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REORGANIZATION AND CHAPTER 11 PROCEEDINGS | 12 Months Ended
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Mar. 31, 2017
Reorganizations [Abstract] |
REORGANIZATION AND CHAPTER 11 PROCEEDINGS | (2)REORGANIZATION AND CHAPTER 11 PROCEEDINGS The lower commodity prices from mid-2014, which persisted through 2017, resulted in reduced offshore exploration and development spending by our customers and reduced revenue and cash flows for the company, which compromised our ability to remain in compliance with certain financial covenants set forth in agreements governing our indebtedness. Prior to the end of fiscal 2016, and while the company was in compliance with its debt agreements, the company borrowed $600 million to provide adequate liquidity to weather the industry downturn. At March 31, 2017, we had $2.04 billion of debt ($2.03 billion, net of deferred debt issue costs of $6.4 million) consisting of (i) $900 million in borrowings under the Credit Agreement (as defined below), which consists of a fully drawn $600 million revolving credit facility and a $300 million term loan facility; (ii) $500 million in principal amount of 2013 Notes (as defined below); (iii) $165 million in principal amount of 2011 Notes (as defined below); (iv) $382.5 million in principal amount of 2010 Notes (as defined below); and (v) approximately $92 million of U.S. dollar-equivalent (“USD”) debt under the Troms Credit Agreement (as defined below), which consists of four tranches of unsecured debt. In response to the significant and sustained decline in commodity prices and resulting decline in the (i) utilization of our offshore support vessels, (ii) average day rates received, and (iii) vessel revenue, in fiscal 2016 and fiscal 2017, we focused on managing our balance sheet to preserve liquidity by taking certain steps, including reducing capital expenditures, terminating and/or renegotiating various contracts, and reducing our workforce and discretionary expenditures. We implemented a number of significant cost reduction measures to mitigate the effects of significantly lower vessel revenue and, given the currently challenging offshore support vessel market and business outlook, took other steps to improve our financial position and liquidity, including (i) the January 2016 suspension of our common stock dividend, (ii) the March 2016 $600 million draw on the Tidewater Credit Facility, and (iii) the renegotiation or termination of vessel construction contracts in order to reduce capital expenditures, which increased current and projected liquidity by in excess of $200 million. Despite efforts to reduce spending, we determined that with our current capital structure, we were not positioned to withstand the ongoing and precipitous decline in oil and gas prices and the corresponding decline in revenues and cash flows. We concluded that a reduction in our long-term debt and cash interest obligations was required to improve our financial position and flexibility. Additionally, we retained financial and legal advisors, to assist us in analyzing and considering financial, transactional and strategic alternatives. As such, we engaged Weil, Gotshal & Manges LLP (“Weil”), as our restructuring counsel and Lazard Frères & Co. LLC (“Lazard”), as our investment banker and financial advisor, to assist us in developing and implementing a comprehensive restructuring plan. At June 30, 2016, we failed to meet a 3.0x minimum interest coverage ratio covenant contained in the Credit Agreement, the Troms Credit Agreement, and the 2013 Notes Purchase Agreement (each as defined below) (collectively, the “Funded Debt Agreements”), which resulted in covenant noncompliance that would have allowed the respective lenders and/or the noteholders to declare us to be in default under each of the Funded Debt Agreements, and accelerate the indebtedness thereunder. In addition, our projected covenant non-compliance resulted in the inclusion in the report provided by our independent registered public accounting firm that accompanied our audited consolidated financial statements for the fiscal year ended March 31, 2016 (the “Audit Opinion”) of an explanatory