Houston: NASDAQ-listed drilling contractor Hercules Offshore is going into a restructuring process, entering an agreement with a steering group of senior note holders holding more than 67% of the company’s senior notes.
A key part of the restructuring will see senior notes worth $1.2bn converted to shares, and an additional $450m of new capital provided by senior noteholders to fund newbuild Hercules Highlander and to keep the company liquid.
A statement from the company said that as part of the agreement, implementation of the prepackaged plan of reorganisation or commencement of a Chapter 11 case with a pre-negotiated plan of reorganisation will occur within the next few weeks.
John T. Rynd, president and CEO of Hercules, commented: “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. The Agreement we reached contemplates a value maximizing transaction for the Company, which we expect will impact our balance sheet only, while our operations will continue as usual. 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.”
Hercules said that all trade creditors, suppliers and contractors are expected to be paid in the ordinary course of business, and customer relationships will be unimpaired. It also gave assurances it has sufficient liquidity for the business to operate normally until the proposed restructuring commences.
Hercules has struggled all year, slashing its workforce by 40% and cold-stacking an additional five rigs. Earlier this month, Saudi Aramco cut rates on three rigs chartered from the company to $67,000 per day, with the previous rates between $117,000 and $136,000 per day.