McDermott International Holdings makes Chapter 15 bankruptcy filing

By Sarah Lizee

Olympia, Wash., Oct. 10 – McDermott International Holdings BV and two affiliates filed Chapter 15 bankrutpcy in the U.S. Bankruptcy Court for the Southern District of Texas on Monday, according to court documents.

McDermott International Holdings, Lealand Finance Co. BV and CB&I UK Ltd. are the only McDermott entities named in these proceedings.

The debtors said they started the Chapter 15 cases in conjunction with pending proceedings in England and the Netherlands to implement a value-maximizing transaction that will alleviate significant pressures on the group’s liquidity outlook and leave the group on solid financial and operational footing.

The debtors entered into a transaction support agreement in early September with some of their consenting lenders.

The McDermott group is also currently subject to actions being taken by one unsecured creditor, Reficar, in four jurisdictions. The debtors said Reficar is attempting to undermine a restructuring that has the support of over 84% of the group’s secured creditors.

Three years ago, the U.S. Bankruptcy Court for the Southern District of Texas confirmed the joint pre-packaged Chapter 11 plan of reorganization of McDermott International, Inc. and its debtor affiliates.

The transactions embodied in the Chapter 11 plan included, among other things, cancelation of all shares outstanding in parent company McDermott International, Inc., the equitization of about $4 billion of the group’s primary funded debt in the parent company, the preservation of about $2.4 billion in prepetition letters of credit, which were reinstated under several exit facilities, and the unimpairment of all general unsecured claims.

The group emerged from the Chapter 11 process as a reorganized enterprise under the parent, incorporated under the laws of Bermuda.

The company said that emerging during the Covid-19 pandemic proved challenging to the debtors and to the group as a whole.

The group has also faced disruptions to its supply chain, fallout from the Russia-Ukraine crisis and its effect on energy markets, and inflationary pressures, including rising costs, a tightening market in steel and other key raw materials, and skilled labor shortages, McDermott said.

The group faces a looming maturity under its existing letters of credit and term loan facilities, including a requirement to cash collateralize about $2 billion in letters of credit in March 2024, and a need to mitigate the Reficar claim.

As part of the transaction support agreement, the group received $250 million in new capital from a group of its existing equity holders, which 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 letter-of-credit facilities for three years, through mid-2027 with no change in pricing, increase the company's liquidity, and discharge certain legacy legal liabilities, the company said in a September press release.

The company expects to continue all current customer agreements, projects and vendor commitments throughout these processes.

McDermott currently expects to complete the processes no later than early 2024.

Kirkland & Ellis LLP and NautaDutilh are serving as legal counsel to McDermott, Credit Suisse is serving as the company's financial adviser and Alvarez & Marsal is serving as restructuring adviser.

PJT Partners is serving as financial adviser for an ad hoc group of McDermott's lenders and equity holders and Davis Polk & Wardwell LLP, Weil, Gotshal & Manges and Loyens & Loeff are serving as the ad hoc group's legal counsel.

FTI Consulting is serving as financing adviser for the steering committee of McDermott's bank lenders, and Linklaters LLP and Bracewell LLP are serving as the steering committee's legal counsel.

McDermott is a Houston-based provider of technology, engineering and construction solutions to the energy industry.

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