What's happening in CHC?
Great post r-r, on so many levels. The financial restructuring has to happen, but what will be more interesting to watch will be the inevitable business restructuring. With the virtual collapse of the traditional "Canadian CHC" market of supporting exploration ops in countries that didn't have an established helicopter industry, I suspect a retrench into the mature areas of operation is required.
So will CHC become a European and Australian only business? What about Brazil, are the margins large enough to sustain operations there?
Some challenging decisions to be made, with a lot of collateral damage?
So will CHC become a European and Australian only business? What about Brazil, are the margins large enough to sustain operations there?
Some challenging decisions to be made, with a lot of collateral damage?
R-R,
Thank you for your background info.
I did not meant to make the lessors the bad guys.
As you said it's business and lessors and CHC knows how it is played.
I still do not feel sorry for them but the problems from CHC are indeed initiated by the former management.
That management took the leasing to a higher (risk) level.
The lessors did not refuse that extra business.
SLB
Thank you for your background info.
I did not meant to make the lessors the bad guys.
As you said it's business and lessors and CHC knows how it is played.
I still do not feel sorry for them but the problems from CHC are indeed initiated by the former management.
That management took the leasing to a higher (risk) level.
The lessors did not refuse that extra business.
SLB
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Let's be clear about a few things.
1. CD&R don't give a flying crap about CHC. They were getting 8.5% return on there 600 Million LOAN to CHC. so they managed to extract at least 40 mill in interest before they lost there little Gig.
2. The Management of the Company has very little or nothing to do with it's failure, It's primary cause of failure is First Reserve selling all the assets.
Another major cause is Global Platforming (Heli-One)
Once the Books get into Benevolent hands....Like right now and the Real Picture unfolds, then start to watch the eye's start rolling. I reckon even CD & R are going to get there fingers burnt.
CHC say there assets are valued at 3.1 Billion. Given 85% of it was in hock and the 3.1 would be a great exaggeration to start with, then CD & R will be really really lucky to get 500 of there 600 Million investment.
Then there is the 1 Plus Billion in Primary debt.
No-one seems to pay any attention to that $150 Million interest bill every year.
If the world was a fair place First Reserve would be made to pay out all debts from other Company's they own...It ****s me to tears when Investment Company's like First Reserve sell of the Assets to part pay the purchase price of that Asset, which is exactly what they did. No Company should be allowed to get above 50% Leverage...85% like CHC was at in the peak, was simply Fiscal suicide.
Personally I think they won't get the Chapter 11 lifeline, and quite honestly I don't think they should.
I noticed a year and a half ago Avionics parts coming with form 1 documents from Avionics shops ALL over the place. I got the impression back then, they were spreading the Debt far and wide.
Why should greedy Buttheads like First Reserve get a free pass when SO many small business's will struggle as a result of that greed!!
Screw YOU "First Reserve" the whole Board should go to Jail!
1. CD&R don't give a flying crap about CHC. They were getting 8.5% return on there 600 Million LOAN to CHC. so they managed to extract at least 40 mill in interest before they lost there little Gig.
2. The Management of the Company has very little or nothing to do with it's failure, It's primary cause of failure is First Reserve selling all the assets.
Another major cause is Global Platforming (Heli-One)
Once the Books get into Benevolent hands....Like right now and the Real Picture unfolds, then start to watch the eye's start rolling. I reckon even CD & R are going to get there fingers burnt.
CHC say there assets are valued at 3.1 Billion. Given 85% of it was in hock and the 3.1 would be a great exaggeration to start with, then CD & R will be really really lucky to get 500 of there 600 Million investment.
Then there is the 1 Plus Billion in Primary debt.
No-one seems to pay any attention to that $150 Million interest bill every year.
If the world was a fair place First Reserve would be made to pay out all debts from other Company's they own...It ****s me to tears when Investment Company's like First Reserve sell of the Assets to part pay the purchase price of that Asset, which is exactly what they did. No Company should be allowed to get above 50% Leverage...85% like CHC was at in the peak, was simply Fiscal suicide.
