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BRS stock crashing

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BRS stock crashing

Old 14th Feb 2019, 04:44
  #61 (permalink)  
 
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Minigun

I would suggest that BRS liquidity while down on the previous reporting period is down, $236mil is still quite a lot of cash, enough for CH 11. BRS has sold and leased back quite a lot of aircraft to generate cash, but as you can see above, they burned through $60m in 6 months of 2018 and $83m in the last quarter alone. That indicates to me that they are burning through cash to sustain operations and therefore making an operating loss. Making a long term operating loss is death to an aviation company.

Last edited by industry insider; 14th Feb 2019 at 04:45. Reason: typo
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Old 14th Feb 2019, 07:58
  #62 (permalink)  
 
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Originally Posted by industry insider View Post

Minigun

I would suggest that BRS liquidity while down on the previous reporting period is down, $236mil is still quite a lot of cash, enough for CH 11. BRS has sold and leased back quite a lot of aircraft to generate cash, but as you can see above, they burned through $60m in 6 months of 2018 and $83m in the last quarter alone. That indicates to me that they are burning through cash to sustain operations and therefore making an operating loss. Making a long term operating loss is death to an aviation company.
With $20m to be paid to Columbia, they must be well South of $200m at this moment, but otherwise agree.
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Old 14th Feb 2019, 08:25
  #63 (permalink)  
 
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On cash alone they have well under 8 months. I suspect the creditors will have taken a view on recovering their money before then. The lawsuits will always follow but what looks to be deliberately misleading financial statements mean that someone should go to jail at least. Not that will be much succor for those about to lose their jobs though. Chapter 7 is the most likely option now because (as MGD noted), the options to CHC with a leased fleet of about 75% simply is not available to BRS who own a much higher %. The creditors will simply step in, padlock the doors and take a share of the aircraft in accordance with how much BRS owe them.
The other operators must be wetting themselves with excitement about poaching contracts from them. CHC could buy the BRS GOM operation, NHV the Norway operation, BMCS the UK operation etc.

Last edited by nowherespecial; 14th Feb 2019 at 08:27. Reason: Typo and CAPS missing
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Old 14th Feb 2019, 08:38
  #64 (permalink)  
 
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Originally Posted by industry insider View Post
New bid contracts in the recent cut throat era, probably not so profitable. Longer term contracts have built in escalations which protect the helicopter operator against general inflationary increases, OEM hourly price rises and even price rises caused by pilot and engineer pay rises under union contracts. If the bid price was right to begin with, they should make reasonable money. In 2014, helicopters were in demand and contract prices were peak. If a helicopter operator can't make money under older long term contracts then they either didn't bid the right price or don't manage their business very well.

There is a rule of how many non pilots and engineers you can have hanging off the skids before your helicopter won't get airborne. Guess what, $ million dollar salaries even for CEOs are very heavy. Even if its managed properly, the helicopter business doesn't enough money to have layers of "management" on multi million $ salaries.
How many of those "peak" contracts are still being honoured by the oil companies or did most of them called in their 90 day “get out” clauses as soon as the downturn hit and re-tendered to the lowest bidder because bottom line is king, not safety or anything else they preach it to be?

I agree the big helicopter operators have too many management layers adding to the operating costs without offering much in return, making it hard for them to compete with the leaner / meaner operators they used to be like as well.

Sadly I feel like it will be curtains for Bristow, can't see them recovering from this because of the lack of leadership & vision, hope I'm wrong.
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Old 14th Feb 2019, 09:49
  #65 (permalink)  
 
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If I remember correctly, when CHC went through their Chapter 11 restructuring, CHC had structured their company in layers that should the parent company have gone bust, the separate regions were protected somewhat. As in CHC Scotia (UK) is a separate entity as is CHC Netherlands, CHC Norway etc, all smaller companies within their own rights.

Although, I’ve no idea how that would have been managed had the parent company went into Chapter 7 bankruptcy and how it would have effected the smaller regional companies?

I suspect Bristows will have similar protection measures in place so that regionalised entities would survive and it would be the parent company that would take the brunt?
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Old 14th Feb 2019, 10:05
  #66 (permalink)  
 
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Originally Posted by industry insider View Post
BRS has sold and leased back quite a lot of aircraft to generate cash, .....
Selling the furniture to pay the rent - that might just work. 🤔
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Old 14th Feb 2019, 10:53
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How many of those "peak" contracts are still being honoured by the oil companies or did most of them called in their 90 day “get out” clauses as soon as the downturn hit and re-tendered to the lowest bidder because bottom line is king, not safety or anything else they preach it to be?
Certainly the ones I know about were honoured for 5 years with escalations. But one is the subject of a tender as a result of natural expiry date and the other one is finishing due to reduced activity and consolidation down to one helicopter operator.
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Old 14th Feb 2019, 11:23
  #68 (permalink)  
 
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Originally Posted by Mitchaa View Post
I suspect Bristows will have similar protection measures in place so that regionalised entities would survive and it would be the parent company that would take the brunt?
That appears to be the company line from U.K. management today in the round robin that some stakeholders got verbally today.

