S&P Downgrades Hercules Offshore (HERO) to 'D' Amid Chapter 11 Filing

S&P Global Ratings today lowered its corporate credit rating on Hercules Offshore Inc. (Nasdaq: HERO) to 'D' from 'CC'. We also lowered the issue-level rating on the company's senior secured term loan to 'D' from 'CC'.

The recovery rating on the senior secured term loan remains '3', reflecting our expectation of meaningful (higher end of the 50% to 70% range) recovery for lenders in the event of a payment default.

"The downgrade follows the company's announcement that it has filed Chapter 11 bankruptcy to facilitate an orderly asset sale," said S&P Global Ratings credit analyst Kevin Kwok.

The company recently entered into a restructuring support agreement with lenders holding about 99% of the first-lien senior secured credit facility (consisting entirely of term loans). According to the restructuring support agreement, HERO was required to commence solicitation of votes to accept or reject the plan by May 31, 2016, and commence a chapter 11 filing by June 6, 2016.

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