Business Context and Reporting Period
Company: Weatherford International Plc
Filing Date: July 1, 2019
Event: Voluntary Chapter 11 Bankruptcy Filing and Restructuring Initiatives
Context: Weatherford International plc and its subsidiaries (the "Weatherford Parties") commenced voluntary cases under Chapter 11 of the U.S. Bankruptcy Code in the Southern District of Texas. The Company intends to operate as a "debtor-in-possession" while seeking confirmation of a prepackaged plan of reorganization.
Key Financial Metrics and Capital Structure
Debt and Liquidity:
- DIP Facility: Received commitments for a $1,750 million senior secured superpriority debtor-in-possession (DIP) credit facility. Proceeds are intended to repay existing Term Loan and 364-Day Credit Agreement obligations, cash collateralize letters of credit, and fund working capital.
- Backstop Commitment: Entered into an agreement to backstop a rights offering for new senior unsecured notes (2024 Notes) with an aggregate principal amount of $1,250 million.
- Backstop Fee: Paid $62.5 million in cash to commitment parties as consideration for the backstop agreement. This payment is non-refundable.
- Forbearance Fees: Agreed to pay a fee of 0.25% on the outstanding principal amount of loans and letter of credit exposure under the Credit Agreement to lenders forbearing from exercising remedies.
Revenue, Profit, and Margins:
The filing text does not provide specific values for revenue, profit, cash flow, or operating margins for the reporting period.
Material Changes and Agreements
Bankruptcy and Defaults:
- The filing of bankruptcy cases triggered events of default under multiple debt instruments, including Term Loans, Revolving Credit Agreements, and various Senior Notes (due 2020 through 2042).
- Enforcement of these defaults is automatically stayed under the Bankruptcy Code.
Restructuring Support:
- RSA Amendment: Amended the Restructuring Support Agreement to cap consideration for financial advisor Lazard Freres & Co. LLC and moved proceedings to Bermuda.
- Forbearance Agreements: Executed forbearance agreements with Credit Agreement Lenders, Term Loan Lenders, 364-Day Lenders, and Swap Counterparties. These agreements prevent acceleration of indebtedness for a specified period.
- Security Interests: Subsidiaries will grant second lien security interests to Credit Agreement Lenders, which may transition to pari passu liens with the DIP Facility if obligations are not paid in full by November 30, 2019.
Guidance, Outlook, and Risks
Outlook and Management Commentary:
- Plan Confirmation: The Company expects the solicitation period for the Plan of Reorganization to end on August 1, 2019.
- Operations: The Company anticipates continuing operations in the ordinary course, with vendors and unsecured creditors paid in full.
- Forward-Looking Statements: Management cautions that actual results may differ due to risks associated with the bankruptcy process, court approvals, creditor actions, and global economic conditions.
Risks and Contingencies:
- Success of the restructuring is contingent on Bankruptcy Court approval of the Plan and the Rights Offering.
- Failure to pay Credit Agreement obligations by November 30, 2019, could alter lien priorities.
- Executive compensation agreements were amended to clarify severance provisions triggered by the Change in Control resulting from the bankruptcy filing.
Investor Verification Checklist
- Verify the status of the Plan of Reorganization solicitation and the expected confirmation date by the Bankruptcy Court.
- Confirm the closing conditions and final terms of the $1,750 million DIP Facility.
- Monitor the subscription levels of the $1,250 million Rights Offering for new 2024 Notes.
- Review the specific terms of the forbearance agreements regarding the November 30, 2019, deadline for Credit Agreement obligations.
- Assess the impact of the Bermuda jurisdiction shift on the restructuring proceedings.