paragraph regarding our ability to continue as a going concern. Our inability to receive an Audit Opinion without modification was a separate event of default under the Credit Agreement that would have allowed the lenders to accelerate the indebtedness thereunder. To avoid an acceleration of indebtedness under the Funded Debt Agreements (and potentially the other Senior Unsecured Notes) we negotiated and obtained limited waivers from the necessary lenders and noteholders to extend the waiver of the audit opinion requirement and/or waive the minimum interest coverage ratio requirement until August 14, 2016 and subsequent, further extensions until September 18, 2016, October 21, 2016, November 11, 2016, January 27, 2017, March 3, 2017, and March 27, 2017. Since January 2016, we have been actively engaged in discussions and negotiations regarding restructuring alternatives with (i) a steering committee comprised of certain Tidewater Lenders (as defined below) (the “Bank Lender Steering Committee”), (ii) the Troms Lenders (as defined below), and (iii) an unofficial committee of certain unaffiliated holders of the 2013 Notes (the “Unofficial 2013 Noteholder Committee”). Since December 2016, such discussions and negotiations have focused on a restructuring through a consensual prepackaged plan pursuant to chapter 11 of the U.S. Bankruptcy Code that would be supported by a substantial percentage of our lenders and the noteholders. When the March 27, 2017 waiver expired on April 7, 2017 in accordance with its terms, our negotiations with the Bank Lender Steering Committee and the Unofficial Noteholder Committee regarding the terms of the restructuring were substantially complete. By early May, the Debtors (as defined below), the Bank Lender Steering Committee and the Unofficial Noteholder Committee reached an agreement in principle regarding the terms, and processes to document, the Restructuring embodied in the Prepackaged Plan through the RSA (as defined below). The RSA is an agreement pursuant to which the lenders agree to support the Prepackaged Plan. The Debtors were also able to reach an agreement in principle with the Troms Lenders regarding an amendment of the Troms Credit Agreement to be executed in conjunction with the Prepackaged Plan. Restructuring Support Agreement. Prior to filing the Bankruptcy Petitions (as defined below), on May 11, 2017, the Debtors (as defined below) entered into a Restructuring Support Agreement (the “RSA”) with certain of its creditors (collectively, the “Consenting Creditors”), specifically: (i) lenders holding approximately 60% of the outstanding principal amount of the loans under the company’s Fourth Amended and Restated Revolving Credit Agreement, dated as of June 21, 2013 (the “Credit Agreement”), between the company as borrower, each of the guarantors named therein, Bank of America, N.A., as administrative agent and the lenders party thereto (the “Consenting Tidewater Lenders”) and (ii) holders of approximately 99% of the aggregate outstanding principal amount of Tidewater’s (a) 3.90% Senior Notes, 2010-Series B due December 30, 2017, 3.95% Senior Notes, 2010-Series C due December 30, 2017, 4.12% Senior Notes, 2010-Series D due December 30, 2018, 4.17% Senior Notes, 2010-Series E due December 30, 2018, 4.33% Senior Notes, 2010-Series F due December 30, 2019, 4.51% Senior Notes, 2010-Series G due December 30, 2020, 4.56% Senior Notes, 2010-Series H due December 30, 2020, and 4.61% Senior Notes, 2010-Series I due December 30, 2022 (collectively, the “2010 Notes”), (b) 4.06% Senior Notes, Series 2011-A due March 31, 2019, 4.64% Senior Notes, Series 2011-B due June 30, 2021, and 4.54% Senior Notes, Series 2011-C due June 30, 2021 (collectively, the “2011 Notes”), and (c) 4.26% Senior Notes, Series 2013-A due November 16, 2020, 5.01% Senior Notes, Series 2013-B due November 15, 2023, and 5.16% Senior Notes, Series 2013-C due November 17, 2025 (collectively, the “2013 Notes,” and together with the 2010 Notes and the 2011 Notes, the “Notes”) (such holders, the “Consenting Noteholders”) to support a restructuring on the terms of the Prepackaged Plan. On May 12, 2017, the Debtors commenced the solicitation of votes on the Prepackaged