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Rating Action:

Moody's affirms Weatherford's B3 rating, negative outlook

14 Aug 2018

Approximately $7 billion of rated debt affected

New York, August 14, 2018 -- Moody's Investors Service ("Moody's") affirmed Weatherford International Ltd.'s (Weatherford, a Bermuda incorporated entity) B3 Corporate Family Rating (CFR) , B3-PD Probability of Default Rating and SGL-3 Speculative Grade Liquidity rating. Moody's also affirmed the Caa1 senior unsecured notes rating of both Weatherford and Weatherford International, LLC (Weatherford LLC, incorporated in Delaware). The rating outlook remains negative.

"Weatherford's high financial leverage and significant refinancing needs will continue to present elevated credit risk through 2019," said Sajjad Alam, Moody's Senior Analyst. "While the company is making progress in improving profitability, cash flow and liquidity, a slow recovery in oilfield services demand and pricing will prolong the company's business transformation and deleveraging process."

Affirmations:

..Issuer: Weatherford International Ltd. (Bermuda)

.... Corporate Family Rating, Affirmed B3

.... Probability of Default Rating, Affirmed B3-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-3

.... Senior Unsecured Notes, Affirmed Caa1 (LGD4)

.... Senior Unsecured Shelf, Affirmed (P)Caa1

.... Multiple Seniority Shelf, Affirmed (P)Caa2

.... Senior Unsecured Commercial Paper, Affirmed NP

..Issuer: Weatherford International, LLC (Delaware)

.... Senior Unsecured Notes, Affirmed Caa1 (LGD4)

.... Senior Unsecured Shelf, Affirmed (P)Caa1

.... Multiple Seniority Shelf, Affirmed (P)Caa2

Outlook Actions:

..Issuer: Weatherford International Ltd. (Bermuda)

.... Outlook, Remains Negative

..Issuer: Weatherford International, LLC (Delaware)

.... Outlook, Remains Negative

RATINGS RATIONALE

Weatherford's B3 CFR reflects the company's unsustainably high debt burden, significant 2020 & 2021 debt maturities, business transformation risk, and limited free cash flow generation prospects through 2019 in a slowly improving oilfield services industry environment. While we expect sequentially higher revenues and earnings in 2018 and 2019, the company will generate only a modest amount of free cash flow to meaningfully reduce debt since it may have to contend with increasing material and labor costs and higher use of working capital, in addition to covering ongoing transformation/restructuring charges. Weatherford has executed a number of significant asset sales in 2017-2018 to accelerate debt reduction and is actively marketing several other non-strategic asset packages to improve financial flexibility. Weatherford's B3 CFR is supported by its large scale and strong market positions in several product categories; its broad geographic and customer diversification, with a substantial portion of its revenue coming from less volatile international markets; and its numerous patented products and technologies that are well-known and widely used in the oilfield services (OFS) industry giving the company some competitive advantage.

The negative outlook reflects Weatherford's need to execute asset sales and business transformation to restore financial flexibility in a slowly improving industry environment. If Weatherford can show sequential improvement in earnings, operating cash flow and financial leverage, a stable outlook could be considered. Weatherford's ratings could be downgraded if the company is unable to reduce leverage and refinancing risk, execute its asset sale targets, or maintain adequate liquidity in 2019. The CFR could be upgraded if Weatherford can produce free cash flow on a sustainable basis, maintain the EBTIDA/interest ratio above 2x and substantially refinance its 2020-2021 debt maturities in a stable to improving industry environment.

Weatherford's SGL-3 rating reflects its adequate liquidity through 2019. Moody's expects a $300-$400 million cash balance, a modest amount of free cash flow generation, adequate covenant compliance cushion, and additional asset sales through 2019 leaving significant availability under its revolving credit facility. Weatherford has a bank credit facility that includes a $900 million unsecured revolver maturing in July 2019, and a $350 million secured first-lien term loan maturing in July 2020. Weatherford had $225 million in revolver drawings and $169 million in letters of credit leaving $506 million in borrowing capacity as of June 30, 2018. We expect the company will extend the revolver maturity in the near future to ensure orderly access to its external line of credit.

The unsecured notes of Weatherford and Weatherford LLC are rated Caa1, one-notch below the B3 CFR, reflecting the contractual and structural subordination of the unsecured notes to Weatherford's credit facility. Weatherford's credit facility benefits from upstream guarantees from a material portion of its operating and holding company subsidiaries and the $350 million term loan has a first lien security on a substantial portion of Weatherford's assets. Neither the unsecured notes of Weatherford nor Weatherford Delaware benefit from upstream guarantees from operating subsidiaries, where nearly all of the consolidated company's assets, leases, and non-debt liabilities reside.

Weatherford International Ltd. and Weatherford International, LLC are wholly-owned subsidiaries of Weatherford International plc, which is headquartered in Switzerland and is a diversified international company that provides a wide range of services and equipment to the global oil and gas industry.

The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Sajjad Alam
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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