McDermott’s bondholders may make it tough for the embattled energy-industry contractor to make additional attracts on its $1.7 billion rescue mortgage.

The firm mentioned Monday it obtained an preliminary $550 million time period mortgage and $100 million in letters of credit score to assist stabilize its enterprise and keep off chapter. But it can want 95% of its unsecured bondholders to comply with swap into new payment-in-kind notes if it desires to have the ability to entry the subsequent $250 million of financing, mentioned Valerie Potenza, head of high-yield analysis at Xtract Research. PIK notes permit debtors to defer curiosity funds.

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“I don’t assume the signing up of this financing facility takes restructuring off the desk,” she mentioned in a telephone interview.

McDermott’s inventory slumped about 13% Monday and its bonds fell as traders fretted about uncertainty over its free money move and 2019 outlook, the excessive rates of interest on the rescue mortgage, and the hurdles it faces accessing the remaining stability of the $1.three billion time period mortgage and $400 million in letters of credit score. The firm’s announcement had initially boosted the shares as a lot as 29% and despatched its bonds rallying.

To receive the financing, McDermott projected free money move of detrimental $1.2 billion for this 12 months, in keeping with a presentation on the U.S. Securities and Exchange Commission web site. That’s nearly double the detrimental $640 million beforehand seen. It agreed to pay round 10% rates of interest on the rescue mortgage, withdrew its annual steerage and mentioned it was halting efforts to promote its industrial storage tanks enterprise.

While the financing is a lifeline that will assist McDermott keep away from chapter, the outlook withdrawal indicators “near-term efficiency uncertainties or working capital challenges,” Bloomberg Intelligence analyst Scott Levine mentioned. The firm’s inventory and bonds have cratered after it struggled with debt taken on from its $three.5 billion acquisition of Chicago Bridge & Iron Co. It’s additionally grappling with decreased spending by the oil and gasoline .

The firm plans to make use of the brand new funds to finance working capital and help the issuance of efficiency ensures. It additionally awarded retention bonuses to some high executives, together with $three.four million for Chief Executive Officer David Dickson. He will obtain one-third of the overall bonus upon the efficient date of the financing settlement, one other third on the funding date of the second tranche of debt, and the remaining on the funding date of the third tranche.

The preliminary $650 million is a part of a rescue financing bundle totaling $1.7 billion offered by a few of its current secured lenders, in keeping with a submitting Monday. Convincing 95% of bondholders to trade their notes is “the massive first massive hurdle,” and it’s required for the corporate to entry the $150 million “tranche C” debt and $350 million “tranche D” debt, Potenza mentioned.

To make certain, the corporate may get consent of two-thirds of its secured lenders to waive the bondholder swap requirement, however that would cut back its borrowing capability to about $1.three billion and constrain entry to lenders of credit score, that are important to function its enterprise, in keeping with Potenza.

Rise and Fall. Shares of the corporate tumbled as a lot as 14%, and ended down about 13% in New York. While its 10.625% bonds due 2024 posted the most important achieve and quantity amongst excessive yield debt on Monday, they reversed that advance. They led high-yield market declines, dropping four cents on the greenback to about $zero.245. The debt now yields practically 62%.

The firm mentioned it’s nonetheless exploring a sale of its Lummus Technology unit and its pipe-fabrication enterprise. It mentioned final month it had obtained expressions of curiosity valuing Lummus at as a lot as $2.5 billion.

The firm makes a speciality of constructing and putting in massive, costly gadgets like oil platforms and pure gasoline crops. It’s presently establishing Sempra Energy’s big Cameron liquefied pure gasoline complicated in Louisiana. Lummus licenses applied sciences utilized in petrochemicals, refining and gasoline…

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