Debt

9 Months Ended

Sep. 30, 2023

Debt

Debt

Note 5 Debt

Debt consisted of the following:

	September 30,		December 31,
	2023		2022
	(In thousands)
5.10% senior notes due September 2023 (1)	$	—	$	52,004
0.75% senior exchangeable notes due January 2024 (2)		155,529		177,005
5.75% senior notes due February 2025		474,092		474,092
9.00% senior priority guaranteed notes due February 2025		—		209,384
7.25% senior guaranteed notes due January 2026		557,902		557,902
7.375% senior priority guaranteed notes due May 2027		700,000		700,000
7.50% senior guaranteed notes due January 2028		389,609		389,609
1.75% senior exchangeable notes due June 2029		250,000		—
	$	2,527,132	$	2,559,996
Less: deferred financing costs		25,793		22,456
Long-term debt	$	2,501,339	$	2,537,540

(1) The 5.10% senior notes due September 2023 were classified as long-term as of December 31, 2022, because we had the ability and intent to refinance these obligations utilizing our 2022 Credit Agreement.

(2) The 0.75% senior exchangeable notes due January 2024 were classified as long-term as of September 30, 2023, because we had the ability and intent to refinance these obligations utilizing our 2022 Credit Agreement.

During the nine months ended September 30, 2023, we repurchased $230.9 million aggregate principal amount of outstanding Nabors Delaware’s notes for approximately $236.8 million in cash, including principal, premium of $4.7 million and $1.9 million in accrued and unpaid interest. In connection with these repurchases, we recognized a $25.2 million gain for the nine months ended September 30, 2023 which is included in Other, net in our condensed consolidated statement of income (loss). $24.5 million of the gain recognized was related to accrued interest for the 9.00% senior priority guaranteed notes due February 2025 accounted for in accordance with ASC 470-60, Troubled Debt Restructuring by Debtors. In addition, the remaining balance of the 5.10% senior notes due September 2023 of $52.1 million was fully redeemed in June 2023.

1.75% Senior Exchangeable Notes Due June 2029

In February 2023, Nabors Delaware issued $250.0 million in aggregate principal amount of 1.75% senior exchangeable notes due 2029, which are fully and unconditionally guaranteed by Nabors. The notes bear interest at a rate of 1.75% per year payable semiannually on June 15 and December 15 of each year, beginning on December 15, 2023. As of September 30, 2023, there was $250.0 million in aggregate principal amount that remained outstanding.

The 1.75% exchangeable notes are exchangeable, only under certain conditions, at an exchange rate of 4.7056 common shares of Nabors per $1,000 principal amount of exchangeable notes (equivalent to an exchange price of approximately $212.51 per common share). Upon any exchange, Nabors will settle its exchange obligation in cash, common shares of Nabors, or a combination of cash and common shares, at our election. The 1.75% exchangeable notes are redeemable, in whole or in part, at our option at any time on or after June 15, 2026 only if the last reported sale price per common shares exceed 130% of the exchange price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading days immediately before the date of the related redemption notice; and (2) the trading day immediately before we send such notice, at a cash redemption price equal to 100% of the principal amount to be redeemed plus accrued and unpaid interest. If a “fundamental change” (as defined in the Indenture) occurs, subject to certain conditions, holders may require us to repurchase for cash any or all of their 1.75% exchangeable notes at a repurchase price equal to 100% of the principal amount of the 1.75% exchangeable notes to be repurchased, plus accrued and unpaid interest. Based on our assessment of the features of the 1.75% exchangeable notes, it was determined that there are features that need to be assessed for bifurcation as a derivative. As part of the assessment, the features were either not required to be bifurcated based on accounting guidance or would have no value if bifurcated.

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 September 30, 2023 and December 31, 2022, there was approximately $155.5 million and $177.0 million in aggregate principal amount that remained outstanding, respectively.

The 0.75% exchangeable notes are currently exchangeable, under certain conditions, at an exchange rate of .8018 common shares of Nabors per $1,000 principal amount of 0.75% exchangeable notes (equivalent to an exchange price of approximately $1,247.19 per common share). Upon any exchange, as a result of an amendment to the notes, Nabors Delaware will settle its exchange obligation in cash. If a “fundamental change” (as defined in the Indenture) occurs, subject to certain conditions, holders may require us to repurchase for cash any or all of their 0.75% exchangeable notes at a repurchase price equal to 100% of the principal amount of the 0.75% exchangeable notes to be repurchased, plus accrued and unpaid interest. The 0.75% 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. The adoption of ASU 2020-06 effective January 1, 2022 resulted in a pre-tax adjustment of $27.5 million to eliminate the remaining unamortized debt discount.

2022 Credit Agreement

On January 21, 2022, Nabors Delaware entered into a revolving credit agreement between Nabors Delaware, the guarantors from time-to-time party thereto, the issuing banks (the “Issuing Banks”) and other lenders party thereto (the “Lenders”) and Citibank, N.A., as administrative agent (the “2022 Credit Agreement”). Under the 2022 Credit Agreement, the Lenders have committed to provide to Nabors Delaware up to an aggregate principal amount at any time outstanding not in excess of $350.0 million (with an accordion feature for an additional $100.0 million, subject to lender approval) under a secured revolving credit facility, including sub-facilities provided by certain of the Lenders for letters of credit in an aggregate principal amount at any time outstanding not in excess of $100.0 million.

The 2022 Credit Agreement permits the incurrence of additional indebtedness secured by liens, which may include liens on the collateral securing the facility, in an amount up to $150.0 million as well as a grower basket for term loans in an amount not to exceed $100.0 million secured by liens not on the collateral. The Company is required to maintain an interest coverage ratio (EBITDA/interest expense), which increases on a quarterly basis, and a minimum guarantor value, requiring the guarantors (other than the Company) and their subsidiaries to own at least 90% of the consolidated property, plant and equipment of the Company. The facility matures on the earlier of (a) January 21, 2026 and (b) to the extent any principal amount of Nabors Delaware’s existing 5.75% senior notes due 2025 remains outstanding on the date that is 90 days prior to the applicable maturity date for such indebtedness, then such 90^th day.

Additionally, the Company is subject to covenants, which are subject to certain exceptions and include, among others, (a) a covenant restricting our ability to incur liens (subject to the additional liens basket of up to $150.0 million), (b) a covenant restricting its ability to pay dividends or make other distributions with respect to its capital stock and to repurchase certain indebtedness and (c) a covenant restricting the ability of the Company’s subsidiaries to incur debt (subject to the grower basket of up to $100.0 million). The agreement also includes a collateral coverage requirement that the collateral rig fair value is to be no less than the collateral coverage threshold, as defined in the agreement.  This requirement includes an independent appraisal report to be delivered every 6 months following the closing date.

As of September 30, 2023, we had no borrowings outstanding under our 2022 Credit Agreement. The weighted average interest rate on borrowings under the 2022 Credit Agreement at September 30, 2023 was 8.02%. In order to make any future borrowings under the 2022 Credit Agreement, 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. We had $45.7 million of letters of credit outstanding under the 2022 Credit Agreement as of September 30, 2023.

As of the date of this report, we were in compliance with all covenants under the 2022 Credit Agreement. We expect to remain in compliance with all covenants under the 2022 Credit Agreement 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.