Debt

6 Months Ended

Jun. 30, 2021

Debt

Debt

Note 5 Debt

Debt consisted of the following:

	June 30,		December 31,
	2021		2020
	(In thousands)
4.625% senior notes due September 2021 (1)	$	82,428	$	86,329
5.50% senior notes due January 2023		24,446		28,443
5.10% senior notes due September 2023		120,141		121,077
0.75% senior exchangeable notes due January 2024		253,733		279,700
5.75% senior notes due February 2025		586,308		610,818
6.50% senior priority guaranteed notes due February 2025		50,485		50,485
9.00% senior priority guaranteed notes due February 2025		218,082		192,032
7.25% senior guaranteed notes due January 2026		559,978		559,978
7.50% senior guaranteed notes due January 2028		389,609		389,609
2018 revolving credit facility		557,500		672,500
		2,842,710		2,990,971
Less: deferred financing costs		19,585		22,270
Long-term debt	$	2,823,125	$	2,968,701

(1) The 4.625% senior notes due September 2021 are classified as long-term because we have the ability and intent to repay this obligation utilizing our 2018 Revolving Credit Facility.

During the six months ended June 30, 2021, we repurchased $30.5 million aggregate principal amount outstanding of our senior unsecured notes for approximately $22.4 million in cash, including principal and $0.6 million in accrued and unpaid interest. In connection with these repurchases, we recognized a net gain of approximately $8.2 million for the six months ended June 30, 2021, which is included in Other, net in our condensed consolidated statement of income (loss).

Exchange Transactions

During the first quarter of 2021, we entered into two private exchange transactions in which Nabors Delaware exchanged 9.0% Senior Priority Guaranteed Notes due 2025 (the “9.0% Exchange Notes”) for various amounts of existing outstanding notes. Nabors Delaware did not receive any cash proceeds from the issuance of the Exchange Notes.

Collectively from the series of exchanges, Nabors Industries, Inc. issued $26.1 million aggregate principal amount of the 9.0% Exchange Notes in exchange for $40.0 million aggregate principal amount of various Nabors Delaware’s outstanding Notes.

We recorded a minimal gain in connection with the exchange transactions, which was accounted for in accordance with ASC 470-60, Troubled Debt Restructuring by Debtors. Under ASC 470-60, a gain is recorded in an amount equal to the sum of the future undiscounted payments (principal and interest) related to the new Exchange Notes plus the costs incurred in connection with the transaction, less the carrying value of the notes that were exchanged. In relation to the transactions, we recorded $9.4 million related to future contractual interest payments on the new Exchange Notes and have included this amount in accrued liabilities and other long-term liabilities.

The aggregate principal amounts and recognized gain for such transactions were as follows (in thousands):

	Six months ended June 30,
	2021
Exchanged
0.75% senior exchangeable notes due January 2024	$	35,000
5.75% senior notes due February 2025		5,000
Aggregate principal amount exchanged		40,000
Aggregate principal amount of debt issued in exchanges		26,050

0.75% Senior Exchangeable Notes Due January 2024

In January 2017, Nabors Delaware issued $575.0 million in aggregate principal amount of 0.75% exchangeable senior unsecured notes due 2024, which are fully and unconditionally guaranteed by Nabors. The notes bear interest at a rate of 0.75% per year payable semiannually on January 15 and July 15 of each year, beginning on July 15, 2017. As of June 30, 2021, there was approximately $287.3 million in aggregate principal amount that remained outstanding.

The exchangeable notes are currently exchangeable, under certain conditions, at an exchange rate of .8018 common shares of Nabors per $1,000 principal amount of exchangeable notes (equivalent to an exchange price of approximately $1,247.19 per common share). The exchangeable notes were originally bifurcated for accounting purposes into debt and equity components of $411.2 million and $163.8 million, respectively, based on the terms of the notes and the relative fair value at the issuance date. Upon any exchange, as a result of an amendment to the notes, Nabors Delaware will settle its exchange obligation in cash.

