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HERMITAGE OFFSHORE: Sets Bidding Procedures for All Assets

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Hermitage Offshore Services Ltd. and affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to authorize the bidding procedures in connection with the auction sale of substantially all of their vessels and related assets.

The proposed Sale is a critical element of the Debtors’ overall restructuring and will maximize the value of their Assets for the benefit of their creditors and other stakeholders.

Prior to the commencement of these chapter 11 cases, the Debtors and their legal and financial advisors, undertook a comprehensive marketing process for the Assets. The Debtors and their advisors have continued to market the Assets post-petition, executing confidentiality agreements with various parties, providing due diligence materials through the opening of a virtual dataroom, and soliciting bids for all Assets, individually or any combination thereof, in order to allow the Debtors flexibility to engage in multiple transactions if necessary to maximize the value of all Assets.

To facilitate the Sale, as is set forth in the Cash Collateral Order, the Debtors have agreed to various case milestones that will allow for an efficient Sale process. Given the limited amount of funding available to support the Sale process and the extensive marketing process that the Debtors have already undertaken, the Debtors are proposing a more expedited sale process than is contemplated by these milestones.

The Debtors have already undertaken a comprehensive marketing process for the Assets and, therefore, believe that many parties that may be interested in acquiring the Assets are aware of the Sale and have already engaged in discussions with the Debtors. They are also engaged in discussions with their lenders, DNB Bank ASA and Skandinaviska Enskilda Banken AB (Publ) (“SEB”), regarding the Lenders’ potential acquisition of all or some of the Assets. The Lenders hold approximately $132.9 million of secured debt, and reserve their right to credit bid, as set forth in the Bidding Procedures.

In addition, the Debtors have limited liquidity and, while they are able to continue operating their businesses for a short time, they do not have sufficient funding to support a lengthy sale process. Accordingly, the milestones cited above and the dates and deadlines provided were designed to facilitate an expeditious Sale process, while still providing potential bidders with sufficient notice, with the goal of eliciting the highest and best offers for the Assets in order to maximize their value for the benefit of the Debtors’ estates and all stakeholders.

The Debtors believe that the Sale process will serve as a cornerstone of their restructuring and maximize the ultimate value realized by their stakeholders. The Bidding Procedures have been designed with the objective of generating the greatest level of interest in and best offers for the Assets while affording the Debtors maximum flexibility to execute a sale of the Assets as efficiently as possible.

The Debtors have not entered into a purchase agreement for a sale of all, substantially all, or any combination of the Assets. Accordingly, pursuant to the Amended Guidelines for the Conduct of Asset Sales adopted by General Order M-331, a form of asset purchase agreement was proposed that is acceptable to the Debtors and consistent with the Debtors’ past practices with respect to sales of their OSVs. Pursuant to the Bidding Procedures, the Debtors are asking that each bidder return one asset purchase agreement for each OSV for which such bidder is bidding.

The salient terms of the APA are:

a. Acquired Assets: The Vessel, the Assumed Contracts, and the spares, bunkers, and other items as set forth in Clause 7.

b. The Vessel, at the time of delivery, is free and clear from all liens, claims, encumbrances, and other interests (except as required under the Assumed Contracts) (Clause 9).

c. The Buyer will deposit, in cash, an amount equal to 10% of the Purchase Price in an account for the parties with the Deposit
Holder (Clause 2).

d. The balance of the Purchase Price, the estimated purchase price for bunkers and lubricants remaining on board, and any other sums payable on delivery by the Buyers to the Sellers under the Agreement, will be paid in full to the Deposit Holder at least one banking day prior to the delivery of the Vessel (Clause 3).

e. The Buyers have waived inspection and have accepted the Vessel and the sale is outright and definite, subject only to the terms and conditions of the Agreement and Bankruptcy Court approval (Clause 4).

f. The Vessel will be delivered and taken over on an “as is, where is” basis at the time of delivery (Clause 11).

The salient terms of the Bidding Procedures are:

a. Bid Deadline: Oct. 1, 2020 at 4:00 p.m. (ET)

b. Initial Bid: Not less than $5 million for each PSV included in the Bid, and not less than $350,000 for each Crew Boat included in the Bid

c. Deposit: 10% of the Purchase Price of the Bid

d. Auction: The Auction, if necessary, will be held on Oct. 7, 2020 at 10:00 a.m. (ET) at the offices of counsel to the Debtors, Proskauer Rose LLP, Eleven Times Square, New York, New York, 10036, or at such other venue (or by such other medium) as may be agreed to by the Debtors, the Consultation Parties, and the United States Trustee.

e. Bid Increments: $100,000 for each PSV included in the Bid, and not less than $25,000 for each Crew Boat in the Bid

f. Sale Hearing: Oct. 13, 2020 at 10:00 a.m. (ET)

g. Sale Objection Deadline: Oct. 1, 2020 at 4:00 p.m. (ET)

h. Closing: Oct. 27, 2020

i. A person or entity may seek to credit bid any portion and up to the entire amount of such person’s secured claims on any individual Asset, portion of the Assets, or all Assets that constitute their respective collateral.

