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Restructuring Plan 'Best Course of Action' for Oil & Gas Company but Bleak for Equity Holders Resear

Streetwise Reports
1 Comment|May 21, 2019

The details and effects of the plan, which is in negotiation as part of a Chapter 11 bankruptcy, were explored in a Raymond James report.


In a May 12 research note, Raymond James analyst Praveen Narra reported that as part of its Chapter 11 bankruptcy, Weatherford International Ltd. (WFT:NYSE) entered negotiations to restructure its outstanding notes, which will mean "equity holders [will] get minimal recovery of new common stock." The analyst added that "while it is a challenging decision, we continue to see the prepackaged restructuring as the best course of action."

In the proposed restructuring plan, existing notes would be canceled and exchanged for 99% of the common stock of the reorganized company, or new common stock, along with $1.25 billion of new tranche B senior unsecured notes with a seven-year maturity, to be issued by the reorganized company.

This would reduce outstanding debt by $5.85 billion. It also would cancel the existing equity in exchange for 1% ownership of newly issued shares and three-year warrants to purchase 10% of the new common stock. "While the restructuring agreement has yet to be finalized, we would expect the plan to go through in the coming weeks, and see Weatherford shares as holding little value given the low exchange ratio," Narra commented.

In other news, Weatherford reported its Q1/19 adjusted EBITDA was $120 million, below Raymond James' $209 million estimate and consensus' $206 million forecast. Earnings per share was $0.18, higher than the $0.12 estimate of Raymond James and the Street.

Raymond James has an Underperform rating on Weatherford.

 

Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional, and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures from Raymond James, Weatherford International plc, May 12, 2019

ANALYST INFORMATION

Analysts Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination, including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.

The analysts Praveen Narra and J. Marshall Adkins, primarily responsible for the preparation of this research report, attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and (2) that no part of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months..

RAYMOND JAMES RELATIONSHIP DISCLOSURES
Certain affiliates of the RJ Group expect to receive or intend to seek compensation for investment banking services from all companies under research coverage within the next three months.

Raymond James & Associates, Inc. makes a market in the shares of Weatherford International plc.

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available here.

 


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