Two of the best known owners of offshore support vessels in the US, Tidewater and GulfMark Offshore, filed for bankruptcy in the same court on 17 May 2017 as another well known company announced plans to spin-off its offshore vessel unit
Having worked on restructuring plans for many months, two US offshore support vessel companies have both been left with no option but to file for protection under Chapter 11 of the US bankruptcy code, such has been the effects of the downturn in the offshore oil and gas market.
Tidewater Inc and certain of its subsidiaries filed voluntary petitions under Chapter 11 of Title 11 of the US Bankruptcy Court for the District of Delaware to pursue a pre-packaged plan of reorganisation in accordance with a restructuring support agreement (RSA) it announced recently.
On 12 May debtors began soliciting votes on the pre-packaged plan from certain of the company’s creditors. The lenders under the company’s fourth amended and restated revolving credit agreement, holders of the company’s 2010 Notes, 2011 Notes, and 2013 notes and holders of sale and leaseback claims – that are anticipated to arise from the company’s rejection in bankruptcy of certain sale and leaseback agreements for vessels chartered by certain debtors – are treated as a single class for purposes of voting under the plan.
In a statement, Tidewater said it plans to reject certain sale-leaseback agreements for leased vessels currently in the company’s fleet, and to limit the resulting rejection damages claims to approximately US$131M. However, the sale-leaseback parties dispute the amount of the rejection damages claims and a final resolution of the amount of such claims will be subject to litigation. “As a result, there is no certainty as to the final amount of sale-leaseback rejection damages claims that will be treated pursuant to the plan,” Tidewater said.
The plan is supported by lenders holding approximately 60% per cent of the outstanding principal amount of loans under the credit agreement and noteholders holding 99% of the aggregate outstanding principal amount of the senior notes. Collectively, these supporting lenders and noteholders also constitute a majority in number of the holders of general unsecured claims.
GulfMark Offshore has also commenced a Chapter 11 case in the US Bankruptcy Court for the District of Delaware. The company said the bankruptcy filing is the next step in a restructuring effort that reached a key milestone with its own RSA, dated 15 May 2017. The filing does not include any of GulfMark’s operating subsidiaries. Contracts and relationships between the company’s subsidiaries and customers, vendors, and employees are unaffected by the bankruptcy filing.
GulfMark has filed a series of motions with the court requesting authority, among other things, to enter into a US$35M interim financing facility. Subject to approval, the financing is expected to be sufficient to support GulfMark’s operations during the restructuring process.
Holders of approximately 47 per cent of the company’s unsecured 6.375% senior notes due 2022 have signed a restructuring support agreement (RSA). Under the terms of the RSA, the company will convert its outstanding senior notes to 35.65% of the equity in a reorganised GulfMark, resulting in the elimination of approximately US$430M in outstanding debt and approximately US$27M in annual interest payments. The company will also launch a US$125M rights offering to holders of its senior notes for an additional 60% of the equity in a reorganised GulfMark, providing liquidity to fund its operations.
The US$125M rights offering will be backstopped by certain holders of the senior notes. Existing shareholders will receive 0.75% of the equity and warrants for an additional 7.5% of the equity in the reorganised GulfMark. The warrants will have a seven-year term and an exercise price based on a reorganised overall equity value of US$1Bn.
The company will continue its operations throughout the process and has entered into a commitment letter, subject to certain conditions including execution of definitive documentation, for financing to support its operations during the process.
“The restructuring will enhance our competitive position when contracting with customers and vendors, and it will substantially strengthen our capital structure and liquidity,” said Quintin Kneen, president and chief executive officer. “While the industry conditions remain challenging, this debt reduction and rights offering will significantly enhance GulfMark’s financial position.”
Mr Kneen continued, “We will continue to focus on being the provider and employer of choice in the industry. Our employees’ dedication to providing safe and reliable services to our customers enables us to be the first call in the offshore vessel industry, and I want to thank them for their service to GulfMark.
"This restructuring enables us to continue meeting our ongoing obligations to all customers, employees, and vendors. We are confident that this step will position GulfMark to seize opportunities as the downturn continues and in the eventual market recovery.”
In another important development in the Gulf of Mexico market, Charles Fabrikant-led Seacor Holdings has confirmed it is to spin-off Seacor Marine in June this year.
In late 2015, when the spin-off was first mooted, Mr Fabrikant, executive chairman and chief executive of Seacor Holdings, said the transaction “would provide additional capital for the offshore group to seek out opportunities arising from the dislocation in the energy sector to acquire discrete assets and pursue strategic transactions that complement our existing business.”
In a statement, Seacor’s board of directors said they had declared a pro rata dividend of the shares of Seacor Marine common stock owned by Seacor that will result in the legal and structural separation of the two companies.
On the distribution date of 1 June 2017, Seacor will issue its stockholders one share of Seacor Marine for every share of Seacor common stock they hold, multiplied by a fraction, the numerator of which is 17,671,356 and the denominator is the number of shares of Seacor common stock outstanding at the time of the spin-off, or approximately 1.007 shares of Seacor Marine common stock per share of Seacor common stock.
Seacor common stock shares will continue to trade ‘regular-way’ on the NYSE under the symbol CKH through and after the 1 June distribution date. Any holders of Seacor common stock who sell their shares regular-way on or before 1 June 2017 will also be selling their right to receive shares of Seacor Marine common stock.
It is anticipated that Seacor common stock will also trade ex-distribution (that is, without the right to receive shares of Seacor Marine common stock) on or about 18 May 2017, and continue through the distribution date, under the symbol CKH WI.
Seacor Marine common stock will begin trading on a ‘when-issued’ basis on the NYSE under the symbol SMHI WI beginning on 18 May 2017. On 2 June 2017, when-issued trading of Seacor Marine common stock will end and regular-way trading under the symbol SMHI will begin.
CBP withdraws Jones Act notice
US Customs & Border Patrol (CBP) has confirmed that a notice proposing significant changes to the Jones Act that would have far-reaching implications for offshore vessel owners has been withdrawn. No detailed explanation of the decision to withdraw the notice was provided.
A notice issued on 10 May 2017 withdrew an earlier one that described proposed modification and revocation of ruling letters relating to CBP’s position regarding the application of coastwise laws to certain merchandise and vessel equipment that are transported between coastwise points.
In the new notice, CBP said: “Based on the many substantive comments CBP received, both supporting and opposing the proposed action, and CBP’s further research on the issue, we conclude that the agency’s notice of proposed modification and revocation of the various ruling letters relating to the Jones Act should be reconsidered. Accordingly, CBP is withdrawing its proposed action relating to the modification of HQ 101925 and revision of rulings determining certain articles are vessel equipment under T.D. 49815(4), as set forth in the January 18, 2017 notice.”
CBP’s proposed reinterpretation of the Jones Act was strongly opposed by international vessel owners but supported by a number of well known owners in the US who operate light construction vessels.
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