From Bloomberg

Lenders to Weatherford International Plc have hired advisers to review whether the oil services company can keep up with payments on its $8 billion debt load.

JPMorgan Chase & Co., the agent for the lenders, picked consultants at FTI Consulting Inc. to evaluate Weatherford’s financial condition, performance and strategic plan, according to people with knowledge of the matter. The hiring was disclosed by JPMorgan in a notice, reviewed by Bloomberg, for holders of Weatherford’s first-lien term loan, the people said.

Weatherford is getting advice from Latham & Watkins, Alvarez & Marsal and Lazard, the people said. They asked not to be identified discussing the confidential relationships.

Representatives for the Baar, Switzerland-based company, JPMorgan and FTI declined to comment. Representatives for the other advisory firms didn’t immediately respond to messages.

The review ratchets up pressure on Weatherford as it seeks an extension on $543 million of credit-line commitments that expire in the third quarter. Credit raters have said a restructuring looks likely.

Some of the company’s junior debt trades at deeply distressed levels, and investor confidence was further shaken on Wednesday when Weatherford delayed reporting its quarterly results and canceled the conference call. The company’s 5.125 percent notes due 2020 fell 7 cents on the dollar to 71.7 cents, one of the biggest decliners in junk bond trading according to Trace data.

“For our part in the speculation game, we lean towards terrible earnings and/or unresolved negotiations with the banking group and front-end bondholders,” CreditSights analyst Jake Leiby wrote in a note Wednesday following Weatherford’s earnings postponement.

The company came through the 2015-2016 energy slump without filing for bankruptcy, unlike more than a hundred of its peers. But cutbacks by oil and gas producers amid choppy oil prices continue to squeeze revenue for energy service companies, and Weatherford’s liquidity could run dry by late 2020 if it isn’t able to extend this year’s maturities, according to Bloomberg Intelligence.

Competitors Pressured

Weatherford’s main competitors have reported results in recent weeks showing a significant negative impact from the pullback in activity and spending onshore, CreditSights’ Leiby wrote. CreditSights remains skeptical that investors will get a positive surprise on the company’s asset sales or free cash flow, Leiby said. The research firm has a negative view of the company’s unsecured bonds.

Based on debt outstanding, Weatherford is one of the biggest distressed oilfield service companies, and a restructuring could rank as one of the largest in 2019. Its first-lien term loan is trading around 98 cents on the dollar, implying full recovery for those lenders in a default or debt overhaul.

Holders of its unsecured bonds wouldn’t fare so well, according to S&P Global Ratings, which in December forecast they’d get about 20 cents on the dollar. Yields on some of those notes top 20%. S&P gave Weatherford a CCC rating and predicted a debt swap or restructuring within 12 months.

Bloomberg reported in December that a group of investors holding at least half of the company’s bonds was working with Milbank and PJT Partners to advise on potential debt negotiations.

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