What's happening in CHC?
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Helicopter leases are one thing. Don't forget they still have a massive leasing issue.
The building they operate from are nearly all leased. A good proportion of the remaining Helicopters will still be leased.
Junk Bonds
1.2 Billion in primary debt
150 million in revolving Credit Debt
600 Million at a cost of 8.5% to CD & R
Can CHC still service this debt given the Company is about to become very much smaller than before. I don't believe it can If it can then it will still have a massive PE ratio problem that no future investor will go near.
The building they operate from are nearly all leased. A good proportion of the remaining Helicopters will still be leased.
Junk Bonds
1.2 Billion in primary debt
150 million in revolving Credit Debt
600 Million at a cost of 8.5% to CD & R
Can CHC still service this debt given the Company is about to become very much smaller than before. I don't believe it can If it can then it will still have a massive PE ratio problem that no future investor will go near.
Last edited by buzz66; 9th Jul 2016 at 04:46.
Buzz,
In essence, the headline for us aviators is leasing of aircraft but the court is looking at all overall debt. For CHC a lot of this is leases but as you noted there are a lot more debt instruments on CHC's balance sheet.
In much the same way as the leasing companies are going to get a beating from CHC, the creditors will also get the haircut. If the court looks at things like affordability of the debt while CHC is in Ch 11 (and I suspect that is a key component within the strategy - I'll admit I haven't read all the documents), then CHC's angle with ALL the creditors will be along the lines of 'I can afford to pay you back at 40c on the $1. This is a typical angle within Ch 11. It is highly likely that the outcome will be that the $1.2bn debt you quote will be substantially lower in the near future, maybe around $400m.
As for the shareholders, in theory the risk for shareholders vs debt holders is in the value of the overall business, not in the value of the debt. Therefore if the business fails then the shareholders (in this case CD&R, FR and a few others) take a beating as well as their equity is wiped out. This is the risk of being a shareholder vs a bond holder, bond holders get paid first. It is up to CHC and the court to decide of the old shareholders get a stake in the newly re-modeled company, there are examples of it happening and it not happening. The real issue for the shareholders will be what happens when and if CHC want to raise some cash from new equity investors (and I suspect CHC will). CHC will ask investors for more money in exchange for equity (not debt). The old shareholders will likely either be diluted so much as to be irrelevant, or wiped out all together. There will be a new board of directors too as shareholders vote for the board. I hope the CEO survives, he seems to be doing a great job.
History would suggest that the answers to your points will be:
Leasing companies will still do business with CHC. If they withdraw their ac out of spite for having some returned, they are just putting their cash into their rivals's pockets when CHC get an ac from someone else. The beauty of CHC doing the Ch 11 now (so many idle ac in the market) is that the market allows them to do it and be relatively insulated from the fall out.
Junk bonds will be refinanced (the haircut)
1.2bn debt will be refinanced (the haircut)
The revolver will be refinanced but there might be collateral against it (ie owned ac/ facilities which alter the number anyway).
CD&R debt will be refinanced (the haircut).
The buildings - well that depends. In the big scheme of the disaster of CHC's balance sheet, the leasing of facilities is small fry. There might be a case to renegotiate the rates but the reality is that is not likely to be material when set against 90 idle aircraft and the debt you mention.
Any which way, CHC's balance sheet will be almost unrecognizable after this is all over.
Basically it's all on the table.
IMHO the most likely course of action will be that CHC wipe out all the current shareholders and do a debt for equity swap with the main people they owe money to (ie the creditors become the owners, maybe with some debt too). In addition, over the next 12 months, CHC will do a cash capital raising and the people who supply that will become shareholders as well. The existing bond holders who do not take the equity swap offer (of all classes) will get a haircut in the region of 60%.
I think CHC will be out of Ch 11 by the middle of October (successful Ch 11 is often 6 months ish) and CHC will successfully emerge much leaner.
Hope that helps.
NWS
In essence, the headline for us aviators is leasing of aircraft but the court is looking at all overall debt. For CHC a lot of this is leases but as you noted there are a lot more debt instruments on CHC's balance sheet.
In much the same way as the leasing companies are going to get a beating from CHC, the creditors will also get the haircut. If the court looks at things like affordability of the debt while CHC is in Ch 11 (and I suspect that is a key component within the strategy - I'll admit I haven't read all the documents), then CHC's angle with ALL the creditors will be along the lines of 'I can afford to pay you back at 40c on the $1. This is a typical angle within Ch 11. It is highly likely that the outcome will be that the $1.2bn debt you quote will be substantially lower in the near future, maybe around $400m.
As for the shareholders, in theory the risk for shareholders vs debt holders is in the value of the overall business, not in the value of the debt. Therefore if the business fails then the shareholders (in this case CD&R, FR and a few others) take a beating as well as their equity is wiped out. This is the risk of being a shareholder vs a bond holder, bond holders get paid first. It is up to CHC and the court to decide of the old shareholders get a stake in the newly re-modeled company, there are examples of it happening and it not happening. The real issue for the shareholders will be what happens when and if CHC want to raise some cash from new equity investors (and I suspect CHC will). CHC will ask investors for more money in exchange for equity (not debt). The old shareholders will likely either be diluted so much as to be irrelevant, or wiped out all together. There will be a new board of directors too as shareholders vote for the board. I hope the CEO survives, he seems to be doing a great job.
