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Hornbeck Offshore Services, Inc. – Leading Offshore Service Vessel Operator Files Prepackaged Chapter 11 with $1.5bn of Debt; Aims for June 18th Confirmation Hearing


May 18, 2020 – Hornbeck Offshore Services, Inc. and 13 affiliated Debtors (OTCQB:HOSS; “Hornbeck” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 20-31920. The Debtors, a leading provider of offshore service vessels primarily in the Gulf of Mexico and Latin America, are represented by Matthew D. Cavenaugh of Jackson Walker LLP. Further board-authorized engagements include (i) Kirkland & Ellis LLP as general bankruptcy counsel, (ii) Portage Point Partners, LLC as restructuring advisors, (iii) Guggenheim Securities, LLC as financial advisors/investment banker and (iv) Stretto as claims agent. 

The Debtors’ lead petition notes between 1,000 and 5,000 creditors; estimated assets of $2.7bn and estimated liabilities of $1.5bn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Wilmington Trust, National Association (as Trustee for $450.0mn plus interest 5.00% Notes due 2021),
(ii) (i) Wilmington Trust, National Association (as Trustee for $225.0mn plus interest 5.875% Notes due 2020) and (iii) Astromaritima Navegacao, S.A. ($909k disputed arbitration claim).

Prepackaged Plan and Restructuring Support Agreement

The Disclosure Statement provides the following overview: "

  • Subject to the terms and conditions set forth in the Restructuring Support Agreement, the Debtors agree to commence voluntary cases under chapter 11 of the Bankruptcy Code and each of the Consenting Creditors and Debtors agree to take certain actions in support of the Plan, including:
    • supporting the restructuring transactions;
    • acting in favor of any matter requiring approval to the extent necessary to implement the restructuring transactions; and 
    • negotiating in good faith to finalize the documentation required to implement the Plan.
  • The Consenting Creditors agree to reserve and forebear exercising certain contractual rights against the applicable Debtors until the earlier to occur of the Termination Date and the Petition Date, in each case, as defined therein.
  • Pursuant to the restructuring transactions contemplated by the Restructuring Support Agreement, the Company will achieve:
    • a significant de-levering of the Company’s capital structure;
    • a $75 million debtor-in-possession term loan facility;
    • access to $100 million of new equity capital post-emergence, fully-backstopped by existing creditors; and 
    • capacity for post-petition financing to provide additional liquidity to the Reorganized Hornbeck post-emergence." 

In a May 13th press release announcing the solicitation of Chapter 11 votes, the Debtors advised that “the Company has the support of secured lenders holding approximately 83% of the Company's aggregate secured indebtedness and unsecured noteholders holding approximately 79% of the Company's aggregate unsecured notes outstanding for the Plan. The Company intends to seek a hearing on June 19, 2020 for confirmation of the Plan following the conclusion of the solicitation period.  

As previously reported, the Company will have access to a $75 million debtor-in-possession term loan facility provided by existing creditors and permitted use of existing cash on hand and cash generated from operations to support the business during the financial restructuring process, which will enable the Company to operate in the ordinary course of business without disruption to its customers, vendors and workforce.  The Plan provides for payment in full of all vendors and employees."

Events Leading to the Chapter 11 Filing

The Disclosure statement provides: "The Debtors have suffered from the same industry-wide headwinds facing other offshore oilfield service market participants, including their OSV peers. As a transportation and service provider to energy companies that operate offshore, the Debtors are dependent on continued investment in offshore drilling, exploration and production by their customers. Such investment is often tied to the current and expected price of oil and, to a lesser extent, natural gas. 

Since the fourth quarter of 2014, oil and natural gas prices worldwide have dropped significantly. This decline has negatively impacted the economics of planned drilling and ongoing production projects, resulting in the curtailment, reduction, delay or postponement of such projects for an indeterminate period of time. These cuts in drilling and production projects impacted the demand for OSVs and other oilfield service sectors by contributing to a considerable vessel oversupply in the marketplace. Industry-wide oversupply granted substantial pricing power to exploration and production companies and deeply impacted all market participants. Other OSV market participants, including Tidewater, GulfMark Offshore, Inc., and HGIM Holdings, LLC, effectuated chapter 11 restructurings in the past several years to substantially deleverage their balance sheets in light of the market pressures. Tidewater and GulfMark Offshore, Inc. later merged. 

Going into 2020, while oil prices were finally showing a partial recovery prior to the advent of the recent oil price war initiated by Russia and Saudi Arabia that started on March 7, 2020, they still remained below the average prices between 2005 and 2014, and they had yet to result in a marked increase in offshore and/or deepwater capital spending by the Debtors’ customers. Though an uptick in drilling activity and dayrates was expected to occur in 2020, the Coronavirus and its impact on the worldwide demand for oil along with the escalating oil price war have further exacerbated current industry conditions and dampened the likelihood of a near-term exit from the current energy downturn, now in its sixth year."

About the Debtors

Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore service vessels primarily in the Gulf of Mexico and Latin America. 

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The post Hornbeck Offshore Services, Inc. – Leading Offshore Service Vessel Operator Files Prepackaged Chapter 11 with $1.5bn of Debt; Aims for June 18th Confirmation Hearing appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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