Fitch puts WPX Energy on positive watch

Fitch Ratings said it placed WPX Energy, Inc.’s BB rating on rating watch positive following the announcement of WPX’s proposed acquisition of Delaware Basin assets. Fitch also placed the senior unsecured debt ratings on positive watch and affirmed the senior secured credit facility.

“The rating watch positive considers WPX’s announcement that it was acquiring Delaware Basin assets in a deal valued at approximately $2.5 billion to be funded with new senior unsecured notes, equity to the seller and cash from the balance sheet. The transaction, which adds approximately 58,500 net acres, daily production of 53 mboe/d and 578 mmboe of proved reserves, at YE 2018, largely in Winkler and Ward counties. In total, WPX will have approximately 184,000 Permian acres, total production of 226.4 mboe/d and almost 5,000 Delaware drilling locations. The assets are immediately accretive to WPX’s FCF profile,” said Fitch in a press release.

WPX plans to issue up to $900 million of new senior unsecured notes. At the time of the launch, Fitch will rate the notes BB/RR4 and put the notes on ratings watch positive, consistent with the other unsecured debt ratings. Upon closing of the transaction, which is expected to occur in 2Q20 after a shareholder vote, Fitch said it expects to resolve the positive watch and upgrade WPX’s rating and subsequently all unsecured debt issuances. “Fitch believes WPX’s pro-forma financial and operational profile is in line with the agency’s investment grade thresholds,” the agency said.

S&P puts International Flavors on watch

S&P said it placed International Flavors & Fragrances Inc. and its senior unsecured ratings on CreditWatch with negative implications on the news the company is merging with Dupont Nemours’ nutrition and biosciences business in a Reverse Morris Trust transaction. The deal values the N&B business at $26.2 billion. DuPont shareholders will own 55.4% of the shares of the new company and IFF shareholders will own 44.6%.

IFF will sell $7.5 billion in debt to fund a one-time $7.3 billion special cash dividend to DuPont, resulting in pro forma 2020 debt to EBITDA just above 4x, up from the agency’s forecast of below 3.5x following the Frutarom acquisition, S&P said.

S&P sees resolving the CreditWatch by the first half of 2020 following a review of the effect of the acquisition on IFF.

S&P rates Weatherford B-

S&P said it raised its rating on Weatherford International plc to B- from D upon the company’s emergency from bankruptcy.

The agency also assigned a B+ issue-level rating and 1 recovery rating to the company’s $450 million asset-based lending revolving credit facility and $195 million letter of credit facility (both maturing in 2024); and a B- issue-level rating and 3 recovery rating to its $2.1 billion unsecured guaranteed notes due 2024.

“Weatherford’s reorganization includes the elimination of about $6.2 billion of funded debt relative to its pre-bankruptcy levels and envisages no significant change to the company’s business in the oilfield services sector. On a pro forma basis for the revised capital structure, we expect the company’s funds from operations (FFO) to total debt to be about 20% in 2020 and 2021, which compares with less than 0% for the first nine months of 2019,” said S&P in a press release.

The restructuring will cut the company’s annual interest costs by $370 million. S&P expects Weatherford’s debt to EBITDA to be about 2.5x in 2020 and 2021, which compares with 14x before it emerged.

The outlook is negative. “The negative outlook on Weatherford reflects our view that despite the significant reduction in the company’s gross debt, market conditions in the oilfield services sector remain challenging,” S&P said.

Moody’s rates Weatherford notes B2

Moody’s Investors Service said it assigned new ratings to Weatherford International Ltd. following its emergence from bankruptcy, including a B1 corporate family rating, a B1-PD probability of default rating, a Ba2 rating on its secured ABL and letters of credit facilities and a B2 rating on the company’s senior unsecured notes. The outlook is stable.

“Weatherford has a more sustainable capital structure and greater financial flexibility after eliminating over $6.2 billion of debt through a pre-packaged Chapter-11 bankruptcy financial restructuring process during 2019," said Sajjad Alam, a Moody’s senior analyst, in a press release. “While we expect U.S. oilfield services industry conditions to remain weak in 2020, Weatherford should have a relatively stable performance given its significantly lower interest burden, reduced overhead costs, a sizeable liquidity cushion and a diversified international market presence.”

Moody’s rated the $2.1 billion senior unsecured notes B2 because of the significant amount of priority-claim secured debt in Weatherford’s capital structure. The $450 million ABL facility and the $195 million LC facility are both secured by a first-lien claim to Weatherford’s assets and they are rated Ba2. The notes and credit facilities have guarantees from Weatherford International plc, Weatherford International, LL, as well as from most material asset owning subsidiaries, the agency said.

A first-lien claim to certain accounts receivable, inventory and rental tools assets and a second-lien claim to other assets, including real assets secure the ABL facility. A first-lien claim to the non-ABL collateral pool and a second-lien claim to ABL collateral secure the LC facility.

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