Hercules Offshore Files Prepackaged Bankruptcy

Less than two weeks ago, Hercules Offshore Inc. (NASDAQ: HERO) announced that it had reached a restructuring support agreement with lenders holding about 99% of the company’s first-lien debt. Monday morning the company filed voluntary petitions with the bankruptcy court for protection under Chapter 11 of the bankruptcy code.

Under the prepackaged Chapter 11 agreement announced on May 27, Hercules will market for sale all the company’s U.S. assets. Any unsold assets will be placed into a wind-down vehicle to ensure their continued, safe operation until they can be sold.

Shareholders are being asked to vote on whether to accept the prepackaged plan, and Hercules is offering them some payment if they vote in favor of the announced deal:

[U]nsecured creditors will be paid in full in the ordinary course of business or at the completion of the Chapter 11 process. Shareholders will receive cash recoveries and interests in the wind-down vehicle if they vote as a class to accept the Plan or just interests in the wind-down vehicle if the class votes against the Plan. Importantly, shareholders will have to wait until the lenders are paid in full before receiving any recovery on their interests if the class votes to reject the Plan as opposed to receiving their pro rata share of $12.5 million on the effective date of the Plan and incremental cash distributions thereafter based on the success of the sale process if the class votes to accept the Plan.

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Approximately 20 million shares are outstanding, suggesting a payment of about $0.625 per share once the plan becomes effective. Further payments depend on proceeds from the asset sales.

Hercules intends to keep operations going and to keep paying suppliers and employees.

Shares closed at $1.41 on Friday and traded down about 20% in Monday’s premarket session at $1.14. The stock’s 52-week range is $0.73 to $14.50.

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