Business Context and Reporting Period
Company: Nabors Industries Ltd.
Filing Type: Form 8-K (Current Report)
Date of Report: October 11, 2018
Event: Entry into a Material Definitive Agreement (2018 Credit Agreement) and Amendment No. 3 to an existing credit agreement.
Key Financial Metrics and Facility Details
This filing details the restructuring of the Company's debt facilities rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- New Facility (2018 Credit Agreement): Unsecured revolving credit facility with an aggregate principal commitment of up to $1,267,000,000.
- US Lenders Commitment: Up to $1,227,000,000 (includes sub-facilities for letters of credit up to $300,000,000 and swingline loans up to $120,000,000).
- Canadian Lender Commitment: Up to $40,000,000 (available in U.S. or Canadian dollars).
- Existing Facility Amendment: Commitments reduced to $666,250,000; maturity remains July 14, 2020.
- Maturity Date (New Facility): October 11, 2023, or July 19, 2022, if 5.5% senior notes due January 2023 remain outstanding.
Material Changes Versus Prior Period
The primary material change is the replacement of the previous credit structure with a new, larger facility and the modification of the existing one:
- Capacity Increase: The new 2018 Credit Agreement increases total available liquidity compared to the amended existing facility ($1.267 billion vs. $666.25 million).
- Administrative Agent Change: Citibank, N.A. resigned as administrative agent for the existing facility, replaced by Wilmington Trust, National Association.
- Lender Composition: Certain lenders exited the existing facility, while new US and Canadian lenders joined the 2018 Credit Agreement.
Covenants, Risks, and Management Commentary
The filing outlines strict financial covenants and restrictions associated with the new credit agreement:
- Financial Covenants:
- Net Debt to Capital Ratio: Must not exceed 0.60:1.
- Asset to Debt Coverage Ratio: If the Company fails to maintain an investment-grade rating from at least two agencies, it must maintain a ratio of at least 2.50:1.
- Restrictive Covenants:
- Liens: Restricted, with an exception for obligations up to $150,000,000.
- Dividends/Distributions: Restricted, with an exception for aggregate payments up to $110,000,000 per fiscal year.
- Subsidiary Debt: Restricted, with an exception for aggregate debt up to $150,000,000.
- Interest Rates: Variable rates based on Base Rate or LIBOR (USD) and Canadian Prime Rate or CDOR (CAD) plus applicable margins.
Investor Verification Checklist
- Verify the Company's current Net Debt to Capital Ratio to ensure compliance with the 0.60:1 covenant.
- Confirm the Company's current credit ratings from major agencies to determine if the stricter 2.50:1 asset coverage ratio applies.
- Review the status of the 5.5% senior notes due January 2023 to determine the exact maturity date of the new facility (2022 vs. 2023).
- Assess the impact of the $110,000,000 annual dividend cap on shareholder return policies.
- Examine the Exhibit 10.1 (Credit Agreement) for specific definitions of "Net Debt" and "Net Capitalization" used in covenant calculations.