Weatherford International is headed to bankruptcy court to try to slash its crushing debt load.
On Friday, the services company said it planned to file under Chapter 11, and announced that its senior creditors are expected to facilitate financing that will sustain operations during bankruptcy and afterward.
The company’s statement on the planned filing said its operations are continuing and the bankruptcy process will have “no expected impact on customer, vendors, partners, or employees.”
Before making the announcement, the company said it negotiated a deal with the majority of its senior lenders, which have first claim in a bankruptcy. If this deal is cleared by the courts, it would reduce the company’s long-term debt by $5.8 billion and provide financing during and after the process.
“We expect that the new capital structure will allow us to continue to capitalize on our momentum and build a truly integrated service company with sustainable profitability and long-term growth potential,” Mark McCollum, president and chief executive officer of Weatherford, said in the announcement.
As for employees, the company’s statement said they “should not experience any changes in the way we do business.” The company’s quarterly earnings filing said continued job reductions are among the cost-cutting initiatives in the “ongoing transformation plan.”
The company’s financial woes grew worse in the first quarter of this year. Weatherford reported a $481 million loss, or 48 cents a share, for the period ended March 31. That was nearly double the deficit for the same period last year, extending a string of quarterly losses dating back four years, according to the Reuters news agency. Sales of products and services for the first quarter dropped by more than 5%.
Weatherford’s liabilities totaled $10.6 billion, which is more than $4 billion greater than its total assets as of March 31.
While Weatherford’s shares have been trading for pennies, it is still one of the largest oilfield service companies with 26,000 employees and facilities in 650 locations around the world.
The company has a major presence in Houston, used a dateline of Baar, Switzerland for the announcement and is incorporated in Ireland. It plans to go through Chapter 11 bankruptcy in the US and also undergo Irish examinership proceedings.
The deal with senior shareholders will provide $1.75 billion in debtor-in-possession financing—giving Weatherford operating capital during and after bankruptcy to execute a plan designed to return it to profitability.