Debt

6 Months Ended

Jun. 30, 2011

Debt [Abstract]

Debt

6. Debt

     Debt is comprised of the following (in thousands):

	June 30,		December 31,
	2011		2010
Term Loan Facility, due July 2013	$	458,925	$	475,156
10.5% Senior Secured Notes, due October 2017		293,295		292,935
3.375% Convertible Senior Notes, due June 2038		88,298		86,488
7.375% Senior Notes, due April 2018		3,511		3,511
Total Debt		844,029		858,090
Less Short-term Debt and Current Portion of Long-term Debt		4,768		4,924
Total Long-term Debt, Net of Current Portion	$	839,261	$	853,166

     The unamortized discount of the 10.5% Senior Secured Notes and 7.375% Senior Notes is being amortized to interest expense over the life of the respective debt instrument. The unamortized discount of the 3.375% Convertible Senior Notes is being amortized to interest expense over their expected life which ends June 1, 2013.

	June 30, 2011							December 31, 2010
	Notional		Unamortized			Carrying		Notional		Unamortized			Carrying
Liability Component	Amount		Discount			Value		Amount		Discount			Value
	(in millions)							(in millions)
10.5% Senior Secured Notes, due October 2017	$	300.0	$	(6.7	)	$	293.3	$	300.0	$	(7.1	)	$	292.9
3.375% Convertible Senior Notes, due June 2038*	$	95.9	$	(7.6	)	$	88.3	$	95.9	$	(9.4	)	$	86.5
7.375% Senior Notes, due April 2018	$	3.5	$	—		$	3.5	$	3.5	$	—		$	3.5

* The carrying amount of the equity component was $30.1 million at both June 30, 2011 and December 31, 2010.

	Three Months Ended June 30,
	2011									2010
	Coupon		Discount		Total		Effective			Coupon		Discount		Total		Effective
	Interest		Amortization		Interest		Rate			Interest		Amortization		Interest		Rate
	(in millions)									(in millions)
10.5% Senior Secured Notes, due October 2017	$	7.9	$	0.2	$	8.1		11.00	%	$	7.8	$	0.2	$	8.0		11.00	%
3.375% Convertible Senior Notes, due June 2038		0.8		0.9		1.7		7.93	%		0.8		0.8		1.6		7.93	%
7.375% Senior Notes, due April 2018		0.1		—		0.1		7.38	%		0.1		—		0.1		7.38	%

	Six Months Ended June 30,
	2011									2010
	Coupon		Discount		Total		Effective			Coupon		Discount		Total		Effective
	Interest		Amortization		Interest		Rate			Interest		Amortization		Interest		Rate
	(in millions)									(in millions)
10.5% Senior Secured Notes, due October 2017	$	15.8	$	0.4	$	16.2		11.00	%	$	15.7	$	0.3	$	16.0		11.00	%
3.375% Convertible Senior Notes, due June 2038		1.6		1.8		3.4		7.93	%		1.6		1.7		3.3		7.93	%
7.375% Senior Notes, due April 2018		0.1		—		0.1		7.38	%		0.1		—		0.1		7.38	%

Senior secured Credit Agreement

     The Company has a $598.9 million credit facility, consisting of a $458.9 million term loan facility and a $140.0 million revolving credit facility. The availability under the $140.0 million revolving credit facility must be used for working capital, capital expenditures and other general corporate purposes and cannot be used to prepay the term loan. The interest rates on borrowings under the Credit Facility are 5.50% plus LIBOR for Eurodollar Loans and 4.50% plus the Alternate Base Rate for ABR Loans. The minimum LIBOR is 2.00% for Eurodollar Loans, or a minimum base rate of 3.00% with respect to ABR Loans. Under the credit agreement, as amended, which governs the credit facility (the “Credit Agreement”), the Company must among other things:

• Maintain a total leverage ratio for any test period calculated as the ratio of consolidated indebtedness on the test date to consolidated EBITDA for the trailing twelve months, all as defined in the Credit Agreement according to the following schedule:

	Maximum Total
Test Date	Leverage Ratio
June 30, 2011	6.75 to 1.00
September 30, 2011	7.50 to 1.00
December 31, 2011	7.75 to 1.00
March 31, 2012	7.50 to 1.00
June 30, 2012	7.25 to 1.00
September 30, 2012	6.75 to 1.00
December 31, 2012	6.25 to 1.00
March 31, 2013	6.00 to 1.00
June 30, 2013	5.75 to 1.00

— At June 30, 2011, the Company’s total leverage ratio was 4.90 to 1.00.

