Sealand

"Many observers have suggested that the birth and subsequent success of Sealand was a stroke of Irish luck. True, the launch of Sealand and its growth into the Canadian Helicopter Company (cHc) happened to coincide with the development of Newfoundland’s offshore petroleum industry, but it would be foolish to suggest that Dobbin did not foresee the business potential from the beginning. Sealand was not initially designed to be a major player in the province's oil and gas production, and JetRangers were not ideal machines to meet the needs of the petroleum giants; they were too small, too slow and too subject to being grounded in bad weather conditions, making aerial surveys, photography and chartered flights their main applications. There was money to be made from these markets, but not big money. That opportunity lay elsewhere."

"On the upside, Dobbin’s pioneering move provided leverage in his negotiations to purchase the Super Pumas. Aerospatiale needed a breakthrough in the North American market, dominated by homegrown competitors Bell and Sikorsky. Aerospatiale were prepared to accommodate the first serious purchaser of Super Pumas with attractive deals, and they did, after Sealand received an injection of capital from Louisiana-based Petroleum Helicopters. Cash acquired in exchange for 22 per cent equity in Sealand enabled Dobbin to place a down payment on a fleet of Super Pumas for delivery in 1982."

"Bidding goodbye to his astonished co-workers at Okanagan, Jones departed for St. John’s. Within a few days of arriving at. Sealand, he began doubting the wisdom of his decision. He may have wangled a good deal out of Dobbin, but its value was worthless if Sealand was unable to meet its financial obligations to him. That was a distinct possibility, since the company was having difficulty meeting its financial obligation to almost everyone else. Among Sealand’s most vocal creditors was Aerospatiale, awaiting payments for its fleet of multimillion-dollar Super Pumas plus spare parts and servicing equipment in Sealand’s possession. The chances of settling the debt quickly were minimal. Sealand’s revenue was about $20 million annually, but overhead costs were absorbing so much of its income that little was left over. Much of Jones’s effort, he soon realized, would consist of juggling one dollar in the bank with every three or four dollars the company owed. Sealand’s immense debt was disconcerting to him and every staff member aware of the situation. But not to Craig Dobbin."

"To become a serious bidder, Sealand would require a fleet of helicopters similar to Okanagan’s aging Sikorsky s-61s. To chase the contracts Dobbin would have to upgrade his fleet. But instead of the economical option of buying or leasing his own Sikorskys, he chose a strategy that became a hallmark for both the remarkable successes and the various crises the company encountered over the next twenty years."

"orget used Sikorskys or new medium-sized LongRangers, Craig Dobbin decided. They were half-measures. To get the job done right he would order a fleet of Supér Pumas, immediately identifying Sealand as a serious player in the industry. It was a bold, almost foolhardy move. The Super Pumas were among the most expensive craft available, each carrying a purchase price of $6 million, or about half the company’s annual gross revenue at that point. He would have to float their purchase at a time when interest rates hovered at record levels of 16 to 18 per cent. What’s more, the Super Pumas were unproven in the North American market; they looked good on paper, but no one was anxious to test-fly the machines in the tightly scheduled and highly competitive offshore petroleum industry. No one, that is, except Craig Dobbin."

"Sean Tucker, a Sealand pilot (and nephew of Craig Dobbin), recalls occasions when Dobbin gathered pilots and maintenance staff _together in the company’s hangar at St. John’s airport to announce, “Boys, I can’t make the payroll this week. If you hang on I'll do my best to see that you get paid next week, and I'll catch up then.” “Each time it happened,” Tucker remembers, “the response was, ‘That’s all right, Mr. Dobbin. Do the best you can, It was an amazing example of the loyalty and affection everyone had for him. And he was as good as his word. Everybody got paid eventually.”"

"It took a disaster of historic proportions to end the crisis. In mid50 November 1985 the volcano Nevado del Ruiz erupted for the first time in nearly 150 years, spewing ash and lava from its 5,ooo-metre summit. Towns and villages were buried beneath ash and mud, and rescue efforts were hampered by fallen bridges and impassable roads. Literally overnight the impasse over entry permits vanished. Instead of barring the Sealand choppers, Colombia pleaded for them to assist in search-and-rescue operations, and for two weeks Sealand craft and crews worked around the clock delivering food and tents to survivors in remote villages and ferrying others to safety. Even with these efforts, assisted by contributions from other countries, thousands of Colombians lost their lives in the eruption."

