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Baker Botts Advises Hercules Offshore In Prepackaged Chapter 11 Case Restructuring over $1.2 Billion in Debt

On November 6, 2015, Baker Botts' client Hercules Offshore, Inc., together with certain of its domestic affiliates (together, “Hercules”), emerged from bankruptcy less than three months after filing for chapter 11 protection. A publicly-traded provider of shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally, Hercules commenced restructuring negotiations earlier this year with an ad hoc steering group comprised of holders of approximately 70% of its unsecured notes (the "Steering Group") to respond to the challenges largely driven by the decline in the price of crude oil and in the demand for use of its fleet of mobile offshore drilling rigs. The Hercules restructuring was one of the first successful reorganizations of an energy company in the current industry down cycle and reinforces the firm’s position as a leader in energy restructurings.

Hercules initiated the chapter 11 bankruptcy cases in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) after receiving overwhelming support for its prepackaged plan (the "Plan") from 98% of the holders of almost all of the $1.2 billion of unsecured notes.  Baker Botts represented Hercules in its negotiations with the Steering Group and assisted Hercules with the formulation, solicitation, and prosecution of the Plan designed to reorganize Hercules’ balance sheet with minimal disruption to its business operations as follows:

  • Hercules reduced its funded indebtedness through an exchange of all of its $1.2 billion in principal of senior unsecured notes for 96.9% of the reorganized company’s common stock; 
  • Hercules' existing equity holders that did not opt-out of the releases under the Plan received 3.1% of the common stock of the company and warrants to buy an additional 20% of the company’s common stock at a specified valuation; and
  • Hercules has paid, or will pay, the claims of its general unsecured creditors in full in the ordinary course of its business. 

Simultaneously, Baker Botts assisted the Company in negotiating and closing a new four and one half year, $450 million senior secured, global exit financing facility (the “Exit Facility”). The Exit Facility was backstopped by members of the Steering Group and all of the holders of the unsecured senior notes were afforded the opportunity to participate in the Exit Facility through procedures approved by the Bankruptcy Court. The Exit Facility provides Hercules with both substantial working capital and acquisition financing for its new Highlander rig presently under construction and deliverable in the Spring of 2016. Baker Botts assisted the company in navigating a number of complicated issues related to the Exit Facility, including granting foreign security interests and arranging for escrow of a significant portion of funds for use in the acquisition of the Highlander.

The Baker Botts professionals and paraprofessionals who contributed to the successful result were:

Financial Restructuring Partners Manny Grillo (New York), Jim Prince (Dallas), and Luckey McDowell (Dallas); Finance Partner Luke Weedon (Dallas); Corporate and Securities Partners Bob Murray and Renee Wilm (New York); Litigation Partner Rich Harper (New York); Tax Partner Josh Mandell (Dallas); Financial Restructuring Special Counsel Omar Alaniz (Dallas); Financial Restructuring Associates Chris Newcomb (New York) and Meggie Gilstrap (Dallas);  Finance Associates Andrew Thomison (Houston), Jon Finelli (New York), Clint Culpepper (Austin), Raj Vashi (Houston) and Whitney Blazek (Dallas); Corporate and Securities Associate Brittany Uthoff (New York); Litigation Associate Mark Little (Houston); Senior Paralegal Rory Fontenla (Dallas) and Paralegal Sara Jones (Dallas).

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