Personally I think they won't get the Chapter 11 lifeline, and quite honestly I don't think they should.
I noticed a year and a half ago Avionics parts coming with form 1 documents from Avionics shops ALL over the place. I got the impression back then, they were spreading the Debt far and wide.
Why should greedy Buttheads like First Reserve get a free pass when SO many small business's will struggle as a result of that greed!!
Screw YOU "First Reserve" the whole Board should go to Jail!
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Rooter
Of course, the leasing companies play a vital function although a healthy mix of leased and owned is best for an operators' business. The problem is that the delta between what the lessors are charging and their real cost of money has become increasingly wide. When one adds the lower rates being charged by the operators as they compete for the shrinking business, something has to give.
Whether it's CHC (which may have been too far gone with owned old aircraft and leased new ones) or any other operator, the costs have to be cut somewhere. If the lessors won't share small pain, they will end up with a big one as operators default. Sensible negotiation today could save a default tomorrow.
Of course, the leasing companies play a vital function although a healthy mix of leased and owned is best for an operators' business. The problem is that the delta between what the lessors are charging and their real cost of money has become increasingly wide. When one adds the lower rates being charged by the operators as they compete for the shrinking business, something has to give.
Whether it's CHC (which may have been too far gone with owned old aircraft and leased new ones) or any other operator, the costs have to be cut somewhere. If the lessors won't share small pain, they will end up with a big one as operators default. Sensible negotiation today could save a default tomorrow.
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Even if I might be disrespectful, as former CHC employee my personal hope is all First Reserve managers and suitcase carriers among them will invest all their money coming from CHC in medicines for their own **** hole.
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I think there are some very interesting revelations going to become apparent in the share structure for the secured and unsecured creditors, but I'll wait until the actual filing before I comment further.
I think the actions of the Lessors will become apparent once the full filing is complete. I am concerned that some lessors may fail and also that there could be a apocalyptic blood bath pulling other operators into default if the 225 issue isn't resolved very, very, rapidly. Every company jumped into the leasing strategy to such a degree that the current and continuing state of the O&G business could result in a perfect storm that causes the entire business to implode.
I certainly agree with many of the comments regarding the ownership and past management, but each corporation is an insular entity. This is not the first bankruptcy in the FR portfolio.
Talking to various colleagues, CHC were indeed doing business with companies that directly competed with Heli-One. Most were extremely sceptical, as this was a common strategy when your credit was maxed out, Evergreen were notorious for this and look what ultimately happened to them!
Talking of Evergreen, I would say that Erickson is on the verge of a Chapter 11 filing in the immediate future, based on the last financials last week. Similar financial situation and similar money sources.
When I was researching some background information a few weeks ago, I stumbled across a very interesting bit of information regarding the investor lawsuits into missing information from the IPO prospectus at both Erickson and CHC. Both lawsuits were initiated by employees that lost their investments! I'll let you reach your own conclusions!
I think the actions of the Lessors will become apparent once the full filing is complete. I am concerned that some lessors may fail and also that there could be a apocalyptic blood bath pulling other operators into default if the 225 issue isn't resolved very, very, rapidly. Every company jumped into the leasing strategy to such a degree that the current and continuing state of the O&G business could result in a perfect storm that causes the entire business to implode.
I certainly agree with many of the comments regarding the ownership and past management, but each corporation is an insular entity. This is not the first bankruptcy in the FR portfolio.
Talking to various colleagues, CHC were indeed doing business with companies that directly competed with Heli-One. Most were extremely sceptical, as this was a common strategy when your credit was maxed out, Evergreen were notorious for this and look what ultimately happened to them!
Talking of Evergreen, I would say that Erickson is on the verge of a Chapter 11 filing in the immediate future, based on the last financials last week. Similar financial situation and similar money sources.
