McDermott meets amendment conditions, prepays $75 million of term loan

By Wendy Van Sickle

Columbus, Ohio, May 16 – McDermott International, Inc. satisfied all the conditions to an amendment to its senior secured credit agreement that it announced on April 18, prepaid $75 million of its term loan and entered a new amendment increasing the margin on term borrowings, the company said in a press release Monday.

The newly effective portions of the amendment provide $450 million of letter-of-credit capacity, with the potential to increase to $600 million under an accordion feature; extend the maturity date of the letter-of-credit facility under the senior secured credit agreement to April 22, 2019, or Jan. 15, 2019 if the term loan remains outstanding or is not refinanced by that date; and provide increased flexibility by increasing the baskets for purchase money debt, acquisitions and purchases of junior priority debt and extending the window to mortgage the DLV 2000 by one year to allow the company to consider potential financing options, the release said.

The amended credit agreement also replaced an existing minimum EBITDA requirement with a more standard covenant package comprised of two leverage ratios and a fixed-charge ratio and removed or reduced certain reporting requirements to the credit agreement lenders. That portion of the amendment took effect in April.

The credit agreement is originally dated April 16, 2014, and Credit Agricole CIB is its administrative agent and is joined as a joint lead arranger and joint bookrunner by Well Fargo Bank, NA. Wells Fargo is the syndication agent, and ABN Amro Capital USA LLC and BBVA Compass are the co-documentation agents.

In connection with obtaining term lender consents to the amendment announced in April, McDermott prepaid $75 million of the term loan and entered into another amendment that increased the applicable margin on the term loan by 300 basis points and requires the company to apply the proceeds from any financing of the DLV 2000 to repay the term loan.

The company said the prepayment will decrease its 2016 ending cash and corresponding gross debt by about $75 million, and the interest rate change will increase 2016 net interest expense and cash interest by about $2 million.

McDermott executive vice president and chief financial officer Stuart Spence said in the release that the company expects the changes as a whole “to provide maximum flexibility and letter of credit support to position us for continued steady bidding activity.”

McDermott is a Houston-based engineering, procurement, construction and installation company for offshore oil and gas projects.

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