Atwood cuts debt further via notes buyback, credit facility changes

By Devika Patel

Knoxville, Tenn., Nov. 14 – Atwood Oceanics, Inc. will continue to seek out ways to improve liquidity and cut debt, with an eye on refinancing its credit facility in mid-2018 and its revolver in 2019. The company’s recent retirement of over $200 million, or 30%, of its $650 million of bonds, included the recent repurchase of $42 million senior notes at a price of 75.

“We continue to make good progress in strengthening our corporate balance sheet,” president and chief executive officer, Robert J. Saltiel said on the company’s fourth quarter earnings call on Monday.

“With the recent changes in our credit facility covenants that we implemented in March, we remain confident that we have ample liquidity through cash on hand and available capacity under our credit facility.

“Even so, the prices of our public bonds have continued to trade at a significant discount to par.

“Because of this, we decided to pursue additional bond buybacks over what we had already done in February and April and in early June, we purchased $5 million of face value of bonds on the open market,” Saltiel said.

“In July, we launched a public tender for our bonds with the goal of retiring up to $150 million of face value bonds.

“The tender concluded with $42 million of face value bonds tendered at a price of approximately 75 cents on the dollar.

“Our company has now retired more than $200 million of our original $650 million of bonds, or more than 30%.

“The reductions in interest expenses and principal amounts outstanding have made a meaningful dent into our long-term debt,” Saltiel said.

Saltiel also added that the company has not completed its debt refinancings.

“Even though we do not have any debt maturities until 2019, we will continue to focus on positioning Atwood Oceanics with a strong hand to refinance and/or extend the maturities of our borrowings.”

Senior vice president and chief financial officer Mark Smith said the company may also look at ways of spreading out its maturities in order to reduce its refinancing risk in 2019.

“Although we have no financing requirements until the refinancing of the revolver, which matures in 2019, we will continue to look for opportunistic ways to increase liquidity, reduce debt and or stagger our maturities in order to reduce the company’s refinancing risk and maintain our significant financial flexibility.

“We will opportunistically monitor credit and equity markets to access capital to delever and stagger maturities between now and mid-2018, when we’ll be in the refinancing window for the credit facility,” Smith said.

Highlights

The Houston-based offshore drilling company reported earned net income of $4.2 million or $0.07 per diluted share, on revenues of $188.7 million for the quarter ended Sept. 30, compared to net income of $99.5 million or $1.53 per diluted share on revenues of $227.8 million for the quarter ended June 30, and compared to net income of $150.7 million or $2.32 per diluted share, on revenues of $363.2 million for the quarter ended Sept. 30, 2015.

Atwood recognized a gain on the purchase of debt of $10.2 million, or $6.6 million, net of tax, and $0.10 per diluted share in gains on extinguishment of debt in connection with the July 25 repurchase of $42 million of the senior notes.

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