Torch Offshore
Client
Torch Offshore, Inc. was a leading provider of sub sea construction services in connection with the in-field development of offshore oil and natural gas reservoirs. Torch provided all manner of services but focused on pipe laying for drilling and production platforms, gathering and distribution systems. Torch built its business providing services in water depths of 20 to 300 feet in the Gulf of Mexico. At the height of its activities Torch operated a fleet of 11 vessels and produced annual revenues of approximately $70 million. Its domestic operations were based in New Orleans and its offshore operations were based in Houston.
Challenge
In 2003 and 2004 Torch attempted to expand its operations, fleet capabilities, and management expertise in order to provide its services in water depths up to 10,000 feet on a global basis. To accomplish this goal, Torch acquired a 520-ft vessel, the M/V Midnight Express. Torch sought to convert the vessel into a unique, state-of-the-art, dynamically positioned offshore construction vessel incorporating a new concept pipe lay system devised by Torch’s management that would allow pipe to be spooled up concurrently with the pipe laying operation. The purchase and refit costs for this vessel approximated up to $115 million. Torch added substantial leverage, including $80 million of new debt associated with the M/V Midnight express. Lower than expected operating results, construction delays and the failure of the M/V Midnight Express to obtain its class certification following construction and the resulting inability to generate deepwater contracts caused a severe liquidity crisis that led to a bankruptcy filing in January, 2005.
Solution
Bridge was retained as the Chief Restructuring Advisor to assist the Company in its reorganization. Bridge quickly assessed the liquidity situation and advised the Board that additional financing was required. Bridge also analyzed the Company's business plan and advised the Board that, due to the substantial debt level, ($145 million) the Company was unlikely to generate sufficient cash to service the existing debt. The Board decided to put the assets of the Company up for sale and Bridge assisted the Company’s investment banker in §363 sales for all of the vessels owned by Torch.
Results
Bridge was able to assist the Company to secure $8.3 million in post-petition DIP financing from its existing lenders. The §363 sales resulted in the Debtor receiving $83 million for the M/V Midnight Express, an $18.3 million credit bid from GECC for the vessels it had financed and a $2.8 million payment for its proprietary saturation diving system from Epic Divers, Inc.
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