In a move to eliminate over US$4.6Bn in debt, Houston-based oil and gas engineering and construction firm McDermott International, Inc has filed for Chapter 11 bankruptcy reorganisation
McDermott operates a fleet of specialised marine construction vessels, dive support, heavy-lift and pipe-lay vessels, supporting offshore oil and gas projects and is a leading engineering, procurement and construction contractor for onshore energy infrastructure, petrochemical plant and LNG terminals. McDermott reported its Q3 2019 results were “impacted by unfavourable changes in cost estimates” on LNG projects, among which were Cameron LNG and Freeport LNG.
McDermott said its restructuring will be implemented through a pre-packaged Chapter 11 process that will be financed by a debtor-in-possession (DIP) financing facility of US$2.81Bn. Subject to court approval, McDermott expects the DIP financing, combined with its cash to enable it to stabilise its cash flows, to allow it to continue normal operations and fulfil its commitments to key stakeholders, customers and suppliers.
McDermott has secured committed exit financing of over US$2.4Bn in a letter of credit facility and will emerge from Chapter 11 with approximately US$500M in funded debt.
McDermott has filed its reorganisation plan in the US Bankruptcy Court for the Southern District of Texas.
As part of the restructuring, McDermott has agreed to sell Lummus Technology to a joint partnership between investment firm The Chatterjee Group and Rhône Group for US$2.73Bn. Lummus Technology is licensor of proprietary gas processing, refining, petrochemical, and coal gasification technologies, with offices in the US, Europe and Asia.
McDermott will have the option to retain or purchase a 10% common equity ownership interest in Lummus Technology from its purchaser.
A higher bidder could emerge for Lummus Technology during an auction held by McDermott in approximately 45 days. 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, McDermott 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 McDermott’s restructuring.
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