Hercules Offshore is back in Chapter 11 with plans to liquidate, after Jefferies Finance and CarVal Investors were among the funds bankrolling the oil and gas company’s exit from its first Chapter 11 case little more than six months ago.
The Houston-based oil and gas company filed a Chapter 11 petition alongside a liquidation proposal on Sunday (5 June) in a Wilmington, Delaware, federal bankruptcy court. First-lien lenders holding some 99.7 percent of the first-lien debt voted to accept the plan prior to Hercules seeking court protection, the company said in a statement.
Under the plan, the lenders would receive a $510 million claim and a majority stake in post-bankruptcy entity in charge of winding down the debtor’s business, which would result in first-lien lenders receiving a recovery of $314.7 million to $504.9 million.
Spokeswomen of Jefferies and CarVal declined to comment. The funds appeared to have exited their positions—a spokeswoman for Hercules’ financial advisor, FTI Consulting, directed questions about Hercules’ creditors to the restructuring support agreement, which CarVal and Jefferies had not signed. Jefferies is still administrative agent on the loan.
According to the indenture filed in November with the US Securities and Exchange Commission, the Employees’ Retirement System of the State of Rhode Island, the South Dakota Retirement System and the Kern County Employees’ Retirement are among the other first-lien lenders.
The loans, which set to mature in May of 2020, accrued interest at one of several base rates plus 8.5 percent or plus 9.5 percent, depending on which base rate is used.
Hercules filed for bankruptcy due to a weak demand for oil rigs and competition.
“The challenges facing the debtors’ business and the offshore drilling market have continued as demand for jackup [oil] rigs remains weak,” Troy Carson, Hercules’ chief financial officer, said in a declaration filed with the bankruptcy court Monday (6 June).
“[A]t the same time, the market remains scheduled to deliver a significant number of newbuild rigs in the next several years,” Carson continued, “which (with the exception of the Hercules Triumph and the Hercules Resilience) are expected to be better suited to meet industry needs than Hercules’ fleet.”
Jefferies, CarVal and the other lenders extended $450 million in early November to fund the construction of Hercules Highland, a new oil rig. Building the rig would allow an affiliate not part of the first bankruptcy case to carry out agreements under a contract reached in Maersk Oil North Sea UK In May 2014.
Hercules emerged from its first bankruptcy proceeding, in which it converted $1.2 billion in debt to equity, in November. Holders of multiple series of senior notes received the new equity. Shareholders as of Sunday included Loomis Sayles & Co., Centerbridge Partners, Western Asset Management and Soros Fund Management, according to Hercules’ petition.