1 AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, NY 10036 Telephone

31 Pages·2010·0.27 MB·English

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AKIN GUMP STRAUSS HAUER & FELD LLP
One Bryant Park
New York, NY 10036
Telephone: [phone]
David H. Botter

AKIN GUMP STRAUSS HAUER & FELD LLP
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Telephone: [phone]
Sarah Link Schultz (pro hac vice admission pending)
Travis A. McRoberts (pro hac vice admission pending)

Proposed Counsel to Debtors and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
)
)
In re: ) Chapter 11
)
INTERNATIONAL SHIPHOLDING
) Case No. 16-12220 (SMB)
CORPORATION, et al.,1
)
) Joint Administration Requested
Debtors.
)

DECLARATION OF LAURENCE H. GURLEY IN SUPPORT OF ENTRY OF
DEBTORS’ MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS (1)
AUTHORIZING DEBTORS TO (A) OBTAIN POSTPETITION FINANCING, (B) USE
CASH COLLATERAL, AND (C) GRANT CERTAIN PROTECTIONS TO
PREPETITION LENDERS, (2) SCHEDULING A FINAL HEARING, AND (3)
GRANTING CERTAIN RELATED RELIEF
I, Laurence H. Gurley, declare as follows under penalty of perjury:
1. I am a Managing Director at Blackhill Partners, LLC (“Blackhill”), an investment
banking firm with its principal office located at 2651 North Harwood St., Suite 120, Dallas,

1 The Debtors in these cases, along with the last four digits of each Debtor’s federal tax identification number, are:
International Shipholding Corporation (9662); Enterprise Ship Co. (9059); Sulphur Carriers, Inc. (8965); Central
Gulf Lines, Inc. (8979); Coastal Carriers, Inc. (6278); Waterman Steamship Corporation (0640); N.W. Johnsen &
Co., Inc. (8006); LMS Shipmanagement, Inc. (0660); U.S. United Ocean Services, LLC (1160); Mary Ann Hudson,
LLC (8478); Sheila McDevitt, LLC (8380); Tower LLC (6755); Frascati Shops, Inc. (7875); Gulf South Shipping
PTE LTD (8628); LCI Shipholdings, Inc. (8094); Dry Bulk Australia LTD (5383); Dry Bulk Americas LTD (6494);
and Marco Shipping Company PTE LTD (4570). The service address for each of the above Debtors is 601 Poydras
Street, Pan American Building, Suite 1850, New Orleans, Louisiana 70130.
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Texas, and the proposed investment banker for the Debtors in the above-captioned bankruptcy
cases. I have worked at Blackhill from 2011 to the present.
A. Blackhill’s Qualifications and Retention
2. Blackhill is an investment banking, restructuring, and securities firm that has
served both public and private companies and their investors for over 15 years. Blackhill
provides a broad range of corporate advisory services to its clients, including services pertaining
to: (i) general financial advice, (ii) corporate restructuring, (iii) mergers, acquisitions, and
divestitures, and (iv) capital raising. In the aggregate, our professionals have advised on over
$100 billion of mergers, acquisitions, restructurings, and financings.
3. Blackhill offers clients a unique combination of top-tier financial restructuring
advice with the full capabilities of an interim management platform, including deep industry
sector knowledge and extensive in-house capital markets capabilities. Our interim management
practice involves serving as Directors and Officers of distressed enterprises, including serving as
Chief Restructuring Officer, Chief Financial Officer, or other independent management.
Blackhill has advised, or is advising, on numerous large and complex in and out of court
restructurings, including those for Pacific Exploration & Production, et al., Ch. 15 Case No. 16-
11189 (JLG) (Bankr. S.D.N.Y. April 29, 2016); ATP Oil & Gas, et al., Case No. 12-36187
(Bankr. S.D. TX. August 17, 2012); Black Elk Energy Offshore Operations, LLC, Case No. 15-
34287 (Bankr. S.D. TX. September 1, 2015), Northern Transportation Company Ltd., No. 1601-
05256, 2016 ABQB (Can. April 27, 2016); Endeavour Operating Corporation, et al., Case No.
14-12308 (Bankr. D. Del. October 10, 2014); Transcoastal Corporation, Case No. 15-34956
(Bankr. N.D. TX. Dec. 8, 2015); RAAM Global Energy Corporation, Case No. 15-35615 (Bankr.
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S.D. TX. Oct. 26, 2015; Cano Petroleum, Inc., Case No. 12-31549 (Bankr. N.D. TX. March 7,
2012), among others.
4. Since May 6, 2016, Blackhill has been rendering investment banking and
advisory services to the Debtors in connection with its restructuring efforts. Blackhill, among
other advisory services, has: (a) analyzed the Debtors’ current liquidity and projected cash flow;
(b) assisted the Debtors in evaluating its restructuring and strategic alternatives; (c) helped the
Debtors prepare for the commencement of this chapter 11 case; and (d) conducted an expedited
process to identify and secure debtor-in-possession financing for the Debtors in connection with
its chapter 11 filing. Blackhill has thus become familiar with the Debtors’ businesses, finances,
and capital structure, as well as their financial restructuring initiatives.
5. I submit this declaration in support of the Debtors’ Motion of Entry of Interim and
Final Orders: (1) Authorizing Debtors to (A) Obtain Postpetition Financing, (B) Use Cash
Collateral, and (C) Grant Certain Protections to Prepetition Lenders, (2) Scheduling a Final
Hearing, and (3) Granting Certain Related Relief (the “DIP Motion”), filed contemporaneously
herewith.2
6. The statements in this declaration are, except where specifically noted, based on
either my personal knowledge or opinion, on information that I have received from the Debtors’
employees or advisors and/or employees of Blackhill working directly with me or under my
supervision, direction or control, or from the Debtors’ records maintained in the ordinary course
of their business. I am not being compensated specifically for this testimony other than through
payments received by Blackhill as a professional to be retained by the Debtors. If I were called

