Offshore staff
HOUSTON – McDermott International Inc. has the support of more than two-thirds of all its funded debt creditors for a restructuring transaction that will equitize nearly all the company’s funded debt, eliminating more than $4.6 billion of debt.
The restructuring transaction will be implemented through a prepackaged Chapter 11 process that will be financed by a debtor-in-possession (DIP) financing facility of $2.81 billion. Subject to court approval, McDermott expects the DIP financing, combined with cash generated by the company, to enable it to stabilize its cash flows, continue operating in the normal course and fulfill its commitments to key stakeholders, including customers, suppliers, joint-venture partners, business partners, and employees.
The company said it also has secured committed exit financing of more than $2.4 billion in letter of credit facility capacity and will emerge from Chapter 11 with approximately $500 million in funded debt.
The restructuring transaction will strengthen its balance sheet, normalize its trade debt, and position it for long-term growth, the company said.
All of McDermott’s businesses are expected to continue to operate as normal for the duration of the restructuring.
This morning, the company began solicitation of votes from its lenders and bondholders in support of a prepackaged Chapter 11 Plan of Reorganization. It intends to start the prepackaged Chapter 11 filing in the US Bankruptcy Court for the Southern District of Texas later today.
The company’s support from all its creditor constituencies is memorialized in a restructuring support agreement. The company said it plans to move swiftly toward court approval of the plan, with confirmation expected within about two months from filing.
As part of the restructuring transaction, subsidiaries of McDermott have entered into a share and asset purchase agreement with a joint partnership between The Chatterjee Group and Rhône Group. The joint partnership will serve as the “stalking-horse bidder” in a court-supervised sale process for Lummus Technology.
Under the terms of the agreement, the joint partnership has agreed, and is committed, to acquire Lummus Technology for a base purchase price of $2.725 billion. McDermott will have the option to retain or purchase, as applicable, a 10% common equity ownership interest in the entity purchasing Lummus Technology.
McDermott said it expects to hold an auction in about 45 days to solicit higher or better bids for the Lummus Technology business. Either the joint partnership or the winning bidder at the auction will purchase Lummus Technology as part of the Chapter 11 process, subject to regulatory and court approval.
Proceeds from the sale of Lummus Technology are expected to repay the DIP financing in full, as well as fund emergence costs and provide cash to the balance sheet for long-term liquidity.
As a result of the upcoming Chapter 11 filing, the company said it expects to be delisted from the New York Stock Exchange within the next 10 days. McDermott common stock will continue to trade in the over-the-counter marketplace throughout the pendency of the Chapter 11 process. The shares are proposed to be cancelled as part of the company’s restructuring.
01/21/2020
