Tuscany International Drilling Inc. (“TID”) and its subsidiary, Tuscany International Holdings (U.S.A.) Ltd. (“TIH”; collectively with TID, “Tuscany” or the “Debtors”) filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code late on Sunday, February 2, 2014 (the “Petition Date”) in the United States District Court for the District of Delaware.
According to the Declaration of Deryck Helkaa, Chief Restructuring Officer of the Debtors in Support of Chapter 11 Petitions and First Day Pleadings (the “Helkaa Declaration”), the Debtors “provide onshore drilling and workover services to oil and gas companies to support the exploration, development, and production of oil and gas.” Helkaa Declaration, ¶ 6. The Debtors have a strong competitive position in the key onshore drilling markets of Ecuador, Brazil and Colombia where they contract their fleet of technologically advanced onshore drilling rigs to customers.
As of the Petition Date, the Debtors owned 26 rigs, of which 12 are located in Colombia, nine in Brazil and five in Ecuador, with 15 of the rigs being contracted and operational, and five being directly owned by the Debtors.
In April of 2010, TID was listed on the Toronto Stock Exchange under the symbol TID, and in December 2011, was listed on the Colombian Stock Exchange under the symbol TIDC. As of January 27, 2014, TID had 375.2 million common shares outstanding, of which approximately 159.2 million are held by insiders. TID has 12.9 million stock options outstanding. See Helkaa Declaration, ¶ 15. According to the Petition filed on February 2, 2014, Tuscany maintains $100 to $500 million in assets, and $100 to $500 million in debts. To view a creditor matrix filed by the Debtors, click here.
Events Leading to Bankruptcy
Beginning in late 2012, Tuscany began to experience significant revenue, cash flow and liquidity challenges, mainly due to low rig utilization, non-payment by certain customers on large overdue accounts, and underperforming acquisitions in Brazil and Africa. See Helkaa Declaration, ¶ 19. As of the Petition Date, seven of their nine Brazilian oil rigs were not being utilized. As a result, the Tuscany Brazilian affiliates incurred a negative EBITDA of $6.7 million from January to October 2013. In addition, Tuscany suffered financial losses in connection with a series of unprofitable acquisitions.
Objectives in Bankruptcy
Tuscany’s main goal in bankruptcy is to restructure their balance sheet through a consensual plan of reorganization supported by their pre-petition lenders, who have connections to the United States. The Debtors received debtor-in possession financing of $35 million that will help carry out operations during the restructuring process.
First Day Pleadings
The Debtors have filed various “first day” motions with the Court. These motions include, among others: (i) motion to pay pre-petition claims of certain critical vendors; (ii) motion for continued use of existing cash management system; (iii) motion to approve post-petition financing and authorizing use of cash collateral; and (iv) motion authorizing payment of certain pre-petition workforce obligations.
The Court has scheduled a “first day” hearing in connection with the above-referenced motions and others for today, February 4, 2014 at 1:00 p.m. (EST). Click here for the Notice filed by the Debtors regarding today’s hearing.
Tuscany is represented by the law firm of Young Conaway Stargatt & Taylor, LLP. Tuscany’s bankruptcy proceeding is before the Honorable Kevin Gross of the Delaware Bankruptcy Court, proceeding under case no. 14-10193.
Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP. Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at firstname.lastname@example.org.