| Chapter 11 Proceedings and Ability to Continue as a Going Concern | 2. Emergence from Chapter 11 Bankruptcy Proceedings Restructuring Support Agreement; Voluntary Reorganization Under Chapter 11 of the U.S. Bankruptcy Code On May 10, 2019, the Weatherford Parties entered into the Restructuring Support Agreement (“RSA”) with certain holders of our unsecured notes (“Consenting Creditors”), setting forth, subject to certain conditions, the terms of the proposed capital financial restructuring of the Company (“Transaction”). The RSA included certain milestones for the progress of the upcoming court proceedings, which included the dates by which the Weatherford Parties were required to, among other things, obtain certain court orders and complete the Transaction. In addition, the parties to the RSA had the right to terminate the RSA and their support for the Transaction under certain circumstances. On June 28, 2019, the Weatherford Parties commenced a solicitation for acceptance of their prepackaged plan of reorganization (“Plan”) by causing the Plan and the corresponding disclosure statement to be distributed to certain creditors of the Company that were entitled to vote on the Plan. On July 1, 2019, Weatherford Ireland, Weatherford Bermuda, and Weatherford Delaware, filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Cases”). Payments Due on Certain Indebtedness The Weatherford Parties’ 7.75% Senior Notes due 2021, 8.25% Senior Notes due 2023 and 6.80% Senior Notes due 2037 (together, “Certain Senior Notes”) provided for an aggregate $69 million interest payment that became due on June 15, 2019. The applicable indenture governing the Certain Senior Notes provided a 30-day grace period that extended the latest date for making this interest payment to July 16, 2019, before an event of default would occur under the applicable indenture. The Weatherford Parties elected to not make this interest payment on the due date and to utilize the 30-day grace period provided by the indentures. As a result of filing the Cases on July 1, 2019, an event of default occurred under each indenture governing these unsecured notes, which automatically accelerated maturity of the principal, plus any accrued and unpaid interest, on such series of unsecured notes and certain other obligations of the Weatherford Parties. Any efforts to enforce such payment obligations under the unsecured notes or other accelerated obligations of the Weatherford Parties were automatically stayed as a result of the Cases, and the creditors’ rights of enforcement in respect of the unsecured notes and other accelerated obligations of the Weatherford Parties were subject to the applicable provisions of the Bankruptcy Code. In addition, all of the Weatherford Parties’ prepetition unsecured senior notes and related unpaid interest were classified as “ Liabilities Subject to Compromise ” on our Consolidated Balance Sheets during bankruptcy as further defined herein and in subsequent disclosures throughout and with respect to the Predecessor as shown in “ Note 3 – Fresh Start Accounting ”. The Weatherford Parties’ Term Loan Agreement required a quarterly payment of $12.5 million plus interest that became due on June 30, 2019. On July 1, 2019, the Weatherford Parties and the Term Loan Lenders entered into a Term Loan Forbearance Agreement where the lenders agreed to forbear from exercising their rights and remedies available to them, including the right to accelerate any indebtedness, for a specified period of time. On July 3, 2019, all unpaid principal and interest under the Term Loan Agreement were repaid in full. See discussion below. Forbearance Agreements On July 1, 2019, the Weatherford Parties and the Credit Agreement Lenders under the Amended and Restated Credit Agreement (the “A&R Credit Agreement”), dated as of May 9, 2016, among WOFS Assurance Limited and Weatherford Bermuda, as borrowers, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto entered into a forbearance agreement (the “Credit Agreement Forbearance Agreement”) with respect to certain defaults under the A&R Credit Agreement, including those arising from the Weatherford Parties’ commencement of the Cases. Specifically, under the Credit Agreement Forbearance Agreement, the Credit Agreement Lenders agreed to forbear from exercising their rights and remedies available to them due to the Specified Defaults defined in the agreement, including the right to accelerate any indebtedness, for a specified period