Fitch lowers Weatherford to CCC

Fitch Ratings said it downgraded the ratings for Weatherford International plc and its subsidiaries, including the companies' long-term issuer default ratings to CCC from B+.

Weatherford International Ltd. (Weatherford Bermuda), a wholly owned subsidiary of Weatherford International plc, expects to issue $500 million senior unsecured notes due 2024, under Rule 144A.

Fitch does not expect the issue to be upsized. The notes will be fully and unconditionally guaranteed by Weatherford and Weatherford International, LLC (Weatherford Delaware) making the notes pari passu with existing senior unsecured debt such as the 7¾% senior unsecured notes due 2021 and the 8¼% senior unsecured notes due 2023.

The company expects to use the proceeds to pay down borrowings under the revolving credit facility.

The agency expects to rate the new unsecured notes CCC-(EXP)/RR5.

Fitch said the downgrade reflects the potential further tightening of the company's specified leverage and L/C ratio covenant following the fourth quarter (4Q) 2016 calculation, and with the expected 0.5 times step-down in 1Q 2017 per the credit agreement.

The agency believes that while the bond deal provides some near-term cushion, use of proceeds to repay revolver borrowings may also signal more limited through the cycle accommodation on the part of the bank group.

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