Drilling company Pioneer Energy restructures through Chapter 11

BY Fraser Tennant

A victim of the turbulent economics of the oil & gas industry, drilling company Pioneer Energy Services has filed for Chapter 11 bankruptcy in order to implement a comprehensive financial restructuring.

The Chapter 11 process and restructuring, reached in agreement with Pioneer’s key stakeholders, includes a number of the company’s subsidiaries but does not include Pioneer’s international entities, the majority of which are located in Colombia.

“Over the course of the last several years, Pioneer has been challenged by the difficult economics of the oil and gas industry,” said Stacy Locke, president and chief executive of Pioneer. “We have continued to adapt to the challenging market environment in which we operate, but our strong underlying business has continued to labour under a heavy debt burden.”

Pioneer intends to use the Chapter 11 process to implement a balance sheet restructuring by significantly reducing the company’s long-term debt and related interest costs, providing access to additional financing and establishing a strong capital structure. Pioneer expects to emerge in a stronger financial position, capable of accelerating future growth and better able to serve our valued customers.

“Our objective is to use the restructuring process to implement a balance sheet restructuring and set Pioneer on a path to succeed in the future with a right-sized debt structure and ample liquidity going forward,” continued Mr Locke. “We are confident that these are the right steps to deliver value for the benefit of our stakeholders.”

Headquartered in Texas, Pioneer provides well servicing, wireline and coiled tubing services to producers primarily in Texas and the Mid-Continent and Rocky Mountain regions.  Pioneer also provides contract land drilling services to oil and gas operators.

The company expects to continue to operate in the normal course during the court-supervised process and the terms of the restructuring contemplate paying all customer, vendor and other trade obligations in full in the ordinary course of business.

Mr Locke concluded: “We appreciate the ongoing hard work and commitment of the entire Pioneer team. I am confident our employees will continue to focus on safety, the day-to-day operations and provide our customers the quality of service they have come to expect from Pioneer.”

News: Pioneer Energy files for bankruptcy protection

Thyssenkrupp sells elevator business for $18.7bn

BY Richard Summerfield

Thyssenkrupp AG has agreed to sell its elevator business to a consortium of Advent, Cinven and Germany’s RAG foundation for $18.7bn.

Once completed, the deal will be the biggest private equity acquisition in Europe since 2007, when KKR took Alliance Boots Plc private in a deal valued at more than $23bn including debt.

Thyssenkrupp will use cash from the elevator unit sale to pay down borrowings and fund some of its pension obligations. The company is heavily indebted and in its most recent earnings statement, net debt jumped to €7.1bn.

“With the sale, we are paving the way for Thyssenkrupp to become successful,” said Martina Merz, chief executive of Thyssenkrupp. “Not only have we obtained a very good selling price, we will also be able to complete the transaction quickly. It is now crucial for us to find the best possible balance for the use of the funds. We will reduce Thyssenkrupp’s debt as far as is necessary and at the same time invest as much as is reasonable in developing the company. With this, Thyssenkrupp can pick up speed again.”

“Cinven is delighted to invest in and accelerate the growth of Thyssenkrupp Elevator both organically and through further acquisitions,” said Bruno Schick, partner and head of DACH and Emerging Europe at Cinven. “Further investment in product development, R&D and international expansion will enable us to grow the business sustainably over the long-term. Alongside Advent and RAG-Stiftung, we look forward to partnering with management to shape the next phase of this outstanding business.”

“Thyssenkrupp Elevator has established itself as an international market leader, with a strong and innovative product portfolio,” said Ranjan Sen, managing partner and head of Germany at Advent. “We look forward to working alongside Cinven and RAG-Stiftung to leverage our collective expertise and capital resources and to build on this excellent platform for further growth, thereby creating a strong, independent industrial company.”

The deal is expected to close by the end of the third quarter of 2020, subject to customary closing conditions and regulatory approvals.

News: Thyssenkrupp sells elevator unit for $18.7 billion to Advent, Cinven consortium

Intuit’s good Karma

BY Richard Summerfield

FinTech firm Intuit has agreed to acquire Credit Karma for approximately $7.1bn in cash and stocks.

Intuit intends to use Credit Karma’s assets to create a digital personalised finance assistant, a platform that gives users access to their personal finance information, such as income and credit history, as well as information about financial products and other advice.

Credit Karma has 106 million members in the US, UK and Canada, with 37 million monthly active users. The company generated nearly $1bn in revenue in 2019, up 20 percent from the prior year.

The purchase price will be payable in equal portions of cash and Intuit shares, which are being valued at about $299.73 per share, according to a statement announcing the deal.

“Our mission is to power prosperity around the world with a bold goal of doubling the household savings rate for customers on our platform,” said Sasan Goodarzi, chief executive of Intuit. “We wake up every day trying to help consumers make ends meet. By joining forces with Credit Karma, we can create a personalized financial assistant that will help consumers find the right financial products, put more money in their pockets and provide insights and advice, enabling them to buy the home they’ve always dreamed about, pay for education and take the vacation they’ve always wanted.”

