Houston-based Epic Companies and its subsidiaries filed for bankruptcy protection in Texas at the end of August, leaving a $30 million trail of unsecured creditors that included hundreds of businesses in Louisiana.
To raise money to pay creditors, the company is slated to be sold at auction on Oct. 22, court records show.
Epic Companies has debt totaling between $100 million and $500 million, with assets of between $10 million and $50 million. It has between 200 and 999 creditors, records show.
In July, Epic Companies defaulted on two loans worth $115 million held by White Oak Global Advisors. Within days, it laid off 400 employees. It's unclear how many worked in Louisiana, since the company did not file a Worker Adjustment and Retraining Notification Act with the state.
The offshore oil well maintenance, diving, marine, heavy lift barge services and offshore construction services company has four offices across Louisiana in Broussard, Belle Chasse, Houma and Golden Meadow. The bankruptcy includes subsidiaries Epic Alabama Steel, Epic Applied Technologies, Epic Diving & Marine Services, Epic San Francisco Shipyard, Epic Specialty Services and Zuma Rock Energy Services.
In early August, disgruntled subcontractors had attempted to force Epic Companies into Chapter 7 bankruptcy liquidation in Louisiana, but the company sought Chapter 11 protection in Houston and has requested the Louisiana case be consolidated there. A Chapter 11 filing typically leads to a reorganization or sale of a company.
"Like many in their industry, the downturn in oil and natural gas prices and other industry-related challenges negatively impacted the debtors' liquidity position," Epic Companies said in its bankruptcy filing on Aug. 26.
Its largest unsecured creditor is Houston fuel business Dan Bunkering, which is owed $2.2 million. Goliath Offshore Holdings, represented by Phelps Dunbar in New Orleans, is owed $1.1 million.
The largest Louisiana-based creditor is Taylors International Services, which is owed $913,179. The Lafayette-based company declined comment.
Another half-dozen businesses from Morgan City to New Iberia are owed between $224,000 to $353,400 each, records show.
For example, Houma-based Offshore Technical Solutions is owed $277,400 by Epic Companies. The company was founded in 2011 and sells water abrasive cutting services for decommissioned offshore oil rigs in the Gulf of Mexico.
"We're not a huge company so any hits like these matters, but we can recover," said Richard Burgo, general manager of Offshore Technical Solutions.
The business had been a big customer of Tetra Technologies' offshore services division, which was acquired by Epic Companies in 2018. Offshore Technical Solutions is also a creditor of Montco Offshore Inc., a similar Houston-based company that filed for bankruptcy in 2017.
"Montco did the same thing and they owed us more," Burgo said, and he’s not expecting to be paid back any time soon.
"I'm not counting on it,” he said. “We're a subcontractor and the subs are usually the ones who pay the price."
The outstanding debt from Montco’s bankruptcy meant the Houma business couldn't pay its employee bonuses that year and it still has not been paid by Montco Offshore. But overall business has been steady since there has been demand for decommissioning services.
"We've been busy and have had really good business every year except 2015," Burgo said.
It's unclear how many subcontractors may see any money from Epic Companies because the liability to asset ratio is so high. One unique aspect about a maritime bankruptcy is that much of what would usually be unsecured debt is secured in a way depending on whether the vessels have an outstanding mortgage, said Robert Stefani, an attorney at law firm King & Jurgens LLC in New Orleans who is not involved in the case.
Companies that supply fuel or even perform repairs on vessels often have what's known as a maritime lien, which allows businesses the right to have the U.S. Marshals office seize the vessel if bills are not paid. Epic Companies already had several of its vessels seized from Lake Charles to Port Fourchon.
"A lot of those suppliers will be secured but they may be behind the mortgagees, so they end up unsecured in a sense," Stefani said.
During a bankruptcy, those vessels are usually sold to raise money to pay creditors. But the market for the offshore oil exploration industry has been down for several years so those sales may not yield much.
"With the price of oil being so low that few rigs are operating, there are more vessels in financial distress. That affects the value of those assets," Stefani said. "If they are going to sell those vessels into a market that is depressed that is going to affect everybody getting paid. That's the reality that everybody has to deal with."
Once the vessels are sold, the first creditor in line to be paid is the mortgage holder, if there is one. Creditors in Texas don’t have priority over those in Louisiana just because the bankruptcy proceeding is happening there. Epic Companies hired G2 Capital Advisors, a Boston-based consultant, which appointed a chief restructuring officer in recent days.
Sometimes subcontractors end up being paid in full in a best-case scenario, but it is not likely.
"I've been involved in cases where all the maritime lien claimants are paid 100 cents on the dollar and I've seen cases where they were unsecured creditors and get what is normal in a bankruptcy, which is very little," Stefani said.
Three companies based in Houma are looking to force marine services business Epic Companies in Houston into Chapter 7 bankruptcy.