CHC GROUP LTD. (OTCMKTS:HELIQ) Files An 8-K Regulation FD Disclosure
Item 7.01 Regulation FD Disclosure.
As previously reported, on May 5, 2016, CHC Group Ltd. (the
Company), and certain of its subsidiaries
(together with the Company, the Debtors) filed
voluntary petitions in the United States Bankruptcy Court for the
Northern District of Texas (the Bankruptcy
Court), seeking relief under Chapter 11 of Title 11 of
the United States Code (the Bankruptcy Code). As
previously reported, on October 11, 2016, the Debtors entered
into a plan support agreement (the PSA) with
respect to the terms of a restructuring to be implemented through
a joint chapter 11 plan of reorganization (the
Plan) to be proposed by the Debtors with (1) The
Milestone Aviation Group Limited (Milestone) and
certain of its affiliates (the Milestone
Parties), (2) holders (the Plan
Sponsors) representing or holding approximately 67.56%
of the outstanding principal amount of the Companys 9.25% Senior
Secured Notes due 2020, (3) the Official Committee of Unsecured
Creditors (the UCC) and (4) holders (the
Individual Creditor Parties and together with
the Milestone Parties, the Plan Sponsors and the UCC, the
Consenting Creditor Parties) of the Companys
9.375% Senior Notes due 2021 (the Unsecured
Notes), that, together with the other Consenting
Creditor Parties represent or hold approximately 73.56% of the
outstanding principal amount of Unsecured Notes.
Joint Chapter 11 Plan and Disclosure Statement
On November 11, 2016, the Debtors filed the Plan and the related
disclosure statement (the Disclosure Statement)
with the Bankruptcy Court. The Plan is subject to acceptance by
the Debtors creditors (as and to the extent required under the
Bankruptcy Code) and confirmation by the Bankruptcy Court. The
Plan represents a comprehensive financial and operational
restructuring of the Debtors and provides additional liquidity
that will further the Debtors emergence from chapter 11. The
descriptions of the Plan and Disclosure Statement are qualified
in their entirety by reference to the Plan and the Disclosure
Statement, copies of which are attached herewith as Exhibit 99.1
and Exhibit 99.2, respectively. Capitalized terms used but not
defined in this Form 8-K shall have the meanings set forth in the
Disclosure Statement.
The Plan reduces the Debtors prepetition debt by $900 million
(prior to conversion of the New Second Lien Convertible Notes to
be issued to the Plan) and their annual Cash interest burden by
85%, which frees up approximately $115 million in annual cash
flow that can be used for reinvestment in the Debtors business.
Below is an overview of the facilities and treatment provided for
under the Plan.
Amended and Restated ABL Credit Facility
The Debtors have agreed to the terms of the Amended and Restated
ABL Credit Agreement, which will reduce the principal balance
under the ABL Credit Agreement, to be apportioned across eight
aircraft that the Debtors will retain. In addition, under the
Amended and Restated ABL Credit Agreement, the Debtors will have
the option to prepay the Amended and Restated ABL Credit Facility
(without any fees, penalties, make-whole or other premiums or
other amounts), in whole or in part, on any monthly payment date.
Milestone Transactions
The Debtors have agreed to a fleet restructuring transaction with
the Milestone Parties, one of the Debtors largest aircraft
lessors. The transaction with the Milestone Parties includes,
among other things, a comprehensive restructuring of lease
rentals, the consensual return of certain helicopters, amendments
to the return conditions for certain helicopters, the lease of
additional helicopters, and, at the Debtors election, the
provision by an affiliate of Milestone, PK Transportation Finance
Ireland Limited, of a new $150 million committed debt facility
for the acquisition and/or refinancing of certain aircraft. The
Milestone transaction also avoids potential complex and costly
litigation around the size of the Milestone Parties General
Unsecured Claims and Administrative Expense Claims, while
enabling the Debtors to continue to use their aircraft to the
restructured lease agreements.
Treatment of Claims and Interests
to the Plan, the Debtors will issue New Membership Interests, New
Second Lien Convertible Notes in the aggregate amount of
approximately $464.1 million, and New Unsecured Notes in the
aggregate amount of $37.5 million.
