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Hercules Offshore Files For Chapter 11 Bankruptcy

A deal with bondholders, giving them a 3 percent stake in the restructured company, will help the Houston drilling firm avoid legal challenges that could drag out the bankruptcy process.

 

Hercules Offshore has become the latest corporate victim of low oil prices. The Houston-based drilling services firm filed for Chapter 11 protection in a Delaware federal bankruptcy court on Thursday.

Low oil prices have struck companies involved in shallow water drilling, like Hercules, particularly hard.

“Deepwater rigs are contracted out for a longer period of time and they’re less susceptible to swings in energy demand,” said Bret Wells, director of the Energy, Environment, and Natural Resources Center at the University of Houston Law Center. “The shallow water drilling tends to be much more sensitive to the price of oil, and they [the rigs] tend to not to be contracted out for as long a period of time.”

Hercules came to court having already worked out a deal with its bondholders, known as a “prepackaged reorganization.” In return for giving up legal claims against Hercules, those creditors will get a 3 percent stake in the company after it emerges from Chapter 11

“You know, you don’t see that very often,” said Marc Schwartz, a bankruptcy attorney with the Houston office of HSSK. “I’ve seen it before, but it’s not frequent. But we’ll probably see more attempts like that, particularly if it works at Hercules.”

The company has set a target date of November 7 for exiting bankruptcy.

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Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media’s coverage of national, state, and local elections. He also reports on major policy issues before the Texas delegations in the U.S. House and Senate, as well as the Texas governorship, the state legislature, and county and city governments. Before taking up his current post, Andrew...

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