2 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the DIP
Motion.
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upon to testify, I could and would testify competently to the facts set forth herein. I am
authorized to submit this declaration on behalf of the Debtors.
B. My Background and Qualifications
7. I have a Bachelor of Arts from the University of Mississippi with concentrations
in Psychology, History, and English. I have over 9 years of investment banking and restructuring
experience. Prior to joining Blackhill in August 2011, I worked at Butler, Snow, O’Mara,
Stevens and Cannada (“Butler Snow”), most recently as a Senior Vice President, advising both
debtors and creditor groups in restructurings and distressed M&A assignments. In addition to
my day to day responsibilities, I currently sit on the Board of Directors of HTC Holdings, LLC, a
privately-held parent company of numerous retail and consumer products brands.
8. I am a holder of Series 7, 22, 24, 63 and 79 licenses with the Financial Industry
Regulatory Authority, and am a registered General Securities Principal. I currently serve as
Partner and Chief Compliance Officer of my firm’s wholly-owned regulated broker/dealer,
Blackhill Advisors, LP (Member FINRA/SIPC).
9. My company-side restructuring experience includes advising numerous public
and private corporations on in and out of court restructurings, including Black Elk Energy
Offshore Operations, LLC, Case No. 15-34287 (Bankr. S.D. Tex. September 1, 2015), Northern
Transportation Company Ltd., No. 1601-05256, 2016 ABQB (Can. April 27, 2016), and Basil
Street Partners, LLC, et al., Case No. 11-19510 (Bankr. M.D. Fla. October 19, 2011), among
others. My firm and I have also advised numerous creditors in restructuring engagements,
including JPMorgan Chase & Co., Morgan Stanley, GE Capital, Wells Fargo and others.
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10. In connection with the above and numerous other restructuring engagements, I
have advised companies with respect to obtaining and negotiating pre- and post-petition
financing.
C. The Debtors’ Need For Postpetition Financing
11. Based on Blackhill’s review of the Debtors financial projections and discussions
with the Debtors’ management team, I understand that the Debtors are in need of financing to
solidify their viability and provide the financing necessary for the Debtors to assess their
restructuring alternatives and carry out a restructuring transaction. This need, as I understand it,
is immediate—the Debtors will run out of cash to continue to operate their businesses as early as
the end of the week of August 1, 2016. Indeed, cash collateral alone is insufficient to fund the
Debtors’ operations and administrative costs during the pendency of their chapter 11 cases. The
inability to achieve business goals for any period of time as a result of cash shortfall could in turn
significantly disrupt, if not destroy, the Debtors’ operations. Thus, to provide the Debtors with
the immediate, appropriate and necessary financing, the negotiation of adequate liquidity in the
form of debtor-in-possession financing was critical.
12. The Debtors’ need for the financing was catalyzed by the Debtors’ recent but prior
involvement in the international dry bulk market. In 2011 and 2012, the Debtors purchased or
took delivery of four (4) international dry bulk vessels and acquired the remaining 50% interest
in another vessel from a joint venture partner, believing that these purchases were made at or
near the market’s cyclical low. However, the market continued to go down, leading to the
Debtors losing equity in those vessels and to their cash dissipating along with it. Although the
Debtors ultimately agreed to sell or sold off their international dry bulk vessels as of March 31,
