Bristow Group Inc. Downgraded To 'CCC-' From 'CCC+' On Elevated Restructuring Risk, Outlook Negative

  • Bristow Group Inc.'s financial reporting issues and the related delay in the release of its 10-Q report are becoming more concerning.
  • We believe that the company may require additional waivers from its lenders.
  • We are lowering our issuer credit rating on Houston-based global helicopter service provider Bristow Group Inc. to 'CCC-' from 'CCC+'.
  • At the same time, we are lowering our issue-level rating on the company's unsecured debt to 'CC' from 'CCC' and our issue-level rating on its secured notes due 2023 to 'CCC+' from 'B'. The '5' recovery rating on the unsecured debt remains unchanged, indicating our expectation for modest recovery (10%-30%; rounded estimate: 20%). The '1' recovery rating on the secured notes also remains unchanged, indicating our expectation for very high (90%-100%; rounded estimate: 95%) recovery in the event of a payment default.
  • The negative outlook reflects the increased probability of a restructuring over the next six months.
NEW YORK (S&P Global Ratings) April 11, 2019—S&P Global Ratings today took the rating actions listed above. The downgrade reflects our view that Bristow's restructuring risk has become elevated due to its liquidity constraints and financial reporting issues, which we believe could take months to resolve. Although the company recently received waivers under two of its credit agreements after failing to deliver its 10-Q report in a timely manner, we believe additional waivers may be necessary and we are uncertain that Bristow will ultimately be able to avoid a going concern qualification in its 10-K report (this could trigger an event of default under certain financing facilities). Furthermore, we expect Bristow's calendar year-end liquidity of $237 million to continue to rapidly decline and note that the financial reporting matter may divert resources from potential liquidity enhancement efforts. Meanwhile, conditions in the oil and gas helicopter services space remain challenging and have already led to bankruptcy filings by several of the company's industry peers. In our view, Bristow's increased restructuring risk is also reflected in the market for its debt and equity securities.
The negative outlook on Bristow reflects our view that the company could engage in a comprehensive restructuring or debt exchange that we would view as distressed over the next six months.
We could lower our rating on Bristow if a default becomes a virtual certainty or the company announces a debt exchange or other restructuring transaction.
We could raise our rating on Bristow if the company resolves its financial reporting issues, maintains liquidity at a level we deem adequate, and exhibits the ability to continue operating without undertaking a debt restructuring.
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