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 US$2.81 billion. Subject to court approval, McDermott expects the DIP financing, combined with cash generated by McDermott, to enable the company to stabilise 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 US$2.4 billion in letter of credit facility capacity and will emerge from Chapter 11 with approximately US$500 million in funded debt. The restructuring transaction will strengthen the company's balance sheet, normalise 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. McDermott expects to continue to pay employee wages and health and welfare benefits, and to pay all suppliers in full. All customer projects are expected to continue uninterrupted on a global basis.
On January 21, the company commenced solicitation of votes from its lenders and bondholders in support of a prepackaged Chapter 11 Plan of Reorganization ("the Plan"). The company said that it intended to commence the prepackaged Chapter 11 filing in the US Bankruptcy Court for the Southern District of Texas ("the Court") on 21 January. The company's support from all of its creditor constituencies is memorialised in a Restructuring Support Agreement. The company plans to move swiftly toward Court approval of the Plan, 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 (the "Agreement") with a joint partnership between The Chatterjee Group and Rhône Group (the "Joint Partnership") pursuant to which the Joint Partnership will serve as the "stalking-horse bidder" in a 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 US$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.
"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 Chief Executive Officer 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 continued: "This financial restructuring will create a sustainable capital structure that matches the strength of our operating business. As a result of the transaction, we are eliminating over $4.6 billion in debt from our balance sheet and we will emerge with robust liquidity and significant financing to execute on customer projects in our backlog. Throughout this process, which we expect to complete expeditiously, McDermott will continue all business operations as normal and deliver on our commitments to our customers. I would like to thank our customers, employees, suppliers and partners for their ongoing dedication, and our lenders for their continued collaboration in reaching this comprehensive and definitive balance sheet solution. McDermott will emerge a stronger, more competitive company with a solid financial foundation, and we will build upon our reputation as a premier, fully integrated provider of technology, engineering and construction solutions to the energy industry."
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. McDermott common stock will continue to trade in the over-the-counter marketplace throughout the pendency of the Chapter 11 process. The shares are proposed to be cancelled as part of McDermott's restructuring.
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