Tidewater enters RSA, plans Chapter 11 filing

Tidewater Inc. (NYSE: TDW), a provider of Offshore Service Vessels to the global energy industry, has entered into a Restructuring Support Agreement (RSA) with certain of its lenders under Tidewater's Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013 and holders of Tidewater Senior Notes due in 2017, 2018, 2019, 2020, 2021, 2022, 2023 and 2025, as applicable to effectuate a proposed prepackaged plan of reorganization.

As contemplated by the RSA, the company and certain of its subsidiaries expect to file Chapter 11 cases in Delaware by May 17, 2017 to implement the Prepackaged Plan. The Prepackaged Plan has the support of the company's lenders holding 60% of the outstanding principal amount of loans under the credit agreement and holders of 99% of the aggregate outstanding principal amount of Tidewater's senior notes.

The company's management has been in discussions with the New York Stock Exchange (NYSE) regarding maintaining its current listing through the restructuring process. The company was recently notified by the NYSE that it has fallen below the continued listing standard that requires listed companies to maintain an average closing price per share of at least $1.00 over a consecutive 30 trading-day period. Tidewater has notified the NYSE of its intent to cure and has until October 18, 2017 to regain compliance with that particular standard. 

Under the Prepackaged Plan:

  • The lenders under the Credit Agreement, holders of the Senior Notes and certain lessor parties under certain sale/leaseback agreements (the "General Unsecured Creditors") will receive their pro rata share of:
    • $225 million of cash;
    • Common stock and, if applicable, warrants (the "Jones Act Warrants") to purchase common stock, representing 95% of the pro forma common equity in reorganized Tidewater (subject to dilution by a management incentive plan and the exercise of warrants issued to existing stockholders under the Prepackaged Plan); and
    • New 8% fixed rate secured notes due in 2022 in the aggregate principal amount of $350 million.
  • Existing shares of Tidewater common stock will be cancelled and existing common stockholders of the company will receive:
    • common stock representing 5% of the pro forma common equity in reorganized Tidewater (subject to dilution by a management incentive plan and the exercise of warrants issued to existing stockholders under the Prepackaged Plan);
    • Series A Warrants to purchase 7.5% of the pro forma equity in reorganized Tidewater (6 year term, exercise price based on an equity value of the Company of approximately $1.71 billion); and
    • Series B Warrants to purchase 7.5% of the pro forma equity (6 year term, exercise price based on an equity value of the company of $2.02 billion).
  • The undisputed claims of other unsecured creditors such as customers, employees, and vendors, will be paid in full in the ordinary course of business (except as otherwise agreed among the parties).

The company's Norwegian term loan facility, which is guaranteed by the company and other contemplated debtors, will remain in place during the Chapter 11 cases. Pursuant to a forbearance agreement, the lenders under this term loan facility have agreed that they will not enforce, or take action to enforce, any of the rights and remedies otherwise available to them under their term loan facility, subject to certain termination rights.

During the Chapter 11 cases, Tidewater plans to reject certain sale-leaseback agreements for leased vessels currently in the company's fleet, and to limit the resulting rejection damages claims to approximately $131 million. However, counterparties to the sale-leaseback agreements dispute the amount of the rejection damages claims and a final resolution of the amount of such claims will be subject to litigation. There is no certainty as to the final amount of sale-leaseback rejection damages claims that will be treated pursuant to the Prepackaged Plan.

Equity issued by reorganized Tidewater under the management incentive plan and upon exercise of the warrants issued to existing shareholders will further dilute the equity recovery for the holders of funded debt and sale/leaseback claims, as well as the existing shareholders described above.

Upon the effectuation of the Prepackaged Plan, Tidewater expects that it will eliminate approximately $1.6 billion in principal of outstanding debt. In addition, considering the rejection of certain sale-leaseback agreements discussed above, the company estimates that interest and operating lease expenses will be reduced by approximately $73 million annually.

All aspects of the Prepackaged Plan remain subject to Bankruptcy Court approval and satisfaction of conditions set forth in the Prepackaged Plan.

Pursuant to the RSA, the Consenting Creditors have agreed to vote in favor of the Prepackaged Plan. The RSA is subject to customary termination rights upon the occurrence of certain events, including, without limitation, the failure of the company to commence solicitation or file the Prepackaged Plan with the Bankruptcy Court by specified dates.

Weil, Gotshal & Manges LLP is acting as restructuring counsel, Jones Walker LLP is acting as corporate counsel, Lazard Frères & Co. is acting as investment banker, and AlixPartners LLP is acting as restructuring advisor to the Company in connection with its restructuring efforts.  Morgan, Lewis & Bockius LLP is acting as legal counsel and FTI Consulting Inc. LLC is acting as financial advisor to the Credit Agreement agent.  Paul, Weiss, Rifkind, Wharton & Garrison LLP and Blank Rome LLP are acting as legal counsel and Houlihan Lokey Capital, Inc. is acting as financial advisor to the holders of Senior Notes.

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