CHC will make Bristow and Babcock look like legacy carriers. I wonder how long it will be before they wish they could also have a clean slate?
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Old 6th May 2016, 12:06
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terminus mos says
The greedy lessors won't negotiate. Current lease prices on new aircraft are lower than prices CHC, Bristow and Babcock are paying for older aircraft.
How long before oil companies start demanding rate renegotiations for that very reason?

Pilot and Engineer Union agreements may also have to be re negotiated to reduce operating costs.
So, less people on less pay. Now could that lead to any unintended consequences anyone?
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Old 6th May 2016, 13:38
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Why are you insisting on the lessors being the bad guys here?..
Some retard brought the fixed wing operating model to helicopter oil and gas operations to make a quick buck... Now they are crying about the nasty lease operators... How much money did CDR rape out of the company?
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Old 6th May 2016, 14:32
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Originally Posted by lowfat
Why are you insisting on the lessors being the bad guys here?..
Some retard brought the fixed wing operating model to helicopter oil and gas operations to make a quick buck... Now they are crying about the nasty lease operators... How much money did CDR rape out of the company?
Bang on, Lowfat!

Helicopter Ops (%95) are not like fixed wing airlines. Only Heli-airline that comes to mind is Vancouver Heli Jet. More and more, fixed wing thinking is/has infiltrated our spin wing world and destroyed it! The true helicopter companies will survive. Switching to "the airline model" with airline execs in leadership of helicopter companies will fail.....has failed with CHC!
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Old 6th May 2016, 15:03
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So CHC is in Chapter 11.....so what??? The way some of you lot are carrying on here, you'd think they were the first aviation entity in the known universe to do such. Chapter 11 exists for very specific reasons and CHC is not the first company to make use of those reasons to ensure their survival. This is business people.....BIG business and ALL the players know the risks, including the leasing companies. Its not about feeling sorry for anyone, its about having enough grey matter up there to understand this is simply business taking its course. Perhaps some of you lot should spend an equal amount of time researching and posting on HOW an operator like CHC could come to this in the first place and by that I mean specifically, how Amelio and his whacko bunch of know-nothing, piggy-bank thieves at FR drove this operator into the ground in record time.
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Old 6th May 2016, 15:07
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Just for everyone thinking this is a magic wand...

"Does Chapter 11 Really Work?
Reports and studies indicate that about 10 to 15% of Chapter 11 cases result in successful reorganizations. Most cases are dismissed (often by agreement of the parties) or converted to Chapter 7 liquidations. Dismissal or conversion of a Chapter 11 case requires bankruptcy court approval. The bankruptcy court can dismiss or convert a Chapter 11 case for cause, including failure by the debtor to show that it can successfully reorganise."

Chapter 11 Bankruptcy: An Overview | Nolo.com
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Old 6th May 2016, 19:41
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Pro_Fane wrote:

Reports and studies indicate that about 10 to 15% of Chapter 11 cases result in successful reorganizations. Most cases are dismissed (often by agreement of the parties) or converted to Chapter 7 liquidations. Dismissal or conversion of a Chapter 11 case requires bankruptcy court approval. The bankruptcy court can dismiss or convert a Chapter 11 case for cause, including failure by the debtor to show that it can successfully reorganise.
Interesting read about Chapter 11, thanks for posting. Perhaps, if possible, a more meaningful metric would be to know what percentage of aviation entities result in successful reorganization, especially organizations commensurate in size to CHC.
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Old 6th May 2016, 19:44
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TM where do you get your info from, I'm intrigued? If you could let me know the lease rate for each frame for each company that would be really helpful as I'm thinking of starting up against Bristow and Babcock. Might call the company Bond or something. PM me if you don't want all these bloody experts on here to know.
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Old 6th May 2016, 19:54
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Originally Posted by cyclic
TM where do you get your info from, I'm intrigued? If you could let me know the lease rate for each frame for each company that would be really helpful as I'm thinking of starting up against Bristow and Babcock. Might call the company Bond or something. PM me if you don't want all these bloody experts on here to know.
Come on cyclic, the Bond business model will never work... 😀
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Old 6th May 2016, 19:57
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Yep, what did they know.
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Old 6th May 2016, 20:02
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Originally Posted by TorqueStripe
Didn't CDR "just" buy 600 Million dollars worth of stock for their funds? I don't know much about financials, but I can't see how a fund can rape a company. As for the CDR customers that invested in their funds...that's a different story (though I'm sure they'll manage).