The Plan contemplates that (i)79.5% of the New Membership
Interests, prior to dilution on account of the New Second Lien
Convertible Notes and the Management Incentive Plan (which
equates to 11.6% of the New Membership Interests, after dilution
on account of the New Second Lien Convertible Notes (as if the
New Second Lien Convertible Notes converted on the Effective
Date), but prior to dilution on account of the Management
Incentive Plan) will be distributed to holders of Allowed Senior
Secured Notes Claims; (ii)8.9% of the New Membership Interests,
prior to dilution on account of the New Second Lien Convertible
Notes and the Management Incentive Plan (which equates to 1.3% of
the New Membership Interests, after dilution on account of the
New Second Lien Convertible Notes (as if the New Second Lien
Convertible Notes converted on the Effective Date), but prior to
dilution on account of the Management Incentive Plan) will be
distributed to holders of Allowed Unsecured Notes Claims; and
(iii)11.6% of the New Membership Interests, prior to dilution on
account of the New Second Lien Convertible Notes and the
Management Incentive Plan (which equates to 1.7% of the New
Membership Interests, after dilution on account of the New Second
Lien Convertible Notes (as if the New Second Lien Convertible
Notes converted on the Effective Date), but prior to dilution on
account of the Management Incentive Plan) will be distributed to
holders of General Unsecured Claims. Holders of General Unsecured
Claims will also receive their pro rata share of the New
Unsecured Notes.
The Plan also contemplates that (A)holders of Allowed Convenience
Claims will receive the lesser of (i)payment in full in Cash and
(ii)their Pro Rata share of the Convenience Claims Distribution
Amount; (B)holders of Allowed Other Priority Claims and Allowed
Other Secured Claims will be paid in full; and (C) holders of the
Companys existing equity securities (including its ordinary and
preferred shares) will not receive any distribution.
On November 14, 2016, the Company issued a press release
announcing that it filed the Plan and related Disclosure
Statement with the Bankruptcy Court. A copy of the press release
is furnished herewith as Exhibit 99.3 and is incorporated herein
by reference.
The information contained in this Item7.01 and Exhibits 99.1,
99.2 and 99.3 hereto are furnished and shall not be deemed filed
for purposes of Section18 of the Securities Exchange Act of 1934,
as amended (the Exchange Act), or incorporated
by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set
forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements
This Form 8-K, accompanying exhibits, and other statements that
we may make, contain forward-looking statements. Forward-looking
statements are statements that are not historical facts and
include statements about our expectations for the timing and
execution of our restructuring plan, our future financial
condition and future business plans and expectations, the effect
of, and our expectations with respect to, the operation of our
business, adequacy of financial resources and commitments and
operating expectations during the pendency of our court
proceedings. Such forward-looking statements are based upon the
current beliefs and expectations of our management, but are
subject to risks and uncertainties, which could cause actual
results and/or the timing of events to differ materially from
those set forth in the forward-looking statements, including,
among others: we filed for protection under Chapter 11 of the
Bankruptcy Code and are subject to risks and uncertainties; we
have also started bankruptcy proceedings in Canada, our ability
to implement the Plan and to obtain Bankruptcy Court approval
with respect to motions in the Chapter 11 proceedings prosecuted
from time to time, including approval of the Disclosure
Statement; operating under Chapter 11 may restrict our ability to
pursue our business strategies; our employees face considerable
uncertainty due to the Chapter 11 proceedings; we may suffer from
a protracted restructuring; our ability to emerge from Chapter 11
and operate profitably thereafter will depend on increasing our
revenue, lowering our costs, and obtaining sufficient financing
or other capital to operate successfully; we have substantial
liquidity needs and, due to our current Chapter 11 proceedings,
may not be able to obtain any equity or debt financings in the
capital markets for the foreseeable future; we may be subject to
claims that will not be discharged in the Chapter 11 proceedings;
our restructuring efforts through the Chapter 11 proceedings may
be expensive, take resources and distract management; we are in
the process of rejecting and abandoning a significant portion of
our helicopter fleet through Chapter 11 proceedings, which may
result in an inability to quickly respond to new opportunities
and a significant loss of market share and profit margins; our
consolidated financial statements have been prepared assuming
that we will continue as a going concern, our independent
registered public accounting firm has raised substantial doubts
about our ability to continue as a going concern, and we have not
included any adjustments that might result from the outcome of
this uncertainty; we have a history of net losses; our
substantial level of indebtedness, operating lease commitments,
purchase and other commitments could materially adversely affect
