McDermott financing lifeline faces possible bondholder hurdle

McDermott’s bondholders could make it difficult for the embattled energy-industry contractor. McDermott’s Lummus Technology is the master licensor of multiple licensed units. New facility underscores strong lender support for McDermott. The company said last week that it received an initial $550 million term loan. It awarded for FEED design competition by POSCO INTERNATIONAL Corporation. $100 million in letters of credit to help stabilize its business and ward off bankruptcy. Company recently received unsolicited approaches for Lummus Technology with valuation exceeding $2.5 billion.

It includes fabrication engineering, procurement, construction and pre-commissioning scope for modules. But it will need 95% of its unsecured bondholders to agree to swap into new payment. FEED scope includes development of a PDH plant to be constructed in U.S. Gulf Coast. The awards follow the completion of a front-end engineering and design (FEED) competition. PIK notes allow borrowers to defer interest payments. The scope includes license, basic engineering package, extended basic engineering, training, technical services.

Valerie Potenza, head of high-yield research says “I don’t think the signing up of this financing facility takes restructuring off the table”.

It builds on past work for Yamal LNG in fabricating large process modules. McDermott’s stock slumped about 13% on last Monday and its bonds fell as investors fretted about uncertainty. The development of the facility will support future growth of propylene in the U.S. The Scope includes subsea umbilicals, risers and flowlines and subsea production systems (SPS) solutions. The high interest rates on the rescue loan, and the hurdles it faces accessing the remaining balance. The award includes technology licensing, basic engineering and technical services.

The company’s announcement had initially boosted the shares as much as 29% and sent its bonds rallying. Offshore installation of the URF and SPS equipment will commence in 2020 and be completed in 2023. McDermott selected due to its strength in engineering and extensive knowledge in executing fluid catalytic cracking projects. McDermott projected free cash flow of negative $1.2 billion for this year. Company announced that its joint venture Qingdao McDermott Wuchuan Offshore Engineering Co. Ltd in Qingdao.

It’s almost double the negative $640 million previously seen. Company announced that it recently received unsolicited approaches to acquire all or part of Lummus Technology. China has been awarded a large contract to provide three complex modules for the Arctic LNG 2 Project. Company announced that it has been awarded a sizeable contract by PetroLogistics ll LLC. It agreed to pay around 10% interest rates on the rescue loan. The award includes a joint URF and SPS EPCI solution, comprising a new subsea well gathering system (GS4).

The outlook withdrawal signals near-term performance uncertainties or working capital challenges. Scope will be completed by McDermott’s Center of Engineering Excellence in Kuala Lumpur. The award recognizes QMW’s experience and excellent performance in the Arctic. McDermott will assist in the development of a PDH plant to be constructed on the U.S. Gulf Coast. The company’s stock and bonds have cratered after it struggled with debt taken on from its $3.5 billion acquisition of Chicago Bridge. McDermott’s joint venture with Chevron has been awarded a sizeable license.

It’s also grappling with reduced spending by the oil and gas industry. The Company expects to utilize the amounts available under the agreement to finance working capital. McDermott’s Lummus Technology is a leading licensor of proprietary petrochemicals. The company plans to use the new funds to finance working capital and support the issuance of performance guarantees. The Haldia unit will be designed to primarily produce premium API Group. It also awarded retention bonuses to some top executives.

CLG’s lubricants technologies provide worldwide licensees with vast commercial experience. It including $3.4 million for Chief Executive Officer David Dickson. The scope includes the fabrication of three Pre-Assembled Unit Complex Process Modules. The award includes in-fill URF EPCI scope involving the development of new subsea wells. The contract was signed in the second quarter of 2019. It will receive one-third of the total bonus upon the effective date of the financing agreement. QMW will undertake fabrication engineering, partial procurement, construction.

Another third on the funding date of the second tranche of debt, and the rest on the funding date of the third tranche. McDermott’s Lummus Technology is a leading licensor of proprietary petrochemicals. The new credit agreement is a continued signal from lenders that support McDermott. A heritage spanning more than 100 years, encompassing approximately 3,100 patents. The initial $650 million is part of a rescue financing package totaling $1.7 billion. Fabrication for the modules is scheduled to commence at the end of 2019 and be completed in mid-2022.

Convincing 95% of bondholders to exchange their notes is “the big first big hurdle”. Lummus is an excellent business, with incredibly impressive employees. McDermott defines a large contract as between USD $50 million and USD $250 million. It’s required for the company to access the $150 million “tranche C” debt. The award builds on McDermott’s work on earlier phases of the Shwe gas field development. Water depths in the field range from 787 to 885 feet (240 to 270 meters). The company could get consent of two-thirds of its secured lenders to waive the bondholder swap requirement.

The designation refers to McDermott’s share of the award via its joint venture. McDermott and BHGE will lead the project from the joint Project Management. It would reduce its borrowing capacity to about $1.3 billion and constrain access to lenders of credit. The process of exploring strategic alternatives is part of ongoing efforts. The plant has a design basis of 500 KTA. It essential to operate its business, according to Potenza. McDermott is pleased to be working with PetroLogistics II in the development of a facility.

Shares of the company tumbled as much as 14%, and ended down about 13% in New York. The agreement provides near-term liquidity for the Company to manage working capital. It will pull from vast expertise in engineering to complete the FEED. The led high-yield market declines, dropping 4 cents on the dollar to about $0.245. The shale revolution has resulted in a significant decline in co-product propylene production. BHGE will deliver the SPS scope, including vertical christmas trees. The company said it’s still exploring a sale of its Lummus Technology unit and its pipe-fabrication business.

Company announced that it has been awarded a large* contract by Saudi Aramco. The last month company received expressions of interest valuing Lummus at as much as $2.5 billion. McDermott’s previously announced processes to sell the remaining portion. The company specializes in building and installing large, expensive items like oil platforms. The award follows an earlier award granted to BHGE in 1Q 2019. It’s currently constructing Sempra Energy’s giant Cameron liquefied natural gas complex in Louisiana. Lummus has a reputation for innovation and reliability in the market. It holds more than 3,100 patents.

Facebook Comments