The manufacturer and operator of the world renowned S-64 Air Crane fire attack helicopter, Erickson Incorporated, has voluntarily filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division.
Following its acquisition of Evergreen Helicopters in March 2013 for US$298 million, which was financed partly with debt, and on top of the global downturn in the offshore helicopter industry, Erickson said a number of factors have contributed to the need for it to conduct a comprehensive restructuring of its seven subsidiary companies.
“We have substantial debt obligations, and the Chapter 11 process will allow us to address those issues,” Erickson said in a general and investor Q&A statement posted on its website.
“Additionally, the company needs to streamline its aircraft fleet (and) this restructuring will allow us to focus on our plan to lower costs, stabilise our businesses, grow revenue and diversify our product lines.”
While it will be business as usual during the Chapter 11 process, Erickson said it expected to file a consensual plan of reorganisation with the support of its major creditor constituencies within the first 50 days of the bankruptcy case which the company anticipates will dramatically reduce its total indebtedness and allow it to exit bankruptcy with a stronger balance sheet in early 2017.
“Unfortunately, Erickson is not immune to the numerous business challenges currently facing the helicopter industry which have placed downward pressure on operating results and asset values,” said Erickson’s president and chief executive Jeff Roberts in a statement.
“Operational integrity and safety continue to be our top priority, and this restructuring will in no way interfere with our performance and commitment to customer satisfaction.
“We have examined a number of alternatives and are convinced that a formal restructuring is the most effective path forward. We anticipate a controlled process that better positions us to serve our customers.”
Founded by Jack Erickson in 1971 with a focus on logging that evolved into the market of aerial firefighting, the restructuring is expected to preserve the jobs of more than 700 of its employees – 300 of whom are based in its home state of Oregon.
Chief financial officer David Lancelot said the Erickson expected to receive about $60 million in new financing from a group of its noteholders that would provide sufficient liquidity for the company to fund ongoing operations during the course of the restructuring.
“We believe this agreement is indicative of broad support for a consensual restructuring which will ultimately provide greater liquidity by way of a deleveraged balance sheet,” said Lancelot. “We believe that Erickson will emerge a financially stronger company at the conclusion of an expeditious bankruptcy process.”
With 69 helicopters currently in its fleet, six Erickson S-64E Air Cranes will be operating across Australia this fire season under contract to Mangalore Airport-based Kestrel Aviation with some already in country and fighting fires in NSW.