of time. Under the terms of the Credit Agreement Forbearance Agreement, the Weatherford Parties paid a fee for the ratable account of the Credit Agreement Lenders in an amount equal to 0.25% on the outstanding principal amount of the loans and total letter of credit exposure under the A&R Credit Agreement. Additionally, (i) to the extent such entities were not already guarantors under the A&R Credit Agreement, all subsidiaries of the Company who were guarantors under the DIP Credit Agreement (defined below) joined as guarantors under the A&R Credit Agreement and (ii) all U.S. and Canadian subsidiaries of the Company granted a second lien security interest in favor of the Credit Agreement Lenders in the same assets that such U.S. and Canadian subsidiaries pledged a first lien security interest in under the DIP Credit Agreement; provided that the aggregate amount of the guaranteed obligations to be secured under the A&R Credit Agreement did not exceed $100 million ; and provided, further, that if the obligations under the A&R Credit Agreement were not paid in full by our emergence date, as amended, such second lien security interest of the Credit Agreement Lenders shall automatically transition from second liens to pari passu liens with the liens under the DIP Credit Agreement. On July 1, 2019, the Weatherford Parties and the Term Loan Lenders under the Term Loan Agreement, dated as of May 4, 2016, among Weatherford Bermuda, as borrower, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (the “Term Loan Agreement”) entered into a forbearance agreement (the “Term Loan Forbearance Agreement”) with respect to certain defaults under the Term Loan Agreement. Specifically, under the Term Loan Forbearance Agreement, the Term Loan Lenders agreed to forbear from exercising their rights and remedies available to them due to the Specified Defaults defined in the agreement, including the right to accelerate any indebtedness, for a specified period of time. On July 3, 2019, the Company repaid in full its outstanding indebtedness under the Term Loan. On July 1, 2019, the Weatherford Parties and the 364-Day Lenders under the 364-Day Revolving Credit Agreement, dated August 16, 2018, among Weatherford Bermuda, as borrower, the other borrowers party thereto, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (“364-Day Credit Agreement”) entered into a forbearance agreement (the “364-Day Revolving Forbearance Agreement”) with respect to certain defaults under the 364-Day Credit Agreement. Specifically, under the 364-Day Revolving Forbearance Agreement, the 364-Day Lenders agreed to forbear from exercising their rights and remedies available to them due to the Specified Defaults defined in the agreement, including the right to accelerate any indebtedness, for a specified period of time. On July 3, 2019, the Company repaid in full its outstanding indebtedness under the 364-Day Revolving Credit Agreement. On July 1, 2019, the Weatherford Parties and three lenders under the DIP Credit Agreement (the “Swap Counterparties”) each party to a hedging agreement with Weatherford Bermuda for the purpose of hedging foreign currency exposure incurred by the Weatherford Parties (each, a “Swap Agreement” and, collectively, the “Swap Agreements”) entered into a consent to swap agreement termination forbearance (the “Swap Forbearance Agreement”) with respect to certain defaults under the Swap Agreements. Specifically, under the Swap Forbearance Agreement, the Swap Counterparties agreed to forbear from exercising their rights and remedies available to them due to certain Events of Default and Termination Events defined in the agreements for a specified period of time. On July 3, 2019, the Weatherford Parties entered into amended and restated Swap Agreements with such Swap Counterparties to govern existing and future foreign currency transactions entered into with such Swap Counterparties. Backstop Commitment Agreement On July 1, 2019, the Weatherford Parties and the commitment parties thereto (the “Initial Commitment Parties”) entered into a Backstop Commitment Agreement. Pursuant to the terms of the Plan, and subject to approval by the Bankruptcy Court in connection with confirmation of the Plan, the Company agreed to offer to holders of its existing unsecured notes, including the Commitment Parties, subscription rights to purchase the Exit Notes in aggregate principal amount of $1.25 billion , upon the Company’s emergence from bankruptcy. On September 9, 