Evaluating a Report for USPAP Compliance

New Online Seminar!

Evaluating a Report for USPAP Compliance

A Special Offering for Lenders and Other Non-Appraisers

Lending professionals and other non-appraisers will gain a better understanding of the Uniform Standards of Professional Appraisal Practice (USPAP) and its applicability to the lending process through this online seminar created by The Appraisal Foundation in partnership with McKissock. The seminar provides insight about appraisers’ USPAP-related obligations in an assignment and arms the underwriter with knowledge of how to best evaluate an appraisal report for USPAP compliance.

This program is not intended for appraisers or to provide training for those performing appraisal review (as defined in USPAP) assignments.

Register for the seminar here.

Feel free to pass this along to your colleagues in the lending community!

Questions? Please contact Paula Seidel at [email protected].

HeliValue$, Inc. held its second quarter Blue Book resale pricing review on July 20, 2015. The models affected are listed below. If you are a current subscriber, please login to your account and visit the resale trends page for each model to view the adjustments.

Agusta AW109E, AW109SP, AW139.
Airbus AS350B2, AS365N2, EC225LP.
Bell 206L-3, 214B, 407GX, 427, 429, 430.
Kaman K-1200.
Robinson R22 Beta II, R66.
Sikorsky S92A

General Market Comments
Light singles like the Bell 206L-4 and 407 are a seeing a little boost in the short range offshore market. With the slowing of new deep water offshore exploration contracts, we are seeing some of the mediums (AW139 & B412EP) and the heavies (S92 & EC225LP) being parked until oil prices recover. Older aircraft such as the Airbus AS332L, AS332L1 and L2, Sikorsky 61N, and the Bell 212 are being replaced with newer aircraft as they become available. These older aircraft are being moved to an almost nonexistent secondary marketplace. The Airbus AS350 series and older Bell 407 models continue to have a depressed market. We have seen some AS332, AS350 series, and AS355 series being parted out due to very low demand and declining resale prices. The used corporate/VIP market continues to be very weak.

While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published values. Stay up-to-date on resale pricing changes by purchasing an annual subscription to The Official Helicopter Blue Book®.

We are interested in any recent sales transactions you would like to report. Every time you buy, sell, lease, finance, or trade a helicopter, and report this information to us, you help update The Official Helicopter Blue Book®. Sales transactions can be reported by emailing [email protected]. All information received is held in the strictest confidence and is only used for our internal review. The next pricing review is scheduled for October 5, 2015.

Carol Busch, AM, of HeliValue$, Inc., has been elected Secretary of the Wisconsin Chapter of the American Society of Appraisers. This announcement comes just two months after the announcement of HeliValue$' President Sharon Desfor's elected position of International Secretary/Treasurer.

Sharon Desfor, HeliValue$' President and ASA's International Secretary/Treasurer, chuckled as she added, "I didn't even know that Carol was running for office, and now we have two ASA Secretaries in one company. I sincerely applaud Carol for her volunteerism and for putting her efforts into such a valuable organization as ASA."

Carol Busch, AM, has been with HeliValue$ for twenty-eight years holding several important positions. Most notable may have been her term as editor of The Official Helicopter Blue Book® from 1993 to 2014. Over the years, Carol has also served as HeliValue$ website manager, public relations manager, events manager, client services, and AR/AP. She now holds the position of Associate Appraiser with over 700 helicopter appraisals completed since April 2013. Carol obtained her American Society of Appraisers accreditation in June 2013 and is on track to receive her senior accreditation status in June 2016. She will be a fourth addition to the HeliValue$ ASA senior accrediated staff. Carol also recently spoke at the 2015 NAFA conference presenting "Will Oil Prices Really Affect the Helicopter Market?"

Carol flashed her trademark grin when she heard the news, and told us, "I'm excited to be a part of the Wisconsin Chapter and promoting ASA's high standards."

About American Society of Appraisers

The American Society of Appraisers is a world renowned and respected international organization devoted to the appraisal profession. ASA is the oldest and only major appraisal organization designating members in all appraisal specialties. www.appraiser.org

HeliValue$ will hold its second quarter Blue Book resale pricing review on July 20. Resale pricing adjustments are based on actual sales transactions and current market conditions such as overall trends in asking prices and increase or decreases in supply, demand, and sales volume. We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide. With the information gathered from many different resources, we review each model covered in The Official Helicopter Blue Book®. While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published page. Stay up-to-date on resale pricing changes by subscribing to The Official Helicopter Blue Book® www.helivalues.com.

