Weatherford to file for bankruptcy (this time really)

Back on May 10, Weatherford International disclosed that it intended to file for bankruptcy. However the company didn’t actually file as it worked to get an agreement on a pre-packaged bankruptcy deal.

Now the time has come. The company today announced that it intends to file for Chapter 11 by July 1, 2019.

Soon after the announcement in May, the NYSE told the company that it intended to de-list the shares. Proceedings are underway, through trading is currently suspended by the NYSE (last share price 5 cents).

If you are feeling sorry for the senior management, don’t! They have looked after themselves. See my blog post Weatherford gives retention and quarterly cash bonuses to Senior Execs. These bonuses survive the bankruptcy filing.

In May, the company said it had entered into a Restructuring Support Agreement (RSA) with approximately 62% of the company’s unsecured loan note holders. Since then, the percentage has increased to 79%.

Interest default

The trigger for the filing now is that the company elected not to pay $68.8 million of interest on $1.7 billion of the notes. The interest payment was due June 15, 2019. The company has a 30-day grace period (i.e. July 16, 2019) before it is technically in default. At that point, those note holders would have the option to accelerate maturity of the principal, plus any accrued and unpaid interest.

Restructuring Terms

As a reminder, under the RSA, the company expects that

  • $7.4 billion of existing unsecured notes will be exchanged for 99% of the common stock of the reorganized company and $1.25 billion of new unsecured tranche B notes. Holders of the unsecured notes will have the option to convert up to $500 million of the tranche B notes to equity.
  • existing secured debt and unsecured credit facility ($1 billion) will be repaid in full
    all trade claims against the company will be paid in full.
  • existing equity will be cancelled and exchanged for 1% of the new common stock and three year warrants to purchase 10% of the new common stock.
  • two debtor-in-possession (DIP) facilities will be entered into. One for a $750 million revolving credit facility, the other a term loan for $1 billion, backed by the note holders.
  • once the company exits bankruptcy, the DIP facilities will be replaced by a $1 billion revolving credit facility and $1.25 billion new tranche A senior unsecured notes.

SEC filing

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