Tervita to Seek New Credit After Debt Restructuring Complete

  • Oil industry waste management provider skipped payment Monday
  • Company in negotiations to slash its C$2.5 billion of debt

Tervita Corp., a Canadian provider of waste management services to the oil industry, plans to seek new credit after completing restructuring talks with lenders to slash its C$2.5 billion ($1.9 billion) worth of obligations.

The company, which is using a 30-day grace period after skipping an interest payment on Monday, expects to be able to secure new lending after the restructuring thanks to its “good quality assets,” Vice President Ryan Wong said in an interview. The deal would involve converting some debt to equity, he said.

“We have good operating assets but our capital structure was not optimal,” Wong said. “At the moment we have more debt than the asset can service. The card we have in our hand is that the company is worth more as a going concern and kept whole than if it were broken down into pieces and sold off.”

Closely-held Tervita has struggled with its finances as energy producers have slashed drilling budgets amid the two-year oil rout. The company has been working with advisers to manage its debt, including reducing costs and selling assets, Wong said. Tervita skipped the $18.2 million, Aug. 15 interest payment on its 10.875 percent unsecured notes maturing in 2018, according to a statement Monday.

“The industry has gone down in terms of activity level, and our cashflow has gone down,” Wong said.

Tervita’s debt is mostly high-yield U.S. dollar denominated notes, Wong said. The company is targeting “substantially lower” debt as it talks with creditors. The company has hired Barclays Capital to advise it in discussions.

The Calgary-based company’s services include managing waste and abandoned oil wells.

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