18-Apr-2016 Source: HeliHub.com
Offshore and SAR operator CHC must be under significant pressure to not make an interest payment. The company has announced that $46 million was due Friday on its 9.25% senior secured notes maturing October 15, 2020 (the “2020 Notes”). The small print governing the 2020 Notes allows CHC a 30-day grace period after the interest payment due date, allowing them to still make the payment and not go into default. The Company has stated that “it is in the best interests of CHC and all of its stakeholders to use the grace period to continue working with its advisors to review all strategic alternatives for restructuring the Company’s debt and improve CHC’s long-term capital structure”.
That is a company under pressure.
Failure to make the payment by the end of the grace period then brings a new situation. Either the trustee or the holders of at least 25% of the 2020 Notes could chose to have their money back prior to the due date in four and a half years time. At the end of January 2016, CHC owned just over £1 Billion on the 2020 Notes.
The default itself could result in a cross-default under other agreements, even without the grace period, and CHC has stated that “the amount of such payments could be material”. At the last full-year accounts to 30th April 2015, the total assets of the company were $2,252 million, and with a figure for liabilities of $2,070 million, gives a net position of $182 million. This was after the company had increased funds through the issue of $589 million of convertible preference shares during that financial year.
In March 2016, CHC issued their unaudited third quarter numbers to 31st January 2016, showing assets down slightly to $2,170 million, liabilities up to $2,190 million and thus the net figure nearly $200 million worse in nine months and $20 million in deficit. A further $40 million of convertible preference shares had been issued in that period.
It would be sad to see CHC disappear from the market, but it is clear that we are now in a period where the company is in flux and will be looking at lots of options, perhaps including a short-term asset sale to ensure the 2020 Notes interest payment can be made. Obvious options would include the Irish SAR contract where CHC operate five Sikorsky S92s and could fit very well into the Bristow model, which is all but rolled out across the UK.
Jeremy Parkin – HeliHub.com