"Jones explained to Dobbin that he enjoyed his job, he and his wife loved Vancouver, and though he was flattered by the offer he was not interested. Refusing to concede, Dobbin called several times over the next few months, attempting to persuade Jones to accept the job, even flying Jones and his wife to St. John’s for a meeting. Jones continued turning down the offer until the day Dobbin called Jones at a relative’s home in Winnipeg and said, “What the hell is it going to take to get you back east running Sealand?”"

"Despite constant threats of bankruptcy, Dobbin kept finding new ways to expand the company, ways that demanded access to new sources of investment capital. His confidence and charm, plus a remarkable knack for grasping and assessing financial figures, helped him succeed where others would not even venture. On one occasion, he announced to a Sealand manager that he was off to New York in search of new financing. “But we're in a serious debt position,” the manager reminded him. “How are you going to convince anybody in New York to give us more money?” Dobbin grinned and replied, “A cat makes strange jumps when it’s cornered.” A few days later he returned with a new inflow of badly needed cash."

"Even with the 10 per cent cut,.from time to time Sealand’s cash situation was insufficient to keep the company afloat. Bob Dunne, a childhood friend of the Dobbin clan who managed the Sealand hangar in the mid-1980s, recalls Dobbin being forced to lay off several of his staff, among them Dunne himself. “He gave me my severance cheque, and it was a pretty good one, too,” Dunne says. “But I was the guy who made the deposit at that particular bank branch and I knew there wasn’t a bunch of money there.” Leaving the Sealand offices, Dunne made a prudent decision. “I beat it to the company’s bank. I knew if I went there I'd get [the cheque] changed without question and without waiting around to see if she'd bounce or not. So I got her changed to cash, then went up the road to my own bank and deposited it.” The next day, Dobbin called Dunne back to the hangar and said, “Good news. I’ve got your job back for you.” ' “He asked me for his cheque back,” Dunne grins, “and I told him what I did. I said I went straight to his bank and got the cash without waiting to see if the cheque would clear or not. And you know what Craig Dobbin did? He laughed and said, ‘You did the right thing. That was good thinking on your part. That’s what he was like.”"

"The appeal to Dobbin may have been more than an opportunity to add to Sealand’s bottom line. It might have been personal. Dobbin’s winning the offshore oil contract from Okanagan a few years earlier had deeply angered one of Okanagan’s larger shareholders, John Lecky. Since that time, Lecky had acquired control of Okanagan, and Craig Dobbin may have enjoyed the chance to challenge him again, the son of a St. John’s lumber dealer matching wits with the Cambridge-educated sophisticate who was heir to the MacMillan Bloedel fortune. Many businesspeople, including Harry Steele and Robert Foster, liked and admired Lecky. Craig Dobbin did not. “John Lecky inherited a billion dollars,” Dobbin once noted, “and it’s become his hobby to blow it all away.”"

"Jones kept raising the issue with Dobbin, pointing out that free trips represented a substantial leak from the company’s revenue stream. Finally he laid it out with all the strength and conviction he could muster. Controlling this single expense, Jones lectured, would represent a major step in the company rising out of its debt position. “J.C., that’s just what I need to hear,” Dobbin replied, slapping Jones on the back. “You get on top of this and tighten it up for me.” Jones asked Dobbin if he was serious; Dobbin assured him that he was damn serious. Quickly rounding up all the Sealand pilots, Jones announced there would be no further free helicopter service for anyone. “Only two ways can you take one of our choppers off the ground,” he ordered. “If it’s a real revenue-producing flight under a contract, or if my signature is on the flight request. Got it?” The pilots got it"

