Hercules Offshore to launch $1.25 billion credit facility on June 5

By Sara Rosenberg

New York, May 21 - Hercules Offshore Inc. has scheduled a bank meeting for June 5 to launch its proposed $1.25 billion credit facility, according to a market source.

UBS is the lead bank on the deal. Other banks involved include Amegy Bank, Comerica Bank, Credit Suisse, Deutsche Bank, Jefferies Finance LLC and JPMorgan.

The facility consists of a $1.1 billion six-year term loan and a $150 million five-year revolving credit facility, according to various filings with the Securities and Exchange Commission.

According to the filings, pricing on the facility is expected to range somewhere between Libor plus 175 and 250 basis points, based on where ratings fall out. If corporate ratings are Ba2/BB, then pricing will be Libor plus 175 bps, If ratings are Ba3/BB-, then pricing will be Libor plus 200 bps. If ratings are B1/B+, then pricing would be Libor plus 225 bps. If ratings are lower than B1/B+, then pricing would be Libor plus 250 bps.

Financial covenants will include maximum leverage and fixed-charge coverage.

Proceeds will be used to help fund the acquisition of Todco for an average total consideration equal to 0.979 shares of Hercules Offshore and $16.00 in cash for each share of Todco common stock outstanding, or an estimated 56.9 million shares of Hercules Offshore and cash of $930.7 million. The transaction is valued at $2.3 billion.

In addition to financing the acquisition, proceeds from the facility will be used to repay in full and terminate Hercules' existing senior secured term loan facility and refinance Todco's revolver.

Closing of the acquisition is expected to take place in mid-2007, subject to regulatory approvals and other customary conditions, as well as both Hercules Offshore and Todco shareholder approvals.

Hercules Offshore is a Houston-based operator of jack-up drilling rigs and liftboats. Todco is a Houston-based provider of contract oil and gas drilling services.

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