Comment: Is Bristow as bad as it looks?

Bristow

Bristow Helicopters is currently under intense market scrutiny stemming from its failure to file its third-quarter results for 31 December 2018 on time.

“Material weaknesses” in its internal accounting processes were cited by the company as the chief reason for the delay in filing. Having twice informed the SEC in February that its results would be late, with the most recent filing lacking a timeframe for the final version of its third quarter results to be filed, Bristow stated that the assessment of its accounting practices may result in an evaluation of its ability to continue as a going concern.

A number of corporate law firms are now circling and investigating the operator for securities fraud and are trying to recruit shareholders for class actions. As a result, the operator’s new CEO, former chief financial officer Don Miller, faces a tough start at the helm.

However, is Bristow actually facing long-term structural issues or is this merely a blip for an operator long considered a star of the sector?

There are some market sources who think the late filing is purely an auditing issue, and that Bristow is far from having to consider any type of restructuring. Helicopter Investor understands that one lender’s view is that Bristow will likely file its late results soon. and that it still has a couple of weeks before it would have to acquire additional waivers from lenders for its tardiness in filing.

Indeed, a close examination of Bristow’s SEC filings gives some weight to this positive take, with its issues seemingly close to being resolved.

Bristow’s concerns over internal control deficiencies have been detailed as relating to helicopter engines not being matched or returned to pledged or leased helicopter airframes within specified periods, as required under secured financing and helicopter lease agreements.

However, only nine helicopter engines under three agreements are still of concern, with previous related issues fixed before December 31 2018, Bristow stated in its 19 February SEC filing. Waivers for non-compliance on these nine engines has been secured, the operator added.

Judging by the above, if Bristow files its third-quarter results sooner rather than later then its recent tribulations may just be a blip.

Yet the late filing has coincided with Bristow announcing a new chief executive in Don Miller and the cancellation of its planned acquisition of Columbia Helicopters.

In public-relations speak, the optics are not great for some market observers.

One point raised by an analyst is that Miller was the chief financial officer responsible for the control failures, but has now been promoted to chief before they have been resolved. Was his appointment maybe due to a lack of suitable external candidates or was Bristow maybe wanting a chief with bankruptcy experience given Miller’s prior roles at a post-bankruptcy Enron company, the observer asks.

While these points may be speculation, they are the type of questions a public company like Bristow will face when a string of negative announcements are issued. And though the underlying issues leading to those announcements may be about to be resolved, Bristow will need to communicate those fixes effectively and efficiently to allay any doubts in investors’ and observers’ minds, particularly at a time when other large operators are under pressure.

Perception of a company is equally as – if not more – important than its actual health when public assessments of a company’s strength are made. Bristow’s share price woes underline this, with the company trading at $3.06 a share on 11 February when it first informed the SEC it would be late filing. Two days later, the share price fell to $1.20 and on 4 March had dropped to $1.16.

Given that several law firms are investigating Bristow, the firm will likely have further public- and investor-relations battles to come.

The market will now wait for Bristow to file its third-quarter results. If those results are filed soon, and put to bed its accounting issues, the operator’s current woes may soon be forgotten, especially given that the oil-and-gas helicopter market looks set for an upswing. However, further delays will lead to tougher questions, and perhaps tougher outcomes.

 

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