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    CD&R to invest in CHC Group

    CHC Group Ltd. and Clayton, Dubilier & Rice

    CHC Group Ltd. (NYSE:HELI) and Clayton, Dubilier & Rice (CD&R) have entered into definitive agreements for CD&R managed funds to invest $500 million in CHC through the purchase of convertible preferred shares to be issued in a private placement.

    As part of the transaction, CHC also intends to pursue a $100 million rights offering of the convertible preferred shares to existing shareholders. CD&R has agreed to purchase convertible preferred shares, if any are not purchased in the rights offering, which could bring CD&R’s total investment amount up to an aggregate of $600 million.

    CHC Helicopter is a global provider of offshore flying services to the global oil-and-gas industry, utilizing one of the industry’s largest fleets of heavy and medium commercial helicopters from approximately 70 bases on six continents. The company also flies search-and-rescue and emergency-medical missions for oil and gas companies, government agencies and other customers. CHC’s Heli-One segment provides helicopter maintenance, repair, and overhaul services to CHC’s own fleet and for third-party customers.

    Upon closing of the transaction, CD&R Operating Partner John Krenicki, a former vice chairman of General Electric and president and CEO of GE Energy, will become chairman of the board of CHC. CD&R will also appoint three additional members to CHC’s board.

    CHC plans to use proceeds from the investment primarily to reduce debt and other fixed charges. A portion of the proceeds is expected to be used to redeem $105 million of senior unsecured notes and $130 million of senior secured notes, plus associated premiums. Remaining proceeds will be used to optimize the mix of owned versus leased aircraft, to further reduce debt opportunistically, and for other general corporate purposes. Once the full investment of $600 million is deployed, CHC projects it will generate $50 million to $60 million in annualized incremental free cash flow, on a pro-forma basis beyond previous estimates.

    CD&R will have a 45% ownership position in CHC Group on an as-converted, pro-forma basis, based on a $500 million investment and prior to the rights offering. This percentage could decrease or increase depending on participation of existing shareholders in the rights offering. First Reserve Corp. and its affiliates, which purchased CHC in 2008, would retain 29% ownership in CHC, on a pro-forma basis.

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