When I was researching some background information a few weeks ago, I stumbled across a very interesting bit of information regarding the investor lawsuits into missing information from the IPO prospectus at both Erickson and CHC. Both lawsuits were initiated by employees that lost their investments! I'll let you reach your own conclusions!
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Terminus, I agree with you, by like so much in this business today, it's being run by beancounters who don't care one iota about the helicopter business, or know anything about it. Look at their backgrounds, then come back a couple of years from now and look where they'll all be, another business and counting the cash somewhere else.
This has happened throughout the entire aviation business. Every part has the same issues. Filled with people with no idea what they are doing or talking about. The landscape may be completely unrecognizable two years from now.
The situation is reminiscent of the mortgage and banking crisis a few years back. My attention was originally piqued with the CHC negative cash flow projection in their financials, revealing an anticipated loss equivalent to $660K PER DAY.
Sanity check time!
This has happened throughout the entire aviation business. Every part has the same issues. Filled with people with no idea what they are doing or talking about. The landscape may be completely unrecognizable two years from now.
The situation is reminiscent of the mortgage and banking crisis a few years back. My attention was originally piqued with the CHC negative cash flow projection in their financials, revealing an anticipated loss equivalent to $660K PER DAY.
Sanity check time!
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RR very interesting and very insightful. Accountants and investors with short term outlooks are more the norm, and the group doesn't mind trading misery as long as it results in a return. As correctly stated the group just moves on to the next project. Aviation is a s_e_x_y industry and at various times or circumstance, it will always attract those that project revelations and spreadsheet borne fantasy.
With so much inventory, tumbling asset values and significantly increased financial risk all around , the impact will be felt not just by O&G, but by everyone. Depending on who blinks first it could be truly devastating to the industry as a whole.
Whether or not this signals a watershed moment, where those with a keen sense of the business again take the reins, remains to be seen. In the interim, it will probably be a pretty rough ride for everyone.
With so much inventory, tumbling asset values and significantly increased financial risk all around , the impact will be felt not just by O&G, but by everyone. Depending on who blinks first it could be truly devastating to the industry as a whole.
Whether or not this signals a watershed moment, where those with a keen sense of the business again take the reins, remains to be seen. In the interim, it will probably be a pretty rough ride for everyone.
Last edited by crunchingnumbers; 7th May 2016 at 16:19.
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Excuse me for a really unknowledgeable question here, but I'd like to know:
If a company goes through Chapter 11, is it very common to restructure in a way that effectively disowns the loyal shareholders who dared to stick around? Like, converting to new stock leaving the old stock to vanish?
I sold my CHC long ago but still hold a bit of helicopter stock so given the current off-shore situation I might as well learn about this stuff.
If a company goes through Chapter 11, is it very common to restructure in a way that effectively disowns the loyal shareholders who dared to stick around? Like, converting to new stock leaving the old stock to vanish?
I sold my CHC long ago but still hold a bit of helicopter stock so given the current off-shore situation I might as well learn about this stuff.
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Excuse me for a really unknowledgeable question here, but I'd like to know:
If a company goes through Chapter 11, is it very common to restructure in a way that effectively disowns the loyal shareholders who dared to stick around? Like, converting to new stock leaving the old stock to vanish?
I sold my CHC long ago but still hold a bit of helicopter stock so given the current off-shore situation I might as well learn about this stuff.
If a company goes through Chapter 11, is it very common to restructure in a way that effectively disowns the loyal shareholders who dared to stick around? Like, converting to new stock leaving the old stock to vanish?
I sold my CHC long ago but still hold a bit of helicopter stock so given the current off-shore situation I might as well learn about this stuff.
There is a stark and ominous caution regarding the stock in the last filing.
As only 20% of the stock was publicly traded and that value has all but vanished, I would suggest there may potentially be some major battling over equity. There is already an investor lawsuit filed regarding the IPO, and those issues are US SEC regulatory issues.
Only time will tell if there is merit or substance to any of these claims.
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?
