Tervita Considers Asset Sales, Restructuring as Debt Weighs

  • Oil-field services company has hired advisers for the process
  • Company's debt seen averaging 15 times EBITDA in 2016: Moody's

Tervita Corp. is considering options including asset sales and debt restructuring as it struggles with high leverage amid a crude market slump.

The Calgary-based oil-field services company is working with advisers on the process, Cam Hantiuk, a company spokesman, said in an e-mail on Tuesday.

“Like a great many companies in the energy space we would always consider divestiture of non-core assets just as we did in 2015, when we divested the majority of our U.S. operations,” Hantiuk said. "Some of those considerations relate to debt structure."

Tervita, a closely held company focused on environmental and energy waste management services for the oil and natural gas industry, is carrying C$3.45 billion ($2.45 billion) of debt 19 months into a crude price rout, according to data compiled by Bloomberg. Energy producers are slashing drilling budgets for a second straight year, reducing work for oil-field servicers. Tervita, founded by David Werklund and Gordon Vivian in 1979, sold a U.S. subsidiary to Republic Services Inc. last year.

Debt Markets

The company has tapped debt markets for financing after scrapping plans for an initial public offering of its shares valued at as much as C$1 billion in 2012. CCS Corp. was renamed Tervita earlier that year when 12 related companies came together.

Tervita’s secured bonds, which have a direct claim on its assets in the event of a bankruptcy, are trading at 58 cents on the dollar, while its unsecured bonds are at 19 cents on the dollar, according to prices from the U.S. Trade reporting and compliance engine.

Moody’s Investors Service downgraded Tervita’s senior unsecured notes to Caa3 from Caa2 in November 2015, reduced its senior secured notes rating to Caa1 from B3 and lowered its corporate family rating to Caa2 from Caa1, changing the outlook to negative from stable.

The company is poised to have debt averaging 15 times its earnings before interest, taxes, depreciation and amortization in 2016, Moody’s said in a statement at the time. Tervita’s liquidity is expected to be weak in 2016 and the company will probably breach its sole financial covenant in the second half of the year, according to Moody’s.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE