Weatherford completes major refi, improves metrics despite challenges

By Devika Patel

Knoxville, Tenn., Nov. 3 – Weatherford International plc was able to stretch out its maturity profile and refinance, repay, redeem or otherwise dispose of debt through a refinancing effort in the last quarter.

Despite several challenges including supply chain disruptions, inflationary pressures and weather impacts, the company boosted its cash balance to leave it with ample liquidity and reduced debt.

“During the past few months, we made significant changes to our capital structure, which included not only refinancing our debt resulting in lower coupon rates and extended maturities, but also paying down $200 million of our unsecured notes with cash on hand,” executive vice president and chief financial officer H. Keith Jennings said on the company’s third quarter ended Sept. 30 earnings conference call on Tuesday.

“After repaying $200 million of the exit notes, partially refinancing a majority of the remaining exit notes and refinancing all the prior secured notes, our annual interest payments will be approximately $204 million until their maturity, which is an annual cash interest savings were approximately $71 million,” Jennings said.

The company began by revising its LC facility to permit debt repayment. Then it repaid unsecured notes, refinanced secured notes, extended debt maturities and boosted liquidity while also conducting a tender for its 2024 exit notes.

“The major highlights of the completed transactions are the transactions begun with the LC facility amendment to permit up to $500 million of debt repayment and, very importantly, allowing for an ABL or RCF to enter the debt stack and hold the prime position on key working capital assets if required,” Jennings said.

“Repayment of $200 million of unsecured 11% notes, we generated free cash flow, extended maturities on both classes of debt.

“We refinanced $500 million of secured notes and extended the maturity to 2028, then we refinanced $1.6 billion of the remaining $1.9 billion of the exit notes enabled by our tender process, with the new tranche maturing in 2030,” Jennings said.

Debt metrics were improved and the company’s maturity ladder stretched out, with the option to call the $300 million of remaining exit notes until the end of 2022.

“The end results can be summarized in the improved debt metrics, as weighted average cost of debt reduced to 8.5%, versus 10.6%, and maturity increased to 7.5 years, versus 3.3 years,” Jennings said.

“Three hundred million dollars of exit notes remain maturing in 2024 with a 103 call option expiring December 2022,” Jennings said.

The third quarter also presented several challenges, including inflation, supply chain disruptions and weather impacts.

“There have been significant headwinds roiling several industries over the past quarter,” president and chief executive officer Girish K. Saligram said on the call.

“In addition to the ongoing effects of the pandemic, the third quarter witnessed pervasive supply chain disruptions, inflationary pressures and severe weather impacts,” Saligram said.

“We continue to see rising inflation and, as a company that deploys equipment to support our services, we are increasingly challenged by logistics and rising transportation costs,” Jennings said.

Consolidated revenues were $945 million, 5% better sequentially and 17% better year-over-year.

Adjusted EBITDA was $179 million for the quarter, a 32% increase sequentially and 72% year-over-year.

Free cash flow was $111 million for the third quarter, a $63 million increase sequentially and $6 million year-over-year.

“Despite these challenges, I am very pleased and proud of our team's commitment to our four strategic imperatives that enabled outperformance against expectations on revenue, adjusted EBITDA and free cash flow,” Saligram said.

Cash and cash equivalents were $1,291,000,000 as of Sept. 30, 2021, compared to $1,118,000,000 as of Dec. 31, 2020.

“We ended the third quarter of 2021 with ample liquidity,” Saligram said.

Long-term debt was $2,431,000,000 as of Sept. 30, 2021, compared to $2,601,000,000 as of Dec. 31, 2020.

In August, Weatherford International Ltd. repaid and terminated its asset-based lending facility and increased its letter-of-credit facility by $50 million to $215 million using proceeds of an issuance of $500 million of new 8¾% senior secured first-lien notes due Sept. 1, 2024, which settled Aug. 28.

Weatherford Bermuda sold the notes to some holders of Weatherford International Ltd.’s 11% senior notes due 2024.

On Sept. 21, Weatherford International Ltd. priced $500 million of seven-year senior secured first-lien notes (Ba3/B) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk. Initial guidance was in the high 6% to 7% area.

Deutsche Bank Securities Inc. was the left bookrunner. Wells Fargo Securities LLC, Barclays and Morgan Stanley & Co. LLC were the joint bookrunners.

Proceeds were earmarked, along with cash on hand to redeem all of Weatherford International Ltd.’s outstanding 8 7/8% senior secured notes due Sept. 1, 2024 and $200 million of its 11% senior notes due Dec. 1, 2024.

On Oct. 14, Weatherford International Ltd. priced an upsized $1.6 billion of 8.5-year senior notes (B3/CCC+) at par to yield 8 5/8%.

The issue size increased from $1.5 billion.

The yield printed at the tight end of yield talk in the 8¾% area. Initial guidance was in the high 8% area.

Demand was heard to be around $2 billion at the opening of Thursday's session, a trader reported at pricing.

After pricing late Thursday afternoon, the bonds broke to 101 bid, 101½ offered, implying that there was decent demand for the paper, a trader remarked at pricing.

Left bookrunner Morgan Stanley & Co. LLC billed and delivered. Joint bookrunners were Wells Fargo Securities LLC, Barclays and Deutsche Bank Securities Inc.

Proceeds were earmarked to partially repurchase or redeem Weatherford International Ltd.’s 11% senior notes due 2024 through a tender offer that was announced on Oct. 12.

In the tender, Weatherford International Ltd. offered to purchase up to $1.5 billion of the $2.1 billion outstanding senior notes due 2024 (Cusip: 947075AP2).

The company offered total consideration of $1,064.76 per $1,000 note, which includes an early tender consideration of $50.

Accrued interest will also be paid to the settlement date.

The company may redeem $300 million of the notes at 103 before Dec. 1, 2022.

On Oct. 14, the company increased the cap on its offer to purchase the notes to $1.6 billion from $1.5 billion.

Also on Oct. 14, Weatherford issued a notice of conditional redemption providing for the redemption of up to $1.6 billion of the remaining notes not tendered in the tender offer. The actual amount was determined by subtracting the amount of notes tendered in the tender offer from the $1.6 billion maximum amount.

The early tender deadline and the withdrawal deadline were 5 p.m. ET on Oct. 25.

The company redeemed $200 million of the notes on Oct. 20.

Early settlement was set for Oct. 27, with the offer expiring at midnight ET on Nov. 8, but on Oct. 26, Weatherford International Ltd. announced that noteholders had tendered 97.16% of the $1.9 billion notes.

Noteholders tendered $1,846,040,000 of the notes.

The offer was therefore oversubscribed and tendered notes were accepted on a prorated basis.

The offer technically expired at midnight ET on Nov. 8. However, the offer was oversubscribed and no more notes were accepted for purchase.

Settlement was on Nov. 10.

The company may also redeem additional notes at 103 before Dec. 1, 2022.

Weatherford is an oilfield services company based in Baar, Switzerland.

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