the first to fall but not unexpected
By David Krapf, Editor in Chief
Hercules Offshore Inc. announced today that it has filed Chapter 11 bankruptcy.
The Houston-based rig operator has filed a pre-packaged plan of reorganization. It anticipates that it will receive court authority to pay employee wages and benefits without interruption and continue to pay trade creditors and suppliers in the ordinary course of business. The Chapter 11 reorganization is expected to conclude in approximately 45-60 days. The company had announced back in June that it planned on filing for bankruptcy.
The company announced on July 13 that the pre-packaged plan provides a substantial deleveraging transaction under which more than $1.2 billion of Hercules Offshore’s outstanding senior notes would be converted to 96.9% of new common equity, and $450 million in new debt financing would be provided by those holders of the senior notes who wish to participate on a pro rata basis. This would fully fund the remaining construction cost of the high-specification jackup rig Hercules Highlander and provide additional liquidity to fund the Company’s operations. The $270 million Hercules Highlander is due for delivery in April 2016.
“Today’s filing is the next step in our financial restructuring,” President and Chief Executive Officer John T. Rynd said in a statement. “We are working toward a new capital structure which will provide a better foundation for Hercules to meet the challenges in the global offshore drilling market due to the downcycle in crude oil prices and expected influx of newbuild jackup rigs over the coming years. The overwhelming support by the noteholders of the plan will enable Hercules to expedite the restructuring process and emerge by mid-fall. We do not expect any interruption to our daily operations as a result of today’s filing."
The company said it has sufficient resources and recurring revenue from operations to continue serving its customers. Hercules filed its voluntary Chapter 11 petitions and pre-packaged plan in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. Information about the case can be found at http://cases.primeclerk.com/hercules.
The Hercules filing comes on the heels of other bankruptcies, like Houston offshore service company Cal Diveand oil producers American Eagle and Dune Energy. The drop in oil prices since 2014 that has brought layoffs and cold stacking of rigs is compounded by the industry’s levels of high-yield debt, according to analysts.
Hercules operates a fleet of 27 jackup rigs, including the Hercules Highlander under construction, and 21 liftboats.As of July 21, nine of its 18 Gulf of Mexico jackups are cold stacked, three are warm stacked, and one is ready stacked.