Debt

12 Months Ended

Dec. 31, 2011

Debt [Abstract]

Debt

11.    Debt

Debt is comprised of the following (in thousands):

	December 31,		December 31,
	2011		2010
Term Loan Facility, due July 2013	$	452,909	$	475,156
10.5% Senior Secured Notes, due October 2017		293,676		292,935
3.375% Convertible Senior Notes, due June 2038		90,180		86,488
7.375% Senior Notes, due April 2018		3,511		3,511
Total Debt		840,276		858,090
Less Short-term Debt and Current Portion of Long-term Debt		22,130		4,924
Total Long-term Debt, Net of Current Portion	$	818,146	$	853,166

The following is a summary of scheduled long-term debt maturities by year (in thousands):

2012	$	22,130
2013		520,959
2014		—
2015		—
2016		—
Thereafter		297,187
	$	840,276

The unamortized discount of the 10.5% Senior Secured Notes is being amortized to interest expense over the life of the 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.

	December 31, 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	$	(6.3	)	$	293.7	$	300.0	$	(7.1	)	$	292.9
3.375% Convertible Senior Notes, due June 2038*		95.9		(5.7	)		90.2		95.9		(9.4	)		86.5

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

	Year Ended December 31,
	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	$	31.4	$	0.8	$	32.2		11.00	%	$	31.4	$	0.7	$	32.1		11.00	%
3.375% Convertible Senior Notes, due June 2038		3.2		3.7		6.9		7.93			3.3		3.4		6.7		7.93

	Year Ended December 31,
	2009
	Coupon		Discount		Total		Effective
	Interest		Amortization		Interest		Rate
	(in millions)
10.5% Senior Secured Notes, due October 2017	$	6.3	$	0.1	$	6.4		11.00	%
3.375% Convertible Senior Notes, due June 2038		4.2		4.0		8.2		7.93

Senior secured Credit Agreement

In connection with the July 2007 acquisition of TODCO, the Company obtained a $1,050.0 million credit facility, consisting of a $900.0 million term loan facility and a $150.0 million revolving credit facility governed by the credit agreement which, as amended, is the (“Credit Agreement”). In April 2008, the Company entered into an agreement to increase the revolving credit facility and in each of July 2009 and March 2011, the terms of the credit agreement were amended. As of December 31, 2011, the Company has a $592.9 million credit facility, consisting of a $452.9 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, 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:

Test Date	Maximum Total Leverage Ratio
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 December 31, 2011, the Company’s total leverage ratio was 5.73 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 December 31, 2011, as calculated pursuant to the Credit Agreement, the Company’s total liquidity was $271.5 million.

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

Period			Fixed Charge 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 December 31, 2011, the Company’s fixed charge coverage ratio was 1.15 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 December 31, 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 $1.1 million, with the balance due on July 11, 2013. All borrowings under the revolving credit facility mature on July 11, 2012. The Company intends to refinance the revolving credit facility and term loan before the revolving credit facility matures. 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. During the fourth quarter of 2011, the Company used a portion of the net proceeds from asset sales to retire $2.4 million of the outstanding balance on the Company’s term loan facility. In January 2012, the Company used a portion of the net proceeds from December 2011 asset sales to retire $17.6 million of the outstanding balance on the Company’s term loan facility as required under the Credit Agreement. Additionally, during the fourth quarter of 2009, the Company used the net proceeds from the equity issuance pursuant to the partial exercise of the underwriters’ over-allotment option and the 10.5% Senior Secured Notes due 2017, which approximated $287.5 million, as well as cash on hand to retire $379.6 million of the outstanding balance on the Company’s term loan facility. In connection with the early retirement, the Company recorded a pretax charge of $1.6 million, $1.0 million, net of tax, related to the write off of unamortized issuance costs.

As of December 31, 2011, no amounts were outstanding and $2.9 million in standby letters of credit had been issued under the revolving credit facility, therefore the remaining availability under this revolving credit facility was $137.1 million. As of December 31, 2011, $452.9 million was outstanding on the term loan facility and the interest rate was 7.5%. The annualized effective rate of interest was 7.67% for the year ended December 31, 2011 after giving consideration to revolver fees.