Other ‘highlights’ are of course it’s business as usual, plenty of money in the bank, engines were in the wrong place which meant lenders were not happy (?), a plan to move debt around on the balance sheet and although not quite saying it, suggesting that the accounts issue might not be as bad as it sounds.

I guess it might keep some happy for a while.
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Old 14th Feb 2019, 11:43
  #69 (permalink)  
 
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How many of those "peak" contracts are still being honoured by the oil companies or did most of them called in their 90 day “get out” clauses as soon as the downturn hit and re-tendered to the lowest bidder because bottom line is king, not safety or anything else they preach it to be?
Can you give some examples? Apart from Dancopter a few years ago. I know Staoil pulled out early in Tanzania, but that was based on the drilling campaign ceasing early and nothing to do with re-tendering.
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Old 14th Feb 2019, 11:56
  #70 (permalink)  
 
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When the Titanic hit that iceberg and started taking on water....the passengers and crew were told the ship was unsinkable as I recall.

When you hemorrhage money the way Bristow is...and no team of Surgeons are able to control it....then this shall not end well.

The Oil business....and Bristow who has its major focus on that segment of the industry....when the Oil Companies catch a cold....Operators like Bristow catch Pneumonia.

I recall a famous comment from a very senior Bristow Manager...."We make money operating helicopters....not selling them!"....when I asked why we had one of the world's oldest fleet of aircraft.

The look I got when I suggested the money from either method looks the same when it is in the Cash Drawer.....indicated I was not apt to be moving up that greasy pole of management.

That applied to many such ideas of how to diversify the Company's Operations so as not to be so reliant upon a single sector of business.
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Old 14th Feb 2019, 12:31
  #71 (permalink)  
 
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I recall a famous comment from a very senior Bristow Manager...."We make money operating helicopters....not selling them!"....when I asked why we had one of the world's oldest fleet of aircraft.
He was pretty well right SAS, if you don't make an operating profit, you will not survive. I have known a few really small operators who have used depreciation schedules, accrued a maintenance reserve but sold before the maintenance was due, made some FX gains and sold aircraft "making money" but then they have to be replaced.

BRS is partially diversified with UK SAR which is a huge contract at decent rates based on press releases and the 10Q and 10K filings ($220m per year) Compared to other operators, UK SAR puts BRS in a theoretically good position and they should be able to make money. Sure, others are hurting with the oil downturn but without the cushion of UK SAR apparently not hurting quite as badly as BRS.

Last edited by industry insider; 14th Feb 2019 at 12:34. Reason: added 10Q UKSAR revenue
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Old 14th Feb 2019, 13:01
  #72 (permalink)  
 
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Has Bristow ever posted a profit since Jonathan Bailiff became CEO? All he seems to be any good at is constant (ineffective) reorganisation which add more and more senior executives on enormous salaries which are obviously totally undeserved in view of the way the company is bleeding money. Yet, despite this Bailiff is leaving with a huge pay off. Shame on the man!
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Old 14th Feb 2019, 13:01
  #73 (permalink)  
 
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But that rather presumes you can extract money from the UKSAR contract to prop up the mother company.

ISTR the idea behind the UKSAR project was for it to be a loss leader to prove the concept that could then be sold on to other countries.
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Old 14th Feb 2019, 13:08
  #74 (permalink)  
 
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To answer Mitchaa's question above about structuring it's pretty complex and all to do with tax, EU rules and Aviation regulatory oversight.

Both CHC and BRS are US listed firms with largely US ownership. This means to operate in Europe they have to have a majority EU owner which means partnering in some shape or form with an EU owned and controlled entity. CHC's partner (from memory) is the family office of a major high street clothing chain owner for example. For the record, this is extremely normal. Therefore if and when the minority shareholder goes bust, in theory the major shareholder becomes the only shareholder (for the sake of clarity, let's call them S1 for use below). That's fine at the company ownership level but the question then becomes can S1 now exercise control of an aviation business without the assistance of BRS in this case who provided the operational oversight, hiring of crew, aircraft, PBH contracts, maintenance etc? The answer is probably not, at least at first.

It gets worse of course. The aircraft for the BRS UK entity will likely be on a bareboat charter from another entity within the BRS group of companies. This means the aircraft they are flying if the parent of BRS goes bust will likely cease to be legally available to S1 as their relationship ceased to exist the moment they filed for Ch 7. S1 will therefore have no legal control potentially of the aircraft.

Now, if the aircraft are owned it's very hard to see them taking off the day after filing for Ch 7 or the creditors pulling the plug. It's come and get the money time. Some of the aircraft might be financed by a small consortium of banks so they are secured but not against 1 owner so decision making becomes very difficult very fast. If they are leased, clearly it's in everyone's best interest to get them back off the ground again and making money but the leases need to be re-written potentially.

Now it's time to add the regulator into the picture. One of the founding principles of getting an AOC is that you have a business case to have one. Clearly BRS in it's current guise do not so the regulator could withdraw the AOC, or at least suspend it until the mess descibed above has been tidied up.