2019, the Weatherford Parties, certain of the Initial Commitment Parties and certain additional commitment parties (the “Additional Commitment Parties” and, together with the Initial Commitment Parties, the “Commitment Parties”) entered into an amendment to the Backstop Commitment Agreement. The Backstop Commitment Agreement Amendment provided for (i) the joinder of the Additional Commitment Parties to the Backstop Commitment Agreement, (ii) the increase in the backstop commitment by $350 million (the “Increased Commitment”) from $1.25 billion to up to $1.6 billion , and (iii) an amendment to the Backstop Commitment Agreement to account for the changes reflected in the Third RSA Amendment. Subject to the terms and conditions contained in the Backstop Commitment Agreement, the Consenting Creditors agreed to purchase any Exit Notes that were not duly subscribed for pursuant to the rights offering at a price equal to $1,000 per $1,000 in principal amount of the Exit Notes purchased by such Commitment Party. On July 1, 2019, as consideration for the commitment, the Weatherford Parties made an aggregate payment of $62.5 million in cash to the Commitment Parties. Except under certain circumstances set forth in the Backstop Commitment Agreement, the payment was non-refundable, regardless of the principal amount of unsubscribed Exit Notes (if any) purchased by the Commitment Parties. As consideration for the Increased Commitment agreed to on September 9, 2019, the Weatherford Parties made an aggregate payment of $18.7 million in cash to certain of the Commitment Parties upon our emergence date. Subject to certain termination rights, the payment was non-refundable, regardless of the principal amount of unsubscribed Exit Notes (if any) purchased by the Commitment Parties. The transactions contemplated by the Backstop Commitment Agreement were conditioned upon the satisfaction or waiver of customary conditions for transactions of this nature, including, without limitation, that (i) the Bankruptcy Court shall have approved the rights offering, (ii) the Bankruptcy Court shall have confirmed the Plan and (iii) the rights offering shall have been conducted, in all material respects, in accordance with the approval of the Bankruptcy Court, the Plan and the Backstop Commitment Agreement. Debtor in Possession Credit Agreement On July 3, 2019, the Weatherford Parties entered into a senior secured superpriority debtor in possession credit agreement (the “DIP Credit Agreement”). The DIP Credit Agreement had two debtor in possession (“DIP”) facilities to provide liquidity during the pendency of the Cases. The facilities consisted of (a) a DIP revolving credit facility in the principal amount of up to $750 million provided by banks or other lenders and (b) a DIP term loan facility in the amount of up to $1.0 billion , which was fully backstopped by the Consenting Creditors. The DIP Credit Agreement matured on the earlier of (i) the date that is 12 months after the Weatherford Parties’ entry into the DIP Credit Agreement or (ii) the date of completion of the Transaction. The DIP Credit Agreement bore interest (i) with respect to Eurodollar borrowings, based on an adjusted LIBOR rate plus an applicable margin of 3.00% , with a 0.00% LIBOR floor and (ii) with respect to alternate base rate borrowings, a base rate plus an applicable margin of 2.00% . In addition to paying interest on outstanding principal amounts under the DIP Credit Agreement, the Weatherford Parties were required to pay an unused commitment fee to the revolving facility lenders in respect of the unutilized DIP revolving facility commitments at a rate equal to 0.375% per annum on the average daily amount of the unutilized revolving facility commitments. The DIP Credit Agreement included a minimum liquidity covenant of $150 million and was secured by substantially all the personal assets and properties of the Weatherford Parties and certain of their subsidiaries. The DIP Credit Agreement was also guaranteed on an unsecured basis by certain other subsidiaries of the Weatherford Parties. Through the term of the DIP Credit Agreement, we were in compliance with our covenants under the DIP Credit Agreement. On July 3, 2019, the Weatherford Parties borrowed approximately $1.4 billion under the DIP Credit Agreement and the proceeds were used to repay certain prepetition indebtedness, cash collateralize certain obligations with respect to letters of credit and similar instruments and finance