The Official Helicopter Blue Book®. Sales transactions can be reported by emailing Lindsay Moore or via our online form here. All information received is held in the strictest confidence and is only used for our internal review.

Congratulations! Sharon Desfor ASA International Secretary/Treasurer - Elect

Sharon moves from MTS Governor to her newly elected position of International Secretary/Treasurer. Sharon will focus on promoting communication and transparency between members and leadership, members' needs whether those are direct benefits or government lobbying, and making ASA relevant on a global basis.

"Sharon has a strong commitment to the education of all appraisal professionals. We are excited that she will have the opportunity to make the ASA even better." - Jason Kmiecik, VP of Operations, HeliValue$, Inc.

www.appaiser.org

Appraising the Appraiser

As originally appeared in Business Aviation Advisor, May/June 2015 (www.bizavadvisor.com)

Finding the Right Appraiser is as Easy as ASA

After the savings and loan crisis in the 1980s, and again in 2008, the banking industry responded with new rules and additional safeguards for better risk management.

One of the most significant changes involves aircraft appraisals.

Prior to 2008, a simple market evaluation by a resale broker, often with just a quick look at the current edition of the Aircraft Blue Book, was sufficient to secure as much as a 90% loan-to-value ratio for a preowned aircraft. That is no longer so.

Today, most banks, leasing companies, and insurance underwriters require that all loan collateral, including business jets, be valued by a qualified, certified appraiser before financing is approved. Those appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), which was created in 1989 by the Appraisal Foundation, and is the generally accepted standard in Canada and Mexico as well as the U.S.

Two organizations provide such appraiser certification: the International Society of Transport Aircraft Trading (ISTAT), which focuses primarily on commercial airliners; and the American Society of Appraisers (ASA), which teaches, tests, and confers credentials to its members, who conduct professional appraisals for business and personal property valuation. The ASA's Machinery and Technical Specialties division offers the only program to train and certify business aircraft appraisers.

Appraisers earn that Aircraft Specialty accreditation by completing a rigorous curriculum and peer evaluation. ASA-accredited appraisers must adhere to the professional standards set forth by ASA's Code of Ethics and Principles of Appraisal Practice, and well as USPAP (in North America), or the International Valuation Standard elsewhere in the world. The two levels of ASA certification, Accredited Member and Accredited Senior Appraiser, are based on the number of years of appraisal experience, with continuing education courses required to hold either accreditation.

The recent rebound in business jet transaction activity has increased the demand for certified appraisals. To meet that need, two established aviation organizations, Jet Support Services, Inc. (JSSI) (www.jetsupport.com) and Embry-Riddle Aeronautical University (ERAU) (www.erau.edu) co-sponsored and co-hosted two ASA accreditation courses earlier this year, one at ERAU's campus in Daytona Beach, FL, and the other at JSSI's European headquarters in Farnborough, UK, with more courses planned for this fall.

What does this mean for you, the aircraft owner?

If you are interested in monitoring the value of your aircraft, whether for financing, refinancing, or sale; or to verify hull value for insurance coverage, you will need to have your aircraft appraised by an ASA-certified appraiser. This will ensure that you have the most accurate and lender-acceptable data.

On average, expect the appraisal to take about one week, with the physical inspection process usually one full day onsite, and the rest reviewing records. The appraiser will conduct a systematic inspection of the interior and the exterior of the aircraft, including: engine, airframe, avionics, instrumentation, and other systems; as well as provide a methodical review of your aircraft's flight and maintenance log books, FAA registration, title, and owner's documentation. Most business jet appraisers avoid "desktop only" appraisals because the inspection and review of the records is extremely important.

In 2015, the average cost for a full appraisal and inspection – required by most lenders – is about $5,000, perhaps up to $7,500, plus expenses. Be aware, however, that a standard appraisal is not the same as a pre-buy inspection for purchase, which can run between $10,000-$50,000 depending on the size and scope of the work.

Rules for lending have changed dramatically in the past six years. If you have not been in the market recently, know that a proper appraisal will ensure that you secure the right equipment at the right price, while meeting your lender's requirements.

