Clayton, Dubilier & Rice to Invest in CHC Group

Represents Significant Step to Strengthen CHC’s Balance Sheet
Investment Supports CHC’s View of Robust Opportunity From Offshore Oil-and-Gas E&P
Lower Leverage, World-Class Safety and Operations, Enable Higher Value for Customers
CHC Reiterates Fiscal 2015 Revenue and EBITDAR1 Guidance; Updates Cash Flow Targets
CD&R Operating Partner John Krenicki, Former GE Energy Executive, to Become CHC Chairman
CHC to Hold Related Conference Call on Friday Aug. 22

Thursday, August 21, 2014
Vancouver, British Columbia, Canada and New York

CHC Group Ltd. (NYSE: HELI) and Clayton, Dubilier & Rice (CD&R) today announced they have entered into definitive agreements for CD&R managed funds to invest $500 million in CHC through the purchase of convertible preferred shares to be issued in a private placement. As part of the transaction, CHC also intends to pursue a $100 million rights offering of the convertible preferred shares to existing shareholders. CD&R has agreed to purchase convertible preferred shares, if any are not purchased in the rights offering, which could bring CD&R’s total investment amount up to an aggregate of $600 million.

According to William Amelio, CHC’s president and chief executive officer, the CD&R investment enables CHC to substantially strengthen its balance sheet, one of CHC’s financial priorities.

“The additional equity from issuing preferred stock will give us the financial flexibility to reduce leverage, enhance long-term operating and free cash flow, and deliver even greater value to customers,” said Mr. Amelio. “Based on CD&R’s strong track record of being a supportive strategic partner, we look forward to working closely with the firm to capitalize on market opportunities and drive enhanced shareholder value.”

CHC Helicopter is a leading global provider of offshore flying services to the global oil-and-gas industry, utilizing one of the industry’s largest fleets of heavy and medium commercial helicopters from approximately 70 bases on six continents. The company also flies search-and-rescue and emergency-medical missions for oil and gas companies, government agencies and other customers. CHC’s Heli-One segment is the leading independent global commercial provider of helicopter maintenance, repair and overhaul services, to CHC’s own fleet as well as for third-party customers.

“Our leadership in safely flying in some of the world’s most remote and challenging regions - and promoting even higher levels of overall industry safety - is well-established,” said Mr. Amelio. “And we believe that our team is redefining world-class operations in our industry.

CHC, which has approximately 4,500 full-time employees, reported $1.8 billion in total revenue and EBITDAR of $471 million for its fiscal year 2014, which ended April 30.

“We are pleased to be investing in an industry leader and playing a constructive role to make sure CHC can capitalize fully on the favourable trends in the energy services sector, including oil-and-gas exploration and production continuing to move farther into deepwater and ultra-deepwater locations”, said Nathan Sleeper, a CD&R partner. “CHC’s proven capabilities line up extremely well with this.”

Upon closing of the transaction, CD&R Operating Partner John Krenicki, a former vice chairman of General Electric and president and chief executive officer of GE Energy, will become chairman of the board of CHC. CD&R will also appoint three additional members to CHC’s board.

“CHC’s ability to serve its customers globally and its record of safety, reliability and aircraft availability set it apart from other companies,” said Mr. Krenicki. “We are excited about the opportunity to work with management to continue this focus on safety and customer service and to build on the company’s strong competitive position.”

CHC plans to use proceeds from the investment primarily to reduce debt and other fixed charges. A portion of the proceeds is expected to be used to redeem $105 million of senior unsecured notes and $130 million of senior secured notes, plus associated premiums.

CHC said remaining proceeds will be used to optimize the mix of owned versus leased aircraft, to further reduce debt opportunistically and for other general corporate purposes. Once the full investment of $600 million is deployed, CHC projects it will generate approximately $50 million to $60 million in annualized incremental free cash flow, on a pro-forma basis beyond previous estimates.

CD&R will have a 45-percent ownership position in CHC Group on an as-converted, pro-forma basis, based on a $500 million investment and prior to the rights offering. This percentage could decrease or increase depending on participation of existing shareholders in the rights offering. First Reserve Corporation and its affiliates, which purchased CHC in 2008, would retain approximately 29-percent ownership in CHC, on a pro-forma basis.

The preferred shares will initially be convertible into CHC ordinary shares at $7.50 per share, subject to accretion of 25 basis points per quarter, until the eighth anniversary of the closing date. The conversion will occur automatically (i) from the second to the eighth anniversary if CHC’s stock price trades at or above 175 percent of the then conversion price for 30 consecutive trading days and (ii) after the eighth anniversary if the average of CHC's stock price trades at or above the then conversion price for 10 consecutive trading days.

The conversion can also occur at CD&R’s option at any time and at CHC’s option (i) after the eighth anniversary at the then current market price and (ii) after the 15th anniversary at the greater of (a) the then current market price and (b) 50 percent of the then conversion price. Notwithstanding the foregoing, the aggregate ordinary shares issued upon conversion of preferred shares held by any holder and its affiliates may not exceed 49.9 percent of the total ordinary shares outstanding immediately after such conversion and, for each ordinary share not issued due to this limitation, the holder will receive a non-voting ordinary share.

Dividends will be payable quarterly at an 8.5-percent per annum rate - in-kind prior to the second anniversary of the transaction, and in cash or in-kind at the election of CHC thereafter, along with any dividends on the ordinary shares, determined on an as converted basis.

The transaction is expected to close by the end of calendar 2014 and is subject to approval by CHC shareholders, regulatory approvals and other conditions. Full terms and conditions of the transaction, including the forms of the definitive agreements, will be filed by CHC with the U.S. Securities and Exchange Commission (SEC).

CHC engaged Morgan Stanley as placement agent for the transaction and Evercore Partners as financial advisor and to render a fairness opinion. Debevoise & Plimpton LLP acted as legal advisor to CD&R and Simpson Thacher & Bartlett LLP represented CHC.

In announcing the investment agreement, CHC reiterated its guidance - first provided in early July - for full-year fiscal-2015 gross revenue to increase at a mid to high single-digit rate, and for EBITDAR during the same period to rise at a high single- to low double-digit rate. The company is targeting fiscal 2015 first quarter gross revenue to be up in the high single to low double digit range year over year and for EBITDAR to be roughly flat. The company will provide any updates to guidance after the transaction closes.

Details of Conference Call
On Friday, August 22, CHC Helicopter’s President and CEO, William Amelio and Joan Hooper, the company’s chief financial officer will hold a conference call at 8:30 a.m. Eastern Time to explain the transaction. The call will be available via webcast at Presentation materials accompanying the conference call will be posted to the same website before the call begins. Analysts only are invited to dial into and register for the call via 877-407-9210 (toll free), or +1-201-689-8049 (international) using conference ID 13589734.