the working capital needs and general corporate purposes of the Weatherford Parties and certain of their subsidiaries. On July 3, 2019, the Company repaid all outstanding amounts due under the secured Term Loan Agreement and 364-Day Credit Agreement totaling approximately $616 million with borrowings from our DIP Credit Agreement. In addition, the Company cash collateralized approximately $271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement. See “ Note 13 – Short-term Borrowings and Other Debt Obligations ” for additional details. We repaid our DIP Credit Agreement borrowings in full on the Effective Date. Amended RSA; Plan Confirmation On August 23, 2019, the Weatherford Parties entered into the second amendment of the RSA (the “Second RSA Amendment”) with certain of the noteholders, and certain equity holders who collectively held approximately 208 million shares of the Weatherford’s outstanding ordinary shares (the “Consenting Equity Holders”) which joined the Consenting Equity Holders as parties to the RSA. In addition, it provided for the payment of $250 thousand to the Consenting Equity Holders’ counsel and amended the terms of the new warrants to be issued under the Plan to the holders of the Company’s existing ordinary shares. The amended new warrant terms include extending the maturity date of the warrants to four years after the effective date of the Plan and reduced the exercise price. Pursuant to the terms of the Third RSA Amendment, the Weatherford Parties agreed to issue a single tranche of up to $2.1 billion aggregate principal amount of new unsecured notes (“Exit Notes”) upon emergence from bankruptcy, consisting of up to $1.6 billion of Exit Notes were issued for cash to holders of subscription rights issued in a rights offering (the “Exit Rights Offering Notes”) and to holders of Unsecured Notes Claims and $500 million of Exit Notes issued on a pro rata basis (the “Exit Takeback Notes”). The Exit Notes were issued in lieu of the two tranches of new unsecured notes in aggregate principal amount of $2.5 billion previously contemplated by the original RSA. The Exit Notes bear interest at a rate of 11% per annum and otherwise generally have the terms set forth in the form of New Senior Unsecured Notes Indenture (“Notes Indenture”) with modifications to reflect the amendments contemplated by the Third RSA Amendment, the removal of the 125% of Consolidated Cash Flow prong in the Notes Indenture and the addition of a covenant requiring the Company to use commercially reasonable efforts to obtain and maintain a rating for the Exit Notes from both Standard & Poor’s and Moody’s Investors Service. On September 11, 2019, the Transaction was approved through the confirmation of the Plan filed in the Cases. The amended RSA and the confirmed Plan contemplated a comprehensive deleveraging of our balance sheet and provided, in pertinent part, as follows (as further described in later paragraphs): • Our existing unsecured notes would be cancelled and exchanged for 99% of the ordinary shares of the reorganized Company (“New Common Stock”) and the Weatherford Parties would issue a single tranche of up to $2.1 billion aggregate principal amount of new Exit Notes upon emergence from bankruptcy, consisting of up to $1.6 billion of Exit Rights Offering Notes (fully backstopped by Commitment Parties in the Backstop Commitment Agreement) issued for cash to holders of subscription rights issued in a rights offering and $500 million of Exit Takeback Notes issued on a pro rata basis with a five-year maturity. • All trade claims against the Company whether arising prior to or after the commencement of the Cases would be paid in full in the ordinary course of business. • Our existing equity would be cancelled and exchanged for 1% of the New Common Stock and four-year warrants to purchase 10% of the New Common Stock, both subject to dilution on account of the equity issued pursuant to the management incentive plan. The strike price of the warrants was expected to be set at an equity value at which the noteholders would receive a recovery equal to par as of the date of the commencement of the Cases in respect of the existing unsecured notes and all other general unsecured claims that were pari passu with the existing unsecured notes. Our affiliates entities that did not file voluntary petitions under the Bankruptcy Code continued operating their businesses and facilities without disruption to customers, vendors, partners or