"That weekend, Jones was working in his garden when he looked up at the sound of a cuc helicopter passing overhead. Recalling no scheduled flight that day, he checked the log on Monday morning to see that the craft had been flown by Sealand’s chief pilot. Jones encountered the pilot and asked, out of curiosity, the purpose of the flight. An emergency call from a client? A post-maintenance test? “The pilot, who I knew adored Craig, started pawing the ground with his foot and looking around, trying not to answer me,” Jones says. “All he said was, ‘I had to go somewhere, and I kept asking him where, what was he doing? Finally, he admitted Dobbin had called, telling the pilot he wanted to go flying and swearing the pilot to secrecy, saying, ‘For God’s sake, don’t let J.C. hear about this!’ So there was the Chairman in conspiracy with his own people to keep me in the dark because I was trying to save the company money.”"

"On the return flight to Newfoundland, Jones assumed the deal was dead before it was born. Rutledge was not prepared to accept empty promises. He had told J ones, in effect, that when the $500,000 was deposited in Rutledge’s account, they would talk. Until then, nothing was going to happen. In St. John’s, Jones broke the news to Dobbin, who pondered the situation for a moment, then shrugged and said, “So pay him the half-million out of our operating line,” meaning the million-dollar credit arrangement Sealand had with rp Bank to cover the firm’s day-to-day expenses. Jones protested they couldn't do that. Tp granted the credit to pay for salaries, rent, fuel and other expenses, not to spend it on acquisitions. The bank would never approve giving half of Sealand’s entire line of credit to Rutledge just to open negotiations. Besides, reducing their access to available cash by 50 per cent would leave Sealand in a difficult position when it came to paying its bills. Dobbin’s response was familiar to Jones by now. “Screw the bankers,” he said. “Let’s do it.”"

"All attempts to present Sealand’s case were made by Jones. Craig 64 Dobbin sat quiet and unsmiling. He let the Sealand president absorb the verbal abuse during several minutes of Aerospatiale’s harangue, then interrupted another of the lawyer's diatribes by standing up and raising his hand. “I’ve had it up to here with you people,” he said when the lawyer sputtered to silence. “You want your helicopters back, here’s where they are.” He began waving his arms, directing the Aerospatiale’s team towards appropriate points of the compass. “There are three parked deep in the Amazon jungle, two more up on Baffin Island, two in St. John’s and three in Africa. You want ‘em, you go and get ’em. But I’m cutting off the insurance on them, bringing my pilots home, moving the helicopters out of the hangars, and you can forget about maintenance. So go get your helicopters. We're going home. Let’s go, J.C.” Without even a glance back, Dobbin stalked out of the board room, J.C. Jones at his heels."

"Responding to a direct summons, Dobbin and Jones travelled south to Aerospatiale’s North American office, expecting to negotiate terms for future payments in a businesslike atmosphere. Instead, they encountered a herd of hostile executives and angry lawyers determined to wring money from Sealand with all the finesse of a Texas posse in pursuit of outlaws. “They talked to us like we were a couple of schoolboys catching hell in the principal's office,” Jones remembers. “They weren't polite, they weren’t accommodating, they weren’t even businesslike. They considered us a couple of dummies from Canada who owed them money and weren’t paying them.” One lawyer repeatedly challenged Jones, growing ruder with every effort Jones made to explain the situation. Referring to Jones and Dobbin as idiots and crooks, the lawyer interrupted every utterance from Jones with a fresh insult and accusation."

"The people at Aerospatiale had a different view. For several months the company had tolerated Sealand’s neglect of its debt in exchange for Sealand’s showcasing its Super Puma fleet in North America. U.S.’helicopter firms had long favoured domestic manufacturers, notably Sikorsky and Bell. The Super Pumas were foreign and highly advanced. How reliable could they be, and how good was French engineering and quality control? Whenever those questions arose, Aerospatiale pointed to Sealand’s success in servicing oil platforms off the coast of Atlantic Canada, high in the Arctic and down in the South American jungle. There was a limit to Aerospatiale’s tolerance, however."

