MD Helicopters voluntarily filed Chapter 11 bankruptcy (reorganization) earlier today as part of a strategy to infuse the company with $60 million of fresh “debtor-in-possession” capital, discharge potentially crippling debt, and expedite the sale of its assets. In a prepared statement, MD said it would continue operations as normal during the reorganization.
“MD fully expects operations to continue as normal during the sale process. We have ample liquidity to meet our business obligations, including a commitment for additional new financing in connection with this process, and we remain focused on serving civil and military customers and working with suppliers as normal,” the company said.
The company had been actively trying to find a buyer since the departure of former CEO Lynn Tilton in March 2020. MD was one of dozens of companies controlled by Tilton’s Patriarch Partners and financed by the now-bankrupt Zohar Funds. Patriarch bought “distressed” companies via funding from a series of collateralized loan obligations (CLOs) marketed through Patriarch via its $2.5 billion “Zohar” funds. Tilton placed the funds into bankruptcy in 2018 in what now appears an unsuccessful attempt to keep Patriarch’s portfolio from being liquidated by Zohar creditors, including bond insurer MBIA, which insured $1 billion worth of Zohar notes. Combined debt of the funds is estimated at $1.7 billion. Tilton assumed control of MD in 2005.
Bankruptcy also appears to be an escape from a potentially nine-figure civil judgment recently lodged against MD. In October, a federal jury found the company guilty of fraud related to military sales to El Salvador, Saudi Arabia, and Costa Rica in 2011 and 2012. Under federal law, the $36 million damage award could have been trebled, and whistleblowers Philip Marsteller and Robert Swisher, who originally filed the complaint in 2013, could have received up to 30 percent of the final amount.
Post-Tilton MD pivoted to improve customer support and bolster its civil market presence, but the clock was ticking. “Since last year, we have been exploring a potential sale of the company that would enable us to move forward with new ownership to support MD’s continued manufacturing operations and maintenance services long into the future, as well as deleverage our capital structure,” said director and chairman Alan Carr, who has run MD since Tilton’s departure.
As part of the bankruptcy process, MD entered into an asset purchase agreement with a creditor consortium led by Bardin Hill and MBIA Insurance, which will acquire nearly all of the company’s assets and provide the new capital. It said “financing from accounts managed by Bardin Hill and MB Global Partners” with “cash generated from MD’s ongoing operations, is expected to support the business throughout the sale process.”
MD said bankruptcy “is expected to provide for a quick and orderly sale of the company in a court-supervised sale process.” The consortium will serve as the “stalking horse bidder” in a court-supervised sale of the company, which could be made to a higher bidder, should one materialize.