PHI enters bankruptcy

May 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

May 2019 Issue

Helicopter company PHI Inc has filed for Chapter 11 bankruptcy protection in US Bankruptcy Court in Dallas.

The company’s filing was a consequence of the imminent maturity of $500m in notes that the company was unable to refinance, as well as the lingering effects of the recent downturn in the oil industry.

The company cleared the path for a potential Chapter 11 filing in October 2018 when it cancelled a previously announced cash tender offer for the repurchase of the $500m in notes and had been under pressure from creditors and investors to sell off its profitable air medical division to satisfy that obligation. In recent months, the company has been refinancing some of its debt and exploring other means of improving its finances. A shareholder group and private investor had pushed the firm to sell off some of its assets.

The downturn in the oil & gas industry has taken a significant toll on PHI in recent years, and in its most recent quarterly earnings report the company showed an $11.5m loss in the third quarter of 2018.

According to the company’s filing, PHI remains in negotiation with noteholders on restructuring the debt and anticipates emerging from Chapter 11 in “relatively short order” and with a “more sustainable balance sheet”. The company expects to operate normally during bankruptcy restructuring with its existing cash and $70m from investment firm Blue Torch Capital LLC, and has asked the court to allow it to maintain its normal employee compensation and benefit programmes and to otherwise operate its business as usual.

“This filing is also not about PHI’s liquidity as a company — we have enough cash on hand to continue operating business as usual and meet all of our commitments to our stakeholders,” the company wrote in a letter about the bankruptcy. “We are confident that we will complete this process as a stronger company and business partner, with a more sustainable debt structure to underpin our long-term success well into the future.”

PHI’s bankruptcy filing only applies to the company’s principal US entities and excludes foreign entities. PHI operates a fleet of 240 aircraft from 70 locations and employs 2200 people worldwide.

In a statement the company said: “After working closely with our advisers since the spring of 2018, interacting with our various stakeholders, and carefully evaluating all possible options, the Board concluded that pursuing Chapter 11 protection is the most appropriate course of action to address our matured debt and strengthen our balance sheet. We are confident this will position the entire company for continued leadership in the industry and provide a platform for PHI’s long-term success. We remain fully committed to all of our stakeholders and to operating with the highest standards of safety and quality as we navigate this process, which we believe is the best option for a timely and efficient resolution to our financial situation.”

PHI is in discussions with the holders of its $500m in unsecured notes and its advisers as it considers alternative ways to address its outstanding debt obligations. The company is also engaged in ongoing discussions with its various lessors to address certain of its above-market lease obligations. The company believes that its creditors and lessors will be supportive of its efforts and its prospective business strategy and thus it intends to file a reorganisation plan in the early stages of the Chapter 11 process. The company hopes to emerge from Chapter 11 protection over the summer with a significantly reduced and more manageable debt load, which will hopefully help the company to prosper in the future.

PHI is not the only company in the helicopter services industry to suffer financial difficulty of late. It became the third major player to file for bankruptcy protection in recent years, following CHC Helicopters and Erickson, both of which entered Chapter 11 in 2016. Helicopter leasing firm Waypoint also filed for bankruptcy in November 2018.

According to filings with the US Securities and Exchange Commission (SEC), the company’s customers include Shell, BP, ExxonMobil and ConocoPhillips. PHI’s oil & gas business sees the company transport people and equipment to and from offshore drilling platforms in the Gulf of Mexico and foreign countries. As of the third quarter of 2018, the company had 126 aircraft available for use in the oil & gas space.

Richard Summerfield