Hercules Offshore Inc. plans to put itself into bankruptcy next month in a creditor-supported deal that would wipe out all of its $1.2 billion of debt.
The offshore drilling rig owner grappling with a cash crunch after oil prices plunged entered into a pact with more than 67 percent of its junior-ranked bondholders including units of Frankin Resources Inc. and T. Rowe Price Group Inc. that would transfer the company’s ownership to them in exchange for canceling its borrowings, according to a Wednesday regulatory filing. The restructuring support agreement requires Houston-based Hercules to file for bankruptcy by July 8.
Investors of six sets of unsecured and convertible notes would trade their holdings for 96.9 percent of new common stock in a reorganized Hercules, according to the filing. The company’s existing equity holders would see their stake reduced to 3.1 percent.
“The new capital structure will provide a better foundation for Hercules to meet the challenges in the global offshore drilling market,” John T. Rynd, chief executive officer, said in a statement Wednesday.
The company plans to issue $450 million of new borrowings when it emerges from bankruptcy to fund the remaining cost of constructing a new drilling rig, the filing shows. The first-lien loan would pay 9.5 percentage points more than the London interbank offered rate and mature in 4.5 years. The debt would be issued at 97 percent of face value and receive backstop support from some noteholders who signed the restructuring agreement.
Craig Muirhead, a spokesman for Hercules, didn’t respond to telephone and e-mail messages Wednesday seeking comment after normal business hours.
Two-thirds of the holders of the company’s 10.25 percent notes due 2019, 8.75 percent bonds maturing in 2021, 7.5 percent notes due 2021 and 6.75 percent notes due 2022 signed the pact, according to the filing.
Hedge-fund firms who signed the pact include Bowery Investment Management, CarVal Investors, Centerbridge Partners and Quantum Partners, the filing shows. In addition to Franklin and T. Rowe, other signers were units of Credit Suisse Group AG, Third Avenue Management and Western Asset Management.
Hercules’s 10.25 percent notes fell 1 cent Wednesday to 32 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Shares fell 66.8 percent to 22 cents at 10:59 a.m. in New York.