employees. The Plan and first day relief provided that vendors and other unsecured creditors could continue to work with the non-debtor affiliates on existing terms and would be paid in the ordinary course of business (in the case of creditors of the Weatherford Parties, following consummation of the Plan). All existing customer and vendor contracts remained in place and were serviced in the ordinary course of business. Weatherford Bermuda commenced provisional liquidation proceedings (“Bermuda Proceedings”) pursuant to the Bermuda Companies Act 1981 by presenting a winding up petition to the Supreme Court of Bermuda (“Bermuda Court”). The Bermuda Court appointed a provisional liquidator who acted as an officer of the Bermuda Court. The appointment of the provisional liquidator provided an automatic statutory stay of proceedings in Bermuda against Weatherford Bermuda and its assets. On the return date of September 6, 2019 for the Bermuda petition - similar to a second day hearing in a Chapter 11 proceeding - Weatherford Bermuda postponed its petition for a specified period, while the Cases were administered. Before the Weatherford Parties emerged from Chapter 11, Weatherford Bermuda, along with the provisional liquidator and subject to the direction of the Bermuda Court, convened meetings of the impaired creditors in order to consider and approve, if appropriate, a scheme of arrangement pursuant to the Bermuda Companies Act 1981. The terms of the approved Bermuda scheme mirrored the terms of the Plan and was a mechanism for ensuring that all of the impaired creditors of Weatherford Bermuda were bound by the terms of the Bermuda scheme. The Bermuda Scheme was effective as of November 25, 2019. On September 23, 2019, Weatherford Ireland filed a petition under the Irish Companies Act 2014 in Ireland (“Irish Examinership Proceeding”) to seek approval for its scheme of arrangement following confirmation of the Plan in the U.S. The filing of the Irish Examinership Proceeding commenced a 100-calendar day protection period under Irish law, during which Weatherford Ireland had the benefit of protection against enforcement and other actions by its creditors. Weatherford Ireland continued operating its business in the ordinary course during the protection period. The approved terms of the Irish scheme mirrored the terms of the Plan. The Irish scheme was approved by the Irish High Court on December 12, 2019. Subject to certain exceptions, under the Bankruptcy Code, the filing of the Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Weatherford Parties or their property to recover, collect or secure a claim arising prior to the date of the Cases. In addition, all of the Weatherford Parties’ prepetition unsecured senior notes and related unpaid interest were liabilities subject to compromise, further discussed below. Since the commencement of the Cases until emergence, the Weatherford Parties continued to operate their businesses as debtors-in-possession under the jurisdiction of and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, the Irish Examinership Proceeding and the Bermuda Proceeding. Emergence On the Effective Date of December 13, 2019 , except as noted below: (1) the Company amended and restated its certificate of incorporation and bylaws on December 10, 2019; (2) the Company appointed new members to the Successor’s board of directors to replace the directors of the Predecessor; (3) all outstanding obligations under our unsecured senior and exchangeable notes were cancelled and the applicable agreements governing such obligations were terminated; for additional details see “ Note 14 – Long-term Debt ”; (4) the senior secured superpriority debtor-in-possession credit agreement (the “DIP Credit Agreement”) the Company previously entered into was paid in full and terminated; for additional details see “ Note 13 – Short-term Borrowings and Other Debt Obligations ”; (5) the Company issued a $2.1 billion aggregate principal amount of unsecured 11.00% Exit Notes due 2024; for additional details see “ Note 14 – Long-term Debt ”; (6) the Company entered into a senior secured asset-based revolving credit agreement in an aggregate amount of $450 million (the “ABL Credit Agreement ” ) with the lenders party thereto and Wells Fargo Bank, N.A. as administrative agent; for additional details see Note 13 – Short-term Borrowings and Other Debt Obligations ; (7) the Company entered into a senior secured letter of credit agreement in an aggregate