DEBT

Listed below is information regarding our indebtedness, all of which was classified as short-term debt on our balance sheet as of June 30, 2018 and as long-term debt on our balance sheet as of December 31, 2017:



	June 30, 2018				December 31, 2017
	Principal		Unamortized Debt Issuance Debt Cost		Principal		Unamortized Debt Issuance Debt Cost
	(Thousands of dollars)
Senior Notes issued March 17, 2014, interest only payable semi-annually at 5.25%, maturing March 15, 2019	$	500,000	$	1,229	$	500,000	$	1,506
Revolving Credit Facility due March 7, 2019 with a group of commercial banks, interest payable at variable rates	122,220		—		117,500		—
Total indebtedness	$	622,220	$	1,229	$	617,500	$	1,506

Senior Notes - Our 5.25% Senior Notes (the “2019 Notes”) will mature on March 15, 2019, are unconditionally guaranteed on a senior basis by each of PHI, Inc.’s wholly-owned domestic subsidiaries, and are the general, unsecured obligations of PHI, Inc. and the guarantors. Interest is payable semi-annually on March 15 and September 15 of each year. PHI has the option to redeem some or all of the 2019 Notes at any time on or after March 15, 2018 at par plus accrued interest. The indenture governing the 2019 Notes (the “2019 Indenture”) contains, among other things, certain restrictive covenants, including limitations on incurring indebtedness, creating liens, selling assets and entering into certain transactions with affiliates. The covenants also limit PHI’s ability to, among other things, pay cash dividends on common stock, repurchase or redeem common or preferred equity, prepay subordinated debt and make certain investments. Upon the occurrence of a “Change in Control Repurchase Event” (as defined in the 2019 Indenture), PHI will be required, unless it has previously elected to redeem the 2019 Notes as described above, to make an offer to purchase the 2019 Notes for a cash price equal to 101% of their principal amount.

Revolving Credit Facility – Our amended and restated revolving credit facility (our “revolving credit facility”) matures on March 7, 2019. Under this facility, we can borrow up to $130.0 million at floating interest rates based on either the London Interbank Offered Rate plus 275 basis points or the prime rate (each as defined in this facility), at our option. This facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under this facility is conditioned upon our continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in certain other transactions or activities and (ii) financial covenants that stipulate that PHI will maintain a consolidated working capital ratio of at least 2 to 1, a net funded debt to consolidated net worth ratio not greater than 1.5 to 1, a fixed charge coverage ratio of at least 1 to 1 if our short term investments fall below $150.0 million, and consolidated net worth of at least $500.0 million (with all such terms or amounts as defined in or determined under this facility). Borrowings under our revolving credit facility are secured on a first-priority basis by our inventory, spare parts and accounts receivable.

Effective as of June 30, 2018, we once again received a waiver of our consolidated working capital ratio for the quarter then ended. As of June 30, 2018, we were in compliance with the remaining covenants. For information about other recent amendments or waivers relating to our revolving credit facility, see "Management Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

Letter of Credit Facility - We maintain a separate letter of credit facility that had $12.1 million in letters of credit outstanding at June 30, 2018 and $12.4 million at December 31, 2017. We have letters of credit securing our workers compensation policies and a traditional provider contract.

We also have outstanding a letters of credit for $7.7 million issued under our $130.0 million credit facility that reduces the amount we can borrow under that facility. The letters of credit were issued to guaranty our performance under an international contract that was awarded in late 2017 and an air medical license.

Other - PHI, Inc. has cash management arrangements with certain of its principal subsidiaries, in which substantial portions of the subsidiaries’ cash is regularly advanced to PHI, Inc. Although PHI, Inc. periodically repays these advances to fund the subsidiaries’ cash requirements throughout the year, at any given point in time PHI, Inc. may owe a substantial sum to its subsidiaries under these advances, which, in accordance with GAAP, are eliminated in consolidation and therefore not recognized on our consolidated balance sheets. For additional information, see Note 15.

Liquidity - Our revolving credit facility indebtedness matures on March 7, 2019 and our outstanding senior notes mature on March 15, 2019. As such, all of our outstanding revolving credit and senior note indebtedness is now due within less than one year. Beginning with our consolidated financial statements as of and for the quarter ended March 31, 2018, we have been required to classify under GAAP all such indebtedness as current liabilities on our consolidated balance sheets. This in turn has caused our current liabilities to exceed our current assets, and has necessitated us receiving two successive short-term waivers of the working capital ratio covenant in our revolving credit facility.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (the "Standard"). Under the Standard, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the entity’s financial statements are issued. Under the Standard, substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within this one year period. This evaluation initially must be undertaken without considering the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this initial determination, management must evaluate whether the mitigating effect of its plans sufficiently alleviates substantial doubt about an entity’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered under the Standard if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within the one year period. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued. PHI’s accompanying financial statements have been prepared in conformity with GAAP, which contemplates PHI’s continuation as a going concern.

Based on our discussions to date with our advisors and current market conditions, we plan to pursue several alternatives to refinance our short-term indebtedness. Nonetheless, because our plans to refinance our debt have not been finalized, and therefore not within our control, these plans cannot be considered probable. Consequently, in accordance with the Standard, these conditions in the aggregate raise substantial doubt about our ability to continue as a going concern within one year after the date the accompanying financial statements are filed. For additional information about our prior and current refinancing plans, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”