Daily News: May 13, 2019

Citigroup to Lead DIP Revolver to Support Weatherford Restructuring


Weatherford International has executed a restructuring support agreement with a group of its senior noteholders that collectively holds or controls approximately 62% of the company’s senior unsecured notes. The proposed comprehensive financial restructuring would significantly reduce the company’s long-term debt and related interest costs, provide access to additional financing and establish a more sustainable capital structure.

The transaction results in pro forma net leverage at or below 2.7x at year-end 2019. The company’s business plan implies significant free cash flow generation under the new capital structure, resulting in reduction of net leverage to 1.8x in 2020 and 1.2x in 2021.

Weatherford expects to implement the restructuring agreement through a pre-packaged Chapter 11 process and expects to file U.S. chapter 11 and Irish examinership proceedings. As part of this process, Weatherford intends to continue engaging in discussions with, and begin soliciting votes from, its creditors in connection with a proposed Plan of Reorganization prior to filing.

“During the past year, we have been executing a company-wide transformation to fundamentally improve the way we operate our business and to strengthen Weatherford for the long run,” said Mark A. McCollum, Weatherford president and CEO. “Despite the challenging market dynamics our industry continues to face, we believe that our transformation strategy, which is designed to improve our execution capabilities, lower our cost structure and create efficiency to allow us to better price our products and services, will position Weatherford for long-term success.”

Under the terms of the restructuring agreement, the company’s unsecured noteholders would exchange approximately $7.4 billion of senior unsecured notes for approximately 99% of the equity in the company and $1.25 billion of new tranche B senior unsecured notes.

The agreement also contemplates that Weatherford will receive commitments for approximately $1.75 billion in debtor-in-possession financing comprised of an approximately $1 billion DIP term loan fully backstopped by certain members of the ad hoc noteholder group and an undrawn $750 million revolving credit facility provided by certain of Weatherford’s bank lenders, which would be available as part of the chapter 11 process and be led by Citigroup, subject to certain conditions.

The restructuring agreement also contemplates a commitment of up to $1.25 billion in new tranche A senior unsecured notes backstopped by certain members of the ad hoc noteholder group, that would be funded at emergence to repay the DIP financing, pre-petition revolving credit debt, case costs, and to recapitalize the company at exit.

Weatherford plans to continue operating its businesses and facilities without disruption to its customers, vendors, partners or employees and that all trade claims against the company (whether arising prior to or after the commencement of the Chapter 11 cases) will be paid in full in the ordinary course of business.

Lazard is acting as financial advisor, Latham & Watkins as legal counsel, and Alvarez & Marsal as restructuring advisor for Weatherford. Evercore is acting as financial advisor for the ad hoc noteholder group and Akin Gump Strauss Hauer & Feld as legal counsel.

Weatherford is a multinational oilfield service companies which operates in over 80 countries and has a network of approximately 650 locations, including manufacturing, service, research and development and training facilities. It employs approximately 26,000 people.