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Texas energy service provider files for Chapter 11


For businesses in Texas, there are inevitable financial pitfalls that will come up. Whether it is industry-wide, global or based on factors that could not have been foreseen, it is often unavoidable to have to come up with various ways to deal with them. For some financial issues, a tactic that many businesses will use is a business bankruptcy through Chapter 11. Understanding the process and how it can be beneficial is key before making the decision that filing for Chapter 11 bankruptcy is the right step.

A Texas energy service provider has filed for Chapter 11 bankruptcy. This is part of a plan that was discussed recently to move forward with a liquidation after an attempted restructuring did not come to fruition. The company is one of many oil companies that is having problems with their business in the current economic climate. The company, which provided rig operator and drilling services, had let it be known that they were planning Chapter 11 around ten days before making it official. Close to 100 percent of their first-lien lenders issued an endorsement of the prepackaged bankruptcy.

Some companies use Chapter 11 to continue operating, but this particular company is seeking a dissolution. Assets will be sold and parts of the business that do not find buyers will be closed down. The unsecured creditors will receive payment. Shareholders will get an upfront payment provided they agree to the plan. Those that vote no will receive a portion of what is accrued from the sale. This company had already had a Chapter 11 filing that it emerged from in late 2015. The continued struggles of the oil industry prevented it from recovering as it hoped. The company has assets such as lifeboats that it will try and sell.

In this case, the bankruptcy is to sell the assets and cease operations. With Chapter 11, a company has numerous options as the process moves forward including reorganization via Chapter 11 or doing as this company is and closing down. Those who are running a business and are considering their options for debt relief should understand the benefits of Chapter 11 and if there are other preferable options at their disposal. Speaking to a legal professional experienced in all aspects of these decisions can help.

Source: USA Today, "Hercules Offshore files for Chapter 11 bankruptcy," Nathan Bomey, June 6, 2016

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