Dallas, Texas 07/20/2015 (Financialstrend) – Hercules Offshore, Inc. (NASDAQ:HERO) has reached an agreement with 67% of its junior ranked bondholders in a deal that allows it to file for bankruptcy under Chapter 11. The restructuring agreement allows the company to reduce its debt with the option of securing additional liquidity.
The restructuring plan involves the transfer of the company’s ownership to the bondholders who, as a result, have agreed to wipe out all the outstanding $1.2 billion in debt. Hercules Offshore, Inc. (NASDAQ:HERO) finds itself in the current financial mess having been hit hard by a plunge in oil prices. The company has already started a solicitation of votes from shareholders for the prepackaged plan of reorganization.
Hercules Offshore, Inc. (NASDAQ:HERO) prospects in the industry have mostly been hit hard by an oversupply of oil in the market as demand remains low. The company, as a result, posted a net loss of $57.1 million compared to a net income of $19.9 million the prior year.
Need For New Capital
Debt holders have already agreed to debt finance the remaining construction cost of Hercules Highlander as well as cater for other operations expenditure to a tune of $450 million. According to the company’s statements all financial obligations to creditors’ suppliers, contractors and employees are to be met as part of the refinancing deal.
Chief executive officer expects the new capital structure to provide a better foundation expected to offset the ongoing challenges in the offshore drilling market. The ongoing restructuring process has already resulted in the layoff of 40% of the staff over the past few months. The company has also received a delisting notice from the SEC on its stock trading at relatively low levels.
Hercules Offshore, Inc. (NASDAQ:HERO) has sold four of its Gulf of Mexico oil rigs as it continues to look for extra cash to cater for other operations. It has also cold-stacked some of the rigs in the recent months