Gulf Construction Online - McDermott files for prepackaged restructuring

Contractors

McDermott files for prepackaged restructuring

01 February 2020

McDermott International has filed for Chapter 11 bankruptcy after the engineering and construction company reached an agreement with creditors to tackle its debt.

The firm earlier said it has the support of two-thirds of the holders of its funded debt in a pact that will eliminate more than $4.6 billion of debt by swapping it for equity.

The company says exit financing – money provided to debtors to allow the firm to continue operating – will amount to $2.4 billion.

Following Chapter 11 bankruptcy proceedings, McDermott will have an estimated $500 million in funded, long-term debt.

McDermott’s petrochemicals subsidiary Lummus Technology will be sold to a joint partnership between two New York headquartered companies, Chatterjee Group and Rhône Group.

The restructuring transaction will be implemented through a prepackaged Chapter 11 process 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 McDermott, to enable the company to stabilise 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 restructuring transaction will strengthen the company’s balance sheet, normalise its trade debt and position the company for long-term growth, it said.

All of McDermott’s businesses are expected to continue to operate as normal for the duration of the restructuring. McDermott expects to continue to pay employee wages and health and welfare benefits, and to pay all suppliers in full. All customer projects are expected to continue uninterrupted on a global basis, it said.

McDermott has a major presence in the Gulf and secured two major contracts in the region last July. In Saudi Arabia, it was awarded a $1.5-billion-plus contract for Package 4 of Saudi Aramco’s Marjan Increment Development Project to provide engineering, procurement, construction and installation (EPCI) of offshore gas facilities and pipelines. In Oman, McDermott clinched a deal to provide front-end engineering design (Feed) services for the Sohar LNG Bunkering Project.