Plan. Troms Forbearance Agreement and Amendment to the Troms Facility Agreement. As previously disclosed, on May 25, 2012, the Debtors, as guarantors, entered into a Term Loan Facility Agreement as amended and restated (the “Troms Facility Agreement”) with Troms Offshore Supply AS, as borrower (the “Troms Borrower”), Eksportkreditt Norge AS and Kommunal Landspensjonskasse Gjensidig Forsikringsselskap as lenders (the “Troms Lenders”), and certain bank guarantors party thereto (together with the Troms Lenders, the “Troms Finance Parties”). On May 11, 2017, the Debtors, the Troms Borrower, the Troms Finance Parties, the Additional Obligors (as defined herein) and Garantiinstituttet for Eksportkreditt and DNB Capital LLC as additional lenders (the “Additional Lenders”), entered into an Amendment and Restatement Agreement No. 4 (the “Fourth Amendment”), pursuant to which, among other things, (a) the Additional Lenders agreed to make available to the Troms Borrower a new term loan for up to $5,068,863, (b) Troms Offshore Fleet Holding AS, Troms Offshore Fleet 1 AS, Troms Offshore Fleet 2 AS, Troms Offshore Fleet 3 AS, Troms Offshore Fleet 4 AS, and JB Holding Company BV, each an indirect, wholly-owned foreign subsidiary of the company, agreed to serve as additional obligors of the obligations thereunder (collectively, the “Additional Obligors”), and (c) the Debtors, the Troms Borrower, the Additional Obligors, the Troms Finance Parties, and the Additional Lenders agreed to amend and restate the Troms Facility Agreement (the “Amended and Restated Troms Facility Agreement”). The Fourth Amendment will become effective on the Effective Date (as defined below). On May 11, 2017, the Debtors also entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Troms Borrower, the Additional Lenders, DNB Bank ASA, New York Branch, as agent on behalf of the Troms Finance Parties, and the Norwegian Export Credit Guarantee Agency, as bank guarantor, which Forbearance Agreement relates to the Troms Facility Agreement. Pursuant to the Forbearance Agreement, among other provisions, the Troms Finance Parties have agreed that during the Forbearance Period (as defined below), subject to certain conditions precedent and continuing conditions, they will not enforce, or otherwise take any action to direct enforcement of, any of the rights and remedies available to the Finance Parties under the Troms Facility Agreement or otherwise, including, without limitation, any action to accelerate, or join in any request for acceleration of, the Troms Facility Agreement due to the company commencing voluntary cases under chapter 11 of the Bankruptcy Code as contemplated by the RSA and the continued existence of certain specified events of default. The Forbearance Period began on May 11, 2017 and ends on the earliest of (i) August 30, 2017, (ii) the occurrence of any event of default under the Troms Facility Agreement, other than certain specified events of default, and (iii) the termination of the RSA as a result of the occurrence of any (a) Creditor Termination Event (as defined in the RSA), (b) Tidewater Termination Event (as defined in the RSA), or (c) other termination of the RSA under its terms. Reorganization and Chapter 11 Proceedings On May 17, 2017 (the “Petition Date”), the company and certain subsidiaries, Cajun Acquisitions, LLC, Gulf Fleet Supply Vessels, L.L.C., Hilliard Oil & Gas, Inc., Java Boat Corporation, Pan Marine International Dutch Holdings, L.L.C., Point Marine, L.L.C., Quality Shipyards, L.L.C., S.O.P., Inc., Tidewater Corporate Services, L.L.C., Tidewater GOM, Inc., Tidewater Marine, L.L.C., Tidewater Marine Alaska, Inc., Tidewater Marine Fleet, L.L.C., Tidewater Marine Hulls, L.L.C., Tidewater Marine International Dutch Holdings, L.L.C., Tidewater Marine Sakhalin, L.L.C., Tidewater Marine Ships, L.L.C., Tidewater Marine Vessels, L.L.C., Tidewater Marine Western, Inc., Tidewater Mexico Holding, L.L.C., Tidewater Subsea, L.L.C., Tidewater Subsea ROV, L.L.C., Tidewater Venture, Inc., Twenty Grand (Brazil), L.L.C., Twenty Grand Marine Service, L.L.C., and Zapata Gulf Marine L.L.C., (together with the company, the “Debtors”) filed voluntary petitions for reorganization (the “Bankruptcy Petitions”) in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") seeking relief under the provisions of chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). On May 19, 2017, the Bankruptcy Court set a combined hearing to consider approval of the Debtors’ disclosure statement and confirmation of the Prepackaged Plan for June 28, 2017. If the Prepackaged Plan is approved by the Bankruptcy Court within the time frame we currently expect, the Prepackaged Plan will likely become effective in July 2017, at which point or shortly thereafter the Debtors would emerge from bankruptcy, however, there can be no assurance that the effectiveness of the Prepackaged Plan will occur on such date, or at all. As of the Petition Date, we had outstanding, unsecured prepetition funded debt obligations totaling approximately $2.04 billion. We also had certain obligations arising under the Sale Leaseback Agreements, pursuant to which the Debtors charter certain vessels owned by third parties. Additionally, as of the Petition Date, we had $23.7 million of accrued interest payable on our Credit Facility and Notes. With the filing of the petition in bankruptcy, all of the debt represented by the Credit Agreement, the Notes, and the Troms Facility Agreement accelerated, but the enforcement of the lenders and noteholders rights thereunder have been stayed by the bankruptcy proceeding. In connection with the restructuring contemplated by the Prepackaged Plan, the Debtors have identified certain cost savings opportunities, including the elimination of burdensome obligations under certain sale leaseback agreements (the “Sale Leaseback Agreements”), pursuant to which the Debtors charter certain vessels owned by third parties (the “Sale Leaseback Parties”). On the Petition Date, the Debtors filed a motion seeking to reject such agreements (the rejection damage claims related thereto, the “Sale Leaseback Claims”). Pursuant an order by the Bankruptcy Court approving a stipulation with the Sale Leaseback Parties, the Bankruptcy Court approved the rejection of the Sale Leaseback Agreements, the reserve for the Sale Leaseback Claims until they are resolved in the amount of approximately $324 million, and the temporary allowance of the disputed Sale Leaseback Claims for purposes of voting on the Prepackaged Plan. During the bankruptcy proceedings, the Debtors are operating as "debtors-in-possession" in accordance with applicable provisions of the Bankruptcy Code. The Bankruptcy Court granted a number of first day motions filed by the Debtors, allowing the company to operate its business in the ordinary course throughout the bankruptcy process. The first day motions authorized, among other things, the company to pay prepetition employee wages and benefits without interruption, maintain its insurance programs, utilize its current cash management system, and pay undisputed prepetition obligations owed to its vendors and trade creditors in the ordinary course of business. Subject to certain exceptions under the Bankruptcy Code, the commencement of the Debtors’ chapter 11 cases automatically stayed most judicial or administrative actions against the Debtors and their property to, among other things, recover or collect a pre-petition claim. The Prepackaged Plan is subject to the approval of the Bankruptcy Court and anticipates, among other things, that on the effective date of the Prepackaged Plan (the “Effective Date”):
| • | The lenders under the Credit Agreement, the holders of Notes, and the Sale Leaseback Parties (collectively, the “General Unsecured Creditors” and the claims thereof, the “General Unsecured Claims”) will receive their pro rata share of (a) $225 million of cash, (b) subject to the limitations discussed below, common stock and, if applicable, warrants (the “Jones Act Warrants”) to purchase common stock, representing 95% of the pro forma common equity in the reorganized company (subject to dilution by a management incentive plan and the exercise of warrants issued to existing stockholders under the Prepackaged Plan as described below); and (c) new 8% fixed rate secured notes due in 2022 in the aggregate principal amount of $350 million (the “New Secured Notes”).