Questions:
1. Has CHC been placed in Chap 11, or simply applied for it?
2. If only an application, what are the timelines to get there?
3. Can the application be deemed unrealistic by the court, and therefore converted to a Chap 7?
4. Is the class action law suit against CHC put in abeyance due to the presumed approval of Chap 11?
5. Airlines having gone through this have in many cases sought rather stiff wage and benefits concessions from their workforce, is that out of the question here?
1. Has CHC been placed in Chap 11, or simply applied for it?
2. If only an application, what are the timelines to get there?
3. Can the application be deemed unrealistic by the court, and therefore converted to a Chap 7?
4. Is the class action law suit against CHC put in abeyance due to the presumed approval of Chap 11?
5. Airlines having gone through this have in many cases sought rather stiff wage and benefits concessions from their workforce, is that out of the question here?
Companies with leasing agreements with CHC must be concerned that bills are never going to get paid.
How will they continue (in the UK) with companies leasing hangars, survival suits, lifejackets??
If I had a contract with CHC, I assume I'd be writing off the last 5 months of unpaid bills and considering that I might as well look for business elsewhere. I'd be very concerned whether the next invoice was going to get settled.
How will they continue (in the UK) with companies leasing hangars, survival suits, lifejackets??
If I had a contract with CHC, I assume I'd be writing off the last 5 months of unpaid bills and considering that I might as well look for business elsewhere. I'd be very concerned whether the next invoice was going to get settled.
Shareholders more important than revenue generating employees, what an awesome way of doing business. There's a lot to be said for hiring quality people and looking after them, they will in turn look after your business. Keeping non revenue generating staff to an absolute minimum is essential in difficult times. first sacrifice in cost saving should be senior management bonuses
Special 25
It's been said a few times in this thread that the protection afforded by Ch.11 is not applicable to the European companies. So my take is it's business as usual with regard to old and new bills in the UK.
It is simple isn't it?
in the UK
It is simple isn't it?
Last edited by Apate; 8th May 2016 at 12:23.
Probably not simple at all! It's not applicable to CHC Scotia - but there are plenty of European companies on the petition (CHC (Netherlands), Heli-One (UK) and on and on)
I know nothing about Ch 11 and so idle curiosity led me to have a look at the petition. I notice that the list of the top 30 unsecured claims has a UK company at No 2:
Name: McGrigors Pension Trustees Limited
Address: 141 Bothwell Street, Glasgow, G2 7EQ
Pensions
Liquidated
Unsecured Claim - $66,440,996
So does that mean that a pension pot is going to lose $66m? Somebody please educate me.
Makes the $5m-ish that they owe to Finmennica, AH and Sikorsky look like loose change.
I just hope that the incompetence of the bigwigs does not turn into financial pain for the worker bees. Oh sorry, I forgot - it's all the fault of the leasing companies.
I know nothing about Ch 11 and so idle curiosity led me to have a look at the petition. I notice that the list of the top 30 unsecured claims has a UK company at No 2:
Name: McGrigors Pension Trustees Limited
Address: 141 Bothwell Street, Glasgow, G2 7EQ
Pensions
Liquidated
Unsecured Claim - $66,440,996
So does that mean that a pension pot is going to lose $66m? Somebody please educate me.
Makes the $5m-ish that they owe to Finmennica, AH and Sikorsky look like loose change.
I just hope that the incompetence of the bigwigs does not turn into financial pain for the worker bees. Oh sorry, I forgot - it's all the fault of the leasing companies.
Ed, my guess would be that this is a pension deficit which CHC is legally liable to meet. Quite how Ch.11 would affect this liability, which is tied to UK legislation, I ain't gotta clue.
Presumably the deficit has been underwritten by the US company, hence its listing on the filing. However this wouldn't excuse CHC Scotia of it's liabilities, or would it?
Presumably the deficit has been underwritten by the US company, hence its listing on the filing. However this wouldn't excuse CHC Scotia of it's liabilities, or would it?
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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?
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?
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.