First Reserve, different story, as Tasspook already mentioned.



CHC was ruined by a management team coming from Lenovo. Not exactly a company I would classify as an airline;-)
Fair point....but they initiated an airline model
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Old 6th May 2016, 20:13
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Cyclic

TM where do you get your info from, I'm intrigued? If you could let me know the lease rate for each frame for each company that would be really helpful as I'm thinking of starting up against Bristow and Babcock. Might call the company Bond or something. PM me if you don't want all these bloody experts on here to know
Why not call them yourself? Milestone (GE), Waypoint or LCI (mainly into AW products). The person to contact depends on your part of the world. You will need a contract (with an oil and gas company for the big stuff) for 5 years, about 3 months money to put into the deal and a PBH type contract. Most lessors don't do much used inventory although with CHC the used market may become more active. Rates will vary with quantity of aircraft, term and assessed contractual risk.

Get a good lawyer, if you want out of the lease or to re negotiate, you may have to go into Chapter 11, incorporation in a US jurisdiction maybe an advantage.

Now all you need is a contract. Good luck.
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Old 7th May 2016, 09:23
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Well, sadly the ball has finally dropped on CHC and they have entered the world of Chapter 11 protection. Hopefully they will arise into a new and functional organization, I wish them well, and especially the employees who are caught in the middle. This is a tough time for everyone concerned, especially with the state of the overall business and the recent tragic loss in Norway.

Interestingly, all of a sudden here on this site, the leasing organizations have become the bad guys and caused all of this this to happen! As others have already pointed out, this simply isn't the case, and is at the very least disingenuous and at most assigning the blame for the acquisition, debt and resultant management of this company, onto a group of service providing businesses, and deflecting it from where some might believe it truly lies; right in the hands of the current ownership, and past management of CHC.

Just to be clear, I am not involved in the leasing business or CHC.

Leasing makes sense from many angles, and is, normally, actually a very good business to be in; and I would suggest that when business is good, is more profitable than running the helicopter operation side of the business, as it carries a guaranteed return, with calculable, or at least, manageable, risk.

Leasing allows a company to acquire and operate the core assets they require to run their business, without the necessity to raise and commit huge capital expenditures for the purchase, and allows a straight deduction of operating expense on a predictable hourly rate, especially if it is a new product run on an OEM Power by the Hour basis. It also keeps all those expenses and debt off the Balance Sheet, which is where one of the major issues with CHC has occurred, as the covenants and remedies for default can be greater than the resources of the company. Leasing assets, also throws the debt, amortization and depreciation into the hands of the lessor, as well as the ultimate disposal of the asset; which as any of you who have ever visited a major operators hangars, would have seen surplus aircraft that were difficult or impossible to sell. Plus these assets are almost always on the books at values far beyond their sale price and those accountants don't like taking the blame when they hear what the true market value is.

Leasing is a business, just like any other. In this instance it requires huge capital investment, forward ordering commitments to meet anticipated demand and a reliable payment from the customer so they can meet their own cash flow requirements and make their own payments. Although these companies may have some original capital investment and funding from private investors and equity funds, beyond that they borrow from banks just like every other business. A quick browse through the Internet will take you to all kinds of sources of information on the scope of borrowing and the lenders. So if you suddenly see a collapse, and worse still a prolonged adjustment of an entire business sector as we have here, the leasing organizations may be unable to service their own debt, unable to place or sell surplus aircraft in the market due to overcapacity and lack of demand, and there is potential for yet another bloodbath in an ancillary sector.