| • | The company’s existing shares of common stock will be cancelled as of the Effective Date. Existing common stockholders of the company will receive their pro rata share of common stock representing 5% of the pro forma common equity in the reorganized company (subject to dilution by a management incentive plan and the exercise of warrants issued to existing stockholders under the Prepackaged Plan) and six year warrants to purchase additional shares of common stock of the reorganized company. These warrants will be issued in two tranches, with the first tranche (the “Series A Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the company of approximately $1.71 billion, and the second tranche (the “Series B Warrants”) being exercisable immediately, at an aggregate exercise price based upon an equity value of the company of $2.02 billion. The Series A Warrants will be exercisable for a number of shares equal to 7.5% of the sum of (i) the total outstanding shares of common stock after completion of the transactions contemplated by the Prepackaged Plan, and (ii) any shares issuable upon exercise of the Jones Act Warrants and the Series A Warrants, while the Series B Warrants will be exercisable for a number of shares equal to 7.5% of the sum of (x) the total outstanding shares of common stock after completion of the transactions contemplated by the Prepackaged Plan, and (y) any shares issuable upon the exercise of the Jones Act Warrants, the Series A Warrants, and Series B Warrants. Like the Jones Act Warrants, the Series A Warrants and the Series B Warrants will not grant the holder thereof any voting or control rights or dividend rights, or contain any negative covenants restricting the operation of the company’s business and will be subject to the restrictions in the company’s new certificate of incorporation described above that prohibit the exercise of such warrants where such exercise would cause the total number of shares held by non-U.S. citizens to exceed 24%.
| • | To assure the continuing ability of certain vessels owned by the company’s subsidiaries to engage in U.S. coastwise trade, the number of shares of the company’s common stock that would otherwise be issuable to the allowed General Unsecured Creditors may be adjusted to assure that the foreign ownership limitations of the United States Jones Act are not exceeded. The Jones Act requires any corporation that engages in coastwise trade be a U.S. citizen within the meaning of that law, which requires, among other things, that the aggregate ownership of common stock by non-U.S. citizens within the meaning of the Jones Act be not more than 25% of its outstanding common stock. The Prepackaged Plan requires that, at the time the company emerges from bankruptcy, not more than 22% of the common stock will be held by non-U.S. citizens. To that end, the Prepackaged Plan provides for the issuance of a combination of common stock of the reorganized company and the Jones Act Warrants to purchase common stock of the reorganized company on a pro rata basis to any non-U.S. citizen among the allowed General Unsecured Creditors whose ownership of common stock, when combined with the shares to be issued to existing Tidewater stockholders that are non-U.S. citizens, would otherwise cause the 22% threshold to be exceeded. The Jones Act Warrants will not grant the holder thereof any voting or control rights or dividend rights, or contain any negative covenants restricting the operation of the company’s business. Generally, the Jones Act Warrants will be exercisable immediately at a nominal exercise price, subject to restrictions contained in the company’s new certificate of incorporation designed to assure the company’s continuing eligibility to engage in coastwise trade under the Jones Act that prohibit the exercise of such warrants where such exercise would cause the total number of shares held by non-U.S. citizens to exceed 24%. The company will establish, under its charter and through Depository Trust Corporation (DTC), appropriate measures to assure compliance with these ownership limitations.
| • | The undisputed claims of other unsecured creditors such as customers, employees, and vendors, will be paid in full in the ordinary course of business (except as otherwise agreed among the parties).
The company and the Sale Leaseback Parties did not reach agreement with respect to the amount of the Sale Leaseback Claims. Accordingly, on the Effective Date, a portion of the above consideration in cash, Jones Act Warrants, and New Secured Notes in an amount that the company believes represents the maximum possible distributions owing on account of the Sale Leaseback Claims will be withheld from the cash, Jones Act Warrants, and New Secured Notes distributed to allowed General Unsecured Claims on account of such disputed Sale Leaseback Claims until they are resolved. To the extent the Sale Leaseback Claims are resolved for less than the amount withheld, the remainder will be distributed to holders of allowed General Unsecured Claims pro rata. Assuming implementation of the Prepackaged Plan, the company expects that it will eliminate approximately $1.6 billion in principal amount of outstanding debt. In addition, taking into account the rejection of the Sale-Leaseback Agreements discussed above, the company estimates that interest and operating lease expenses, collectively, will be reduced by approximately $73 million annually. Combined vessel operating lease expense and interest and debt costs, net was $108.8 million for the fiscal year 2017.

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