For more information about and to find an accredited Appraiser go to www.appraisers.org or call 800-272-8258. BAA

HeliValue$, Inc. held its first quarter 2015 Blue Book resale pricing review on April 1. Resale pricing adjustments were made on the following models on April 2, 2015. To view the adjustments, please log into your account and visit the resale trends page for each model.

Results of April 1, 2015 resale pricing review of The Official Helicopter Blue Book®

Agusta AW109SP	Airbus EC155B
Airbus AS350B	Airbus EC155B1
Airbus AS350B1	Sikorsky S-76B
Airbus EC145	Sikorsky S-76C+
Airbus EC135P1/T1

General Market Comments

There has been little change since our last review in January of 2015. As seen in the last two market updates, light single-turbine helicopters continue to flood the world market. At the time of this review, there were over 700 light singles on the market. The Airbus AS350B (H125) series makes up 35% of those 700 plus, followed by the Bell 206B series at 20%. We are also starting to see slight growth in the used light twin inventory. There are roughly 250 light twins on the market. Of those, 66% are listed as corporate/VIP configured, 77% are ten years or older and the A109 series makes up 45% of all light twin listings. There isn’t a strong secondary market for these machines, with the exception of the BK117, which has found some new life in the utility and oil & gas/mineral exploration markets. There is a softening in the heavy market mostly due to the replacement of older models like the S76A, B, C and AS332 series that are now coming onto the market. We continue to see discounted resale values for most VIP configured machines across all categories.

Resale pricing adjustments are based on actual sales transactions and current market conditions such as overall trends in asking prices and increase or decreases in supply, demand, and sales volume. We obtain sales pricing data from owners and operators, lenders and lessors, brokers and equipment manufacturers worldwide. With the information gathered from many different resources, we review each model covered in The Official Helicopter Blue Book®. While we do review all models each quarter, frequently traded models are updated as soon as they begin to show variation from the previously published page. Stay up-to-date on resale pricing changes by subscribing to The Official Helicopter Blue Book® www.helivalues.com

As usual, we are interested in any recent sales transactions you would like to report. Every time you buy, sell, lease, finance, or trade a helicopter, and report this information to us, you help update The Official Helicopter Blue Book®. Sales transactions can be reported by emailing [email protected] All information received is held in the strictest confidence and is only used for our internal review. The next pricing review is scheduled for July 20, 2015.

Please feel free to email with any questions or comments.

Lindsay Higgins, HeliValue$, Inc.

Unions: UK North Sea Workers Give 'Overwhelming' Support For Strike

LONDON, March 27 (Reuters) - Trade unions Unite and GMB said members working offshore in Britain's oil and gas industry had shown overwhelming support for industrial action over proposed changes to their terms and conditions in a consultative ballot which closed on Friday.

Unite's members covered by the Offshore Contractors' Agreement delivered a 93.5 percent vote in favour of proceeding to a strike ballot, increasing the likelihood of North Sea strike action for the first time in a generation, the union said.

GMB's members also voted "overwhelmingly" in favour of an official ballot for strike action over proposals from clients and contractors to change their conditions of employment, GMB said.

The vote came after talks between GMB and Unite and the Offshore Contractors' Association in February and March failed to make progress on rota changes, rates of pay, sick pay and holiday patterns, GMB said.

"The vote quite clearly demonstrates the anger and frustration of our members employed in the offshore industry," said Dave Hulse, GMB National Officer. "Members are prepared to strongly oppose the changes from clients and contractors."

It was not immediately clear how many workers any eventual strike action would involve. The unions now face the task of putting together an electoral register that is robust enough to withstand any potential legal challenges, a process which could take some time, a spokesman for GMB said.

Some operators want to move to a three weeks on, three weeks off shift pattern, as opposed to the more traditional two weeks on, two or three weeks off.

Companies are also cutting headcount in their North Sea operations to trim costs, with hundreds of job losses announced at Royal Dutch Shell, BP, Talisman Sinopec, Chevron, ConocoPhillips and Taqa since oil prices plunged in 2014.

Unite Scottish Secretary Pat Rafferty said the "massive support" for industrial action should come as no surprise to offshore employers. "The industry agenda is clear in that it wants to impose a reduced number of employees to work longer and for much less -- it's a 'race to the bottom' disease that is unsustainable and unacceptable."