• Maintain a minimum level of liquidity, measured as the amount of unrestricted cash and cash equivalents on hand and availability under the revolving credit facility, of (i) $75.0 million during calendar year 2011 and (ii) $50.0 million thereafter. As of June 30, 2011, as calculated pursuant to the Credit Agreement, the Company’s total liquidity was $245.9 million.

• Maintain a minimum fixed charge coverage ratio according to the following schedule:

			Fixed Charge
Period			Coverage Ratio
July 1, 2009	—	December 31, 2011	1.00 to 1.00
January 1, 2012	—	March 31, 2012	1.05 to 1.00
April 1, 2012	—	June 30, 2012	1.10 to 1.00
July 1, 2012 and thereafter			1.15 to 1.00

— The consolidated fixed charge coverage ratio for any test period is defined as the sum of consolidated EBITDA for the test period plus an amount that may be added for the purpose of calculating the ratio for such test period, not to exceed $130.0 million in total during the term of the credit facility, to consolidated fixed charges for the test period adjusted by an amount not to exceed $110.0 million during the term of the credit facility to be deducted from capital expenditures, all as defined in the Credit Agreement. As of June 30, 2011, the Company’s fixed charge coverage ratio was 1.49 to 1.00.

• Make mandatory prepayments of debt outstanding under the Credit Agreement with 50% of excess cash flow as defined in the Credit Agreement for the fiscal years ending December 31, 2011 and 2012, and with proceeds from:

— unsecured debt issuances, with the exception of refinancing;

— secured debt issuances;

— casualty events not used to repair damaged property;

— sales of assets in excess of $25 million annually; and

— unless the Company has achieved a specified leverage ratio, 50% of proceeds from equity issuances, excluding those for permitted acquisitions or to meet the minimum liquidity requirements.

     The Company’s obligations under the Credit Agreement are secured by liens on a majority of its vessels and substantially all of its other personal property. Substantially all of the Company’s domestic subsidiaries, and several of its international subsidiaries, guarantee the obligations under the Credit Agreement and have granted similar liens on the majority of their vessels and substantially all of their other personal property.

     Other covenants contained in the Credit Agreement restrict, among other things, asset dispositions, mergers and acquisitions, dividends, stock repurchases and redemptions, other restricted payments, debt issuances, liens, investments, convertible notes repurchases and affiliate transactions. The Credit Agreement also contains a provision under which an event of default on any other indebtedness exceeding $25.0 million would be considered an event of default under the Company’s Credit Agreement.

     The Credit Agreement requires that the Company meet certain financial ratios and tests, which it met as of June 30, 2011. The Company’s failure to comply with such covenants would result in an event of default under the Credit Agreement. Additionally, in order to maintain compliance with the Company’s financial covenants, borrowings under the Company’s revolving credit facility may be limited to an amount less than the full amount of remaining availability after outstanding letters of credit. An event of default could prevent the Company from borrowing under the revolving credit facility, which would in turn have a material adverse effect on the Company’s available liquidity. Furthermore, an event of default could result in the Company having to immediately repay all amounts outstanding under the credit facility, the 10.5% Senior Secured Notes and the 3.375% Convertible Senior Notes and in the foreclosure of liens on its assets.

     Other than the required prepayments as outlined previously, the principal amount of the term loan amortizes in equal quarterly installments of approximately $1.2 million, with the balance due on July 11, 2013. All borrowings under the revolving credit facility mature on July 11, 2012. Interest payments on both the revolving and term loan facility are due at least on a quarterly basis and in certain instances, more frequently. In addition to its scheduled payments, during the second quarter of 2011, the Company used a portion of the net proceeds from the sale of the Delta Towing assets to retire $15.0 million of the outstanding balance on the Company’s term loan facility.

