ITEM 1.01. ENTRY INTO MATERIAL DEFINITIVE AGREEMENT
On June 17 and 18, 2009, Hercules Offshore, Inc. (the “Company”) entered into separate exchange
agreements with certain holders of its 3.375% Convertible Senior Notes due 2038
(the “Notes”),
pursuant to which holders of approximately $45.8 million in aggregate principal amount of
the Notes
agreed to exchange their Notes for an aggregate of 7,755,440 shares of the
Company’s common stock and
the payment of accrued interest (collectively, the “Exchange”).
Approximately $95.9 million of the Notes will
remain outstanding after the closing of the Exchange, which is expected to occur on June 23, 2009.
A copy of the form of exchange agreement is attached to this Current Report as Exhibit 10.1.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
See
Item 1.01 above which is incorporated herein by reference. The issuance of the
7,755,440 shares of common stock will not be registered under the Securities Act of 1933, as amended (the
“Securities Act”), in reliance on an exemption under Section 4(2) of the Securities Act and Rule
506 of Regulation D, as the Exchange was not public.
ITEM 7.01 REGULATION FD DISCLOSURE
Exchange Agreements
On
June 18, 2009, the Company issued a press release announcing it had entered into separate
exchange agreements with certain holders of $45.8 million aggregate principal amount of Notes,
pursuant to which the Company agreed to exchange the Notes for an aggregate of
7,755,440 shares of the
Company’s common stock and the payment of accrued interest. A copy of the Company’s press release
is attached to this Current Report as Exhibit 99.1.
Fleet Status Report
Also
on June 18, 2009, the Company is posting on its website at www.herculesoffshore.com a
report entitled “Hercules Offshore Fleet Status Report” (the “Fleet Status Report”). The Fleet
Status Report includes the Hercules Offshore Rig Fleet Status (as of June 16, 2009), which contains
information for each of the Company’s drilling rigs, including contract dayrate and duration. The
Fleet Status Report also includes the Hercules Offshore Liftboat Fleet Status Report, which
contains information by liftboat class for May 2009, including revenue per day and operating days.
The Fleet Status Report is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is
incorporated herein by reference.
The information furnished pursuant to Item 7.01, including Exhibits 99.1 and 99.2, shall not
be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and will
not be incorporated by reference into any registration statement filed by the Company under the
Securities Act unless specifically identified therein as being incorporated therein by
reference.
The information and statements made in the Fleet Status Report that are not historical facts
are forward-looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include
statements concerning estimated contract expiration dates, dayrates, estimated dates for completion
of repairs and upgrades and commencement dates of new contracts. Such statements are subject to a
number of risks, uncertainties and assumptions, including without limitation, early termination by
the customer pursuant to the contract or otherwise, cancellation or completion of certain contracts
earlier than expected, operational difficulties, shipyard and other delays and other factors
described in the Company’s annual report on Form 10-K and its most recent periodic reports and
other documents filed with the Securities and Exchange Commission, which are available free of
charge at the SEC’s website at www.sec.gov or the Company’s website at www.herculesoffshore.com.
The Company cautions you that forward-looking statements are not guarantees of future performance
and that actual results or developments may differ materially from those projected or implied in
these statements.
ITEM 8.01 OTHER EVENTS
Agreement to Sell Hercules 100 and Hercules 110
On June 15, 2009, the Company, through certain of its subsidiaries, executed an agreement to
sell its Hercules 100 and Hercules 110 jackup drilling rigs for a total purchase price of $12.0
million. The Hercules 100 is retired and stacked in Sabine Pass, Texas, and the Hercules 110 is
cold-stacked in Trinidad. The closing of the sale of the Hercules 100 and Hercules 110 is expected
to occur on or before August 15, 2009 and is subject to customary closing conditions.
Debt Covenant Compliance
The Company has a $1,150.0 million credit facility (the “Credit Agreement”), consisting of a
$900.0 million term loan facility and a $250.0 million revolving credit facility. The Company’s
Credit Agreement requires that it meet certain financial ratios and tests. As of March 31, 2009
the Company was in compliance with all of its financial covenants under its credit facility.
However, based upon the Company’s current operating forecast for the remainder of 2009, if the
Company is not able to undertake sufficient additional mitigating actions beyond those announced
today, the Company would not be in compliance with certain of its debt covenants when it reports
its results for the year ended December 31, 2009. The Company’s failure to comply with such
covenants would result in an event of default under the Credit Agreement. An event of default
could prevent the Company from borrowing under the revolving credit facility, which would in turn
have a material adverse effect on the Company’s available liquidity.
Additionally, an event of default could result in the Company having to immediately repay all
amounts outstanding under the term loan facility and the revolving credit facility and in the
foreclosure of liens on its assets. An event of default could raise substantial doubt as to
whether the Company will be able to continue its business under normal operations. The Company may
refinance its loan or seek an amendment of its Credit Agreement at materially increased cost. In
the event of an amendment, the lenders may impose additional operational and financial restrictions
which could further limit the Company’s ability to adequately respond to changing business
conditions and from capitalizing on future business opportunities.
The exchange of equity for the
Notes and the sale of Hercules 100
and Hercules 110 announced today are steps to strengthen the Company’s capital structure and to
mitigate a breach of the financial covenants under the Credit Agreement. Those actions alone are
unlikely to be sufficient to avoid a breach of its covenants; therefore, the Company may pursue
other mitigating actions that could include, but are not limited to, one or more of the following:
seeking an amendment of the Credit Agreement; additional asset sales; and the issuance of debt,
convertible debt or equity.
This Form 8-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934. Such statements are
subject to a number of risks, uncertainties and assumptions,
including contracts, dayrates, our plans and other factors described in
Hercules Offshore’s most recent periodic reports and other documents filed with the Securities and
Exchange Commission, which are available free of charge at the SEC’s Web site at
http://www.sec.gov or the Company’s Web site at http://www.herculesoffshore.com .
Hercules Offshore cautions you that forward-looking statements are not guarantees of future
performance and that actual results or developments may differ materially from those projected or
implied in these statements.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
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Description |
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10.1 |
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Basic Form of Exchange Agreement |
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99.1 |
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Press release dated June 18, 2009 |
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99.2 |
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Hercules Offshore Fleet Status Report |