(Reporting by Claire Milhench; Editing by Janet Lawrence)

Pick a letter: U or V

You could get a barrel of West Texas Intermediate oil on Wednesday for just $44.66 (although what anyone would do with one barrel – or enough to fill 3.5 ten-gallon hats – is a mystery). This is the lowest price for six years and shows a fall of about 60 per cent from last summer.

In their analyst calls, Bristow, CHC and Era Group have all talked about whether it will be a U-shaped recovery or a V-shaped one. Of course no one knows. So sensibly, they are preparing for a U and hoping for a V (hopefully we will get a square root √).

While exploration accounts for less than 25 percent of their business, oil companies are also looking to cut production costs by asking operators to find savings and negotiate contracts.

There is little sign of a rebound in oil prices yet. US oil production has not yet fallen and the amount of oil stored in the US continues to rise. Yesterday, Ali al-Omair, Kuwait’s oil minister, told Reuters: “Within OPEC we don't have any other choice than keeping the ceiling of production as it is because we don't want to lose our share in the market."

Every downturn is different – and OEMs and operators are clearly in it together – but it will be interesting to see if leasing companies can give smaller operators more flexibility.

West Texas Intermediate futures for April are at $43.9 a barrel. The August future is now at $50.

CHC cutting costs

Continuing on oil, CHC’s third quarter call was far more depressing than Clark McGinn’s (its former head of asset finance’s, now gardening before moving to Waypoint) presentation at Helicopter Investor London 2015 last month. The operator is cutting costs and looking to boost its capital efficiency.

Karl Fessenden, CEO of CHC, said there have been lots of delays and cancellations on the exploration side. Although he stressed that 80 per cent of CHC’s flights are supporting production rather than exploration.

CHC Group had revenue of $415 million and a net loss of $465 million for its fiscal 2015 third quarter, which ended January 31, 2015.

Sales fell by 2 per cent in real terms (or 9 percent including currency changes). CHC had an adjusted loss of $30 million, when special items of $442 million (which includes $404 million of goodwill). Adjusted EBITDAR – which includes lease rentals - was $115 million and was up in real terms when currency changes are excluded.

Joan Hooper, CFO of CHC, said they are expecting to take seven new helicopters in their 2016 fiscal year (which starts on 1 May this year) out of their firm orders for 19 helicopters.

Hooper discussed helicopter finance several times. CHC has recently had its fleet valued at about $3 billion. Some 80-85 per cent of these helicopters are leased. This many, however, may change said Hooper: “We’re just in throes of doing that in terms of what is the right mix of owned versus leased over the next several years.

“How do we refinance aircraft from a lease cost? Is there other ways to finance aircraft other than the same, so are there other debt related searches that might be cheaper than leasing. We are going to look at all those options to lower overall cost of capital and lower our fixed charges.”

CHC has bought back debt and estimates that this will save it $20 million a year in interest costs. Hooper also thinks they can get lease rates down.

“Lease is probably okay other than I mentioned, we are going to really look to find ways to actually lower the lease costs,” says Hooper. “We believe there is excess capacity in the lease financing market and so we're going to be talking to the lessors about coming up with a book of business that’s attractive to them and if we can refinance that at attractive rates we will be looking to do that.”

A great year(a) for Era

Chris Bradshaw, CEO of Era Group, was slightly more bullish (as was Jonathan Baliff at Bristow last month). Era had a record year in 2014 when special items for 2013 are removed.

ERA Group had net income for its fourth quarter, ending December 31, 2014 of $3.2 million on operating revenues of $74.7 million. It reported net income for its 2014 of $17.1 million, on operating revenues of $331.2 million compared to net income of $18.7 million on operating revenues of $299.0 million in the prior fiscal year.

Its 2014 EBITDA was $85.9 million compared to EBITDA of $93.1 million in the prior fiscal year – but 2013 included gains on asset dispositions and special items. Adjusted 2014 EBITDA was $84.7 million compared to $77 million in the prior year.

Era made a $6.1 million gain selling helicopters in 2014 compared to $18.3 million in the prior year.

Bradshaw estimates that 75 per cent of its business comes from production support, pipeline operations, transporting US Government inspectors and dry-leasing.

Era is waiting for its first four AW189s (it is the North American launch customer) and its first S92 comes in August. It says it has already placed all of these and two more S92s. In total, it has firm orders for 19 helicopters: 10 AW189s, four S92s and five AW169s.