amount of $195 million (the “LC Credit Agreement”) for issuance of bid and performance letters of credit; for additional details see Note 13 – Short-term Borrowings and Other Debt Obligations ; (8) the Company issued 69,999,954 shares of Successor new ordinary shares (“New Ordinary Shares”) to the holders of the Company’s existing senior notes and holders of the existing ordinary shares (“Old Ordinary Shares”); for additional details see “ Note 20 – Shareholders’ Equity (Deficiency) ”; (9) the Company issued warrants (the “New Warrants”), to holders of the Company’s existing Old Ordinary Shares, to purchase up to an aggregate of 7,777,779 New Ordinary Shares in the Company at an exercise price of $99.96 per ordinary share. The New Warrants are exercisable until the earlier of December 13, 2023 and the date of consummation of any liquidity event as defined in the Warrant Agreement; for additional details see “ Note 20 – Shareholders’ Equity (Deficiency) ”. Prepetition Charges Expenses, gains and losses that are realized or incurred before July 1, 2019 and in relation to the Cases are recorded under the caption “ Prepetition Charges ” on our Consolidated Statements of Operations . The $86 million of prepetition charges primarily consisted of professional and other fees related to the Cases. Reorganization Items Any expenses, gains and losses that are realized or incurred as of or subsequent to the Petition Date and as a direct result of the Cases are recorded under “ Reorganization Items ” on our Consolidated Statements of Operations for the Predecessor and Successor Periods and consisted of the following: Successor Predecessor Period From Period From 12/14/19 01/01/19 through through Reorganization Gain (Expense) (Dollars in millions) 12/31/19 12/13/19 Gain on Settlement of Liabilities Subject to Compromise $ — $ 4,297 Fresh Start Valuation Adjustments — 1,434 Reorganization Items for Plan Effects (Non-Cash) — 5,731 Unamortized Debt Issuance and Discount $ — $ (128 ) Unamortized Interest Rate Derivative Loss — (8 ) Reorganization Items (Non-Cash) — (136 ) Backstop Commitment Fees $ — $ (81 ) DIP Financing Fees — (56 ) Professional Fees (4 ) (69 ) Reorganization Fees (4 ) (206 ) Total Reorganization Items $ (4 ) $ 5,389 Reorganization Items (Fees) Unpaid $ 30 $ 30 Reorganization Items (Fees) Paid $ 4 $ 176 Liabilities Subject to Compromise The Weatherford Parties’ prepetition principal balance on the Predecessor’s unsecured Senior and Exchangeable Senior Notes and related unpaid accrued interest as of the Petition Date were reclassified from “ Long-term Debt ” and “ Other Current Liabilities ”, respectively, to “ Liabilities Subject to Compromise ” on our Consolidated Balance Sheets on July 2, 2019 and during the bankruptcy proceedings at the amounts that were allowed as claims by the Bankruptcy Court. See also “ Note 3 – Fresh Start Accounting ” for further details. Upon emergence from bankruptcy, the liabilities subject to compromise of $7.6 billion were cancelled and the applicable agreements governing such obligations were terminated. Predecessor December 13, (Dollars in millions) 2019 5.125% Senior Notes due 2020 $ 365 5.875% Exchangeable Senior Notes due 2021 1,265 7.75% Senior Notes due 2021 750 4.50% Senior Notes due 2022 646 8.25% Senior Notes due 2023 750 9.875% Senior Notes due 2024 790 9.875% Senior Notes due 2025 600 6.50% Senior Notes due 2036 453 6.80% Senior Notes due 2037 259 7.00% Senior Notes due 2038 461 9.875% Senior Notes due 2039 250 6.75% Senior Notes due 2040 463 5.95% Senior Notes due 2042 375 Accrued Interest on Senior Notes and Exchangeable Senior Notes 207 Liabilities Subject to Compromise $ 7,634 The contractual interest expense on our Senior and Exchangeable Senior Notes is in excess of recorded interest expense on these notes by $257 million Fresh Start Accounting Upon emergence from bankruptcy, we qualified for and adopted Fresh Start Accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes because (1) the holders of the then existing common shares of the Predecessor received less than 50 percent of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. The reorganization value derived from the range of enterprise values associated with the Plan was allocated to the Company’s identifiable tangible and intangible assets and liabilities based on their fair values (except for deferred income taxes) with the remaining excess value allocated to goodwill in accordance with ASC 805 – Business