PHI INC

Among other things, the Term Sheet provides that, upon our emergence from bankruptcy, our current secured lenders will be repaid and our current unsecured creditors will, subject to various exceptions and limitations, receive equity in a newly-reorganized parent company issuer. The Term Sheet further provides that, contingent upon the effectiveness of the Company’s plan of reorganization, Mr. Al A. Gonsoulin, who currently serves as the Company’s Chairman and Chief Executive Officer, will retire from all positions held with the Company and its subsidiaries, including as a member of the Board of Directors, effective upon the date of the Company’s emergence from the Chapter 11 Cases (the “Emergence Date”). The Term Sheet further provides that Mr. Lance F. Bospflug, who currently serves as President, Chief Operating Officer and a director of the Company, will be appointed to succeed Mr. Gonsoulin as Chief Executive Officer of the Company on the Emergence Date and will continue to serve as a member of the Board.

As noted elsewhere herein, on August 2, 2019, the Bankruptcy Court entered a confirmation order confirming the Debtors’ Third Amended Joint Plan of Reorganization filed with the Bankruptcy Court on June 18, 2019, as thereafter supplemented (collectively the “Plan”). The Plan contemplates a series of restructuring transactions, including without limitation borrowing additional funds principally to refinance existing debt, issuing additional equity securities, implementing a new holding company structure, settling bankruptcy claims in the manner contemplated under the Plan and making various regulatory filings in connection therewith. We expect to complete all these transactions and filings and to fully implement the Plan effective as of the end of August 2019, at which time we would emerge from Chapter 11. However, implementation of the Plan, as well as several of its component transactions, are subject to various conditions that must either be met or duly waived on or prior to such effective date, including those described in Note 2. It is also possible that the Plan could be amended or supplemented in accordance with the Bankruptcy Code prior to the Plan becoming effective. For these reasons, we can give you no assurance as to when, or ultimately if, the Plan (or any other plan or reorganization) will become effective.  As such, there is raise substantial doubt about our ability to continue as a going concern.

We filed with the Bankruptcy Court and the SEC projected financial information to demonstrate to the Bankruptcy Court the feasibility of our Plan and our ability to continue operations following our emergence from the Chapter 11 Cases. Those projections (and similar projections furnished to individuals during the Chapter 11 Cases in connection with their proposed investment in us) were prepared solely for the purpose of the Chapter 11 Cases and have not been, and will not be, updated on an ongoing basis. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections and valuation estimates may prove to be wrong in material respects. Actual results will likely vary significantly from those contemplated by the projections. For all of these reasons, investors should view our publicly-filed projections as speculative and should not rely on these projections.

The amount of publicly-available information concerning us may decrease substantially following our anticipated emergence from bankruptcy.

We expect to have fewer than 300 stockholders of record upon emergence from bankruptcy, and therefore will be eligible to terminate the registration of our common stock under the Exchange Act. Although no definitive decision has been made as to whether or when to take such action, we are currently contemplating filing documentation with the SEC after the Emergence Date that would voluntarily deregister our securities under Section 12(g) of the Exchange Act and suspend our reporting obligations under Section 15(d) of the Exchange Act. If we do so, our obligations to file periodic reports would be suspended or terminated. Although we could thereafter voluntarily elect to provide information to our security holders, we would not be legally obligated to do so. To the extent these actions limit the amount of publicly-available information concerning us and our securities, our ability to raise additional funds, the ability of our security holders to sell their securities, and the liquidity and trading prices of our securities could all be negatively impacted.

If our Plan is implemented as anticipated, we expect to continue at emergence from bankruptcy to be subject to financing arrangements containing negative covenants that may materially restrict our operations. Similarly, we expect that our future financing arrangements will likely contain similar covenants. Our ability to meet certain of these covenants can be affected by events beyond our control, and we cannot assure you that we will meet them in the future. Any such failure to meet such covenants would constitute an event of default, which could potentially result in additional defaults or the acceleration of payment obligations under cross-default or cross-acceleration provisions in other of our agreements. We may be prevented from taking advantage of business opportunities that arise because of the limitations imposed on us by these restrictive covenants. These restrictions could also limit our ability to obtain future financings, make needed capital expenditures, withstand a downturn in our business or the economy in general, or otherwise conduct necessary corporate activities.