He said: “The biggest driver of Era’s record profit was demand in the Gulf of Mexico” and Bradshaw is still bullish. “I would certainly note that relative to a lot of the other oil and gas markets around the world the Gulf of Mexico is a relative bright spot. The current floating rig count in the Gulf of Mexico today is about 43, which has held-up pretty well, it's actually up from about 38 at mid-year 2014 and about 36 at the end of September 2014.”

Bradshaw is also upbeat about Brazil…

Petrobras petrodollars

While everyone is being depressed about oil prices, operators are eagerly awaiting news from Petrobras. The latest bidding round closed at the end of January.

In its latest analyst call, Bradshaw said Era Group was the lowest bidder for four AW139 helicopters with contracts scheduled to start in the first quarter of 2016. It also said it won a bid for four heavy aircraft (three of these are renewals). Unusually for Era – which likes owning aircraft – it is considering sale and leasebacks.

CHC was more circumspect. With Fessenden saying: “I would just say that it's too early to comment on this. It’s a public tender. It also had public challenges, which are in the public domain and so we won’t make any comments on anything until the tender has closed and those challenges have been addressed. And there have been numerous challenges frankly.”

KKR really, really like helicopters

KKR these week firmly established itself as serial helicopter investor by buying Air Medical Group.

It now owns Air Medical, has a stake in Malaysia’s Westar and a joint venture with Lease Corporation International. Air Medical Group replaces its stake in Avincis which it sold out to Babcock (now the – genuinely – catchy Babcock Mission Critical Services).

Bain Capital bought its stake in Air Medical in 2010. At the time a source told Reuters it was valued at $1 billion. Another source has told Reuters that Bain is paying $2 billion now. This sounds like a good return, although Air Medical has grown significantly since then buying at least five operators and moving into ground transportation.

At Helicopter Investor Miami 2014, Dave Hinton, senior vice president of finance and controller of Air Medical, had a great motto: “We want to be the best thing that happens to you on the worst day of your life,” he said.

Singapore slings

We are still working on Helicopter Investor Asia 2015, which takes place for the first time in Singapore on 8 June. If you would be interested in speaking, sponsoring or attending (operators attend for free) please email [email protected].

Have a great weekend,

Alasdair Whyte
Editor
Helicopter Investor

As a result of our fourth quarter pricing review of The Official Helicopter Blue Book®, resale pricing adjustments were made to the following models. To view the adjustments made, please log into your account and visit the resale trends page for each model.

Results of January 6, 2015 resale pricing review

Agusta AW109SP	Bell 407
Agusta 119K	Airbus AS350B2
Agusta AW139	Airbus AS350B3
Bell 205A	Airbus BK117A4
Bell 230	Airbus EC155B1

Listed below are models that had a pricing adjustment since the review on January 6, 2015.

Sikorsky 330J

Sikorsky S61N

Airbus 332L1

Airbus 332L2

As usual, we are interested in any recent sales transactions you would like to report. Every time you buy, sell, lease, finance, or trade a helicopter, and report this information to us, you help update The Official Helicopter Blue Book®. Sales transactions can be reported by emailing [email protected]. All information received is held in the strictest confidence and is only used for our internal review. The next pricing review is scheduled for April 1, 2015.

To view the most recent changes to the resale pricing for these models, login to your account, choose a model and then the Resale Trends tab.

General Market Comments

Comp 59880230

HeliValue$ continues to see an increasing inventory of light single engine helicopters on the world market, especially the AS350 series. With the decline in corporate and VIP markets and the introduction of more efficient light twins, there has been a steady increase of older light twins like the AW109 into the used marketplace. Despite recent panic over declining oil prices, there continues to be strong demand for medium and heavy offshore machines. Due to the low supply of offshore configured machines and the steady decline of the VIP/Corporate market overall, we continue to see discounted prices for the used medium and heavy VIP/Corporate configured aircraft.

There has been an increasing number of inquiries about the oil price decline and its effect on the helicopter industry. Recently one of our appraisers Ben Moore, addressed these concerns in an article emailed to our subscriber and client base on February 17, 2015. If you're interested, you can find a copy of his article here.

Please feel free to email with any questions or comments.

Lindsay Higgins, HeliValue$, Inc.