By Susanna Moon
Chicago, Oct. 13 – Hornbeck Offshore Services, Inc. proposed an exchange offer for its 5 7/8% senior notes due 2020 to an ad hoc investor group and was countered with two separate responses.
The noteholder counter-proposals are backed by different sets of holders within the ad hoc group, according to an 8-K filing with the Securities and Exchange Commission.
Neither of the counter-proposals was acceptable, the company said.
“Through its financial advisor, PwC Corporate Finance LLC, the company remains committed to engaging with its bondholders in order to seek constructive solutions that address its long-term debt,” the company added.
In the company’s offer dated Oct. 2, Hornbeck was offering to swap out the notes for loans and cash with an exchange value of 76% of par, consisting of 68% senior secured second-lien term loans and 8% cash.
The tenor would be six years and the coupon 8¾%.
Holders also would give “customary exit consent” to amend the notes to eliminate substantially all covenants, events of default and related defined terms and other provisions.
The company was offering up to $300 million of incremental lien debt comprising a combination of second-lien tranche and first-lien pay-in-kind accrual and/or working capital ABL as permitted by the $300 million first-lien term loan.
Holders representing at least 50.1% of the 2020 notes also would agree to sign support agreements before a publicly launched exchange offer to all noteholders.
The affirmative and negative covenants would be consistent with customary high-yield covenants but no more restrictive than the more permissive first-lien term loan agreement filed with the SEC on June 16, 2017 and the indenture for the 5% senior notes due 2021 and with additional flexibility reflecting the junior lien status of the second-lien tranche.
Counter proposals
In each counter-proposal, the ad hoc groups are asking for an exchange value of 79% of par, or a mix of 69.5% second-lien loans and 9.5% cash.
Also, the tenor would be the earlier of six years or 90 days after maturity of the company’s $300 million first-lien term-loan with a cash coupon of 8 7/8%.
Holders would provide consents to amend the notes to eliminate substantially all covenants and events of default.
Ad hoc group holders representing 50.1% of the notes would agree to pledge support before a public exchange offer with a minimum participation threshold of 80%, which may be waived with holder consents.
Covenants would require minimum available liquidity of at least $25 million.
Affirmative and negative covenants would be substantially similar to such covenants under the first-lien term loan agreement filed with the SEC on June 16.
The company also would rescind termination of 2020 notes ad hoc group advisers.
The difference between the two counter-proposals is that one is asking for a private exchange with another option for holders of 5% notes due 2021 in the ad hoc group to exchange up to $55 million on a private basis for either a) 69.5% second-lien loans and 4.5% cash or b) 63.5% second-lien loans and 9.5% cash, at the company’s option.
Hornbeck is a Covington, La.-based provider of offshore supply vessels.
Company’s proposal
| Issuer: | Hornbeck Offshore Services, Inc.
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| Issue: | Senior secured second-lien term loans
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| Maturity: | Six years
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| Coupon: | 8¾%
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| Price: | 76% of par, consisting of 68% senior secured second-lien term loans and 8% cash
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| Call option: | Prepayable at 101 in year one and at par after that
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| Counter-proposals
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| Issuer: | Hornbeck Offshore Services, Inc.
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| Issue: | Senior secured second-lien term loans
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| Maturity: | Earlier of six years or 90 days after maturity of $300 million first-lien term-loan
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| Coupon: | 8 7/8%
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| Price: | 79% of par, which is a mix of 69.5% second-lien loans and 9.5% cash
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| Call option: | Prepayable at 101 in year one and at par after that
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