Hercules Offshore to Begin Restructuring
The Houston-based NASDAQ-listed drilling contractor Hercules Offshore Inc. (HERO) has entered a restructuring agreement with a noteholder group, and expects a prepackaged reorganization plan.
HERO says the agreement will convert $1.2B of debt to new common equity, and noteholders will backstop $450M of new debt financing to fully fund the remaining construction cost of the Hercules Highlander and provide additional liquidity to fund the company's operations.
HERO's existing equity holders will see their stake reduced to 3.1%.
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,” he added.
Hercules said in February that Saudi Aramco—the world’s largest oil producer—terminated its drilling contract for its Hercules 261 rig, a casualty of the collapse in oil prices. On June 1, Hercules said the contract was reinstated at a lower rate, and rates were reduced for two other Saudi Aramco contracts.
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.
