Monday, October 4, 2010

Will Reorganization of Trico Marine Services Bring Investors New Opportunities or has Offshore-Energy-Services Provider Hit the Ocean Floor

Over the past years Trico Marine Services Inc. (PinkSheets: TRMAQ) shares have been taking on water and just last week the provider of support vessels for offshore oil and natural-gas drillers became submerged, voluntarily filing petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Included in the petitions were Trico’s U.S. companies as well as its Cayman Islands holding company but its other foreign subsidiaries will remain afloat.
While the company has said its U.S. and worldwide operations are expected to continue without interruption they will be going through a restructuring process in hopes of restoring viability and regaining investor trust. That may be a difficult task for Trico as their company stock was suspended on Wednesday after failing to meet NASDAQ listing qualifications and they have said they have no plans to appeal the decision. Since the delisting Trico has been trading on the Pink Sheets under the symbol TRMAQ. Now the question arises, what does Trico have to offer?
It was last October that the stock was trading at a 52-week high of 9.47 but a dismal first quarter was followed by additional troubles into the second, eventually sinking the stock to a low of 0.18 on August 26; a day after the bankruptcy announcement. According to Richard Bachmann, chairman and chief executive, the decision to reorganize was based on “The combination of a sluggish economy, a highly leveraged balance sheet and imminent interest payments due.” These factors led Trico “to determine that a court-supervised restructuring is the best course of action for the company and its stakeholders.”
That leveraged balance sheet included a tough to swallow $353.6 million of debt compared to listed assets of $30.6 million according to their bankruptcy filing. Sealing TRMAQ’s bankruptcy fate was a June loan agreement established with Tennenbaum Capital Partners that required the company to file for Chapter 11 no later than September 8, 2010.
While that June agreement included $50 million in debtor-in-possession financing it has since been revised to $35 million for bankruptcy financing.
As Bachmann has pointed out, TRMAQ’s collapse has been the result of a number of factors and many of those were seemingly out of the company’s control. In 2009 there were plenty of signs that there could be trouble for TRMAQ as the oil industry began cutting expenses on oil and natural gas projects, an obvious indicator that things could become tight for a company that provides support services for the offshore and subsea services market.
Those services are wrapped in Trico’s three operating companies: DeepOcean, specializing in subsea installation and construction support, survey, inspection, maintenance and repair services as well as subsea decommissioning. CTC Marine, specializing in trenching, cable-lay, life of field seismic, and subsea installation, and Trico Offshore, specializing in offshore towing and supply services.
As the demand for oil began to shore up, the need for Trico’s services became less and less, eventually leading to a situation where their cash intake was insufficient to meet debt obligations.
Provided Trico can restructure and get its financial feet on firmer ground there stands a chance they could return to positive days. Much of that will depend on the global economy and demand for oil but with their operations in the North Sea, West Africa, Mexico, Brazil, the Middle East and Southeast Asia there remain opportunities.
Those opportunities may arise from the number of subsidiaries operating under Trico as their foreign subsidiaries were not included in the recent bankruptcy filing and are not subject to the requirements of the U.S. Bankruptcy Code.
With all that said, shares in TRMAQ have continued to tumble since the bankruptcy filing and subsequent delisting on the NASDAQ exchange. On Thursday the stock dropped to a low of 0.13, well below its 5-day moving average of 0.21 as well as its 50-day and 200-day moving average of 0.48 and 2.45 respectively.
Whether Trico can emerge out of the bankruptcy filing and find smoother waters to sail remains to be seen but with investors dumping shares of TRMAQ as quick as they can it appears doubtful.
TRMAQ Chart:
Trico Marine TRMAQ Chart
Trico Marine TRMAQ Chart

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