-
-
-
-
Harvey Gulf International Marine and a lenders committee holding close to half of the company’s debt have reached a restructuring deal in which management would get 3% of the new equity on a fully diluted basis, according to sources with knowledge of the matter. The deal paves the way for a $1.2 billion prepackaged chapter 11 filing, following GulfMark Offshore and Tidewater Inc., which both filed for bankruptcy protection last year.

The New Orleans-based offshore service vessel provider, advised by Blackhill Partners and Vinson & Elkins, aims to slash nearly $900 million of debt through a chapter 11 process, the sources said. Harvey’s management team would also receive warrants for 11% more equity at strike prices reflecting three levels of enterprise value: $750 million, $1 billion and $1.25 billion.

Under the restructuring support agreement, the lenders, working with PJT Partners and Davis Polk, would swap their $1.2 billion of bank debt in three slices secured by essentially all of the company’s assets into $350 million of five-year LIBOR+600 bps take-back paper and 97% of new stock, the sources said.

The company’s private equity backer, Jordan Co., would not receive equity in the reorganized company, the sources said. New York City-based Jordan has invested in Harvey Gulf’s shipyard business, and discussions are ongoing regarding lenders purchasing the shipyard business from Jordan, the sources said. The private equity firm supports the RSA, according to sources.

Upon filing for chapter 11, Harvey Gulf would not seek debtor-in-possession financing, as it has sufficient liquidity from its cash flow to support both the in-court restructuring process and continuing operations, according to sources.

The six-decade-old marine transportation company focused on the U.S. Gulf of Mexico would remain a private company, the sources added.

The parties will now seek wider support from lenders for the deal before filing for chapter 11, the sources said.

Harvey Gulf skipped about $30 million of coupon and amortization payments due Sept. 30, 2017, and entered into a forbearance agreement with its lenders. The parties extended the forbearance deadline several times to today from the original deadline of Oct. 31 as the company, Jordan and the lenders negotiated the deal, including the equity split, the sources said.

The company’s three tranches of bank debt were all quoted around 46/48 Wednesday, according to AdvantangeData.

Harvey Gulf’s $115 million term loan A maturing in June 2018 tumbled to a trough of 38/40 in September last year from 78.5/79.5 on June 16, when Reorg reported that Harvey Gulf had engaged financial and legal advisors, according to sources and AdvantageData. The term loan A was quoted at 46.5/48.5 Wednesday.

The company’s $840 million term loan B due June 2020 dropped to as low as 33/35 in September from 56.5/58.5 on June 16 and recovered to 46.5/48.5 Wednesday.

The company also has a $270 million revolver due 2018 that is fully drawn, sources said. Bank of America serves as the bank debt’s agent. The revolver was quoted at 46/48 on Wednesday, up from 37/39 on Jan. 9, according to AdvantageData.

In their restructurings, competitors GulfMark Offshore cut $430 million of debt and Tidewater shed $1.6 billion. Hornbeck Offshore Services Inc., which reported a sharp year-over-year increase in fourth-quarter EBITDA to $13.9 million this week, is in ongoing debt discussions with creditors after swapping term sheets last year without a deal. Falling oil prices from more than $100 a barrel in mid-2014 to about $61 on Thursday rendered many offshore drilling projects uneconomical. This led to muted offshore activities and a glut of service vessels without work.

Harvey Gulf, Jordan Co. and the financial and legal advisors to the company and the lenders did not immediately respond to requests for comment.

Equity Split

The parties had previously diverged on the post-reorganization equity split among constituencies during discussions last year.

Harvey Gulf’s lenders received a proposal that Jordan played a primary role in drafting. The proposal would have given 46% of new stock to the private equity firm and 14% to the management, Reorg reported in August. The proposal contemplated swapping 42.5% of Harvey’s three tranches of bank debt into a first lien term loan, 32.5% into preferred equity and the remaining 25% into 40% of new stock.

The creditors countered with a proposal giving themselves 97.5% of new equity and the management team 2.5%. The counterproposal would leave no new stock for Jordan but warrants for 2.5% of equity and $350 million of debt would remain on the balance sheet after reorganization.

Third-Generation Company

CEO Shane Guidry - Harvey Gulf’s third-generation chief from the Guidry family - and Jordan acquired the company in 2008. The company began supporting the Gulf Coast transportation market in 1955, according to its website. The CEO’s son, Ashton Guidry, joined the company, according to a press release in 2014. The company sold its towing business in May 2014 and oil prices lost half their value by the end of that year.

Harvey Gulf lists 61 vessels on its website as of today, including two under construction. The company provides personnel and cargo transportation, offshore drilling construction and remote-operated-vehicle inspection support and accommodations support.

Harvey Gulf has 52 platform supply vessels, four multipurpose support vessels and five fast supply and utility vessels, according to its website. The company bases its operations in Port Fourchon in Louisiana.

The company bought Gulf Coast Shipyard Group in 2015 and founded an entity, Harvey Shipyard Group, to manage the shipbuilding assets in Gulfport, Miss., and New Orleans. Harvey’s shipyard operating arm engages in construction of offshore support vessels and yachts.