Hercules Offshore has long been struggling to stay afloat, and now the company has announced that it will be filing for bankruptcy in the coming weeks.
As the Houston-based company moves through the process of reorganization, it stressed that its operations will continue normally and maintained that there are no plans for layoffs at present.
By filing for Chapter 11 bankruptcy, Hercules will be able to offload its astounding $1.2 billion in debt by converting outstanding notes into new common equity, according to Petro Global News. The move has been approved by the company’s creditors, and provisions have been made for Hercules’ current stakeholders.
“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 CEO John T. Rynd said in a press release.
Rynd is confident that Hercules will be able to move forward after it sorts out its financial woes, noting, “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.”
Under the agreement, noteholders will receive 96.9 percent of Hercules’ new common stock issued under the reorganization. Current stockholders will receive the remaining 3.1 percent of the new common stock, as well as warrants to purchase additional new common stock at a predetermined enterprise value.
A $450 million backstop has also been built into the agreement that would be used for general corporate purposes as well as to fund the remaining construction cost of Hercules’ newbuild jackup rig, Hercules Highlander, the press release reports.