Shallow-water driller Hercules Offshore could be forced to file for bankruptcy for the second time in less than a year as some creditors state that it may have breached its covenant on the $450m first lien sr. sec. credit facility. Previously, Hercules had filed for Ch-11 restructuring in August 2015 and emerged from bankruptcy in November 2015.
During the restructuring process, the company issued a debt-to-equity swap conversion for bondholders holding c.$1.2bn of debt for a 96.9% stake in the new equity shares and raised a $450m credit facility.
S&P downgraded the company’s $450m credit facility to CCC-. Further, the company had filed a forebearance agreement last week which has caused concern amongst creditors.
Creditors claimed that Hercules first violated the terms of the loan when its subsidiary, Hercules Offshore Nigeria Limited, failed to offer a vessel’s mortgage as collateral for the loan on 15 April 2016. The second violation occurred when Hercules didn’t meet a deadline to consolidate its Gibraltar-based affiliate into another unit of the company.
In the forebearance agreement filed with the SEC, Hercules stated that creditors had asserted that the company was in default, although they had not provided a formal notice on the same. Hercules also stated that it believed that default could be avoided before next week’s deadline.