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.

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