Hercules Offshore to file for bankruptcy protection

Hercules Offshore expects to proceed with its reorganization plan by filing for Chapter 11 bankruptcy protection by July 8, according to various media outlets.

The company has reached a restructuring agreement with a majority of its debtholders. In the company's June 17 filing with the US Securities and Exchange Commission, Hercules discloses that the company’s restructuring agreement includes that $1.2 billion of the company’s outstanding notes will be converted to new common equity. The debtholders have also agreed to backstop $450 million of new debt financing to fund the remaining construction cost of the Hercules Highlander and other company operations.

Hercules has cut 40% of its 1,800 employees in recent months and has cold-stacked 11 of its 20 rigs in the Gulf of Mexico. Analysts with Raymond James commented on June 18 that these recent announcements from Hercules did not come as a surprise, since "the high amount of leverage and weaker macro conditions have weighed on the company’s financial health."

Pursuant to the reorganization plan, Hercules has reassured that all trade creditors, suppliers, and contractors, as well as employees, are expected to be paid as usual, and that customer relationships and contracts should not be negatively affected.

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