Hercules Offshore CEO John Rynd. Image courtesy of Fox Business.

Hercules Offshore said Wednesday it will file for Chapter 11 bankruptcy within the next few weeks as part of a creditor-supported deal that will eliminate the company’s $1.2 billion of debt.

Houston-based Hercules said its noteholders have agreed to a substantial deleveraging transaction that will wipe out the company’s  $1.2 billion in outstanding notes and convert the notes into new common equity.

The noteholders will receive 96.9 percent of the company’s new common stock issued in the reorganization.

Existing common stock holders will receive 3.1 percent of the new common stock and warrants to purchase new common stock at a predetermined enterprise value.

The noteholders have also agreed to backstop $450 million of new debt financing that will fully fund the remaining construction cost for the Hercules Highlander and provide additional liquidity to fund the company’s operations.

The company said there are no layoffs scheduled at this time as a result of this financial restructuring and that any changes in its headcount “will be driven by overall business conditions or activity levels.”

Hercules CEO John T. Rynd said Hercules has sufficient liquidity to fund its operations through the restructuring period.

The company’s operations will continue as usual while the restructuring is taking place.

The agreement calls for Hercules Offshore to undergo a balance sheet restructuring through either a prepackaged or pre-negotiated plan of reorganization.

Foreign subsidiaries are not party to the restructuring support agreement.

“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. 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.

Hercules said it will begin bankruptcy and reorganization activities within the “next few weeks.”


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