Restructure & Sale of an Offshore Oilfield Services Company

Cal Dive International, Inc., a provider of offshore construction services for the oil and natural gas industry, had been significantly affected by a rapidly deteriorating business environment resulting from the continued drop in oil prices, adverse weather conditions, and third party contractor delays. The company filed for bankruptcy in Delaware with plans to sell its domestic and international assets and operations, and obtained a debtor-in-possession (DIP) facility from the secured lenders. The prepetition capital structure included $100 million of secured debt, $100 million of second lien debt, and $86 million of convertible notes.

Cal Dive subsequently engaged Carl Marks Advisors as Chief Restructuring Officer to provide bankruptcy, financial, and operational advisory services. The firm was separately engaged and approved by the bankruptcy court to provide sell­ side investment banking services. Carl Marks Advisors was selected because of our past track record with middle market energy companies, our deep market knowledge, and significant experience in bringing creative and effective solutions to businesses facing financial distress.

Prior to filing for bankruptcy, Cal Dive was pursuing refinancing opportunities and a potential strategic sale. However, the velocity of decreasing oil prices became a real challenge for Cal Dive as the value of its business and assets dropped in the deteriorating market environment.

Once engaged as Chief Restructuring Officer, the Carl Marks Advisors team quickly assessed the situation and presented several restructuring scenarios to Cal Dive and its creditors. Although a “hunker down” approach was considered in reorganizing the business, the uncertain trajectory of oil prices made it difficult to garner the support of creditors. Under the tight deadlines presented by the DIP agreement, Carl Marks Advisors worked quickly to market the going concern operations and assets for sale.

Leveraging our experience in managing complex restructurings, Carl Marks Advisors addressed a variety of issues simultaneously, including DIP compliance, reporting weekly cash forecasts and variances, completing customer projects, attending court hearings, and providing stakeholder communications.

In a difficult market, Carl Marks Advisors successfully ran a sell-side sale process, and negotiated and closed on several sales. Transactions included the sale of Australian operations to a private equity consortium of SCF Partners and Viburnum Funds; the sale of Mexico operations to Arendal, an oil and gas engineering, design and construction firm; and the sale of 13 vessels to multiple buyers.

• When market conditions are deteriorating quickly, it is critical to set realistic expectations for all stakeholders. For Cal Dive, the secured lenders expected the vessel values to be in line with previous appraisals, which is rarely the case in a distressed sale environment and a market supply glut.
• Take swift, decisive action to reduce the cash burn in order to preserve the going concern. Cal Dive could not afford to keep the parts of the organization that would be necessary to maintain if the market improved. It was necessary to preserve the Australian and Mexican operations as going concerns to achieve higher sale values.
• Communication and accurate, timely reporting are critical to establish credibility and successfully negotiate a restructuring. In Cal Dive’s case, the creditors demanded weekly communications and reporting and made consistent requests for detailed information and analyses. It was important to be responsive to creditors’ requests while keeping the focus on priorities and objectives.