The phenomenal recent rise of the leasing business was fuelled by contemporary business management practices, but equally importantly, the availability of vast amounts of cheap money looking for a good, secure and predictable return, like maybe your own pension accounts?

No company was ever forced to enter into a lease agreement with anyone. They willingly entered into them, understood the limitations and remedies provided within the contracts and perhaps more importantly in recent times, utilized their own resources for the Sale and Leaseback of their own existing assets to provide cash and remove debt from the Balance Sheet. So now because they won't renegotiate the pricing, they have become root of all evil that has befallen CHC.

Chapter 11 contains some very specific remedies and provisions for the financiers and lessors of aircraft, again as many have noted the airline industry has been full of bankruptcies for decades! Some of the assumptions made here about how Chapter 11 specifically functions are generalized and are wholly incorrect. CHC and the lessors both know exactly how the process works. This explains the presence of one of the consultants specializing in aviation assets. Strategically, the lessor may be very unlikely to engage in any kind of negotiation if a Chapter 11 filing is the most likely outcome. They are better to let it go through the cycle and see what exactly the reorganization plan is and how best to ultimately package and protect all their assets with the debtor and gain the maximum return and protection. If you are pitting one lessor against another with the scale of fleet reduction being discussed, CHC may still be able to negotiate some significant benefit.

The one complete unknown at this time, is the future status of the 225, both in terms of airworthiness and customer acceptance. Any prolonged inability to get this helicopter back into service will have a major impact on the lessors and operators, as there are a multitude of spare aircraft that can step into the role. Already lessors had been placing 225's with other than the originally assigned operator, and a number of brand new aircraft were already in storage straight from the factory. An untimely or bad resolution to this issue may cause major issues in the leasing and operator sector, let alone for the manufacturer.

The helicopter market, demand for specific used helicopter models and pricing have always been cyclical. Many have seen models that were selling for a couple of hundred thousand dollars when the market was depressed selling for millions a year or two later and this will never change. The big issue is when new production aircraft cannot be placed into service, or aircraft in their first lease cycle get terminated. The conditions in the leasing contracts might potentially force other operators into Chapter 11, for no reason other than they can't generate revenue with the asset and the lease default covenants may make cash demands the company is unable to meet.

A recovery in the O&G field is critical for the offshore helicopter business to survive this downturn. In past times, helicopters exiting the offshore sector were always in demand for some utility or other application. Currently that market too is oversupplied and a lot of machines are re-entering the marketplace with nowhere to go, despite very attractive pricing for good equipment. As an example, when the 332 exited the market, they all came out of service, but you haven't seen too many enter into a secondary operational role.

There have always been helicopter leasing businesses around, but the current scale and trend is unprecedented. Many companies owned holding companies that leased their assets back to themselves, which made for good business. Operators leased helicopters to their operating partners or even their competitors if they failed to win a contract. It has always been there and is a good, profitable business to be in, and more importantly, means an asset is generating cash. For anyone with a good long memory, CHC actually formed a helicopter leasing company in Ireland, partnered with Guinness Peat Aviation, but it was a concept before its time, and too many of the potential customers were it's competitors.

There have been past failures in the aviation leasing business, the biggest that I personally was involved with was CIT. I did a lot of work with them repossessing assets and ultimately delivering them to new operators, but they themselves got caught out in a business deal that took them into Chapter 11.

I have been directly through two Chapter 11 bankruptcies. Both companies were successfully recovered, but both were very different organizations at the completion of the process. One company emerged and was purchased by a smaller company that grew the combined group into a major player. The other refocused its business and continues to this day as a small business. I've also worked and been involved in the purchase and reorganization of various other companies in various stages of distress or bankruptcy and it all comes down to strategy and planning.

I hope it all works out well for everyone concerned. There are a lot of downstream suppliers and vendors that may be very seriously impacted by this, and I wish them all the very best of luck getting through it as rapidly and beneficially as possible.
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