Business Context and Reporting Period
This Form 8-K Current Report was filed by Nabors Industries Ltd. (NIL) on September 12, 2013. The report details a material definitive agreement involving the issuance of new senior notes by its wholly owned subsidiary, Nabors Industries, Inc. (NII), and the concurrent completion of a tender offer to repurchase existing debt.
Key Financial Metrics and Transaction Details
- New Debt Issuance: NII issued $700 million in aggregate principal amount of new senior notes, fully guaranteed by NIL.
- $350 million of 2.35% Senior Notes due 2016.
- $350 million of 5.1% Senior Notes due 2023.
- Net Proceeds: Approximately $695.0 million (before expenses).
- Debt Repurchase (Tender Offer): NII accepted for purchase approximately $785.4 million in aggregate principal amount of its 9.25% Notes due 2019.
- Repurchase Cost: Total consideration paid was $992.1 million, plus accrued and unpaid interest.
- Funding Sources: Proceeds from the new note issuance, borrowings under the commercial paper program, and cash on hand.
Material Changes and Debt Restructuring
The primary material change is a significant refinancing of the company's capital structure. The company replaced a portion of its higher-interest 9.25% debt (due 2019) with new debt carrying lower interest rates (2.35% and 5.1%). This transaction reduces the weighted average cost of debt for the repurchased portion and extends the maturity profile for the new 2023 tranche.
Outlook, Covenants, and Risks
- Registration Rights: NII and NIL agreed to file a registration statement with the SEC by May 12, 2014, to register an offer to exchange the new notes for registered notes with substantially identical terms.
- Covenants: The Indenture includes customary covenants limiting the ability to incur certain liens or enter into sale and leaseback transactions.
- Change of Control: In the event of a Change of Control Triggering Event, holders may require NII to purchase the notes at 101% of the principal amount plus accrued interest.
- Redemption: The notes are redeemable at the option of NII at specified redemption prices.
- Ranking: The new notes rank equal to other senior unsubordinated indebtedness and senior to subordinated indebtedness.
Investor Verification Checklist
- Verify the exact amount of the 9.25% Notes due 2019 remaining outstanding after the $785.4 million repurchase.
- Confirm the total interest expense savings resulting from replacing the 9.25% coupon with the 2.35% and 5.1% coupons.
- Review the specific "Change of Control Triggering Event" definition in the filed Indenture (Exhibit 4.1).
- Assess the impact of the $992.1 million cash outflow on the company's current liquidity position and commercial paper borrowing capacity.
- Monitor the filing of the registration statement required by May 12, 2014, under the Registration Rights Agreements.