Patterson-UTI secures $150 million loan to repay Seventy Seven debt

By Devika Patel

Knoxville, Tenn., Dec. 13 – Patterson-UTI Energy, Inc. arranged a $150 million bridge facility and will also use borrowings under its currently undrawn $500 million revolving credit facility in its bid to acquire Seventy Seven Energy Inc., an Oklahoma City-based oil and natural gas wellsite services and equipment provider, in an all-stock transaction.

The new $150 million senior unsecured bridge facility, which was negotiated Monday, will be used to pay off Seventy Seven’s $336 million of debt, net of cash, when the merger settles.

“Patterson-UTI has sufficient liquidity to pay back Seventy Seven Energy’s indebtedness,” president and chief executive officer Andy Hendricks said on the company’s conference call announcing the merger on Tuesday.

“In addition to cash on hand, we have a $500 million revolving line of credit which is currently undrawn.

“This revolver is subject to a borrowing base and our current borrowing base is $500 million.

“In addition, we have secured a three-year, $150 million unsecured bridge financing facility.

“We currently do not have any bank term debt and we have no term debt maturities before October 2020,” Hendricks said.

After the merger settles, the company “may take a slightly more aggressive stance on how much leverage we’re willing to accept given where we are in the cycle,” chairman of the board and director Mark S. Siegel said on the call.

“We want to maintain that relatively conservative balance sheet that’s, we think, helped us be in a very good position,” Siegel said. “Taking on their debt would take us above the historic 20% debt to cap we’ve had.”

Under the terms of the transaction, Patterson-UTI will acquire all of Seventy Seven’s common shares for 49.6 million Patterson-UTI shares. The transaction values Seventy Seven at $1.76 billion; the exchange ratio would be about 1.7725 Patterson-UTI shares for each Seventy Seven share, and Seventy Seven shareholders would own about 25% of the combined company.

The company said in a press release that it has the financial resources to repay Seventy Seven’s debt through cash on hand, borrowings under its undrawn $500 million revolving credit facility and the new $150 million senior unsecured bridge financing commitment. The company also said it expects to issue additional equity.

The $150 million senior unsecured bridge facility with a three-year term was arranged with Canyon Capital Advisors LLC on Monday, and will be substantially similar to Patterson-UTI’s existing senior unsecured revolving credit agreement, the company reported in an 8-K filed Tuesday with the Securities and Exchange Commission.

The merger is expected to close late in the first quarter of 2017.

Patterson-UTI is a Houston-based provider of onshore contract drilling and pressure pumping services to exploration and production companies.

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