     As of June 30, 2011, no amounts were outstanding and $11.9 million in standby letters of credit had been issued under the revolving credit facility, therefore the remaining availability under this revolving credit facility was $128.1 million. As of June 30, 2011, $458.9 million was outstanding on the term loan facility and the interest rate was 7.5%. The annualized effective rate of interest was 7.39% for the six months ended June 30, 2011 after giving consideration to revolver fees.

     In connection with the amendment of the Credit Agreement in March 2011 (“2011 Credit Amendment”), the Company agreed to pay consenting lenders an upfront fee of 0.25% on their commitment, or approximately $1.4 million. Including agent bank fees and expenses the Company’s total cost was approximately $2.0 million. The Company recognized a pretax charge of $0.5 million, $0.3 million net of tax, related to the write off of certain unamortized issuance costs and the expense of certain fees in connection with the 2011 Credit Amendment.

10.5% senior secured notes due 2017

     The 10.5% Senior Secured Notes are guaranteed by all of the Company’s existing and future restricted subsidiaries that incur or guarantee indebtedness under a credit facility, including the Company’s existing credit facility. The notes are secured by liens on all collateral that secures the Company’s obligations under its secured credit facility, subject to limited exceptions. The liens securing the notes share on an equal and ratable first priority basis with liens securing the Company’s credit facility. Under the intercreditor agreement, the collateral agent for the lenders under the Company’s secured credit facility is generally entitled to sole control of all decisions and actions.

     All the liens securing the notes may be released if the Company’s secured indebtedness, other than these notes, does not exceed the lesser of $375.0 million and 15.0% of the Company’s consolidated tangible assets. The Company refers to such a release as a “collateral suspension.” If a collateral suspension is in effect, the notes and the guarantees will be unsecured, and will effectively rank junior to the Company’s secured indebtedness to the extent of the value of the collateral securing such indebtedness. If, after any such release of liens on collateral, the aggregate principal amount of the Company’s secured indebtedness, other than these notes, exceeds the greater of $375.0 million and 15.0% of its consolidated tangible assets, as defined in the indenture, then the collateral obligations of the Company and guarantors will be reinstated and must be complied with within 30 days of such event.

     The indenture governing the notes contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to:

• incur additional indebtedness or issue certain preferred stock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and other payments by restricted subsidiaries;

• engage in transactions with its affiliates; and

• consolidate, merge or transfer all or substantially all of its assets.

     The indenture governing the notes also contains a provision under which an event of default by the Company or by any restricted subsidiary on any other indebtedness exceeding $25.0 million would be considered an event of default under the indenture if such default: a) is caused by failure to pay the principal at final maturity, or b) results in the acceleration of such indebtedness prior to maturity.

3.375% convertible senior notes due 2038

     The 3.375% Convertible Senior Notes will be convertible under certain circumstances into shares of the Company’s common stock (“Common Stock”) at an initial conversion rate of 19.9695 shares of Common Stock per $1,000 principal amount of notes, which is equal to an initial conversion price of approximately $50.08 per share. Upon conversion of a note, a holder will receive, at the Company’s election, shares of Common Stock, cash or a combination of cash and shares of Common Stock. At June 30, 2011, the number of conversion shares potentially issuable in relation to the 3.375% Convertible Senior Notes was 1.9 million.

     The indenture governing the 3.375% Convertible Senior Notes contains a provision under which an event of default by the Company or by any subsidiary on any other indebtedness exceeding $25.0 million would be considered an event of default under the indenture if such default: a) is caused by failure to pay the principal at final maturity, or b) results in the acceleration of such indebtedness prior to maturity.

     The Company determined that upon maturity or redemption it has the intent and ability to settle the principal amount of its 3.375% Convertible Senior Notes in cash, and any additional conversion consideration spread (the excess of conversion value over face value) in shares of the Company’s Common Stock.

Other debt

     In connection with the TODCO acquisition in July 2007, one of the Company’s domestic subsidiaries assumed approximately $3.5 million of 7.375% Senior Notes due in April 2018. There are no financial or operating covenants associated with these notes.