McDermott International has received 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 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 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 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 the company’s balance sheet, normalize its trade debt and position the Company for long-term growth.
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.
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 pursuant to which the Joint Partnership will serve as the “stalking-horse bidder” in a court-supervised sale process for Lummus Technology.
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.
“The restructuring transaction, which has the full support from all of our funded creditors, including our unsecured bondholders, is further recognition of McDermott’s fundamentally solid operating business and proven strategy,” said David Dickson, president and Chief Executive Officer of McDermott. “Our record backlog, the majority of which has been booked in the last two years, and high rate of new project awards demonstrates our customers’ continued confidence in our business, the demand for our skills and our long-term opportunities ahead.”
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.
Barclays is serving as administrative agent for the term loan lenders, and Credit Agricole is serving as administrative agent for the revolving credit facility.
Kirkland & Ellis is serving as legal counsel to McDermott, Evercore Group is serving as the company’s financial advisor. AP Services, an affiliate of AlixPartners, is serving as operational advisor. Jackson Walker is serving as local legal counsel, Baker Botts. is serving as corporate legal counsel, Arias, Fabrega & Fabrega is serving as Panamanian legal counsel and Prime Clerk is serving as administrative agent.
Davis Polk & Wardwell is serving as legal counsel to the term loan lenders, Centerview Partners is serving as financial advisor to the term loan lenders, and Latham & Watkins is serving as legal counsel to the agent to the term loan lenders.
Linklaters is serving as legal counsel to the revolving lenders, Bracewell LLP is serving as legal counsel to the agent to the revolving lenders and FTI Consulting is serving as financial advisor to the agent to the revolving lenders.
Paul, Weiss, Rifkind, Wharton & Garrison and Brown Rudnick are serving as legal counsel to the bondholders. Houlihan Lokey is serving as financial advisor to the bondholders.
McDermott is fully integrated provider of technology, engineering and construction solutions to the energy industry.