Hornbeck Offshore Services, Inc. (NYSE:HOS)

Hornbeck Offshore Services, Inc. (NYSE:HOS) New Credit Facility

Hornbeck Offshore Services, Inc. (NYSE:HOS)

Hornbeck Offshore Services, Inc. (NYSE:HOS) financial flexibility has received a major boost with the signing of a new credit facility agreement. Under the terms of the agreement, the company will refinance its existing $200 million senior secured revolving credit facility with a new first-lien, “delayed draw” credit facility. The six-year term agreement provides the company with $300 million.

New Credit Facility

The new credit facility will accrue an interest rate of either LIBOR rate or base rate, at the company’s option. Hornbeck Offshore says it will focus its efforts on lowering the interest rate to lower the current call protection to two years.

The facility increases Hornbeck Offshore Services, Inc. (NYSE:HOS)’s applicable borrowing base from $75 million in addition to extending the maturity date by over three years. Funds from the new facility are to be used for general corporate purposes as well as for working capital. Hornbeck also plans to acquire a number of distressed assets in the market.

Hornbeck Offshore Woes

The pursuit by Hornbeck Offshore Services, Inc. (NYSE:HOS) of a new credit facility does not come as a surprise given that its cash balance has come under pressure. The company recently posted a wider than expected first quarter net loss. The offshore company says it generated a net loss of $27.9 million for the first three months of the year, up from a net loss of $7.5 million as of Q1 2016.

The company appears to be struggling with its core business as its revenues have dropped by 42.6% to $32.7 million in the quarter. Weak global market conditions continue to hurt operations leading to an increase in vessels stacked. As of the end of the first quarter, the company had an average of 45.9 vessels stacked compared to 33.7 a year ago.

“[…]The Company’s active fleet for 2017 is expected to be comprised of an average of 17.2 new generation OSVs and 6.1 MPSVs. With an assumed average of 46.0 new generation OSVs and 2.0 MPSVs projected to be stacked during fiscal 2018, the Company’s active fleet for 2018 is expected to be comprised of an average of 16.0 new generation OSVs and 7.3 MPSVs,” Hornbeck Offshore Services, Inc. (NYSE:HOS) in a statement.

Hornbeck Offshore Services, Inc. (NYSE:HOS) Operating expenses in the quarter dropped to $27.9 million from $40.4 million, helped by a decrease in the company’s active fleet. General and administrative expenses on the other hand nearly doubled to $14.2 million from $8.7 million. Hornbeck Offshore attributes the increase to bad debt reserves and an increase in short-term incentive compensation.

Hornbeck Offshore Services, Inc. (NYSE:HOS) stock was up by 33.33% in Friday’s trading session to end the week at $2.64 a share. Today HOS shares are down around 5%.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.