McDermott has finalised a pre-packaged restructuring of its massive debt, which will see the oilfield services company file for bankruptcy protection under Chapter 11.
The restructuring will be financed by a debtor-in-possession (DIP) facility of $2.81 billion. As part of the deal, McDermott has also agreed to a stalking-horse offer sell its Lummus Technology unit for $2.73 billion.
Texas-based McDermott said the restructuring will eliminate $4.6 billion of debt. Its total debt stood at $9.86 billion as of Nov. 4, 2019.
DIP financing packages allow bankrupt companies to remain in business and fund operations as bankruptcy case proceeds.
The company also has secured committed exit financing of over $2.4 billion in letter of credit facility capacity and will emerge from Chapter 11 with approximately $500 million in funded debt.
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 fully pay all suppliers.
“As a result of the transaction, we are eliminating over $4.6 billion in debt from our balance sheet and we will emerge with robust liquidity and significant financing to execute on customer projects in our backlog,” McDermott CEO David Dickson said in a statement. “McDermott will emerge a stronger, more competitive company with a solid financial foundation.”
For the Lummus Technology business, McDermott will have the option to retain or purchase a 10 per cent in the joint partnership (between The Chatterjee Group and Rhône Group) entity purchasing the business. McDermott expects to hold an auction in approximately 45 days to solicit higher or better bids for the Lummus Technology business.
Proceeds from the sale of Lummus Technology are expected to repay the DIP financing in full, as well as fund other costs.
The company’s total liabilities jumped to $7.86 billion at the end of June 2018 after it acquired CB&I, from $1.36 billion in the previous quarter. Additionally, McDermott last year raised another $1.7 billion to support its operations.