“We started Credit Karma with a goal to build a trusted destination for all consumers, to make financial progress regardless of where they are in life,” said Kenneth Lin, founder and chief executive of Credit Karma. “We saw the opportunity to enrich people’s financial lives through transparency, simplicity and certainty.”

The deal — expected to close in the second half of 2020, subject to regulatory approvals — is the largest in Intuit’s 37-year history and the first significant acquisition announced since Mr Goodarzi took control of the company.

News: Intuit to buy Credit Karma for $7.1 billion in cash-and-stock deal

Morgan Stanley to acquire E-Trade in $13bn deal

BY Fraser Tennant

In a combination which creates an industry leader in wealth management, global financial services firm Morgan Stanley is to acquire online brokerage industry company E-Trade in a deal valued at $13bn.

A pioneer in the digital brokerage and banking space for nearly 40 years, E-Trade’s consumer-facing technology platforms and digital banking services, including direct integration with brokerage accounts, checking and high-yield savings accounts, is expected to complement and significantly accelerate Morgan Stanley’s digital banking efforts. 

“Since we created the digital brokerage category nearly 40 years ago, E-Trade has consistently disrupted the status quo and delivered cutting-edge tools and services to investors, traders and stock plan administrators,” said Mike Pizzi, chief executive of E-Trade. “By joining Morgan Stanley, we will be able to take our combined offering to the next level and deliver an even more comprehensive suite of wealth management capabilities.”

For Morgan Stanley, the acquisition marks the continuation of a decade-long effort to rebalance its portfolio of businesses, so that a greater percentage of its revenues and income are derived from balance sheet light and more durable sources of revenues.

“E-Trade represents an extraordinary growth opportunity for our wealth management business and a leap forward in our wealth management strategy,” said James Gorman, chairman and chief executive of Morgan Stanley. “The combination adds an iconic brand in the direct-to-consumer channel to our leading adviser-driven model, while also creating a premier workplace wealth provider for corporations and their employees.

“E-Trade’s products, innovation in technology and established brand will help position Morgan Stanley as a top player across all three channels: financial advisory, self-directed and workplace,” continued Mr Gorman. “In addition, this continues the decade-long transition of our firm to a more balance sheet light business mix, emphasising more durable sources of revenue.”

Morgan Stanley’s acquisition of E-Trade is subject to customary closing conditions, including regulatory approvals and approval by E-Trade shareholders, and is expected to close in the fourth quarter of 2020.

Mr Gorman concluded: “We look forward to welcoming the infusion of management and technology talent that E-Trade will bring to Morgan Stanley.”

News: Morgan Stanley to buy E-Trade Financial in $13bn deal

Sustainable debt market to top $400bn in 2020, claims new report

BY Fraser Tennant

Driven by an expansion of the pool of financing options for investors, 2020 is likely to see the sustainable debt market surpass $400bn, according to a new report by S&P Global Ratings.

In ‘Led By Green Bonds, The Sustainable Debt Market Looks To Surge Ahead’ S&P notes that issuance in sustainable debt has doubled in 2019, with the primary driver being green bonds, which is expected to remain the main type of sustainable debt instrument in 2020.

"We also expect the sustainable debt market to continue to diversify and innovate, as investors look for alternative ways to contribute to sustainability objectives," said Noemie De La Gorce, ratings credit analyst at  S&P Global Ratings. “Furthermore, the market shows few signs of abating. Strong market fundamentals along with persisting positive credit conditions in the private sector are likely to support further green issuance growth in the next year.”

The report’s key takeaways include: (i) green-labelled issuance is expected to reach close to $300bn in 2020, partly reflecting the surge in absolute global fixed-income issuance and private financing; (ii) other sustainability-labelled debt instruments have emerged, including social bonds, sustainability bonds and sustainability-linked loans, which increased to about 35 percent of the total sustainable debt market in 2019; (iii) the unique and unprecedented regulatory and political push for green and sustainable finance in Europe will help to consolidate the region’s leadership in green-labelled issuance; and (iv) the majority of green-labelled proceeds will remain allocated to the energy transition, which absorbed 80 percent of proceeds in 2019.

Looking ahead, the S&P report suggests that issuance in the labelled green bond market could grow close to $300bn in 2020, after achieving a record $238bn in 2019. "While it still represents a minor part of global issuance, this share is increasing – to about 3.5 percent from less than 1 percent five years ago,” added Ms De La Gorce. “We expect this growth to be a long-term phenomenon, with sovereign and regulatory interventions, particularly in Europe, acting as a catalyst for private issuance.”

That said, the report sounds a note of caution, stating that growth levels are insufficient to bridge the existing financing gap between available sustainable debt and the investments needed to transition to a low-carbon and climate-resilient economy, which the UN. estimates will be at least $60 trillion by 2050.

Report: Led By Green Bonds, The Sustainable Debt Market Looks To Surge Ahead