Houston-based Hercules Offshore has filed for Chapter 11 bankruptcy protection with a pre-packaged deal that will send the company into a reorganization and financial restructuring.
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Image from Hercules. |
Hercules is anticipating to 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, among other things, the company announced today (13 August).
"Today's filing is the next step in our financial restructuring. 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," said John T. Rynd, Hercules president and CEO.
Hercules expects the reorganization to be settled in about 45-60 days.
The pre-packaged plan will implement more than US$1.2 billion of the company’s outstanding senior notes to be converted to 96.9% of new common equity, in addition to $450 million in new debt financing to be provided by those holders of the senior notes who wish to participate, which would fully fund the remaining construction costs of the Hercules Highlander jackup, Hercules announced on 13 July.
The filing follows the completion of the solicitation process of the company's senior bondholders, which resulted in overwhelming approval of the pre-packaged plan.
More than 300 senior bondholders with aggregate holdings in excess of $1.2 billion of senior notes have voted to accept the plan, while only two holders with approximately $320,000 of the senior notes voted against the plan, Hercules said.
"The overwhelming support by the bondholders 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," Rynd said.
Hercules has been through a roller coaster of events this year including a Saudi Aramco stint, in which the Saudi Arabian company canceled a five-year jackup contract in February, only to reinstate it in June.
The company was also able to sell four previously cold-stacked jackups, and signed a five-year deal with Italian giant Eni for a jackup in West Africa.
However, Hercules has a total of 11 cold-stacked jackups, with five of those added to the list this year. The company has also seen a 40% reduction in its workforce in 2015 prior to the bankruptcy announcement, in addition to a $57.1 million net loss.
With its headquarters based in Houston, Hercules operates a fleet of 27 jackups, including one rig under construction, and 21 liftboats.
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