Combinations. The amount of deferred income taxes recorded was determined in accordance with ASC 740 – Income Taxes. The Effective Date fair values of the Company’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheets. Reorganization Value Under ASC 852, the Successor determined a value to be assigned to the equity of the emerging entity as of the date of adoption of Fresh Start Accounting. Based on the Company’s revised projections filed with the SEC on a Form 8-K on October 7, 2019 and October 16, 2019, management and its investment bankers reassessed the value of the Company, resulting in an estimated range of enterprise value between $4.5 billion and $6.0 billion . The Company engaged third-party valuation advisors to assist in determining a point estimate of enterprise value within the range. Management concluded that the best point estimate of enterprise value was $4.5 billion . The Company engaged valuation experts to assist management in the allocation of such enterprise value to the assets and liabilities for financial reporting purposes based on management’s latest outlook as of the effective date. Based on this reassessment, the Company deemed it appropriate to use a final enterprise value of $4.5 billion for financial reporting purposes. The following table reconciles the enterprise value to the estimated fair value of our Successor common shares as of the Fresh Start Reporting Date: (Dollars in millions) Fresh Start Reporting Date Enterprise Value $ 4,516 Plus: Cash and Cash Equivalents (includes $25 million cash collateral released from restricted cash on 12/17/19) 518 Less: Fair Value of Debt (2,103 ) Fair Value of Successor Equity $ 2,931 The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date: (Dollars in millions) Fresh Start Reporting Date Enterprise Value $ 4,516 Plus: Cash and Cash Equivalents (includes $25 million cash collateral released from restricted cash on 12/17/19) 518 Plus: Current Liabilities Excluding Short-term Borrowings and Current Portion of Long-term Debt 1,707 Plus: Non-current Liabilities Excluding Long-term Debt 627 Reorganization Value of Successor’s Assets to be Allocated $ 7,368 With the assistance of third-party valuation advisors, we determined the enterprise and corresponding equity value of the Successor using various valuation methods, including: (i) a calculation of the present value of future cash flows based on our financial projections, and (ii) a peer group trading analysis. The enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in our valuations, as well as the realization of certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the financial projections, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially. Valuation Process The fair values of the Company’s principal assets, including inventory, rental and service equipment, real property, and intangible assets were estimated with the assistance of third-party valuation advisors. In addition, we also estimated the fair value of the Company’s lease liabilities, Exit Notes, and New Warrants issued. Inventory The fair value of the inventory was determined by using both a cost approach and income approach. Inventory was segregated into raw materials, spare parts, work in process (“WIP”), and finished goods. Fair value of raw materials and spare parts inventory were determined using the cost approach. Fair value of WIP and finished goods inventory were determined by estimating the net realizable value of the inventory, adjusted for holding period before an item is sold. Additional obsolescence assessment was performed on the estimated fair value of inventory to determine if further adjustments were necessary. Property, Plant and Equipment Land, Buildings and Leasehold Improvements The fair value of real property locations were estimated using the sales comparison (market) approach and cost approach. As part of the valuation process, the third-party advisors obtained information on the Company’s current usage, building type, year built, and history of major capital expenditures made by the Company. Certain site inspections were conducted and review of market information such as comparable sales and current listings were obtained for the Company’s largest sites. In addition, an obsolescence assessment for real property locations at the reporting unit level was reviewed to determine if adjustments to fair value estimates were needed. Rental and Service Equipment, Machinery and Other The fair values of rent |
