Weatherford files for Chapter 11

July 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

July 2019 Issue

In a bid to reduce its long-term debt after more than four years of not making a profit, oilfield services company Weatherford International has entered into an agreement with its creditors that allows the company to file for a prepackaged Chapter 11 bankruptcy.

The agreement allows Weatherford to restructure its operations and secure $1.75bn in new financing and up to $1.25bn in additional post-emergence financing.

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

Weatherford’s senior noteholders – the Ad Hoc Noteholder Group – collectively holds or controls approximately 62 percent of the company’s senior unsecured notes. The proposed comprehensive financial restructuring would significantly reduce Weatherford’s long-term debt and related interest costs, provide access to additional financing and establish a more sustainable capital structure.

“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, president and chief executive of Weatherford. “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.”

One of the largest multinational oilfield service companies providing innovative solutions, technology and services to the oil and gas industry, Weatherford operates in over 80 countries and has a network of approximately 650 locations, including manufacturing, service, research and development and training facilities, and employs approximately 26,000 people.

Weatherford has stated that its operations will continue without interruption during the bankruptcy and restructuring process, with no expected impact on its customers, vendors, partners or employees. The company has also said that all trade claims against it – whether arising prior to or after the commencement of the Chapter process – will be paid in full in the ordinary course of business.

Acting as Weatherford’s financial adviser is Lazard. Latham & Watkins, LLP is legal counsel and Alvarez & Marsal is restructuring adviser. Acting as financial adviser for the Ad Hoc Noteholder Group is Evercore. Akin Gump Strauss Hauer & Feld LLP is acting as legal counsel.

“We are pleased that our noteholders recognise the long-term value Weatherford can create with an improved balance sheet as we work to achieve the full potential of our business transformation,” adds Mr McCollum. “We expect that the new capital structure will allow us to continue to capitalise on our momentum and build a truly integrated service company with sustainable profitability and long-term growth potential.”

Mr McCollum concluded: “We are taking these actions to ensure we can do an even better job of meeting our commitments to all of our key stakeholders by creating the strongest Weatherford possible. Our customers, partners, employees and vendors should not experience any changes in the way we do business, and we expect their experience will improve after a restructuring is complete. We are confident that these steps will allow us to continue our transformation journey and position Weatherford for long-term success.”

Fraser Tennant