By Peg Brickley
Hermitage Offshore Services Ltd. filed for bankruptcy protection, its business of providing support for oil-drilling operations battered by the coronavirus pandemic.
The Tuesday filing in a U.S. Bankruptcy Court in New York automatically staved off creditors of Hermitage, which operates mostly in the North Sea and off the West Coast of Africa
Bankruptcy followed forbearance agreements that bought Hermitage time with lenders DNB Bank ASA of Norway and Skandinaviska Enskilda Banken AB of Sweden, which are owed nearly $133 million. Hermitage pledged 10 platform supply vessels and 11 crew boats to the banks in January as security to refinance the loans.
On Tuesday, the forbearance period ran out, the banks withdrew more than $3 million from the company's accounts, and Hermitage filed for bankruptcy to preserve its liquidity.
The company has no deal with the banks and no bankruptcy loan lined up, but Hermitage believes it can last a couple of weeks with court protection, according to Christopher Avella, the company's chief financial officer.
The goal is to reach an accord with lenders that would allow Hermitage to wait out the tough market conditions, Mr. Avella said in a court filing.
The company is controlled by the Monaco-based Scorpio group of companies, which owns more than 67% of its shares. Scorpio's owners are members of the Lolli-Ghetti family, including Emanuele Lauro, Hermitage's chairman and chief executive.
Efforts to find buyers for the company or its assets began in the first quarter of the year as Hermitage cut back operations.
Offshore drillers have been especially hard hit by Covid-19, with a number of companies filing for bankruptcy or warning that they would do so since the start of the pandemic.
Pacific Drilling SA, an offshore oil and gas drilling contractor, said last week that it might file for bankruptcy and it has started talks with a group of creditors about a restructuring. Fieldwood Energy LLC, which operates in the Gulf of Mexico, recently filed for chapter 11 protection and Noble Corp. filed for bankruptcy in July. Diamond Offshore Drilling Inc. filed for bankruptcy in April while Valaris PLC, which carries some $7 billion in debt, recently warned that it might soon file for bankruptcy.
Hermitage has been issuing public warnings about its financial troubles and losses for months.
The Bermuda-based company last month reported "a significant and abrupt deterioration in the financial condition," raising substantial doubt that it could stay in business. Behind the distress was the one-two punch of pandemic distress and diving crude oil prices that have felled dozens of other energy companies.
Earlier, Hermitage warned investors that major oil producers have cut back significantly, meaning lower rates for its vessels, contract cancellations and renegotiations.
Hermitage filed for bankruptcy protection under case number 20-11850, with Perella Weinberg Partners and Snapdragon Advisory AB as financial advisers and Proskauer Rose LLP as legal counsel.
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