"Within a few days, Jones was on his way to meet with Rutledge at his firm’s office in Buttonville Airport, northeast of Toronto. Rutledge greeted him warmly, then set the first rule. Before negotiations began for Sealand to acquire his company, Rutledge wanted a guaranteed non-refundable deposit of $500,000. No matter how the negotiations proceeded and whether or not a purchase deal was reached, Rutledge would pocket the $500,000. Rutledge also set a negotiating deadline. If a deal was not reached within ninety days of Rutledge receiving the deposit, discussions would be cut off and Rutledge would retain the half-million dollars."

"In 1985 yet another crisis arose to challenge Craig Dobbin’s determination to succeed. In a perfect storm of adversity, offshore petroleum exploration and production around the world plummeted, and the federal government cancelled a package of incentive programs. Both events occurred just after Sealand placed an order committing it to accept delivery of six new Super Puma craft from Aerospatiale and purchase an additional six in the near future. Almost overnight, too many helicopter service operations began chasing too few contracts, creating an unprecedented buyer’s market. Less than two years earlier, Sealand was winning bids of $240,000 per month to supply one Super Puma and crew; now they were being asked to provide the same service at $99,000, with a second Super Puma as backup."

"In Dobbin’s eyes, the risk of Aerospatiale shutting down Sealand was nil. The machines were about to sit uninsured and unprotected in locations around the world without pilots to ferry them to France or Texas. The prospect of Aerospatiale selling the machines at better than fire-sale prices to anyone else within a short time was not good; in exchange for taking Sealand’s debts off its books, Aerospatiale would acquire an inventory of a dozen used machines, perhaps with operational problems and with no immediate buyers. Dobbin’s decision to walk was hardly risk-free, however. Without the Super Pumas, Sealand was certain to lose its offshore petroleum contracts, and Aerospatiale could apply sufficient legal pressure to shut down Sealand entirely if it chose."

"Foster tapped str Canada, the local arm of Bankers Trust in New York, as a funding source, and on behalf of Sealand he began negotiations with Len Rutledge to purchase Toronto Helicopters. According to Foster, the negotiations grew complicated because of Rutledge’s apparently endless demands. “We would reach an agreement and get ready to sign off,” Foster says, “and Len would say, ‘Oh, there’s one more thing, and we'd have to deal with that.” Rutledge kept raising issues each time Foster believed they had a deal until, within a day or two of the final deadline, he said again to Foster, “Oh, there’s just one more thing.” “Len,” Foster replied, “I’ll do this ‘one more thing, but if there’s anything else I’m going to advise Craig Dobbin to just walk away and forget everything.” The “one more thing” this time turned out to be the purchase of Rutledge’s Mercedes-Benz. Foster agreed, and negotiations were completed. Sealand was about to purchase its larger rival, leaving Sealand with a sweat-generating 27:1 debt-toequity ratio."

"that it couldn’t ignore Aerospatiale’s concern about continuing to provide parts and support without payment, especially when so much money remained outstanding for the purchase of the Super Pumas. The two sides agreed on a plan of repayment that met both their needs, and Sealand continued its operations. It was classic Craig Dobbin, this rolling the dice with everything on the table, and he would repeat the action over and over again in the coming years."

"After spending time and effort on the ou1P pitch, Jones was dispirited when he broke news of the province’s rejection to Craig Dobbin, expecting the Sealand owner to abandon the idea. Dobbin, however, had a different response. “The hell with the contract,” he grinned. “Let’s buy the buggers out and we'll get the contract that way! We'll start with Toronto.” Buy them? Jones thought. What a crazy idea. Toronto Helicopters was comparable to Sealand in size, providing craft and pilots for a wide range of services beyond the ouIP contract. It was also a very profitable company. What’s more, John Lecky had been attempting to purchase Toronto from company president Len Rutledge for some time; each effort was turned down flat. Why should Rutledge look with favour on Sealand’s offer? One of Craig Dobbin’s most popular aphorisms was “Never take no for an answer,” and he instructed Jones to contact Rutledge, set up a meeting and arrange a deal. To Jones’s surprise, Rutledge’s response to his request for a meeting was, “Sure, let’s talk.”"

