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Weatherford Issues New Debt after Affirming Its Debt Covenants

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What’s Weatherford International’s net debt?

On November 15, Weatherford International (WFT) announced new debt issuance. The debts were issued to qualified institutional buyers. They’re due to be repaid in 2024. Weatherford International plans to raise $540 million debt through this issuance.

Before the new debt issuance, Weatherford International’s aggregate short-term and long-term debt was $7.5 billion as of September 30, 2016. On that date, its cash and marketable securities stood at $440 million. So, Weatherford International’s net debt was ~$7.1 billion on the day. The net debt is the total debt less cash and marketable securities. Following the new debt issuance, Weatherford International’s net debt is expected to be ~$7.6 billion. Weatherford International accounts for 0.31% of the iShares U.S. Energy ETF (IYE). The Oil & Gas Equipment & Services industry accounts for 14.8% of IYE.

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Why did it issue new debt?

Weatherford International plans to repay its revolving credit facility with the proceeds from the new debt. As of September 30, its revolving facility was ~$1.9 billion. On September 30, Schlumberger’s (SLB) net debt was $10.5 billion, while Halliburton’s (HAL) net debt was $9.0 billion. Baker Hughes’s (BHI) net debt was -$714 million. Its cash and marketable securities exceeded the total debt.

Weatherford reaffirmed its debt covenant

On November 1, Weatherford International disclosed that based on its 4Q16 forecast, it meets its debt covenants. The company disclosed that it expects to see improved earnings before interest, tax, depreciation, and amortization and a reduction in its Letter of Credit (a form of bank credit) balance. It expects higher customer spend and higher order booking in 2017. It can result in a higher profit margin. In November, Weatherford International’s stock price volatility rose following some analysts’ forecast of the company failing to meet its debt covenants. Read Did Weatherford International Violate a Debt Covenant? to learn more.

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