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Monday, October 17, 2016

CHC Faces Bankruptcy Challenges, Despite Plan

James T. McKenna

CHC Group faces additional challenges to reorganizing its operations beyond gaining a judge's approval of its plan with key creditors emerging from bankruptcy.

The U.S. judge overseeing that operator's federal Chapter 11 case, Barbara Houser, is set to hear arguments Nov. 2 in Dallas on the "plan support agreement" with creditors and lessor Milestone Aviation. Those parties can back out of the plan if it is not approved by the court and executed by Nov. 11.

Under the pact, CHC would get $300 million in new capital from existing creditors and terms for restructured aircraft leases and additional asset-based financing commitments of $150 million from Milestone and its affiliates. CHC said it anticipates emerging from bankruptcy proceedings "as quickly as possible" with forecasted liquidity of more than $400 million and access to an additional $150 million of aircraft financing.

The support agreement reflects CHC's efforts to build consensus among parties to the bankruptcy, which contain many (but not all) of its subsidiaries and affiliates. U.S. bankruptcy proceedings can open a company's reorganization to all sorts of bidders, however, with surprising results. 

With Eastern Air Lines’ bankruptcy 27 years ago, for instance, creditors’ efforts with the judge and unions on options for saving that company were stalled when a diamond dealer walked into the Manhattan courtroom with a bag of cash and an offer to buy the air carrier.

CHC told the judge Oct. 11 that it and its advisors had worked hard to nail down alternatives for recapitalizing its helicopter, MRO and other operations. One advisor, the investment bank PJT Partners, began working after CHC's May 5 bankruptcy filing to identify possible sources of new financing. It contacted about 20 potential investors and received inquiries from roughly 25, CHC said in a filing seeking Houser's approval of the plan.

PJT executed nondisclosure agreements with about 15 potential investors, CHC said, and a handful went through initial due diligence with PJT. "Ultimately," the operator added, "none of these third parties were interested in submitting a formal proposal" to CHC.

As PJT pursued that option, CHC negotiated with existing creditors on potential investments. Those talks led to a proposal from a group of six secured creditors that the company found more favorable to a separate bid by a seventh, individual creditor. The group of six became the plan’s key sponsors. They are Alliance Bernstein L.P., Bain Capital Credit, LP, Carl Marks Management Company, Franklin Advisers, Inc., Tennenbaum Capital Partners and Wayzata Investment Partners LLC.

CHC also won backing for its plan from Milestone Aviation its committee of unsecured creditors. That committee can be a key player in a bankruptcy case, since the money its members have lent to the debtor company is not secured by aircraft or other assets that can be seized and sold. The members' main means of recovery are through ensuring the debtor survives as a viable entity capable of repaying the debts or making sure its unencumbered assets are sold at the highest prices.
From AIN:

CHC Recapitalizes with $450 Million Lifeline

Bankrupt offshore gas/petroleum helicopter services company CHC announced a financial restructuring plan last week that will recapitalize with up to $300 million in new capital and leasing lines of $150 million. GE Capital's Milestone Aviation Group and its affiliates are taking the lead on the latter. CHC filed Chapter 11 bankruptcy in the Northern District of Texas on May 5 and subsequently announced plans to shed most of its leased helicopter fleet, reducing its overall fleet size from 230 to 75. At the time of its bankruptcy filing, the company listed debts of $2.19 billion against assets of $2.17 billion as of January 31. The refinancing is part of a “plan support agreement” designed to speed CHC's emergence from bankruptcy proceedings. It is subject to court approval.  “Executing this agreement enables us to establish a stronger capital structure for CHC and is another critical milestone toward completing our court-supervised reorganization process,” said CHC CEO Karl Fessenden. “We look forward to obtaining approval of our restructuring plan, recapitalizing the company and putting CHC on the path to long-term success.”