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Law360 (August 12, 2020, 11:15 AM EDT ) Oil drilling company Hermitage Offshore Services Ltd. said Wednesday it hit Chapter 11 in New York with plans to continue operations as it restructures debt that ballooned to more than $100 million in part because of the COVID-19 pandemic.
The company and 28 of its subsidiaries resorted to filing for bankruptcy Tuesday after restructuring talks with its creditors broke down, Hermitage said. Hermitage blamed a "prolonged slump" in global oil prices that was exacerbated by the public health crisis.
"While the company would have preferred to complete its financial restructuring out of court, it was unable to reach a consensual agreement with its lenders, which made filing Chapter 11 necessary to provide a single forum for all continuing conversations with its lenders," according to the company's statement.
Hermitage said it intends to provide uninterrupted customer service and honor all current and future charter party agreements throughout the Chapter 11 process.
According to its Chapter 11 filings, the company currently has $132.9 million in secured debt.
In its Chapter 11 declaration, CFO Christopher Avella said the company currently operates 10 platform supply ships and 11 crew boats.
He said in light of the "unprecedented collapse" in oil prices and the expected impact of COVID-19, the company began preparing for restructuring early this year. He said it began discussions with two potential buyers, one of which dropped out when the pandemic's impact on the oil industry became clearer.
"The debtors remain in discussions with buyer 2, and are hopeful that a sale of the debtors' assets may occur during these cases," he said.
The company also began cost-cutting measures, sold its interest in two anchor handling tugs and negotiated a series of forbearances with its lenders while it attempted to negotiate an out-of-court restructuring, he said. The last forbearance expired Aug. 11 and the lenders withdrew $3.3 million from the company's bank accounts, leading to the Chapter 11 filing to preserve the company's remaining liquidity, he said.
He said Hermitage is hoping to negotiate a Chapter 11 plan with its lenders and "remains committed" to a consensual resolution.
Incorporated in the Marshall Islands in 2013, Hermitage's fleet includes modern harsh environment platform supply vessels, crew boats and anchor handling vessels, according to the company's website. The company went public in 2014 on the New York Stock Exchange.
Hermitage is the latest in a string of companies in the oil and gas industry who have entered Chapter 11 in recent months, blaming years of depressed commodity prices and the shock of the COVID-19 pandemic. Among offshore companies alone, the last two months have seen filings from Diamond Offshore, Noble Corp. and Fieldwood Energy.
Hermitage is represented by Brian S. Rosen and Joshua A. Esses of Proskauer Rose LLP.
The case is In re: Hermitage Offshore Services Ltd., case number 20-11850, in the U.S. Bankruptcy Court for the Southern District of New York.
--Editing by Alyssa Miller.
Update: This story has been updated with more details and with case and counsel information.
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