New majority owner revives MD Helicopters
After months of uncertainty, MD Helicopters (MDHI) has a new owner. Patriarch Partners, a New York-based financial firm with assets of approximately $4.5 billion, has acquired a controlling interest in the troubled Mesa, Ariz. manufacturer.
For the first time in nearly two years, MDHI CEO Henk Schaeken’s smile can brighten with relief and a degree of faith in his company’s future. “We’re definitely back on the map,” he told AIN. “Patriarch Partners are now 51-percent owners, with MD Helicopters BV and ABN Amro, our long-standing bank, as minority shareholders. Patriarch has a track record of helping companies in difficulties, and it, and especially CEO Lynn Tilton, has been doing everything possible to get us back into the marketplace.”
The restructuring is said to ensure that MDHI will have adequate working capital to continue building its existing product lines (the MD Explorer, MD 600N, MD 520N and the MD 500 series), re-ignite customer support and fulfill existing orders. Significantly, MDHI becomes an independent, Arizona-based company rather than the subsidiary of a Dutch one.
“RDM purchased the light helicopter operation from Boeing in 1999,” said Joep van den Nieuwenhuijzen of former owner RDM. “This (Patriarch) transaction is fully in line with our efforts over the past years to support the company and its products.” Schaeken is eager to point out that the deal “assures our customers that MDHI will have sufficient working capital to be a strong, viable company, fully able to support its products and customers.”
In turn, Patriarch Partners CEO Tilton said she was “proud to add MDHI to our company portfolio. We believe that the demand for its products is deep and strong. We are pleased to be part of this great product line’s future. The strength of Patriarch Partners and the depth of our asset base provide the long-term financial and strategic support that the company needs to rise to its natural level in the light helicopter market.”
Early in March, the Netherlands’ cancellation of an order for seven heavily equipped MD 902s for its national police dealt MDHI a serious blow. The agency was operating one MD 902 under lease while awaiting delivery of its new fleet. Deliveries were initially scheduled for last year, but that was pushed to early this year for the first two aircraft. Later, certification of a higher mtow became an issue.
When it became obvious that the contractor, Helifly, could not deliver the two on time and concerns grew about the level of support the agency could expect for any helicopters that might be delivered, the Dutch interior minister cancelled the order despite Helifly’s strenuous last-ditch efforts.
Restoring Customer Confidence
With new money now available, the company has already re-ignited its supply chain and production line and, Schaeken said, his immediate goal is to restore customer confidence in the company and its ability to support its products. MDHI has a backlog of 17 helicopters, including recent orders from the police departments of Houston; Glendale, Calif.; and Columbus, Ohio, and from two private owners.
“We will be meeting with our customers and suppliers as soon as possible, to help regain both their confidence in our long-term viability and the solid working relationships we once enjoyed,” he said.
One critical supplier is Kaman, which stopped work on fuselages for the smaller types after payments from MDHI dried up. In September last year, it wrote off $21 million worth of billed receivables and recoverable costs. At press time, the Bloomfield, Conn. manufacturer was not prepared to comment on its future relationship with MDHI.
To a large extent, existing MDHI customers appear to have remained loyal to the product, even if their confidence in product support has been stretched a little thin at times. Jeremy Awenat is managing director of Specialist Aviation Services (SAS), which has 13 Explorers in public service use in the UK. He said, “Our customers routinely run a competition between leading types, and our experience has been, when they pick the 902, they stick with their decisions. Clearly MDHI’s troubles have been an issue, and I expect that has played its part in one or two police forces’ decisions since they became apparent, but we have managed to keep our existing fleet flying–one of them accumulated 170 hours during May.
“It has always been the best helicopter available for law enforcement and, if anything, MDHI’s product support has improved over the last year or so,” he added.
Geoff Rogers is unit executive officer for the UK’s Cambridgeshire Police, which chose the 902 in July 2003. Since then, Awenat has kept him updated as the MDHI story took its various twists but, said Rogers, he never lost faith that the helicopter would turn up. “We knew they were still moving product so we hung in there.” Rogers expects MDHI to deliver the unit’s helicopter to SAS for completion by this month and to take delivery in January.
He explained, “That’s only about six months behind schedule, which is manageable. Clearly if it had gone on much longer we would be having second thoughts, but of course procuring another new one would have put us back even more. And we have absolute confidence in SAS.”
Schaeken announced that the company intends to bid its MD Explorer for the U.S. Army’s Light Utility Helicopter program. He also confirms that during the financial upheaval production continued in Mesa, albeit at a slow pace. “We sold an MD 520N to our Russian dealers [GALS Helicopters of Moscow] earlier this year. We have completed two MD 600Ns for the Turkish National Police, and remaining financing issues over the other eight have now been cleared up.”
Jobs became an issue during the downturn, and, he said, Patriarch is also helping them to correct the deficiencies, restore employee benefits and secure their future. “Some had to leave because obviously we couldn’t offer much security, but I am glad to say that some of them are already coming back. We have lost a couple of senior staff, including marketing director Colin Whicher and financial director Ray Cobbold, so we are trying to fill those positions now.
“Our association with Patriarch Partners provides assurances to our customers, suppliers and our employees that MD Helicopters will, once again, be a major supplier. Our new working capital facility and the strength of our investors demonstrate to all concerned that MD Helicopters is in the helicopter business to stay.”
MD Helicopters will be at Helitech in Europe this month.