Energy industry contractor McDermott International has filed for Chapter 11 bankruptcy as it looks to eliminate over $4.6 billion of debt.
The company said on Tuesday 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.
The restructuring transaction will be implemented through a prepackaged Chapter 11 process that will be financed by a debtor-in-possession (DIP) financing facility of $2.81 billion.
Subject to court approval, McDermott 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 also has secured committed exit financing of over $2.4 billion in letter of credit facility capacity and will emerge from Chapter 11 with approximately $500 million in funded debt.
McDermott said the restructuring transaction will strengthen its balance sheet, normalize its trade debt and position the company for long-term growth.
All of McDermott’s businesses are expected to continue to operate as normal for the duration of the restructuring.
The company intends to commence the prepackaged Chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas later today.
It plans to move swiftly toward Court approval of the plan of reorganization, with confirmation expected within approximately two months from filing.
As part of the restructuring transaction, subsidiaries of McDermott have entered into a share and asset purchase agreement with a joint partnership between The Chatterjee Group and Rhône Group for the court-supervised sale process for Lummus Technology.
Under the terms of the agreement, the joint partnership has agreed, and is committed, to acquire Lummus Technology for a base purchase price of $2.725 billion. McDermott will have the option to retain or purchase, as applicable, a 10 percent common equity ownership interest in the entity purchasing Lummus Technology.
McDermott expects to hold an auction in approximately 45 days to solicit higher or better bids for the Lummus Technology business. Either the joint partnership or the winning bidder at the auction will purchase Lummus Technology as part of the Chapter 11 process, subject to regulatory and court approval.
Proceeds from the sale of Lummus Technology are expected to repay the DIP financing in full, as well as fund emergence costs and provide cash to the balance sheet for long-term liquidity.
As a result of the upcoming Chapter 11 filing, McDermott expects to be delisted from the New York Stock Exchange within the next 10 days.