Published on October 25th, 2016 | by Jim Lee


CHC Group announces $450 million in commitments to recapitalize the Company

In a piece posted on 6th May, we noted that the CHC Group (CHC), had earlier announced on 5th May, that the Company and certain of its wholly-owned subsidiaries had filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. At the time CHC, with headquarters in in Richmond, British Columbia in Canada, said that a key part of the Chapter 11 restructuring, would be to “facilitate its financial and fleet reorganisation”.

Given that a large part of CHC’s fleet of helicopters are leased, it is perhaps not surprising, that as part of $450 million (around €413.54 million) refinancing deal to recapitalise the company, key creditors, including the Milestone Aviation Group, a subsidiary of GE Capital Aviation Services Co., will take over majority ownership of a newly restructured company, while existing shareholders will not be involved in the new entity. CHC currently has a fleet of over 220 helicopters and provides air transportation for the offshore oil and gas industry, search and rescue services in Ireland and air ambulance services in Australia – as well as maintenance services through its subsidiary Heli-One.

Although its Irish operation had not been affected by the Chapter filing, CHC had struggled to continue profitable operations within a struggling energy sector posting a $76 million (around €69.85 million) loss on 31st January last which covered the preceding three months, with the company experiencing a sharp drop in revenue. The company’s troubles came to the surface in April 2015 when it delayed making a $46 million (around €42.28 million) payment on its debt due in 2020 in an attempt to refinance its debt and avoid going into default.

In its statement on the 12th October, CHC formally announced that it had entered into, what was described as, a plan support agreement (the ‘PSA); with respect to the terms of a chapter 11 plan of reorganisation (the ‘Plan;). The PSA contemplates a comprehensive recapitalisation of the Company that will provide $300 million (around €275.76 million) in new capital from its existing creditors, as well as terms for restructured aircraft leases and additional asset based financing commitments of $150 million (around €137.88 million) from its largest lessor and its affiliates. The PSA will be implemented pursuant to a plan of reorganisation as part of CHC’s Chapter 11 proceedings that were commenced on 5th May. The Company expects to submit the Plan to the court in the next few weeks and anticipates emerging from the court-supervised process as quickly as possible with forecasted liquidity of more than $400 million (around €367.68 million) and access to an additional $150 million (around €137.88 million) of aircraft financing.


CHC Helicopters Super Puma

The parties to the PSA include: The Milestone Aviation Group Limited (‘Milestone’) and certain of its affiliates (the ‘Milestone Parties’), holders (the ‘Plan Sponsors’) of approximately 67.56% of the outstanding principal amount of the Company’s 9.25% Senior Secured Notes due 2020 (the ‘Secured Notes’), the Official Committee of Unsecured Creditors (the ‘UCC’), and holders (the “Individual Creditor Parties” and together with the Milestone Parties, the Plan Sponsors and the UCC, the “Consenting Creditor Parties”) of approximately 73.56% of the outstanding principal amount of the Company’s 9.375% Senior Notes due 2021 (the ‘Unsecured Notes’).

“Executing this agreement enables us to establish a stronger capital structure for CHC and is another critical milestone toward completing our court-supervised reorganisation process,” said Karl Fessenden, President and Chief Executive Officer. “With the support of the Plan Sponsors, Unsecured Creditors Committee, and The Milestone Aviation Group Limited as our lead aircraft lessor, we look forward to obtaining approval of our restructuring plan, recapitalising the company, and putting CHC on the path to long-term success. We remain confident that the restructuring we are undertaking will position CHC to capitalise on future growth opportunities as our industry recovers.

“CHC is one of the leading global providers of helicopter services, and will be very well-positioned post restructuring to benefit from a recovery in the global energy industry,” said Mike Bevacqua, a Managing Director at Bain Capital Credit, which is the Company’s lead Plan Sponsor and largest secured creditor. “We believe this recapitalisation will have a positive outcome for all the Company’s stakeholders, and look forward to continuing to play a constructive role in supporting CHC’s progress.”

Under the lease restructuring term sheet entered into between the Company and Milestone (the ‘Milestone Term Sheet’), which is incorporated into the PSA, Milestone will serve as the lead lessor for CHC’s go-forward fleet of helicopters. Milestone will provide CHC with modified lease terms on their existing leases and additional helicopters at market lease rates. In addition to the leased aircraft, the Milestone Term Sheet includes provision of a commitment letter for a new $150 million (around €137.88 million) asset backed debt facility for purchase or refinancing of aircraft.

Milestone Aviation Group, a GE Capital Aviation Services Company, is the world’s leading helicopter leasing company. Milestone has a fleet of over 215 helicopters worth $3.7 billion (around €3.4 billion) and supports 32 operators in 26 countries on six continents. The company has a forward order book of firm and option aircraft with an estimated aggregate purchase price of $3.2 billion (around €2.94 billion).

