McDermott International is looking for a bridge mortgage to assist it cowl a working-capital deficit of about $1.7 billion till it will probably promote an asset akin to its Lummus Technology unit, based on an individual with data of the matter.
The Houston-based firm, which gives building providers to grease and gasoline corporations, is working with advisers on methods to repair shortfalls in liquidity and dealing capital, based on folks with data of the discussions. Existing collectors expect to be approached for the bridge mortgage.
Evercore Inc., the corporate employed to discover an asset sale, beforehand approached McDermott’s collectors about offering new cash by second-lien debt issuance, mentioned the folks, who requested to not be recognized discussing confidential issues.
McDermott’s bonds and time period mortgage have plunged since information of its adviser hires started to leak. Existing collectors mentioned the declines make it much less probably that they might lend extra money to the corporate with out being on the high of the capital construction, akin to in a chapter or super-priority mortgage.
A consultant for McDermott mentioned the corporate declined to remark. A consultant for Evercore didn’t have a direct remark.
McDermott has giant working capital wants and money necessities because of the nature of its enterprise, which requires upfront investments in initiatives. Those wants have been compounded by higher-than-expected prices on its Cameron and Freeport liquefied pure gasoline initiatives, which it bought from Chicago Bridge & Iron Co., Michael Corelli, a senior credit score officer at Moody’s Investors Service, mentioned. The scores firm downgraded McDermott one notch to B3 final week.
McDermott has struggled since Chief Executive Officer David Dickson agreed to buy belongings from CB&I as a part of a $three.5 billion deal final 12 months. In addition to the working capital deficit, it reported a internet lack of $146 million and detrimental free money stream of $220 million for the three months ended June 30, based on the corporate. It’s additionally been harm by a normal slowdown within the oil and gasoline business amid depressed commodity costs. Last 12 months, the corporate had a internet lack of $2.7 billion.
The firm confirmed it was working with Evercore to discover unsolicited curiosity in its Lummus Technology enterprise, with a valuation exceeding $2.5 billion. That quantity mixed with its $1.5 billion in boats, gear and buildings, in addition to $500 million in storage belongings, might be sufficient to cowl its debt and most well-liked inventory, Citi analysis analysts wrote in a Sept. 18 be aware.
McDermott mentioned it had about $three.eight billion of gross debt on the finish of the second quarter and $1 billion of money out there.
If it have been to promote the know-how enterprise for greater than $500 million, McDermott’s bond guidelines stipulate that it should use the web proceeds to repay debt, based on a Covenant Review report.
The firm can also be getting recommendation from Kirkland & Ellis LLP and AlixPartners LLP, and a gaggle of its bondholders have tapped Paul Weiss Rifkind Wharton & Garrison LLP and Houlihan Lokey Inc., folks with data of the matter beforehand mentioned. Representatives for AlixPartners and Houlihan Lokey declined to remark; Kirkland & Ellis and Paul Weiss didn’t instantly reply to requests for remark.
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