Hercules Offshore Restructuring Plan Obtains Court Approval

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Hercules Offshore obtained a court approval for its restructuring plan under Chapter 11 of the U.S. Bankruptcy Code on Thursday. The company is a provider shallow-water drilling and marine services to oil and natural gas exploration and production industry.

Last month, Hercules Offshore sought the approval of the court for the prepackaged reorganization plan, which provides a substantial deleveraging transaction.


Hercules Offshore prepackaged restructuring plan

The company will convert more than $1.2 billion of its outstanding senior note to 96.9% of new common equity. The holder of the senior notes who wish to participate on a pro rate basis will provide $450 million in new debt financing.

Hercules Offshore plans to fund the remaining construction cost of the Hercules Highlander in Singapore. It will also provide additional funding for its operations. Most of the company’s senior creditors support the prepackaged restructuring plan.

U.S. Bankruptcy Court Judge Kevin Carey approved the pledge of bondholders to provide $450 million loans to Hercules Offshore to finance its exit from Chapter 11 bankruptcy.

According to the company’s lawyer, its existing equity holders could get small recoveries despite being $500 million out of the money if things go right. The equity holder will also have to give up their right to file a lawsuit against the Hercules Offshore over its financial problems to get that money.

Hercules Offshore needs to modify its proposal

A federal bankruptcy watchdog argued that Hercules Offshore needs to modify its restructuring plan to ensure that certain third-parties including its former officers and directors are not immune from potential lawsuits in the future. Judge Carey agreed.

Hercules Offshore will make changes to its proposal, according to its lawyer. Judge Carey said he would approve the proposal once he sees the changes.

Low oil prices impacted Hercules Offshore

Since last year, Hercules Offshore has been negotiating with its bondholders and advisers regarding the restructuring of its balance sheet. The company has bee negatively impacted by the decline of oil prices. Currently, oil is trading below $45 per barrel in the United States.

Hercules Offshore is hoping to exit the Chapter 11 bankruptcy by November. The company estimated that its business is worth around $535 million to $725 million. Its total liabilities were approximately $1.31 billion, most in the form of bond debt.

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