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Erickson Inc. has filed for relief under Chapter 11 of the Bankruptcy Code, citing “numerous business challenges” that have impacted its operating results and asset values.
The company, renowned as the manufacturer and operator of the Erickson S-64 Aircrane, had been saddled with debt following its acquisition of Evergreen Helicopters in 2013, and the subsequent downturn in the helicopter industry appears to have been enough to force it to file for Chapter 11.
The Evergreen acquisition was later the subject of a shareholder’s class-action lawsuit, alleging a breach of fiduciary duty, that was settled in June this year with an $18.5 million payment from Erickson and the private equity company that controls it.
In Erickson’s voluntary application for Chapter 11, it said it was seeking approval of $180 million in debtor-in-possession financing, but will continue to operate “in the ordinary course of business” during the Chapter 11 process. It said it would file a consensual plan of reorganization within the first 50 days of the bankruptcy case — with the aim of exiting bankruptcy with a stronger balance sheet in early 2017.
In a statement about the move, Erickson CFO David Lancelot said the company 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.
“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,” Jeff Roberts, the company’s president and CEO, said 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.”
In a General and Investor Q&A posted on its website, Erickson noted that it “needs to streamline its aircraft fleet” as part of its restructuring, allowing it to lower its costs, stabilize its businesses, grow revenue, and diversify its product lines.
Following its acquisitions of Evergreen and Air Amazonia in 2013, Erickson had a mixed fleet of 86 rotary-wing and fixed-wing aircraft, including Bell 212s, 214STs, Bell 412EPs, Airbus Helicopters AS350s, AS330J Pumas, AS332 L1 Super Pumas; Sikorsky S-61s, S-76C+, Beechcraft 1900D and Casa C-212 Aviocar — in addition to the S-64 Aircrane.
However, despite the streamlining of its fleet, the company said it “[does] not anticipate additional reductions in our workforce,” which currently numbers more than 700, with 300 of those based in Oregon, where Erickson has its head office.
“Our Chapter 11 filing should in no way compromise or disrupt our ability to serve our domestic or international customers,” a Suppliers Q&A stated. “We will purchase supplies and provide services to customers just as we always have. Employees will continue to receive their paychecks in the same manner as before and suppliers and service providers will be paid for post-filing goods and services utilized in the normal course.”
Speculation that the company would be making an announcement on its financial situation was rife after it failed to release its quarterly results last week. This followed a Securities and Exchange Commission filing that reported the resignations of board member James Welch and Quinn Morgan.