Struggling Helicopter company switches to cash bonuses

Bristow Group, the struggling helicopter company with its head office in west Houston, announced that it has received a warning from the NYSE that its average closing price of its stock has been under $1 over the past 30 days. The company has 6 months to regain compliance with the $1 minimum share price. Otherwise the company could be delisted.

The share price is currently 37 cents (market cap $14 million).

Cash retention bonuses

In the same SEC filing, the company announced that it had paid cash retention bonuses to 9 executive officers.  CEO Don Miller got $945,000 and CFO Brian Allman got $400,000.

It also announced that, from Oct 1, 2019 onwards, certain executives will receive quarterly cash bonuses based on performance and operational targets. These will replace equity incentives. The target award is $942,000 for the CEO Don Miller and $250,000 for the CFO. The filing doesn’t specify how many executives will be receiving quarterly bonuses. The maximum bonus that could be paid out is double the target.

I don’t understand why Mr Miller and Mr Allman should be receiving retention bonuses at this time. Mr Miller was promoted from CFO to CEO on 1 March 2019 and Mr Allman was promoted from Chief Accounting Officer to CFO the same day. They should prove themselves in their current roles before being given retention bonuses.

Material weakness in Internal Controls

The company, which has a March year end, still hasn’t filed its 10-Q for the quarter ending December 31, 2018. The delay was because it found a material weakness in its internal controls related to certain covenants.

The company has a clause in its lending agreement that pledged engines in its helicopter fleet may be swapped with ‘loaner’ engines supplied by a maintenance company, provided that the ‘loaner’ is replaced with the original engine (or similar) within 180 days. The company found that some ‘loaner’ engines had been on the airframes for more than 180 days.

Failed acquisition and Expensive advisers

The company is coming off a spectacular failed acquisition that cost it a $20 million termination fee and elected not to make a $12.5 million interest payment on its senior loan notes. It has hired Alvarez and Marsal and Houlihan Lokey to advise on strategic alternatives.

The company has stated that in its upcoming annual report it will disclose a substantial doubt about the company’s ability to continue as a going concern.

Activist Investor

On May 8, an activist investor, Global Value Investment Corp, filed a proxy statement. It alleges that the company has failed to cut costs quickly enough. GVIC states that Bristow has

  • a fleet of 16 owned H225 helicopters that have not flown commercially since mid-2016 because of a fatal crash of another company’s H225 model. GVIC believes this fleet is worth at least $90 million. It alleges that Bristow has not actively tried to sell this fleet.
  • Two fixed-wing airlines, Eastern Airways (based in the UK) and Airnorth (Australia) that will have negative EBITDA for the year ended March 31, 2019. GVIC believes these could be sold for up to $230 million.

GVIC has called for the resignation of four directors and proposed its slate of alternatives. If GVIC gets control of the board it states it will replace Mr Miller as CEO.

If Mr Miller is forced out, he won’t have to pay back his retention bonus. He will also a severance payment equivalent to 2 x base salary of $700,000 plus prorated annual incentive target bonus ($770,000).

SEC filing

Global Value Investment Proxy


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