ZAPATA TO SELL RIG FLEET IN MAJOR RESTRUCTURING

July 2, 1990
Zapata Corp., Houston, plans to sell its 12 rig offshore drilling fleet as part of a major restructuring program. Zapata Chairman R.C. Lassiter said the restructuring hinges on three components that must all occur for it to succeed. If it doesn't or if stockholders don't approve, the company may have to seek protection under bankruptcy laws, Lassiter warned. Success entails cutting Zapata's financial obligations to the point that remaining debt can be paid from operational cash

Zapata Corp., Houston, plans to sell its 12 rig offshore drilling fleet as part of a major restructuring program.

Zapata Chairman R.C. Lassiter said the restructuring hinges on three components that must all occur for it to succeed. If it doesn't or if stockholders don't approve, the company may have to seek protection under bankruptcy laws, Lassiter warned.

Success entails cutting Zapata's financial obligations to the point that remaining debt can be paid from operational cash flow and the company is profitable again, he said.

The other two components of the restructuring call for use of cash and additional equity to cut outstanding bank debt to a manageable level and acceptance by bondholders of an offer for Zapata's subordinated debt.

Lassiter said discussions have been held with a number of potential buyers for the rig fleet. Agreement could come in a matter of weeks, he said.

Negotiations are under way with Zapata's bank group, but Lassiter did not disclose further details of the debt restructuring.

Although Zapata got its start as an offshore drilling contractor, Lassiter said leaving the business is prudent because of the industry's slow recovery.

"How long will the recovery take? Would we be making a mistake to get out of the drilling business at this point? For Zapata, the answer is 'no,' because I believe the recovery is going to take longer than Zapata can wait."

Lassiter said the company would be healthy after the rig fleet sale because it is the biggest shareholder in the world's largest service vessel company, Zapata Gulf Marine Corp., which is solidly in the black. He also cited the company's natural gas and commercial fishing operations as contributing to its good economic outlook.

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