The principal provisions of the Plan contemplated by the PSA are as follows (sorry if the language is a bit technical):

  • Eligible holders of the Secured Notes and the Unsecured Notes will have the opportunity to participate in a rights offering to purchase mandatorily convertible second lien notes (the ‘New Second Lien Convertible Notes’) of the Company for an aggregate purchase price of $300 million (around €275.76 million) [the ‘Rights Offering’], with $280 million (around €257.3 million) allocated to the holders of Secured Notes and $20 million (around €18.38 million) allocated to holders of Unsecured Notes. The New Second Lien Convertible Notes will be convertible into 85.4% of the New Common Shares on a fully diluted basis (but subject to dilution by the management incentive plan of the Reorganised Company (‘MIP’)), and will vote in post-emergence governance matters on an as-converted basis.
  • Holders of the Secured Notes, Unsecured Notes and General Unsecured Claims will receive the following general treatment under the Plan:
  • In addition to the ability to participate in the Rights Offering allocated to the Secured Notes, all holders of Secured Notes will receive their pro rata share of 79.5% of new equity (‘New Equity’) to be issued by a newly-formed Cayman limited liability company (the ‘Reorganised Company’) (prior to dilution by New Second Lien Convertible Notes and the MIP), which equates to 11.6% of New Equity (fully diluted on account of the New Second Lien Convertible Notes, but excluding the MIP).
  • All holders of Unsecured Notes will receive their pro rata share of 8.9% of New Equity (prior to dilution by the New Second Lien Convertible Notes and the MIP), which equates to 1.3% of New Equity (fully diluted on account of the New Second Lien Convertible Notes, but excluding the MIP).
  • All other holders of General Unsecured Claims of the Company will receive their pro rata share of (a) 11.6% of New Equity (prior to dilution by the New Second Lien Convertible Notes and the MIP), which equates to 1.7% of New Equity (fully diluted on account of the New Second Lien Convertible Notes, but excluding the MIP), and (b) $37.5 million (around €34.45 million) in new unsecured notes of the Reorganized Company.
  • The Plan may also provide for distributions up to an aggregate amount of $750,000 (around €689,060) in cash to holders of certain General Unsecured Claims, with any such distributions reducing the principal amount of the New Unsecured Notes on a dollar for dollar basis and further provides for an allocation from distributions on the Secured Notes and/or Unsecured Notes of a specified amount of New Membership Interests for any Non-Eligible Offerees of the Secured Notes and/or Unsecured Notes who timely execute a Non-Eligible Offeree acknowledgement and vote in favour of the Plan.
  • Holders of the Company’s Revolving Credit Agreement Claims will receive a new term note in the amount of their claim, in accordance with the Bankruptcy Code, or such other treatment that is reasonably acceptable to the Company, the UCC, and the Plan Sponsors. The Company and the Consenting Creditor Parties are currently in active negotiations with holders of the Revolving Credit Agreement Claims as to their treatment.
  • The Plan does not provide for any distribution to holders of the Company’s existing equity securities, including its ordinary shares and preferred shares. Following the effective date of the Plan, the Company will apply to the Registrar of Companies in the Cayman Islands for a voluntary striking off of the Company. Upon a striking off of the Company, the Company will be dissolved (subject to certain reinstatement rights of the holders of the existing equity) and the existing equity holders will receive no distribution.

The PSA and other transaction agreements to be executed by the Company include certain covenants on the part of the Company to solicit and seek court approval of the Plan, and the Consenting Creditor Parties have agreed to vote in favour of and support the Plan and the restructuring transactions. The PSA and related agreements are subject to customary closing conditions and termination rights upon the occurrence of certain events, as well as payment of certain fees and expenses. In connection with the PSA, certain of the Consenting Creditor Parties have agreed, pursuant to a backstop agreement (the ‘Backstop Agreement’), to backstop the Rights Offering in consideration of the payment, subject to court approval, of a non-refundable premium payable in New Second Lien Convertible Notes in the amount of $30.8 million (around €28.3 million) or, upon certain triggering events, in cash in the amount of $21.3 million (around €19.6 million). The Backstop Agreement also includes certain covenants on the part of the Company and is subject to customary closing conditions and termination rights upon the occurrence of certain events.

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About the Author

Jim has had a life-long interest in military matters and aviation. Initially, he fused both of these interests together with a passion for military aviation, initially as a photographer. He has travelled extensively over the years and has been the guest of many European air forces, plus the air forces of the United States, Russia and others throughout the world. His first introduction to journalism coincided with an interest in the civil aviation industry was when he initially wrote for and later edited, ‘Aviation Ireland’, the club magazine of the Aviation Society of Ireland. Jim was a contributor to Flying in Ireland since its inception over 10 years ago and is now a key contributor to this site. He has also contributed items for a number of other aviation magazines and has produced a number of detailed contributions to Government policy documents, most recently the Irish Government’s White Paper on Defence. He is also deeply involved in the local community and voluntary sector and has worked both in local government and central government.

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