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2016, the Debtors still had to weather the financial consequences of their ill-timed expansion
efforts in that sector.
13. Additionally, in late 2012, the Debtors acquired U.S. United Ocean Services, LLC
(“UOS”) for approximately $115 million to become the largest Jones Act dry bulk operator by
capacity. Subsequent to the UOS acquisition, which was primarily financed with a new bank
term loan, draws on the Debtors’ line of credit, two sale and leaseback transactions and available
cash, the Debtors initiated a capital improvement plan for the acquired UOS assets which
exceeded $40 million. From the time of acquisition, the volume of one key commodity carried
has been reduced by approximately 40%, and pricing for the carriage of such cargo has also been
reduced significantly as a result of competitive pressures at the time of recent contract renewal
negotiations. As a result of the above lower volumes and pricing, the contribution of the UOS
segment to the cash flows of the business have been significantly reduced since the time of the
acquisition.
D. Prepetition Financing Negotiations
14. Despite their best efforts, the Debtors are unable to obtain financing on an
unsecured basis. The Debtors attempted to secure financing on terms other than a secured super-
priority basis, but given the Debtors’ asset base and balance sheet, they were unable to do so.
The Debtors have been unable to obtain (a) adequate unsecured credit allowable under
Bankruptcy Code section 503(b)(1) as an administrative expense; (b) credit for money borrowed
secured solely by a lien on property of the estate that is not otherwise subject to a lien; or
(c) credit for money borrowed secured by a junior lien on property of the estate which is subject
to a lien, in each case, on more favorable terms and conditions than those provided in the DIP
Facility. In addition, the Debtors are unable to obtain credit for borrowed money without
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granting priming liens on the DIP Collateral. Indeed, no sophisticated lender, including the
Prepetition Secured Parties, was willing to extend financing on anything less than a priming
basis accompanied by superpriority claims. Accordingly, the Debtors believe entering a DIP
Facility with superpriority administrative claims, consensual priming liens on encumbered
property, junior priority liens on the Debtors’ encumbered property, and first priority liens on the
Debtors’ unencumbered property is appropriate under the circumstances of these Chapter 11
Cases.
15. Specifically, prior to the Petition Date, the Debtors explored all practicable
avenues to obtain the financing necessary to address their ongoing liquidity issues. I understand
that the Debtors independently reached out to a number of financial sponsors and strategic
buyers of the business prior to engaging Blackhill. These discussions did not result in any
proposal to allow the Debtors to continue to operate via an out of court restructuring. After these
initial discussions and the Debtors’ retention of Blackhill as discussed above, Blackhill reached
out to approximately 59 third-parties and four out of the Debtors’ five Prepetition Secured
Lenders.3 The Debtors received signed non-disclosure agreements (“NDAs”) from 28 of these
constituencies (four of which were the four Prepetition Secured Lenders) and provided all of the
constituencies who executed an NDA with equal access to a virtual data room, the Blackhill
team, the Debtors’ proposed legal counsel of Akin Gump Strauss Hauer & Feld LLP, and other
information specifically requested regarding the Debtors’ financials and company operations.
16. The Debtors received five preliminary proposals for postpetition financing. Only
three of these proposals were affirmed to a more final status such that the Debtors and Blackhill