It's not beyond anyone that it gets fixed but it's not as simple as 'the UK entity is fine' owing to how the businesses are structured globally these days. Not saying it will happen for sure, but potentially it's a mess which will take weeks to fix.

NWS

and 212man - Shell with CHC 2016....
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Old 14th Feb 2019, 13:24
  #75 (permalink)  
 
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Originally Posted by 212man View Post
Can you give some examples? Apart from Dancopter a few years ago. I know Staoil pulled out early in Tanzania, but that was based on the drilling campaign ceasing early and nothing to do with re-tendering.
I can't give any other specific examples but we were told by management that most of our contracts had to be re-negotiated / re-tendered after the downturn and we only managed to keep them by lowering our rates significantly. Of course it wouldn't be the first time we were lied to by our management, that’s why I asked the question. Industry Insider says that the contracts he knows of were honoured so more than likely we weren’t told the (complete) truth.
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Old 14th Feb 2019, 13:44
  #76 (permalink)  
 
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Oil Co - Drop your price
RW - No we have a valid and very nice contract
Oil Co - Ok you are hereby served 90 days notice as per that contract
RW - Ok if we take our pants down can we get an extension at a lower rate
Oil Co - Maybe.

And repeat.

It's business, no one should take it personally if your company is being wildly overpaid for a service your customers can go out and procure for a lot less today with very little blow back, why not do it? Sucks to be us in the bad times but in the good times it's great.

It gets very interesting though as the thought continues to develop when you think about who BRS's customers are and what they lose by allowing BRS to disappear. Is it possible BRS could be saved by a client whom they are majorly exposed to? Chevron? Conoco? Exxon? They all have the money and have been known to dabble in aviation before. Unlikely but for spending $60m-100m on stock and buying the debt at probably 5-20c on the $ at the moment, it could happen.
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Old 14th Feb 2019, 13:48
  #77 (permalink)  
 
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Originally Posted by nowherespecial View Post
To answer Mitchaa's question above about structuring it's pretty complex and all to do with tax, EU rules and Aviation regulatory oversight.

Both CHC and BRS are US listed firms with largely US ownership. This means to operate in Europe they have to have a majority EU owner which means partnering in some shape or form with an EU owned and controlled entity. CHC's partner (from memory) is the family office of a major high street clothing chain owner for example. For the record, this is extremely normal. Therefore if and when the minority shareholder goes bust, in theory the major shareholder becomes the only shareholder (for the sake of clarity, let's call them S1 for use below). That's fine at the company ownership level but the question then becomes can S1 now exercise control of an aviation business without the assistance of BRS in this case who provided the operational oversight, hiring of crew, aircraft, PBH contracts, maintenance etc? The answer is probably not, at least at first.

It gets worse of course. The aircraft for the BRS UK entity will likely be on a bareboat charter from another entity within the BRS group of companies. This means the aircraft they are flying if the parent of BRS goes bust will likely cease to be legally available to S1 as their relationship ceased to exist the moment they filed for Ch 7. S1 will therefore have no legal control potentially of the aircraft.

Now, if the aircraft are owned it's very hard to see them taking off the day after filing for Ch 7 or the creditors pulling the plug. It's come and get the money time. Some of the aircraft might be financed by a small consortium of banks so they are secured but not against 1 owner so decision making becomes very difficult very fast. If they are leased, clearly it's in everyone's best interest to get them back off the ground again and making money but the leases need to be re-written potentially.

Now it's time to add the regulator into the picture. One of the founding principles of getting an AOC is that you have a business case to have one. Clearly BRS in it's current guise do not so the regulator could withdraw the AOC, or at least suspend it until the mess descibed above has been tidied up.

It's not beyond anyone that it gets fixed but it's not as simple as 'the UK entity is fine' owing to how the businesses are structured globally these days. Not saying it will happen for sure, but potentially it's a mess which will take weeks to fix.

NWS

and 212man - Shell with CHC 2016....
Excellent post and helps my understanding of the various smaller companies of the parent company. Thanks.
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Old 14th Feb 2019, 13:55
  #78 (permalink)  
 
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Glad to be of help
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Old 14th Feb 2019, 14:26
  #79 (permalink)  
 
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Oil Co - Drop your price
RW - No we have a valid and very nice contract
Oil Co - Ok you are hereby served 90 days notice as per that contract
RW - Ok if we take our pants down can we get an extension at a lower rate
Oil Co - Maybe.
It doesn’t a work as simply as that. Negotiations during a tender phase can be tough. But once the contract is signed it’s actually strong for both parties and normally prevails. The rules around asking for a discount are very complex. To threaten termination to get a discount would be unheard of in any company with which I have had an association.

I have seen price escalations in the downturn because they were in the contract, I have seen contractors, not just aviation, hold the line on prices when under a contract with no threats or bullying. Do a good job as per contract and most importantly know the customer and what they want.
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Old 14th Feb 2019, 14:41
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II, I respect your experiences but after a good number of years in the hummingbird's commercial department I assure you that is most definitely not mine. I wish it was. Depends how good your lawyers/ contract drafters are I guess. And how desperate your competition are.

Sadly in this market almost all we have had is desperation and the race for revenue.
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