Troubled engineering and construction group McDermott International said today it has the support of more than two-thirds of its funded debt creditors for a $4.6-billion debt-to-equity restructuring.
Subject to court approval, the restructuring will be implemented through a prepackaged Chapter 11 bankruptcy process financed by a debtor-in-possession (DIP) financing facility of $2.81 billion. The company has also secured committed exit financing of over $2.4 billion and will emerge from Chapter 11 with funded debts of approximately $500 million.
McDermott says that all its businesses are expected to operate normally during the Chapter 11 process. It intends to carry on paying all suppliers in full and continue all its customer projects without interruption.
As part of the restructuring, McDermott has agreed to sell its Lummus Technology subsidiary to a joint partnership of The Chatterjee Group (TCG; New York) and Rhône Group (New York and London), under which the partnership will serve as the “stalking-horse bidder” in a court-supervised sale of Lummus. TCG is a strategic investor with businesses across a wide range of industries. Rhône Group is a private equity firm.
Under the agreement, the partnership has agreed, and is committed, to acquire Lummus for a base purchase price of $2.725 billion. McDermott will have the option to retain or purchase a 10% common equity stake in the entity established by the partnership to buy the company.
In addition, McDermott expects to hold an auction in approximately 45 days to solicit higher or better bids for Lummus. Either the partnership or the winning bidder will buy Lummus as part of the Chapter 11 process, subject to regulatory and court approval. Proceeds from the sale of Lummus are expected to repay the DIP financing in full, as well as fund emergence costs and provide cash to the McDermott balance sheet for long-term liquidity.
McDermott intends to commence the prepackaged Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas later today, with approval expected within approximately two months from filing.
“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 CEO 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.”
Dickson added, “This financial restructuring will create a sustainable capital structure that matches the strength of our operating business. McDermott will emerge a stronger, more competitive company with a solid financial foundation…”
Following the 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 on the over-the-counter market throughout the Chapter 11 process. The shares are proposed to be cancelled as part of McDermott’s restructuring.
By Natasha Alperowicz
Source: Chemical Week
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