3 Given that the fifth lender, ING, would soon be paid in full, Blackhill and the Debtors chose not to reach
out to them. Moreover, Blackhill and the Debtors did not reach out to shareholders of the Debtors for the necessary
financing because the existing shareholders are not the type of institutions that would have the liquidity to provide
the amount of funds the Debtors need.
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received a proposed debtor in possession financing term sheet; these proposals were received
from DVB Bank, SEACOR Holdings, and Midship Capital and are explained in more detail
below. The other two proposals failed to offer sufficient funds to meet the Debtors need and
therefore did not undergo further negotiations. The Debtors did not receive any offers of
financing on an unsecured basis or for junior debt financing.
1. The MID-SHIP Proposal
17. The Debtors explored each of the term sheets received with respect to postpetition
financing. Specifically, on July 22, 2016, the Debtors received a proposed financing offer from
MID-SHIP Capital in the amount of up to $9 million consisting of three $3 million tranches (the
“MID-SHIP Proposal). The MID-SHIP Proposal (a) sought to impose liens on certain non-
debtor entities as well as priority liens on unencumbered assets of the Debtors’ estates, (b)
required the Debtors to sell Debtor and non-Debtor assets on an expedited basis, and (c) limited
initial and future access to funding upon meeting certain case milestones. This proposal, which
only offered insufficient funding on contingent terms, was not the most favorable or best terms
the Debtors would be able to achieve in their search for postpetition financing. As a result of the
foregoing, the Debtors determined not to proceed with the MID-SHIP Proposal.
2. The SEACOR Proposal
18. Around the same time, on July 12, 2016, the Debtors received a proposed
financing offer from SEACOR in the amount of $15 million (the “SEACOR Proposal”)—which
was far superior to the Midship Proposal. The initial SEACOR Proposal, which had a relatively
short 120-day term, contemplated (a) the granting of priming liens on all Prepetition Secured
Parties, (b) providing adequate protection to the Prepetition Secured Parties in the form of a
combination of, among other things, (i) payment of fees and expenses, (ii) payment of
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postpetition interest at the non-default contract rate, and (iii) granting of adequate protection
liens for diminution of value. The initial SEACOR Proposal also required the Debtors to file a
plan acceptable to SEACOR or alternatively initiate a sale process on an expedited basis. The
Debtors and SEACOR negotiated the SEACOR Proposal for several weeks until the parties
agreed to the term set forth in the DIP Motion. The Debtors and I believe that the SEACOR
Proposal, which is memorialized in the DIP Motion provides the Debtors with sufficient
liquidity, time, and flexibility to achieve a consensual restructuring. Material revisions to the
SEACOR Proposal include (a) an increase in the face amount of its financing proposal to $16
million, with $7 million to be available to the Debtors upon the entry of an Interim Order to
provide for those expenses necessary to avoid immediate and irreparable harm, and with the
remaining $9 million available to the Debtors upon the entry of a Final Order, (b) a modification
of the milestones contained in the DIP Facility to provide that the Debtors must: (i) file a
proposed plan of reorganization and disclosure statement within 75 days of the Petition Date, (ii)
obtain an order approving the Debtors’ discourse statement within 100 days of the Petition Date,
and (iii) obtain a confirmation order and consummate the acceptable plan within 140 days of the
Petition Date, and (c) certain other modifications that provide economic benefit to the Debtors’
estate and their stakeholders.
3. Negotiations with Prepetition Secured Lenders
19. During the negotiation of the SEACOR Proposal, the Debtors entered into
negotiations with the Prepetition Secured Lenders in an attempt to reach an agreement for
consensual priming. After extensive negotiations with Regions, which acts as Agent for the
Company’s senior secured credit facility, Regions (as Agent) ultimately agreed, under certain
conditions, to being primed by SEACOR in exchange for certain adequate protections, including
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(a) SEACOR’s agreement to use commercially reasonable efforts to exercise remedies with
respect to, and foreclose on, the vessels Bali Sea and Banda Sea before exercising remedies with
respect to other DIP Collateral, and (b) SEACOR’s agreement that with respect to any sale of the
vessel Green Ridge, that (i) notwithstanding anything in the DIP Credit Agreement to the
contrary, fifty-percent (50%) of the net cash proceeds of such sale shall be applied to pay
obligations under the Senior Facility, subject to a maximum of $15,000,000; and (ii) the
remaining net cash proceeds of such sale shall not prepay the DIP Obligations; provided that
such net cash proceeds are promptly deposited in a blocked account (under terms and conditions
set forth in more detail in the proposed Interim Order).
20. On July 29, 2016, the Debtors received a term sheet for postpetition financing
from DVB (the “DVB Proposal”). The DVB Proposal proposed a postpetition financing facility
in the amount of $42 to 43 million that contemplated (a) the granting of priming liens on all
Prepetition Secured Parties, (b) the roll-up of substantially all or all of the DVB Lenders’ claims
against the DVB Prepetition Collateral, and (c) providing adequate protection to the Prepetition
Secured Parties in the form of, among other things, (i) payment of fees and expenses, (ii)
payment of postpetition interest at the non-default contract rate, and (iii) granting of adequate
protection liens for diminution of value. Upon receipt of the DVB Proposal, the Debtors entered
into discussions with DVB Bank regarding the terms of the DVB Proposal. As a result of these
discussions, SEACOR agreed to allow DVB Lenders to participate in the DIP Facility and
SEACOR and the Debtors agreed to provide the DVB Lenders with an adequate protection
package substantially similar to the protections provided to the Regions Lenders (except with
respect to the Green Ridge) in exchange for the DVB Lenders’ consent to priming.
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