"The action of Bankers Trust, Jones believed, was akin to extortion, costing Sealand millions of dollars more than anticipated. But there was no backing out. He agreed to the higher interest rate, new terms were drafted, an agreement was signed, and the deal was completed. Craig Dobbin was furious over the actions of Bankers Trust, of course. In retrospect, however, the purchase of Toronto Helicopters proved a major step in transforming the company into a global powerhouse. With Toronto Helicopters rolled into Sealand and its cash flow solving many of Sealand’s liquidity concerns, Craig Dobbin’s eyes brightened at the prospect of the next step in expanding his company, this one even more audacious. One morning shortly after the deal to purchase Toronto Helicopters was completed, Craig Dobbin strolled into Robert Foster's Toronto office. “Robert,” he said, “I want you to get on a plane, fly to Calgary and buy Okanagan Helicopters for me.”"

"The dominant size of cuc enabled Dobbin to extend the company’s clout in the industry and acquire more competitors. By the . end of 1987, cHc had gathered fuel distributor Aero Flight Holdings Ltd. under its corporate wing, along with Offshore Helicopter Technologies Ltd., operator of a flight simulator facility in St. John’s. Early the following year cHc spent $9.7 million to purchase Ranger Helicopters Canada, highly regarded for its geological services, then topped off its acquisitions with Quebec-based Viking Helicopters in early 1989. Second only to cuc in size within Canada, Viking was Quebec-based, providing Dobbin and cue with a solid blanket of services across Canada. The once regional Sealand reigned supreme over helicopter services in Canada as cHc, with annual revenues approaching $100 million and Craig Dobbin being hailed as a genius financial strategist."

"Robert Foster made his pitch to potential investors based in part on the performance of recently acquired Toronto Helicopters. The addition to Sealand was an established, well-run organization whose steady cash flow promised to alleviate Sealand’s fiscal problems. Adding Okanagan would make Sealand a healthy operation capable of riding out future financial difficulties. The response from Bay Street investors was decidedly cool; as J.C. Jones put it, “Everywhere we went we got sand kicked in our faces.”"

"Nothing Jones offered could sway the lawyer from his position. Finally, the New York man offered to provide the money at an interest rate two full percentage points above the agreed-upon level. In a take-it-or-leave-it offer, Bankers Trust was employing a strategy designed to improve its own profits by hiding details of its agreement during preliminary discussions, cornering Sealand until it could not afford to kill the deal. The hardball-playing New York lawyer, Jones suspected, had ridden into town determined to fleece the trusting, slow-moving Canadians.” Jones turned to the Canadian vice-presidents of Bankers Trust, reminding them that they had given their word on the terms of the deal and had represented the bank’s position during weeks of discussion. Sealand had invested an enormous amount of time and money to this stage, based on BT’s assurances. “You can’t change the rules on the one-yard line,” he insisted. The vice-presidents remained silent. “They wouldn’t even look at me,” Jones says. “Meanwhile, Len Rutledge is at the other end of the table grinning from ear to ear,"

"Craig Dobbin now operated what was by far the largest helicopter company in Canada and one of the five biggest companies of its kind in the world. At the end of September 1987, cHc’s accounts payable had been averaging almost twelve months in arrears. Shell Oil was threatening to cancel Dobbin’s personal and corporate credit, refusing to provide further products or services until the outstanding debts owed by him and Sealand were settled. By October 15, Sealand/cuc’s accounts payable had dropped to near zero, and Craig Dobbin’s personal bank balance was nudging $20 million."

"THE CAREER SUCCESS of Christine Baird is illustrative of both Dobbin’s insight into an employee’s potential and his ability to exploit that potential for his own and the subject’s benefit. Hired as secretary to Sealand’s then-president Al Soutar, Baird impressed J.C. Jones when he arrived to fill Soutar’s role. “I was doing a lot of travelling at the time,” Jones says, “and I would call back to the office to check on things, see if this helicopter had been serviced on time or that flight had left as scheduled. When I would ask to speak to the ops manager or the service manager, Christine would say, ‘What do you want to know?’ I would tell her, and she would have the answer right there at her fingertips. In my opinion, and this includes everybody, vice-presidents and all, she was the sharpest person in the cHc building. An amazing woman.”"