CHC Group, units file for Chapter 11 bankruptcy, seek ‘orderly path’

By Susanna Moon

Chicago, May 5 – CHC Group Ltd. said the company and some of its wholly owned subsidiaries filed for Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the Northern District of Texas to begin restructuring of its balance sheet and fleet.

CHC and its advisers decided that a court-supervised reorganization paved the best and most efficient way to align its debt, lease and interest costs with customer demand in the current operating environment, according to a company press release.

Like others in the oil and gas sector, CHC’s operations have been impaired by the tumble in oil prices since the peak in 2014 and “general uncertainty in the energy market,” which has caused falling demand and more idle aircraft.

Despite efforts to cut costs, the company said it has had to ask advisers to help evaluate strategic alternatives to improve its capital structure.

The company also filed some first-day court motions to facilitate operating as usual during the court-supervised restructuring.

CHC said it expects to maintain enough liquidity to maintain its business operations.

“The step we have taken today provides an orderly path to enhance our financial flexibility and establish a competitive capital and operating structure that will allow us to invest in and grow CHC’s business over the long-term,” Karl Fessenden, CHC’s president and chief executive officer, said in the company press release.

In conjunction with the filing, CHC requested court approval to use the cash collateral of its pre-bankruptcy secured parties to find its operations while in bankruptcy.

Payment skipped

CHC said on April 15 that the company and its CHC Helicopter SA subsidiary decided to skip the $46 million interest payment due April 15 on its 9¼% senior secured notes due Oct. 15, 2020.

Under the notes indenture, CHC has 30 days to make the interest payment and cure any potential event of default for non-payment.

At the end of the third quarter of the 2016 fiscal year, CHC had total liquidity of $377 million to fund ongoing operations and meet its obligations to suppliers and employees in the near term.

Debt details

CHC had $2,169,903,000 in total assets and $2,190,379,000 in total debt as of Jan. 31, according to its Chapter 11 petition.

The company’s largest unsecured creditors are:

• International Corporate Trust of New York, with a $98.43 million unsecured notes claim;

• McGrigors Pension Trustees Ltd. of Glasgow, Scotland, with a $66.44 million pensions claim;

• Martello Property Services Inc. of Vancouver, B.C., with a $26.59 million lease financing facility claim;

• Finmeccanica SPA, with a $4.96 million trade claim;

• Airbus Helicopters of Marseille, France, with a $4.15 million trade claim;

• Sikorsky Commercial Inc. of Trumbull, Conn., with a $3.08 million trade claim;

• Coface – Parilease SAS of Paris, with a $2.2 million lease claim;

• CAE of Mississauga, Ont., with a $2.13 million services claim;

• Waypoint Asset Co. (Ireland) Ltd. of Dublin, Ireland, with a $1.32 million trade and lease claim; and

• Turbomeca of Bidart, France, with a $1.19 million trade claim.

Filing defaults

According to an 8-K filed with the Securities and Exchange Commission, the bankruptcy filing constitutes an event of default under the indentures for the company’s 9¼% % senior secured notes due 2020, 9 3/8% senior notes due 2021.

In addition, the Chapter 11 case constitutes an event of default under CHC’s 2014 and 2015 credit agreements, but efforts to enforce default-related rights are automatically stayed by the bankruptcy filing.

The company said in the 8-K that there was $1,014,289,200 total principal amount of 2020 notes and $94.73 million total principal amount of 2021 notes outstanding as of May 4. In addition, there was $327.5 million of borrowings outstanding under the 2014 credit agreement and $42.6 million in letters of credit, as well as $139 million of borrowings outstanding under the 2015 credit agreement.

Trading update

Effective May 5, the company said its ordinary shares will cease trading on the OTCQX International Market and begin trading on the OTC Pink Marketplace under the symbol HELIQ.

Seabury Advisors, PJT Partners and CDG Group are the financial advisers. Weil, Gotshal & Manges LLP and Debevoise & Plimpton LLP are the legal advisers.

CHC is a commercial operator of helicopters based in Richmond, B.C. The Chapter 11 case number is 16-31854.

Caroline Salls contributed to this report

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