Hercules Offshore amends facility, modifying total leverage, fixed-charge ratio

By Jennifer Chiou

New York, July 23 - Hercules Offshore, Inc. announced that it received the necessary lender consents to amend its credit agreement related to its $882 million term loan and $250 million credit facility.

The amendment is subject to certain closing conditions, including a reduction of the revolving credit facility to $175 million. It is currently unfunded, but is expected to close within the next few business days, according to a company release.

Other changes include the:

• Elimination of the total leverage ratio financial covenant for the nine-month period commencing Oct. 1 and ending on June 30, 2010;

• Increase of the total leverage ratio that Hercules must maintain following the expiration of the nine-month period to 8.0x for the quarter ended Sept. 30, 2010 with step-downs thereafter;

• Revision of the fixed-charge coverage ratio definition and the minimum ratio to be more favorable to the company; and

• Addition of a minimum liquidity covenant, requiring the company to maintain the sum of unrestricted cash and equivalents and revolving credit availability of at least $100 million through Dec. 31, 2010, declining to $75 million through Dec. 31, 2011, and declining to $50 million thereafter.

The initial interest rate of the amended facility will be Libor plus 650 basis points, with a floor of Libor plus 200 bps. The interest rate on the facility will decline by 150 bps, to Libor plus 500 bps once the principal on the term loan is reduced by about $200 million to $684.3 million or less.

The interest rate will decline further by an additional 100 bps to Libor plus 400 bps as the principal on the term loan is reduced by an additional $200 million to $484.3 million or less.

"Our opportunistic retirement of debt at a discount to par, and the sale of non-core assets are recent measures that exemplify our commitment to strengthening our capital structure," John T. Rynd, chief executive officer and president, said in a news release.

"We are pleased to announce that we have reached an agreement with our lenders to amend our senior secured credit facility to provide the financial covenant relief that we believe will provide us with the flexibility needed to operate through the trough of this business cycle."

Houston-based Hercules Offshore operates a fleet of 31 jackup rigs, 17 barge rigs, 65 liftboats, three submersible rigs, one platform rig and a fleet of marine support vessels.

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