HOUSTON,
June 17, 2015 /PRNewswire/ -- Hercules Offshore,
Inc. (Nasdaq: HERO) (the "Company" or "Hercules"), today
announced that it has entered into a Restructuring Support
Agreement (the "Agreement") with a steering group of its
senior noteholders, collectively owning or controlling in
excess of 67% of the aggregate outstanding principal amount of the
Company's 10.25% senior notes due 2019, 8.75% senior notes due
2021, 7.5% senior notes due 2021 and 6.75% senior notes due 2022
(the "Noteholders"). Pursuant to the Agreement, the Noteholders
have agreed to (1) support a substantial deleveraging transaction
pursuant to which approximately $1.2
billion of the Company's outstanding notes will be converted
to new common equity, and (2) backstop $450
million of new debt financing which will fully fund the
remaining construction cost of the Hercules Highlander and
provide additional liquidity to fund the
Company's operations. Under the Agreement, the Company and the
Noteholders will seek to implement this balance sheet restructuring
through either a prepackaged or pre-negotiated plan of
reorganization (in either case, the "Plan"). As set forth
in the Agreement, implementation of the prepackaged plan of
reorganization or commencement of a Chapter 11 case with a
pre-negotiated plan of reorganization will occur within the next
few weeks.
"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," said President
and Chief Executive Officer John T.
Rynd.
A key component of the Agreement is that pursuant to the
contemplated restructuring, all trade creditors, suppliers and
contractors are expected to be paid in the ordinary course of
business, and customer relationships will be unimpaired. Employees
can expect they will be paid in the ordinary course.
"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," Mr. Rynd commented.
Detailed terms of the Agreement are addressed in the
Company's Form 8-K filed on June 17,
2015. The significant elements of the Agreement
include:
- The Noteholders' support for a transaction pursuant to which
(a) all holders of Senior Notes will agree to exchange
approximately $1.2 billion of the
outstanding notes for 96.9% of the Company's new common stock
issued in the reorganization ("New Common Stock") and (b) holders
of the Company's existing common stock will receive 3.1% of the New
Common Stock and warrants to purchase New Common Stock at a
predetermined enterprise value.
- The Noteholders' agreement to backstop the raising of
$450 million of new debt that would
be used for general corporate purposes as well as to
fund the remaining construction cost of the Company's newbuild
jackup rig, Hercules Highlander. The debt would be
guaranteed by substantially all of the Company's domestic and
international subsidiaries and secured by first liens on
substantially all of the Company's domestic and foreign assets. The
debt would have a maturity of four and one-half years and bear
interest at LIBOR plus 9.5% per annum (1.0% LIBOR floor), and
be issued at a price equal to 97% of the principal
amount.
- The opportunity for all holders of Senior Notes to
participate in the new debt raise on a pro rata basis,
according to their noteholdings.
"We have worked closely with the Noteholders and their advisors
to create a stronger capital structure that will allow us to better
compete in this cyclical business. The Noteholders have also agreed
to backstop $450 million of new
capital to be used for additional liquidity and construction
commitments for Hercules Highlander, which together will
help position the Company to benefit during the expected rebound in
the offshore drilling industry. We expect minimal interruption to
our operations as we implement the restructuring contemplated
by the Agreement. I want to thank our employees, customers, vendors
and creditors as we navigate through this process," said Mr.
Rynd.
The Company has set up a hotline to answer questions about the
transaction detailed in this press release. The hotline can be
accessed by dialing +1 (888) 647-1715 for domestic callers or +1
(310) 751-2619 for international callers. The Company has also
posted FAQs on its website at http://www.herculesoffshore.com.
This press release is not intended to be, and should not in any
way be construed as, a solicitation of votes of noteholders or
other investors regarding the plan of reorganization. In addition,
any items set forth in this press release regarding the Agreement
are subject to the terms of the Agreement, and in the event of any
inconsistency, the terms of the Agreement should be relied
upon.
About Hercules Offshore, Inc.
Headquartered in Houston,
Hercules Offshore, Inc. operates a fleet of 27 jackup rigs,
including one rig under construction, and 24 liftboats. The Company
offers a range of services to oil and gas producers to meet their
needs during drilling, well service, platform inspection,
maintenance, and decommissioning operations in several key shallow
water provinces around the world. For more information, please
visit our website at http://www.herculesoffshore.com.
Statements above that are not historical fact are
forward-looking statements, including the timing of the
restructuring, and its impact on our operations, customers, vendors
and employees. Forward-looking statements by their nature involve
substantial risks, uncertainties and assumptions, including without
limitation, contract renegotiations with customers, early
termination or renegotiation by customers or suppliers pursuant to
contract or otherwise, government and regulatory actions and other
factors described in the risks and uncertainties described in our
periodic reports filed with the Securities and Exchange Commission.
Many of these factors are beyond our ability to control or predict.
Forward-looking statements related to the Restructuring Support
Agreement involve known and unknown risks, uncertainties,
assumptions and other factors which may cause our actual results,
performance or achievements to be materially different from any
results, performance or achievements expressed or implied by our
forward-looking statements, including but not limited to potential
adverse effects related to the following: potential de-listing of
our common stock on Nasdaq; potential restructuring of our
outstanding debt and related effects on the holders of our
outstanding common stock and notes; potential effects of the
industry downturn on our business, financial condition and results
of operations; potential limitations on our ability to maintain
contracts and other critical business relationships; requirements
for adequate liquidity to fund our operations in the future,
including obtaining sufficient financing on acceptable terms; and
other matters related to the potential restructuring and our
indebtedness. Accordingly, you should not place undue reliance on
forward-looking statements. The Company does not intend to publicly
update any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as may be required
under applicable securities laws.
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SOURCE Hercules Offshore, Inc.