History would suggest that the answers to your points will be:
Leasing companies will still do business with CHC. If they withdraw their ac out of spite for having some returned, they are just putting their cash into their rivals's pockets when CHC get an ac from someone else. The beauty of CHC doing the Ch 11 now (so many idle ac in the market) is that the market allows them to do it and be relatively insulated from the fall out.
Junk bonds will be refinanced (the haircut)
1.2bn debt will be refinanced (the haircut)
The revolver will be refinanced but there might be collateral against it (ie owned ac/ facilities which alter the number anyway).
CD&R debt will be refinanced (the haircut).
The buildings - well that depends. In the big scheme of the disaster of CHC's balance sheet, the leasing of facilities is small fry. There might be a case to renegotiate the rates but the reality is that is not likely to be material when set against 90 idle aircraft and the debt you mention.
Any which way, CHC's balance sheet will be almost unrecognizable after this is all over.
Basically it's all on the table.
IMHO the most likely course of action will be that CHC wipe out all the current shareholders and do a debt for equity swap with the main people they owe money to (ie the creditors become the owners, maybe with some debt too). In addition, over the next 12 months, CHC will do a cash capital raising and the people who supply that will become shareholders as well. The existing bond holders who do not take the equity swap offer (of all classes) will get a haircut in the region of 60%.
I think CHC will be out of Ch 11 by the middle of October (successful Ch 11 is often 6 months ish) and CHC will successfully emerge much leaner.
Hope that helps.
NWS
As a PS - don;t get hooked up on the technicals of valuation, CHC is worth $1.1m (million) according to the OTC exchange using the shares x value of shares valuation. The shares are still trading, (up 13% last week no less).
Here for the link to the exchange website:
HELIQ CHC Group Ltd.: Summary, Stock Quote & Trades for CHC Group Ltd. - OTCMarkets.com
The q added to the ticker code (HELIQ) denotes the bankruptcy.
Here for the link to the exchange website:
HELIQ CHC Group Ltd.: Summary, Stock Quote & Trades for CHC Group Ltd. - OTCMarkets.com
The q added to the ticker code (HELIQ) denotes the bankruptcy.
Serf, CHC have given the owners time to come and collect them, 30 days in Europe and N America, 45 elsewhere.
CHC agreed to keep them insured, that's it. The leasing companies may well ask CHC to help them demobilise them, but that will be private agreements between CHC and the leasing companies (LC), indeed I'd expect the LC to pay for the demob to a place of their choice.
CHC agreed to keep them insured, that's it. The leasing companies may well ask CHC to help them demobilise them, but that will be private agreements between CHC and the leasing companies (LC), indeed I'd expect the LC to pay for the demob to a place of their choice.
It's not all about oil. Bond are well established in secure alternative sectors. Bristow have some other irons in the fire including training and SAR. The recent Bristow earnings document tells us they expect UK SAR alone to be 11% of group revenue.
I suspect there will be many lease returns when the Puma/ 225s are eligible for lease return from all operators. The leasing companies will melt with the write-downs in value. Those operators who own them will write the value off in their next quarterly reports. Both BRS and BBK can probably absorb the cost, not without pain (esp for BRS being a smaller company) but I don;t think it will push any over the edge.
Most of the leasing companies want the ac returned with zero hours on the major components and a g check. That's about $2m worth of work to hand back an ac which now has little value commercially (at the moment at least). The losers here will be leasing companies by miles.
Most of the leasing companies want the ac returned with zero hours on the major components and a g check. That's about $2m worth of work to hand back an ac which now has little value commercially (at the moment at least). The losers here will be leasing companies by miles.
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Most of the leasing companies want the ac returned with zero hours on the major components and a g check. That's about $2m worth of work to hand back an ac which now has little value commercially (at the moment at least). The losers here will be leasing companies by miles.
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Need Storage?
Looks like CHC are now in the storage business. Might help the bottom line?
HeliHub CHC offers storage space for offshore helicopters
HeliHub CHC offers storage space for offshore helicopters
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Max is right, but as the judge has already accepted the return of 90 odd aircraft, I think the resulting improvement in CHC's financial situation will be clear for many to see in about 6 months.
BRS, NHV though, much less clear.
BRS, NHV though, much less clear.
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News from Reuters indicate that CHC has difficulties in finding investors:
Helicopter services company CHC seeks more time for Chapter 11 plan
BY JIM CHRISTIE
Helicopter services company CHC Group Ltd is asking a bankruptcy court for more time to raise capital and address other issues before filing a Chapter 11 reorganization plan.
CHC said in court papers on Friday that in order to emerge from bankruptcy as a going concern it wants an extension of its exclusivity period through Jan. 3, 2017, to negotiate a new capital structure with an injection of new equity, reduce its fleet and restructure aircraft leases.
Helicopter services company CHC seeks more time for Chapter 11 plan
BY JIM CHRISTIE
Helicopter services company CHC Group Ltd is asking a bankruptcy court for more time to raise capital and address other issues before filing a Chapter 11 reorganization plan.
CHC said in court papers on Friday that in order to emerge from bankruptcy as a going concern it wants an extension of its exclusivity period through Jan. 3, 2017, to negotiate a new capital structure with an injection of new equity, reduce its fleet and restructure aircraft leases.
