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After six months Hercules Offshore seeks bankruptcy protection again

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Staff writer ▼ | May 27, 2016
Hercules Offshore has entered into a Restructuring Support Agreement (RSA) with lenders holding approximately 99 percent of the indebtedness under its first lien credit agreement.
Hercules Offshore
Chapter 11   The ongoing decline in oil prices
Under the terms of the RSA, Hercules and certain of its U.S. subsidiaries will solicit acceptances and rejections of its pre-packaged Chapter 11 plan from first lien lenders and shareholders, file voluntary Chapter 11 petitions.

Hercules Offshore's international subsidiaries will not be included as part of the Chapter 11 cases but will be part of the sale process.

Hercules's Chapter 11 Plan provides that unsecured creditors will be paid in full. the company expects to file the typical First Day Motions to, among other things, maintain employee wages and benefits and insurance throughout the Chapter 11 process and will file a separate First Day Motion to continue paying its suppliers' pre-petition claims under normal payment terms.

If ehe company's shareholders vote as a class to accept the Plan, shareholders will receive cash recoveries over time including a payment of $12.5 million upon the completion of the Chapter 11 process and additional cash distributions thereafter depending on the success of the sale of the company's assets through interests in the post-Chapter 11 wind-down vehicle.

The secured lenders likewise are projected to receive cash payments largely dependent on the success of the sale process.

As part of the process, Hercules also announced that it has entered into a definitive agreement to transfer the right to acquire the newbuild harsh environment jack-up rig, formerly named Hercules Highlander, to a subsidiary of Maersk Drilling.

The rig is ready for immediate delivery from Jurong Shipyard in Singapore. According to the agreement, Maersk Highlander UK Ltd. succeeds to the right to take delivery of the rig and will settle the final payment of approximately $196 million with Jurong.

On November 6, 2015, Hercules completed its initial financial restructuring under Chapter 11 of the U.S. Bankruptcy Code with a new $450 million senior secured credit facility in place.

Since this time, the ongoing decline in oil prices, the consolidation of its U.S. customer base and the addition of new capacity have negatively impacted dayrates and demand for Hercules's services.

On February 11, 2016, the company announced a special committee comprised of all the independent members of its board of directors to explore strategic alternatives.

This RSA announcement is the outcome of that process and follows a thorough sale process, which did not yield results that would have been better for stakeholders than what is contemplated by the Plan.


 

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