our ability to fulfill our obligations under our debt agreements,
our ability to react to changes in our business and our ability
to incur additional debt to fund future needs; all flights with
the aircraft type H225 and AS332 L2 have been temporarily
grounded which may cause a material and adverse impact to our
financial viability; operating helicopters involves a degree of
inherent risk and we are exposed to the risk of losses from
safety incidents; if we are unable to mitigate potential losses
through a robust safety management and insurance coverage
program, our financial condition would be jeopardized in the
event of a safety or other hazardous incident; failure to
maintain standards of acceptable safety performance could have an
adverse impact on our ability to attract and retain customers and
could adversely impact our reputation, operations and financial
performance; our operations are largely dependent upon the level
of activity in the offshore oil and gas industry; the oil and gas
industries on which we are largely dependent are suffering
through a severe downturn, resulting in significant negative
impact on demand for our services, and no assurance can be given
that the downturn will not continue to be prolonged; many of the
markets in which we operate are highly competitive, and if we are
unable to effectively compete, it may result in a loss of market
share or a decrease in revenue or profit margins; we rely on a
limited number of large offshore helicopter support contracts
with a limited number of customers. If any of these are
terminated early or not renewed, our revenues could decline;
negative publicity may adversely impact us; our fixed operating
expenses and long-term contracts with customers could adversely
affect our business under certain circumstances; we depend on a
small number of helicopter manufacturers and any safety issues
can severely limit our ability to continue operating helicopters
already in our fleet; we depend on a limited number of
third-party suppliers for helicopter parts and subcontract
services; restructuring of our operations and organizational
structure may lead to significant costs; our business requires
substantial capital expenditures, lease and working capital
financing, which we are currently blocked from accessing through
the capital markets and banks. Any further deterioration of
current industry or business conditions, the capital and banking
markets or a prolonged period in Chapter 11 proceedings generally
could adversely impact our business, financial condition and
results of operations; we rely on the secondary used helicopter
market to dispose of our older helicopters and parts due to our
ongoing fleet modernization efforts; our operations are subject
to extensive regulations which could increase our costs and
adversely affect us; our maintenance, repair and overhaul (MRO)
business, Heli-One, could suffer if licenses issued by original
equipment manufacturers (OEMs) and/or governmental authorities
are not renewed or we cannot obtain additional licenses; we
derive significant revenue from non-wholly owned variable
interest entities. If we are unable to maintain good relations
with the other owners of such non-wholly owned entities, our
business, financial condition or results of operations could be
adversely affected; our operations may suffer due to political,
regulatory, commercial and economic uncertainty; our business in
countries with a history of corruption and transactions with
foreign governments increases the compliance risks associated
with our international activities; we are subject to extensive
federal, state, local and foreign environmental, health and
safety laws, rules, regulations and ordinances that could have an
adverse impact on our business; we are subject to many different
forms of taxation in various jurisdictions throughout the world,
which could lead to disagreements with tax authorities regarding
the application of tax laws; the offshore helicopter services
industry is cyclical; we are exposed to foreign currency risks;
our failure to hedge exposure to fluctuations in foreign currency
exchange rates effectively could unfavorably affect our financial
performance; we are exposed to credit risks; our customers may
seek to shift risk to us; if oil and gas companies undertake cost
reduction methods, there may
be an adverse effect on our business; reductions in spending on
helicopter services by government agencies could lead to
modifications of search and rescue (SAR) and emergency medical
services (EMS) contract terms or delays in receiving payments,
which could adversely impact our business, financial condition
and results of operations; failure to develop or implement new
technologies and disruption to our systems could affect our
results of operations; we rely on information technology, and if
we are unable to protect against service interruptions, data
corruption, cyber-based attacks or network security breaches, our
operations could be disrupted and our business could be
negatively affected; the loss of key personnel could affect our
growth and future success; labor problems could adversely affect
us; if the assets in our defined benefit pension plans are not
sufficient to meet the plans obligations, we could be required to
make substantial cash contributions and our liquidity could be
adversely affected; adverse results of legal proceedings could
