S&P: Erickson Inc. Recovery Rating Revised To '4' From '3' On Revised Valuation Assumption; Issue-Level Rating Unchanged
The change in recovery is primarily due to a revised valuation assumption of the helicopter assets backing the second-lien notes, based on our expectation of lower realized values in an environment of oversupply.
Key analytical factorsWe have valued the company on a discrete asset valuation (DAV) basis because we believe that it would be liquidated in the event of default. We have assumed that, at default, the asset-based lending revolving credit facility is 87% drawn, which is comparable with current levels. The estimated recovery reflects the senior secured notes' second-lien position on Erickson's assets in relation to the first-lien amount. Simulated year of default: 2017
Simplified waterfallNet enterprise value (after 5% administrative costs): $295 millionValuation split (obligors/nonobligors): 80%/20%Value available to first-lien debt claims (collateral/noncollateral): $274 million/$0Secured first-lien debt claims: $125 million--Recovery expectations: Not applicableValue available to second-lien debt claims (collateral/noncollateral): $150 million/$20 millionSecured second-lien debt claims: $370 million--Recovery expectations: 30%-50% (higher half of the range)Total value available to unsecured claims: $21 million--Recovery expectations: Not applicableStructurally subordinated debt claims: $11 million--Recovery expectations: Not applicableNote: All debt amounts include six months of prepetition interest. The collateral value equals the asset pledge from obligors after priority claims plus the equity pledge from nonobligors after nonobligor debt.