What is the primary purpose of this debt issuance?

The primary purpose of this $3.95 billion debt issuance is to refinance existing, higher-cost debt. Specifically, Baker Hughes aims to use the proceeds to purchase its outstanding 7.50% and 6.00% senior notes due 2018 through tender offers and subsequent redemptions. This strategy is expected to lower the company's overall interest expense.

What is the debt structure and risk profile of these new notes?

The new notes are senior unsecured obligations of Baker Hughes, a GE company, LLC and Baker Hughes Co-Obligor, Inc. They rank equally with the issuers' other senior indebtedness but are effectively junior to any future secured indebtedness. Furthermore, they are structurally subordinated to all existing and future indebtedness and obligations of the company's subsidiaries.

What are the implications of the Registration Rights Agreement?

The Registration Rights Agreement obligates Baker Hughes to file a registration statement for an exchange offer of these privately placed notes within one year (by December 11, 2018). If the company fails to complete this exchange offer within the stipulated timeframe, it will be required to pay additional interest to the noteholders. This agreement aims to provide liquidity for investors by allowing them to exchange these restricted notes for freely tradable registered notes.

How does this debt issuance relate to Baker Hughes's ownership structure with GE?

The filing refers to 'Baker Hughes, a GE company' (BHGE), indicating that General Electric is a significant stakeholder. The use of proceeds explicitly mentions that remaining funds may be used for purchases of common units from BHGE and General Electric Company in connection with a previously announced share repurchase authorization. This highlights the ongoing integration and financial strategies between the two entities.

BKR 8-K: Material Agreements & Financial Events

Summary

Baker Hughes, a GE company (BHGE) announced on December 11, 2017, the successful completion of a significant private placement of $3.95 billion in senior notes. These notes are comprised of three tranches: $1.25 billion of 2.773% notes due 2022, $1.35 billion of 3.337% notes due 2027, and $1.35 billion of 4.080% notes due 2047. The primary use of these proceeds is to refinance existing debt, specifically to purchase outstanding 7.50% and 6.00% senior notes due 2018 through tender offers, and potentially purchase other outstanding debentures and notes. Any remaining proceeds will be used for general corporate purposes, which may include share repurchases. This transaction indicates proactive debt management by BHGE, aimed at lowering its overall interest expense by replacing higher-coupon debt with newer, lower-coupon debt. Investors should note that these notes are senior unsecured obligations, ranking equally with other senior indebtedness but subordinated to secured debt and structurally subordinated to subsidiary debt. The company also entered into a Registration Rights Agreement, obligating them to file for an exchange offer to register these privately placed notes within a year, or face potential additional interest payments.

Key Highlights

1Completion of a $3.95 billion private placement of senior notes across three maturities (2022, 2027, 2047).
2The notes carry interest rates of 2.773%, 3.337%, and 4.080% respectively, indicating a refinancing strategy.
3Proceeds are primarily designated for the retirement of higher-interest 2018 senior notes via tender offers and redemptions.
4The company is also exploring repurchasing other outstanding debt instruments (2024 and 2029 notes).
5Remaining net proceeds may be used for general corporate purposes, including potential share repurchases from BHGE and General Electric.
6The notes are senior unsecured obligations, ranking equally with other senior debt but subordinated to secured debt and structurally subordinated to subsidiary debt.
7A Registration Rights Agreement was executed, requiring BHGE to register the notes through an exchange offer by December 11, 2018, to avoid additional interest payments.

Baker Hughes Co 8-K Report, Material Agreement (Dec 12, 2017)

Summary

Key Highlights

Frequently Asked Questions