materially and adversely affect our business, financial condition
or results of operations; in the event we are or become treated
as a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes, our U.S. shareholders could be
subject to adverse U.S. federal income tax consequences; we are
controlled by a shareholder group, which might have interests
that conflict with ours or the interests of our other
shareholders; due to our Chapter 11 bankruptcy proceedings, our
ordinary shares may have no value and any investment in our
shares is highly speculative; the market for our ordinary shares
historically has experienced significant price and volume
fluctuations; we have not paid dividends on our ordinary shares
historically and may not pay any cash dividends on our ordinary
or preferred shares for the foreseeable future; to the terms of
the preferred shares, which rank senior to our ordinary shares,
we are required to pay regular cash dividends or issue shares in
respect of amounts accrued as dividends on the preferred shares,
and we may be required under certain circumstances to repurchase
the preferred shares; we are currently unable to pay such
obligations while we are in Chapter 11 proceedings and are likely
not to pay any cash dividends for the foreseeable future; our
preferred shares have rights, preferences and privileges that are
not held by, and are preferential to the rights of, holders of
our ordinary shares. Such preferential rights could adversely
affect our liquidity and financial condition, and may result in
the interests of the holders of our preferred shares differing
from those of the holders of our ordinary shares; we are a
holding company and, accordingly, are dependent upon
distributions from our subsidiaries to generate the funds
necessary to meet our financial obligations and pay dividends;
the requirements of being a public company may strain our
resources and distract our management; provisions of our articles
of association and Cayman Islands corporate law may discourage or
prevent an acquisition of us which could adversely affect the
value of our ordinary shares; our organizational documents
contain a variety of anti-takeover provisions that could delay,
deter or prevent a change in control; shareholder rights under
Cayman Islands law may differ materially from shareholder rights
in the United States, which could adversely affect the ability of
us and our shareholders to protect our and their interests; as a
shareholder, you might have difficulty obtaining or enforcing a
judgment against us because we are incorporated under the laws of
the Cayman Islands; our major investors, Clayton, Dubilier Rice
and First Reserve Management, L.P., may compete with us, and our
articles of association contain a provision that expressly
permits our non-employee directors to compete with us; and other
risks and uncertainties detailed from time to time in our filings
with the Securities and Exchange Commission, including the
Companys Annual Report on Form 10-K for the year ended April 30,
2016. The Companys filings with the Securities and Exchange
Commission are available at www.sec.gov. You are urged to
consider these factors carefully in evaluating the
forward-looking statements herein and are cautioned not to place
undue reliance on such forward-looking statements, which are
qualified in their entirety by this cautionary statement. The
forward-looking statements speak only as of the date on which
they are made and the Company undertakes no obligation to
publicly update such forward-looking statements to reflect
subsequent events or circumstances. No assurances can be given
that our efforts to effectively reorganize under Chapter 11 of
the Bankruptcy Code will ultimately be successful or that we will
succeed in strengthening our balance sheet or increase our
financial flexibility. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those
indicated.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| 99.1 |
Joint Chapter 11 Plan of Reorganization dated November 11, 2016 |
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| 99.2 | Proposed Disclosure Statement dated November 11, 2016 | |
| 99.3 | Press Release |
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About CHC GROUP LTD. (OTCMKTS:HELIQ)
CHC Group Ltd., formerly FR Horizon Holding (Cayman) Inc., is a commercial operator of helicopters. The Company operates through two segments: Helicopter Services and Heli-One. The Helicopter Services segment consists of flying operations in the North Sea, the Americas, the Asia Pacific region and the Africa-Euro Asia region, primarily serving its offshore oil and gas customers, in addition to providing search and rescue (SAR), and emergency medical services (EMS) to government agencies, and oil and gas customers. The Heli-One segment includes helicopter maintenance, repair and overhaul (MRO) facilities in Norway, Poland, Canada and the United States, providing services for its fleet and for its external customer base in Europe, Asia and North America. Its MRO services include maintenance outsourcing solutions, engineering services and logistics support. The Heli-One operations have facilities in Delta, British Columbia; Stavanger, Norway; Fort Collins, Colorado, and Rzeszow, Poland. CHC GROUP LTD. (OTCMKTS:HELIQ) Recent Trading Information
CHC GROUP LTD. (OTCMKTS:HELIQ) closed its last trading session 00.000 at 0.120 with 10,990 shares trading hands.