McDermott Enters Deal to Initiate Financial Restructuring

McDermott International Ltd announced that it has entered into a transaction support agreement - with more than 75 percent, in aggregate, of its secured letter of credit providers, funded debt creditors, and equity holders - to initiate a financial restructuring process.

The move is being undertaken to strengthen McDermott’s capital structure, enhance its liquidity position, and “further position the company for long-term success”, McDermott outlined in a release posted on its website.

In addition, McDermott revealed in the release that it has received $250 million in new capital from a group of its existing equity holders, which it said will support its ability to operate its business, deliver on existing projects, and expand backlog with new client projects.

Under the terms of the agreement, McDermott will amend and extend its term loans and LC facilities for three years, through mid-2027 with no change in pricing, increase the company’s liquidity, and discharge certain legacy legal liabilities, McDermott noted in the release. CB&I Storage Solutions will have dedicated working capital and an independent LC facility separate from the McDermott LC facilities, the company highlighted.

To implement the agreement, McDermott International Holdings B.V. and Lealand Finance Company B.V. will initiate procedures in the Netherlands under the Dutch Act on Confirmation of Extrajudicial Plans, McDermott stated. CB&I UK Limited will initiate a restructuring Plan under Part 26A of the Companies Act 2006 (UK) in England, it added.

McDermott International Holdings B.V., Lealand Finance Company B.V., and CB&I UK Limited are the only McDermott entities named in these proceedings, the company highlighted in the release. Following the completion of the Netherlands and UK processes, McDermott said it will make a voluntary filing in the U.S. to secure legal recognition of the international court decisions.

McDermott noted in the release that it expects to continue all current customer agreements, projects, and vendor commitments throughout these processes. The company pointed out that it currently expects to complete the processes no later than early 2024.

“Over the past 24 months, our executive leadership has made transformative progress in resetting and implementing our business strategy by leveraging the strength of our operating business and tailoring our approach to our core clients,” Michael McKelvy, the President and CEO of McDermott, said in a company statement.

“We are pleased to have reached this agreement with our key stakeholders, which demonstrates their confidence in the long-term strength and sustainability of our business,” he added.

“These proactive steps ensure that McDermott is strongly positioned to deliver on our growing number of client projects as we continue our important work of accelerating the energy transition in our industry,” he continued.

“We intend to continue all operations as normal as we move through these processes, including continued delivery on our client projects, and I thank our customers, suppliers and partners for their patience and unwavering support ... As we celebrate our 100th anniversary, we look forward to a long future as one of the few companies in the world with the scope, assets, capabilities, and know-how to meet growing customer and global demand for low carbon solutions and energy transition,” McKelvy went on to state.

McDermott has already won several contracts this year, with a flurry of these coming in July.

During that month, the company revealed that it had been awarded a project management consultancy and engineering, procurement, and construction management contract for the Naphtha Cracker Expansion (Phase II) polypropylene expansion and new ethylene derivative unit project from Indian Oil Corporation Limited.

Also in July, McDermott announced that it had secured a “major” contract from Qatargas Operating Company Limited to deliver engineering, procurement, construction, and installation for the North Field Production Sustainability Offshore Fuel Gas Pipeline and Subsea Cables Project, COMP1.

During the same month, McDermott revealed that it had been awarded an engineering, procurement, and removal contract for offshore decommissioning work by Woodside Energy and an offshore transportation and installation contract from Sarawak Shell Berhad for the F22, F27, and Selasih fields pipelay and heavy lift project off the coast of Sarawak in East Malaysia.

2020 Restructuring Process

Back in June 2020, McDermott International Ltd announced that the company had successfully completed a restructuring process.

“The comprehensive balance sheet restructuring equitizes nearly all of McDermott’s $4.6 billion of funded debt,” McDermott said in a release posted on its site at the time.

“The company emerges with $2.4 billion in letter of credit capacity and $544 million of funded debt,” it added.

In the release, McDermott announced that it had completed the sale of Lummus Technology to a joint partnership between Haldia Petrochemicals Ltd., a flagship company of The Chatterjee Group, and Rhône Capital, “having received all required regulatory approvals and pursuant to the company’s plan of reorganization”.

“Proceeds from the sale of Lummus Technology will repay the debtor-in-possession financing in full, as well as fund emergence costs and provide cash to the balance sheet for long-term liquidity,” the company noted at the time. .

“We are pleased to have completed this process so swiftly thanks to the dedication of our employees and the support of our new owners, customers, suppliers and partners," David Dickson, McDermott’s President and Chief Executive Officer at the time, said in a company statement in June 2020.

“We will continue executing on our significant backlog, with a new capital structure to match and support the strength of our operating business, and we emerge well-positioned for long-term growth and success, even amid this period of global uncertainty,” he added.

“We look forward to continued delivery on customer projects. Finally, we congratulate our Lummus colleagues, and look forward to continuing our working partnership with Lummus as we move into the future,” he continued.

In March 2020, McDermott announced that the U.S. Bankruptcy Court for the Southern District of Texas confirmed the company’s plan of reorganization and approved the sale of Lummus Technology to a joint partnership between The Chatterjee Group and Rhône Capital.

“With the support of our creditors, employees, customers and suppliers, we have been able to confirm our plan of reorganization less than two months after we initially filed for Chapter 11,” Dickson said in a company statement at the time.

“This is a significant achievement and allows us to emerge in the near-term as a stronger, more competitive player, with a sustainable capital structure that matches the strength of our operating business,” he added.

In its March 2020 statement, McDermott said that, under the terms of the plan, it would complete a “comprehensive restructuring transaction to de-lever its balance sheet and immediately position the company for long-term growth”.

In January 2020, McDermott announced that it had the support of more than two-thirds of all its funded debt creditors for a restructuring transaction that it said would equitize nearly all the company’s funded debt.

“The restructuring transaction will be implemented through a prepackaged Chapter 11 process that will be financed by a debtor-in-possession financing facility of $2.81 billion,” the company stated at the time.

“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,” it added.

To contact the author, email andreas.exarheas@rigzone.com