Hercules Offshore solicits votes for prepackaged plan of reorganization

By Toni Weeks

San Luis Obispo, Calif., July 13 – Hercules Offshore, Inc. said it began a solicitation of votes for a prepackaged plan of reorganization from holders of its 10¼% senior notes due 2019, 8¾% senior notes due 2021, 7½% senior notes due 2021, 6¾% senior notes due 2022, 7 3/8% senior notes due 2018 and 3 3/8% convertible senior notes due 2038.

Hercules and the noteholders will implement the balance sheet restructuring through the pre-packaged reorganization, which provides that claims of trade creditors, suppliers and employees will be paid in full.

Noteholders of record as of July 13 are eligible to vote, according to a press release. Votes on the prepackaged plan must be received by Prime Clerk, the company’s voting agent, by Aug. 12.

Assuming the company receives the required acceptances, it intends to commence a prepackaged Chapter 11 case shortly after the conclusion of the solicitation period, the press release said.

Restructuring terms

As previously reported, the company entered into a restructuring support agreement on June 17 with noteholders holding about 67% of the total outstanding principal amount of the company’s notes.

Under the agreement, about $1.2 billion of notes will be converted to 96.9% of new common equity, and $450 million in new backstop debt financing will be provided.

The debt will have a maturity of 4½ years and bear interest at Libor plus 950 basis points with a 1% Libor floor and be issued at a price equal to 97% of the principal amount. The backstopped new debt financing will fully fund the remaining construction cost of the Hercules Highlander and provide additional liquidity to fund Hercules Offshore’s operations.

In addition, Hercules said the backstopped debt would be guaranteed by substantially all of its domestic and international subsidiaries and secured by first liens on substantially all of its domestic and foreign assets.

The company’s current shareholders will have the opportunity to receive their pro rata portion of the remaining 3.1% of the common equity as well as some warrants.

The agreement includes the opportunity for all senior noteholders to participate in the new debt raise.

“We have reached a restructuring agreement with an overwhelming majority of our senior noteholders that will allow Hercules to substantially reduce its debt burden and secure additional liquidity to help us navigate the current downcycle,” president and chief executive officer John T. Rynd said in the June 17 press release.

“Once our financial restructuring is completed, the new capital structure 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.”

‘Sufficient liquidity’

The company said a key component of the agreement is that all trade creditors, suppliers and contractors are expected to be paid in the ordinary course of business and that customer relationships will be unimpaired.

“Hercules has sufficient liquidity to fund its operations through the period in which the restructuring contemplated by the agreement will take place, which is important in our ability to meet our existing and future obligations to our customers, employees and vendors,” Rynd said in the previous release.

Hercules is a Houston-based provider of offshore drilling equipment and services.

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