In connection with the 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. Additionally, in connection with the 2009 Credit Amendment, a fee of 0.50%, which approximated $4.8 million, was paid to lenders consenting to the 2009 Credit Amendment based on their total commitment. The Company recognized a pretax charge of $10.8 million, $7.0 million net of tax, related to the write off of unamortized issuance costs in connection with the 2009 Credit Amendment.

10.5% Senior Secured Notes due 2017

On October 20, 2009, the Company completed an offering of $300.0 million of senior secured notes at a coupon rate of 10.5% (“10.5% Senior Secured Notes”) with a maturity in October 2017. The interest on the 10.5% Senior Secured Notes is payable in cash semi-annually in arrears on April 15 and October 15 of each year to holders of record at the close of business on April 1 or October 1. Interest on the notes will be computed on the basis of a 360-day year of twelve 30-day months. The notes were sold at 97.383% of their face amount to yield 11.0% and were recorded at their discounted amount, with the discount to be amortized over the life of the notes. The Company used the net proceeds of approximately $284.4 million from the offering to repay a portion of the indebtedness outstanding under its term loan facility.

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.

Prior to October 15, 2012, the Company may redeem the notes with the net cash proceeds of certain equity offerings, at a redemption price equal to 110.50% of the aggregate principal amount plus accrued and unpaid interest; provided, that (i) after giving effect to any such redemption, at least 65% of the notes originally issued would remain outstanding immediately after such redemption and (ii) the Company makes such redemption not more than 90 days after the consummation of such equity offering. In addition, prior to October 15, 2013, the Company may redeem all or part of the notes at a price equal to 100% of the aggregate principal amount of notes to be redeemed, plus the applicable premium, as defined in the indenture, and accrued and unpaid interest.

On or after October 15, 2013, the Company may redeem the notes, in whole or part, at the redemption prices set forth below, together with accrued and unpaid interest to the redemption date.

Year	Optional Redemption Price
2013		105.2500	%
2014		102.6250	%
2015		101.3125	%
2016 and thereafter		100.0000	%

If the Company experiences a change of control, as defined, it must offer to repurchase the notes at an offer price in cash equal to 101% of their principal amount, plus accrued and unpaid interest. Furthermore, following certain asset sales, the Company may be required to use the proceeds to offer to repurchase the notes at an offer price in cash equal to 100% of their principal amount, plus accrued and unpaid interest.

3.375% Convertible Senior Notes due 2038

On June 3, 2008, the Company completed an offering of $250.0 million convertible senior notes at a coupon rate of 3.375% (“3.375% Convertible Senior Notes”) with a maturity in June 2038. The interest on the 3.375% Convertible Senior Notes is payable in cash semi-annually in arrears, on June 1 and December 1 of each year until June 1, 2013, after which the principal will accrete at an annual yield to maturity of 3.375% per year. The Company will also pay contingent interest during any six-month interest period commencing June 1, 2013, for which the trading price of these notes for a specified period of time equals or exceeds 120% of their accreted principal amount. The 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 December 31, 2011, the number of conversion shares potentially issuable in relation to the 3.375% Convertible Senior Notes was 1.9 million. The Company may redeem the notes at its option beginning June 6, 2013, and holders of the notes will have the right to require the Company to repurchase the notes on June 1, 2013 and certain dates thereafter or on the occurrence of a fundamental change.

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 is: a) 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.

In April 2009, the Company repurchased $20.0 million aggregate principal amount of the 3.375% Convertible Senior Notes for a cost of $6.1 million, resulting in a gain of $10.7 million. In addition, the Company expensed $0.4 million of unamortized issuance costs in connection with the retirement. In June 2009, the Company retired $45.8 million aggregate principal amount of its 3.375% Convertible Senior Notes in exchange for the issuance of 7,755,440 shares of Common Stock valued at $4.38 per share and payment of accrued interest, resulting in a gain of $4.4 million. In addition, the Company expensed $1.0 million of unamortized issuance costs in connection with the retirement. In accordance with FASB ASC 470-20 Debt – Debt with Conversion and Other Options, the settlement consideration was allocated to the extinguishment of the liability component in an amount equal to the fair value of that component immediately prior to extinguishment, with the difference between this allocation and the net carrying amount of the liability component and unamortized debt issuance costs recognized as a gain or loss on debt extinguishment. If there would have been any remaining settlement consideration, it would have been allocated to the reacquisition of the equity component and recognized as a reduction of Stockholders’ Equity.

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.