Barclays Raises Bristow Group To Overweight

Barclays has upgraded Bristow Group Inc

to Overweight from Equal Weight, with a $20 price target, as it believes the company has an "opportunity to shore up its near-term liquidity shortfall." Shares of BRS have dropped 48 percent year-to-date due to the investor anxiety over its liquidity concerns despite recent credit amendments provides covenant headroom. The company has decided not to raise equity as it has confidence in its liquidity. "We believe BRS's first order of business, before any need to tap the capital markets, is to pursue sale leasebacks of up to $340mm of UK SAR aircraft, which may prove attractive sale leaseback candidates despite our cautious view of the leasing market, as well as asset-based financing for up to $125mn of UK SAR bases and infrastructure," analyst William Thompson wrote in a note. Thompson says a successful sale leaseback, coupled with some level of divestitures and capex deferrals/cancellations, should bridge Bristow's near-term liquidity shortfall. Once the liquidity crisis resolves, the company could focus on cutting its fixed costs and gaining market share in light of the CHC bankruptcy and Super Puma grounding. Further, the analyst highlighted that Bristow should benefit from better pricing and contracts for mission critical service next cycle. Offshore transports and SAR remains a mission critical service with only two major global providers. Rival CHC post bankruptcy return will have only 75 helicopters. BRS still owns a majority of its fleet and over a third of its reported $2.1bn owned fleet value comprises heavy S92s, which will benefit from the recent grounding of the EC225 and AS332L2 Super Pumas fleet," Thompson added. Shares of Bristow closed Friday's regular trading session at $13.52.