This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.
It was likely the last line in a press release late Friday that had Tidewater (TDW) investors fleeing on Monday. Shares tanked by more than 44% on heavy trading volume (14 million vs. the average 1.5 million).
The provider of offshore service vessels updated investors on waiver extensions from lenders and noteholders, but also stated the possibility of bankruptcy:
While the company will continue to work toward amendments to its various debt arrangements that will be acceptable to all parties, there is a possibility that the lenders, noteholders and the company will not be able to negotiate new debt terms that are acceptable to all parties, in which case the company will have to consider other options, including a possible reorganization under Chapter 11 of the federal bankruptcy laws.
It should come as no surprise that the company has been financially stressed out, given its total debt of $2.04 billion as of June 30, according to data by Thomson Reuters. But after working to amend some of its debt arrangement "to obtain relief from certain covenants," Tidewater received only a limited deadline extension to Nov. 11. This was also at least the second extension for Tidewater.
However, given recent industry data, "including data regarding projected levels of offshore drilling activity, the primary driver of activity within the offshore service vessel industry, has led the company to conclude that important debt terms will require further negotiation."
Investors must have thought the need for further discussions regarding its debt terms, with the looming possibility of bankruptcy following any failed discussions, was a sign to get out before it might become too late.