2018 Revolving Credit Facility

In October 2018, Nabors Delaware and Nabors Drilling Canada Limited (“Nabors Canada” and together with Nabors Delaware, the “Borrowers”) entered into a credit agreement dated October 11, 2018 by and among the Borrowers, the Guarantors identified therein, HSBC Bank Canada, as the Canadian lender (the “Canadian Lender”) the issuing banks and other lenders party thereto (the “US Lenders” and, together with the Canadian Lender, the “Lenders”) and Citibank, N.A., as administrative agent solely for the U.S. Lenders (as may be amended, restated, supplemented or otherwise modified from time to time, the “2018 Revolving Credit Facility”). The 2018 Revolving Credit Facility originally had a borrowing capacity of $1.267 billion and is fully and unconditionally guaranteed by Nabors and certain of its wholly owned subsidiaries. The 2018 Revolving Credit Facility matures at the earlier of (a) October 11, 2023 and (b) July 19, 2022, if any of Nabors Delaware’s existing 5.50% senior notes due January 2023 remain outstanding as of such date. The 2018 Revolving Credit Facility contains certain affirmative and negative covenants. Amendment No. 1 to the 2018 Revolving Credit Facility provided for additional currencies in which letters of credit could be issued. On December 13, 2019, Amendment No. 2 was entered into which reduced the borrowing capacity to $1.0136 billion ($981.6 million for Nabors Delaware and $32.0 million for Nabors Canada), and replaced the net funded debt to capitalization covenant with a covenant to maintain net funded indebtedness at no greater than 5.5 times EBITDA. Amendment No. 3 to the 2018 Revolving Credit Facility was entered into on March 3, 2020, in order to permit letters of credit from the Canadian Lender on the portion of the facility dedicated to Canadian borrowings.

In September 2020, Amendment No. 4 was entered into in order to revise certain of the covenant and collateral requirements under the 2018 Revolving Credit Facility. Amendment No. 4 provides the Lenders with a first lien security interest in certain drilling rigs located in the U.S. and Canada and replaced the prior covenant to maintain net funded debt at no greater than 5.5 times EBITDA with a new covenant to maintain minimum liquidity of no less than $160.0 million at any time. Minimum liquidity is defined to mean, generally, a consolidated cash balance consisting of (a) the aggregate amount of unrestricted cash and cash equivalents maintained in a deposit account U.S. or Canadian branch of a commercial bank, plus (b) the lesser of $75 million or an amount equal to 75% of the aggregate amount of unrestricted cash and cash equivalents held in deposit account of a commercial bank outside of the U.S. or Canada, plus (c) available commitments under the 2018 Revolving Credit Facility. Additionally, the “asset to debt coverage” ratio was revised such that during any period in which Nabors Delaware fails to maintain an investment grade rating from at least two ratings agencies, the guarantors under the facility and their respective subsidiaries will be required to maintain an asset to debt coverage of at least 4.25:1, which was the case as of the date of this report. On July 29, 2021, in connection with the closing of the sale of substantially all of our Canada Drilling assets, we entered into a Canadian Amending Agreement with the Canadian Lender under which we repaid all outstanding loans owed to the Canadian Lender under

the 2018 Revolving Credit Facility, the first lien security interest in the Canada assets was released and the commitments of the Canadian Lender under the 2018 Revolving Credit Facility were terminated.

As of June 30, 2021, we had $557.5 million outstanding under our 2018 Revolving Credit Facility and the net book value of the collateralized assets under the 2018 Revolving Credit Facility was $1.26 billion. The weighted average interest rate on borrowings under the 2018 Revolving Credit Facility at June 30, 2021 was 3.62%. In order to make any future borrowings under the 2018 Revolving Credit Facility, Nabors and certain of its wholly owned subsidiaries are subject to compliance with the conditions and covenants contained therein, including compliance with applicable financial ratios.

As of the date of this report, we were in compliance with all covenants under the 2018 Revolving Credit Facility. We expect to remain in compliance with all covenants under the 2018 Revolving Credit Facility during the twelve-month period following the date of this report based on our current operational and financial projections. However, we can make no assurance of continued compliance if our current projections or material underlying assumptions prove to be incorrect. If we fail to comply with the covenants, the revolving credit commitment could be terminated, and any outstanding borrowings under the facility could be declared immediately due and payable.