Nabors Industries’ Credit Agreement Amendment: A Strategic Move for Liquidity and Covenant Flexibility

Nabors Industries Ltd. has long navigated a complex debt landscape, and its recent First Amendment to the Amended and Restated Credit Agreement, dated September 4, 2025, underscores a strategic pivot toward liquidity management and covenant flexibility. This amendment allows Nabors Delaware to repurchase up to $100 million of equity annually, a move that directly addresses the company’s need to balance shareholder returns with financial stability [2]. By revising the restricted payments covenant to permit such repurchases, Nabors has created a pathway to optimize its capital structure without triggering restrictive dividend limitations [2].

Liquidity Management: Balancing Repurchases and Operational Needs

The amendment’s focus on equity repurchases reflects Nabors’ broader liquidity strategy. The company’s primary liquidity sources include cash reserves, investments, and the 2024 Credit Agreement, which provides critical flexibility to meet operational and debt obligations [4]. Allowing $100 million in annual repurchases—while maintaining unchanged terms for other covenants—suggests a calculated approach to preserving cash flow. This is particularly significant given Nabors’ history of credit facility adjustments, such as the Third Amendment to its ABL Credit Agreement, which altered interest rates to align with market conditions [3].

However, the amendment’s restriction on concurrent dividend distributions during buybacks introduces a trade-off. Shareholders may face diluted returns if Nabors prioritizes repurchases over dividends, but this constraint ensures the company retains sufficient liquidity to service its debt. As stated in the 8-K filing, the amendment “does not alter other provisions of the original credit agreement,” emphasizing a targeted rather than broad revision [2].

Covenant Flexibility: A Historical Context

Nabors’ approach to covenant flexibility is not new. For instance, the September 2020 Amendment No. 4 to its credit agreement introduced a minimum liquidity threshold of $160 million and adjusted the Guarantor Coverage Ratio [3]. These changes mirrored the September 2025 amendment’s intent to align covenants with operational realities. The 2024 Credit Agreement further reinforces this trend by mandating an interest coverage ratio, a metric that Nabors has historically managed through strategic debt restructuring [4].

The March 26, 2021, First Amendment to the Second Lien Term Loan Credit Agreement also provides context. While specific liquidity terms for this amendment remain undisclosed, prior adjustments—such as converting the net debt to capitalization ratio covenant to a net debt to EBITDA ratio—highlight Nabors’ preference for metrics tied to operational performance [2]. This pattern suggests that the September 2025 amendment is part of a continuum, not an isolated event.

Strategic Implications for Investors

For investors, the amendment signals Nabors’ commitment to maintaining financial flexibility amid volatile market conditions. The $100 million repurchase cap, combined with the 2024 Credit Agreement’s liquidity provisions, positions the company to navigate potential downturns without overextending its balance sheet. However, the absence of explicit details on interest rate adjustments or borrowing capacity in the September 2025 amendment raises questions about its long-term impact [1].

A visual comparison of Nabors’ liquidity sources and covenant thresholds over the past five years would provide further clarity. For example, a bar chart contrasting cash reserves, credit facility availability, and debt service obligations could illustrate how the amendment aligns with historical trends.

Conclusion

Nabors Industries’ First Amendment to its credit agreement on September 4, 2025, is a calculated step to enhance liquidity management and covenant flexibility. By permitting $100 million in annual equity repurchases while preserving other covenants, the company balances shareholder value with financial prudence. Investors should monitor how this amendment interacts with broader credit arrangements, such as the 2024 Credit Agreement’s interest coverage ratio requirements, to assess its long-term viability.

Source:
[1] NABORS INDUSTRIES LTD_March 31, 2025 [https://www.sec.gov/Archives/edgar/data/1163739/000155837025007138/nbr-20250331x10q.htm]
[2] [8-K] Nabors Industries Ltd. Reports Material Event [https://www.stocktitan.net/sec-filings/NBR/8-k-nabors-industries-ltd-reports-material-event-15424e7edc20.html]
[3] Form S-4/A NABORS INDUSTRIES LTD [https://www.streetinsider.com/SEC+Filings/Form+S-4A+NABORS+INDUSTRIES+LTD/24067639.html]
[4] Quarterly Report for Quarter Ending June 30, 2025 [https://www.publicnow.com/view/F2501FD1C1080C0E2B2A1A88776CE0C90C7A0953?1754066892]