Within two business days after entry of the Bidding Procedures Order, the Debtors will cause the Sale Notice to be served on the entities on the Master Service List, the Sale Notice Parties, and any party that has requested notice.

On Sept. 26, 2020, the Debtors will file with the Court and serve the Cure Notice on all Contract Counterparties, and post the Cure Notice to the case website (https://cases.primeclerk.com/hermitage). The Cure Objection Deadline is Oct. 1, 2020 at 4:00 p.m. (ET).

Finally, the Debtors ask relief from the fourteen (14) day stay imposed by Bankruptcy Rule 6004(h) and 6006(d). In light of the current circumstances and financial condition of the Debtors, the Debtors believe that, in order to maximize the value of their estates, retain sufficient liquidity to safely operate the OSVs, and efficiently turn the OSVs over to the Buyers, the Sale should be consummated as soon as possible.

A copy of the Bidding Procedures and APA is available at https://tinyurl.com/y6bu6sov from PacerMonitor.com free of charge.

About Hermitage Offshore

Bermuda-based Hermitage Offshore Services Ltd. (previously Nordic American Offshore Ltd.) is an offshore support vessel company that owns 23 vessels consisting of 10 platform supply vessels, or PSVs, two anchor handling tug supply vessels, or AHTS vessels, and 11 crew boats. The Company’s vessels primarily operate in the North Sea or the West Coast of Africa.

The Debtors’ OSVs are all focused on, and used primarily in, the oil and gas business, including in the installation, maintenance, and movement of oil and gas platforms. Demand for the Debtors’ services, as well as its operations, growth, and stability in the value of the OSVs depend on activity in offshore oil and natural gas exploration, development, and production.

Hermitage Offshore Services Ltd. (Lead Debtor) (Bankr. S.D.N.Y. Case No. 20-11850) and 20 affiliates sought Chapter 11 protection on Aug. 11, 2020. The cases are assigned to Judge Martin Glenn.

The 20 affiliates are:

Debtor Case No.
—— ——–
PSV Adminco 2019 LLC 20-11848
CB Holdco Limited 20-11851
Blue Power Limited 20-11852
Delta Cistern V Limited 20-11853
Sierra Cistern V Limited 20-11854
Petro Craft 2017-1 Shipping Company Limited 20-11855
Petro Craft 2017-2 Shipping Company Limited 20-11856
Petro Craft 2017-3 Shipping Company Limited 20-11857
Petro Craft 2017-4 Shipping Company Limited 20-11858
Petro Craft 2017-5 Shipping Company Limited 20-11859
Petro Craft 2017-7 Shipping Company Limited 20-11861
Petro Craft 2017-8 Shipping Company Limited 20-11862
Petro Combi 6030-01 Shipping Company Limited 20-11863
Petro Combi 6030-02 Shipping Company Limited 20-11864
Petro Combi 6030-03 Shipping Company Limited 20-11865
Petro Combi 6030-04 Shipping Company Limited 20-11866
Hermit Storm Shipping Company Limited 20-11868
Hermit Viking Shipping Company Limited 20-11869
Hermit Protector Shipping Company Limited 20-11870
Hermit Guardian Shipping Company Limited 20-11871
Hermit Thunder Shipping Company Limited 20-11872
Delta PSV Norway AS 20-11873
NAO Norway AS 20-11874
Hermit Galaxy Shipping Company Limited 20-11875
Hermit Horizon Shipping Company Limited 20-11876
Hermit Power Shipping Company Limited 20-11877
Hermit Prosper Shipping Company Limited 20-11878
Hermit Fighter Shipping Company Limited 20-11879

In the petitions signed by Cameron Mackey, director, the consolidated cases estimated assets and liabilities in the range of $100 million to $500 million.

The Debtors tapped Brian S. Rosen, Esq., and Joshua A. Esses, Esq., at Proskauer Rose LLP as counsel. The Debtors tapped Perella Weinberg Partners L.P. as their Investment Banker. They tapped Napdragon Advisory AB as their Professional Shipping Advisory Firm. Prime Clerk LLC serves as the Debtors’ Claims, Noticing and Solicitation Agent.