Business Context and Reporting Period
Company: Weatherford International Plc
Filing Type: Form 8-K (Current Report)
Date of Report: August 16, 2018
Event: Entry into Material Definitive Agreements regarding debt restructuring and new credit facilities.
Key Financial Metrics and Debt Structure
This filing details a restructuring of Weatherford's revolving credit facilities and the establishment of a new short-term secured facility. As of August 16, 2018:
- Total Revolving Commitments: $900 million (split between unsecured and secured facilities).
- Unsecured Senior Revolving Facility: $583 million total commitment (comprised of $357 million extended portion and $226 million non-extended portion).
- Secured Second Lien Facility (364-Day): $317 million, maturing August 15, 2019.
- Term Loan Borrowings: $350 million outstanding as of June 30, 2018, and August 16, 2018.
- Future Commitment Reduction: Total commitments are scheduled to reduce to $846 million on November 14, 2018, due to a $54 million reduction in the unsecured facility.
Note: The filing does not provide revenue, profit, cash flow, or margin data.
Material Changes Versus Prior Period
On August 16, 2018, Weatherford executed three primary agreements altering its capital structure:
- Revolving Amendment: Amended the existing Amended and Restated Credit Agreement (A&R). Certain lenders ($674 million) extended their commitments to July 13, 2020, while others ($226 million) maintain maturity on July 12, 2019.
- Term Loan Amendment: Modified the Term Loan Agreement to permit the new 364-Day Credit Agreement and adjust covenants.
- New 364-Day Credit Agreement: Established a new $317 million secured second lien revolving facility.
Covenant Modifications:
- Increased permitted receivables purchase facilities/factoring from $300 million to $400 million annually.
- Increased permitted liens on cash equivalents from $25 million to $100 million.
- Added a Current Asset Coverage Ratio requirement of not less than 2.1 to 1 while the 364-Day facility is active.
Guidance, Risks, and Covenants
Financial Covenants: The agreements require maintenance of the following ratios:
- Specified Senior Leverage Ratio: No greater than 2.5 to 1.
- Specified Leverage and LC Ratio: No greater than 3.5 to 1.
- Specified Asset Coverage Ratio: At least 4 to 1.
- Current Asset Coverage Ratio: Not less than 2.1 to 1.
Risks and Contingencies:
- Security Interest: The 364-Day Credit Agreement is secured by current assets of certain subsidiaries.
- Events of Default: Include failure to meet financial ratios, non-payment, bankruptcy, or change of control. Upon default, all amounts may become immediately due.
- Interest Rates: Variable rates based on LIBOR or alternate base rate plus margins ranging from 1.175% to 3.95% depending on leverage ratios.
Investor Verification Checklist
- Verify the company's ability to maintain the new Current Asset Coverage Ratio of 2.1 to 1.
- Confirm the status of the $54 million commitment reduction scheduled for November 14, 2018.
- Review the specific subsidiaries pledging assets as collateral for the $317 million secured facility.
- Monitor the maturity dates of the split revolving facilities (July 2019 vs. July 2020).
- Assess the impact of the increased permitted receivables factoring ($400 million limit) on working capital management.