Hercules Offshore gets $450 million senior secured term loan at 97 OID

By Marisa Wong

Morgantown, W.Va., Nov. 6 – Hercules Offshore, Inc. entered into a credit agreement on Friday for a $450 million senior secured term loan facility, according to an 8-K filing with the Securities and Exchange Commission.

Jefferies Finance LLC is the administrative agent and collateral agent.

The loans were issued with an original issue discount at 97.

Of the proceeds, $200 million were placed into an escrow account to be used to finance the remaining installment payment on the company’s Hercules Highlander rig. Remaining proceeds are being used to complete the company’s pre-packaged plan of reorganization. Hercules completed its financial restructuring and emerged from Chapter 11 bankruptcy on Friday.

All loans mature on May 6, 2020.

The company may voluntarily prepay loans, subject to prepayment premiums, and is required to make prepayments with proceeds from asset sales and debt issuances.

Loans bear interest at Libor plus an applicable margin of 950 basis points, subject to a 1% Libor floor.

In connection with entering into the credit agreement, the company paid the original commitment parties a 2% put option premium.

The credit agreement contains a number of covenants and requires the company to comply with a maximum senior secured first-lien leverage ratio beginning from the fiscal quarter ending March 31, 2017 and a minimum liquidity amount beginning from the closing date of the credit facility.

The maximum secured leverage ratio is 6.0 to 1.0 for the fiscal quarter ending March 31, 2017, 5.0 to 1.0 for the fiscal quarter ending June 30, 2017, 4.0 to 1.0 for the fiscal quarter ending Sept. 30, 2017 and 3.50 to 1.0 for the fiscal quarter ending Dec. 31, 2017 and after.

The minimum liquidity is $100 million for the period beginning on the closing date and ending on June 30, 2016, $75 million for the period beginning July 1, 2016 and ending Dec. 31, 2016, $50 million for the period beginning Jan. 1, 2017 and ending June 30, 2017 and $25.0 million for the period beginning July 1, 2017 and after.

Hercules, a Houston-based provider of offshore drilling equipment and services, filed for bankruptcy on Aug. 13. The Chapter 11 case number is 15-11685.

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