McDermott International Inc.’s $1.7 billion super-senior credit score facility might give a sign of phrases if the struggling engineering and development agency have been to transform the debt right into a chapter mortgage.

The facility consists of a $1.three billion time period mortgage and $400 million in letters of credit score. It accommodates extremely restrictive covenants that might present a template for the form of phrases they might obtain in the event that they have been to transform their debt right into a debtor-in-possession mortgage in chapter, Valerie Potenza, a high-yield analyst at Xtract Research, stated in an interview.

“It appears to be like like a DIP, talks like a DIP, but it surely’s not a DIP,” she stated.

A consultant for McDermott didn’t instantly reply to a request for remark.

McDermott skipped a Nov. 1 curiosity fee on its bonds, triggering a 30-day grace interval to make the fee or file for Chapter 11. It additionally warned in regulatory paperwork of the chance of chapter.


The firm final month managed to barter the $1.7 billion rescue financing, but it surely faces quite a few hurdles to entry the roughly $1.1 billion out there throughout three tranches after its preliminary $650 million draw.

The super-senior facility accommodates DIP-like lender protections, reminiscent of a restrict on its capacity to tackle new debt, in line with Potenza. If the corporate have been to finish up submitting for chapter, it’s affordable to imagine that the prevailing group of lenders would negotiate with the corporate to offer a restructuring mortgage, she stated.

Regardless of McDermott’s destiny, the lenders are being well-compensated for taking the chance of lending to the corporate, which supplies providers to grease and gasoline corporations. If McDermott succeeds in promoting its Lummus Technology unit, the super-senior lenders will obtain their par worth plus a three% premium, in line with Xtract’s evaluation of the credit score settlement.

In the occasion of a chapter submitting within the subsequent 18 months, McDermott should repay the mortgage earlier than different funds, even when a Chapter 11 is triggered by insolvency. Those lenders would obtain a make-whole premium within the first six months and a three% premium for the 12 months thereafter, in line with Xtract.


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