Nabors Announces Amendment and Restatement of $475 Million Credit Facility

Rhea-AI Summary

Nabors Industries announced an amendment and restatement of its $475 million secured credit facility, which includes $350 million for revolving credit and $125 million for letters of credit. This facility matures on June 17, 2029, with potential early maturity based on the status of other debt securities. This replaces the previous $350 million facility due in January 2026. Key changes include an increase in the letter of credit facility from $100 million to $125 million and a $200 million uncommitted accordion feature. The interest coverage ratio remains at 2.75:1.00, with a minimum guarantor value of 90%. The initial borrowing margin is approximately 2.75%, subject to changes in Nabors' credit ratings. CFO William Restrepo highlighted the improved liquidity and flexibility to support international market growth and working capital needs.

Positive

• New credit facility increases from $350 million to $475 million.
• Maturity date extended from January 2026 to June 2029.
• Increase in letter of credit facility from $100 million to $125 million.
• Introduction of a $200 million uncommitted accordion feature.
• Interest coverage ratio of 2.75:1.00 remains stable.
• The facility provides improved liquidity and flexibility for working capital needs.
• Support for growth in international markets through bid or performance bonds.

Negative

• Potential early maturity if certain debt securities are not sufficiently paid down.
• The borrowing rate is variable and may increase with changes in credit ratings.
• No increase in the existing basket for additional indebtedness, which remains at $150 million.

Insights

Financial Analyst

Nabors Industries recently amended and restated their secured credit facility, increasing it to $475 million from the prior $350 million. This move significantly enhances their financial flexibility. The new facility is split into $350 million for revolving credit and $125 million for letters of credit, with a maturity date set to June 17, 2029. This extended maturity date provides Nabors with a more robust runway for both operational and strategic financial planning.

The new agreement also includes a $200 million uncommitted accordion feature, offering the ability to increase commitments either for revolving credit or letters of credit, effectively doubling the flexibility available compared to the previous $100 million accordion. This addition is particularly noteworthy as it allows Nabors to scale its borrowing capacity in alignment with its evolving financial needs without immediate obligations.

With the initial borrowing margin set at approximately 2.75%, the cost of borrowing is relatively moderate. However, it is important to note that this rate is subject to adjustments based on Nabors' credit ratings. This stipulation underlines the importance of maintaining or improving credit quality to manage borrowing costs effectively over time.

Strategically, this amended facility is intended to bolster Nabors' liquidity and support growth in international markets, which often require bid or performance bonds, thus not consuming the revolving credit capacity. For investors, this could signal a more aggressive stance towards international market expansion and a focus on maintaining liquidity flexibility.

In the short term, the improved liquidity profile is a positive, providing Nabors with the means to manage working capital more effectively and address debt maturities prudently. In the long term, success will depend on how they leverage this increased financial flexibility for growth and operational improvements.

Rating: Positive (1)

HAMILTON, Bermuda, June 17, 2024 /PRNewswire/ -- Nabors Industries Ltd. ("Nabors") (NYSE: NBR) closed, on June 17, 2024, an amendment and restatement of its secured credit facility. The new $475 million facility is comprised of $350 million for revolving credit and $125 million for letters of credit. The facility matures on June 17, 2029. The maturity date can be brought forward to 90 days before the maturity date of certain of the Company's debt securities, if those debt securities were not sufficiently paid down prior to such date. The amended and restated facility replaces the Company's prior $350 million secured credit facility, which would have matured on January 21, 2026.

Changes in the amended and restated credit facility from the prior facility include:

• a $125-million letter of credit facility, increased from $100 million in the prior credit facility, with issued letters of credit not affecting Nabors' capacity under the $350 million revolving facility; and
• A $200-million uncommitted accordion feature that can be applied to increase the commitments for Revolving Credit or Letters of Credit Facility, or both.  This compares to a $100 million accordion for the prior facility. 

The existing basket in the prior facility of up to $150 million for additional indebtedness in the form of term loans and letter of credits, secured by liens, remains unchanged.  In addition, the grower basket for term loans of up to $100 million also remains unchanged.

Consistent with the prior credit facility, the amended and restated credit facility requires Nabors to maintain an interest coverage ratio of 2.75:1.00 and a minimum guarantor value of 90%. The amended and restated credit facility is guaranteed by Nabors and certain of its subsidiaries.

Initial borrowing margin under the new credit facility will be approximately 2.75%. The borrowing rate will vary over time and may be adjusted with changes to Nabors' credit ratings.

William Restrepo, Nabors' Chief Financial Officer, commented, "Following our recent notes issue in late 2023, we are improving our near-term liquidity by closing on this amended credit facility. The amended facility matures five years from now. The expansion of our credit facility will provide us with more flexibility to address our working capital needs and will support growth in our international markets, where contracts often require bid or performance bonds, without consuming capacity of the revolving credit facility.

"This amendment to our credit facility improves our overall liquidity profile. As we have done before, we plan to continue addressing our debt maturities prudently and well in advance of their expiration. As we progress through 2024, we expect our operating results to strengthen, supporting our cash flow targets."

Institutions participating in the credit facility are Citibank, N.A., Wells Fargo Bank, N.A., Goldman Sachs Bank USA, HSBC Bank USA, N.A. and Morgan Stanley Senior Funding, Inc.

Further details regarding the credit facility are available in a Current Report on Form 8-K filed with the Securities and Exchange Commission.

About Nabors Industries
Nabors Industries is a leading provider of advanced technology for the energy industry. With presence in more than 20 countries, Nabors has established a global network of people, technology and equipment to deploy solutions that deliver safe, efficient and responsible energy production. By leveraging its core competencies, particularly in drilling, engineering, automation, data science and manufacturing, Nabors aims to innovate the future of energy and enable the transition to a lower-carbon world. Learn more about Nabors and its energy technology leadership: www.nabors.com. 

Investor Contacts:
For further information regarding Nabors, please contact William C. Conroy, CFA, Vice President of Corporate Development & Investor Relations, +1 281-775-2423 or via e-mail william.conroy@nabors.com, or Kara Peak, Director of Corporate Development & Investor Relations, +1 281-775-4954 or via email kara.peak@nabors.com.

 

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SOURCE Nabors Industries Ltd.

FAQ

What is the new maturity date for Nabors' credit facility?

The new maturity date is June 17, 2029.

How much is Nabors' new credit facility worth?

The new credit facility is worth $475 million.

What changes were made to Nabors' letter of credit facility?

The letter of credit facility increased from $100 million to $125 million.

What is the interest coverage ratio required under Nabors' amended credit facility?

The interest coverage ratio required is 2.75:1.00.

Who are the institutions participating in Nabors' credit facility?

Institutions include Citibank, Wells Fargo, Goldman Sachs, HSBC, and Morgan Stanley.