McDermott makes expected pre-packaged Chapter 11 bankruptcy filing

By Caroline Salls

Pittsburgh, Jan. 22 – McDermott International, Inc. made a pre-packaged Chapter 11 bankruptcy filing late Tuesday in the U.S. Bankruptcy Court for the Southern District of Texas.

According to an 8-K filed with the Securities and Exchange Commission, McDermott has filed motions seeking court approval to continue to operate its businesses as debtors-in-possession under the jurisdiction of the court.

As previously reported, the company announced Tuesday that it has the support of more than two-thirds of all its funded debt creditors for a restructuring transaction that will equitize nearly all its funded debt, eliminating over $4.6 billion of debt.

McDermott said the Chapter 11 proceedings will be financed by a debtor-in-possession financing facility of $2.81 billion. Subject to court approval, the company said it expects the DIP financing, combined with cash generated by McDermott, to enable it 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.

The company said it has also secured committed exit financing of more than $2.4 billion in letter-of-credit facility capacity and will emerge from Chapter 11 with roughly $500 million in funded debt.

McDermott said it began solicitations of votes from its lenders and bondholders Tuesday morning on a pre-packaged Chapter 11 plan of reorganization. Confirmation of the plan is expected to be obtained within about two months from the filing date.

Sale procedures

As part of the restructuring transaction, subsidiaries of McDermott have entered into a share and asset purchase agreement with a joint partnership between Chatterjee Group and Rhone Group under which the joint partnership will serve as the stalking horse bidder in a court-supervised sale process for Lummus Technology. The joint partnership has agreed to acquire Lummus for a base purchase price of $2,725,000,000.

McDermott will have the option to retain or purchase a 10% common equity ownership interest in the entity purchasing Lummus Technology.

Under bid procedures filed with the court, if the stalking horse bidder is not ultimately the winning bidder, McDermott will pay it an $81.75 million break-up fee and reimburse up to $25 million of its sale-related expenses.

Competing bids are due by 5 p.m. ET on March 1 and must at least equal the stalking horse bid, plus a 3% initial minimum overbid amount and the amount of the break-up fee and expense reimbursement.

Bids at auction must be made in minimum increments of $10 million.

Debt details

According to the Chapter 11 petition, McDermott had $8,754,000,000 in total assets and $9,863,000,000 in total debt as of Sept. 30.

The company’s largest unsecured creditors are UMB Bank, NA of Kansas City, Mo., with a $1,398,000,000 2024 notes claim; Greensill Capital UK Ltd. of London, with a $34.8 million working capital financing claim; H Butting GmbH Co. KG of Knesebeck, Germany; Bomac Contractors Ltd. of Beaumont, Tex., with a $13.56 million trade payable claim; ST Corp., based in Tokyo, with a $12.92 million trade payable claim; Trinidad Offshore Fabricators Unlimited of Trinidad, West Indies, with a $12.51 million trade payable claim; Allseas Marine Contractors SA of Chatel-Saint-Denis, Switzerland, with a $12.51 million trade payable claim; Zakher Marine Saudi Co. Ltd. of Abu Dhabi, with an $11.07 million trade payable claim; David E. Harvey Builders Inc. of Houston, with a $10.14 million trade payable claim; and Eisenbau Kramer GmbH of Kreutzal-Kredenbach, Germany, with a $9.59 million trade payable claim.

The company said in the 8-K that the Chapter 11 filing constituted an event of default under its pre-bankruptcy letter-of-credit agreement, credit agreement, super-priority senior secured credit agreement, 10 5/8% senior notes due 2024 and amended and restated master agreement for stand-by letters of credit.

Although the defaults would trigger acceleration of the debt instruments, efforts to enforce the payment obligations are automatically stayed under the Bankruptcy Code.

McDermott is a Houston-based provider of technology, engineering and construction solutions to the energy industry. The Chapter 11 case number is 20-30336.

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