Seahawk Drilling's former parent blasts plan share price assumption

By Caroline Salls

Pittsburgh, Aug. 19 - Seahawk Drilling, Inc. former parent Pride International, Inc. objected to the company's proposed plan of reorganization, arguing that the plan "violates fundamental statutory creditor protections, including the absolute priority rule," according to a Friday filing with the U.S. Bankruptcy Court For the Southern District of Texas.

"Equity is at the bottom of the capital structure and entitled to nothing until all creditors are paid in full, with interest and attorneys' fees," Pride said in the objection. "The plan violates this bedrock bankruptcy principle."

Pride International said the plan assumes that Seahawk asset purchaser Hercules Offshore, Inc.'s share price will be high enough on the effective date to pay all allowed claims in full and to fund reserves for disputed claims, with post-bankruptcy interest and attorneys' fees and costs.

However, Pride said recent volatility in the stock market, specifically in connection with Hercules' stock, "casts doubt on this assumption."

Pride said it now appears that the Hercules share price will most likely not be high enough to give Seahawk enough stock value to pay the claims and fund the reserves.

The closing price of Hercules common stock was $3.31 per share on Aug. 18, the objection said, down from a closing price of $5.92 per share on May 12 and a closing price of $5.48 per share when Seahawk's disclosure statement was approved on July 8.

Pride said Hercules' stock has traded between $2.05 and $6.99 over the past year.

According to the objection, it appears that equity will be out of the money on the plan effective date, and, under the absolute priority rule, equity must await resolution and payment of all disputed claims before receiving a penny.

In addition to violating the absolute priority rule by providing a distribution for equity before all creditors are paid in full, Pride said the plan violates the Bankruptcy Code's requirements that a plan provide similar treatment to similarly situated creditors and not unfairly discriminate among creditor classes.

Specifically, Pride said the plan improperly treats holders of disputed claims differently than holders of allowed claims.

Seahawk, a Houston-based offshore drilling company, filed for bankruptcy on Feb. 11, 2011. The Chapter 11 case number is 11-20089.

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