Houston-based oilfield services company McDermott International is filing for Chapter 11 bankruptcy protection.
In a statement, the company said it has secured $2.81 billion debtor-in-possession (DIP) financing that will allow it to remain in operation. It said two-thirds of its creditors have agreed to support a prepackaged financial 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.
Under the terms of the DIP financing deal, it has reached a stalking-horse agreement to sell its Lummus Technology unit for $2.73 billion to the Chatterjee Group and Rhône Group. 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.
“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,” chief executive officer of McDermott David Dickson said.
In 2018, the company combined its offshore engineering and construction business with Chicago Bridge & Iron and its liabilities jumped to $7.86 billion at the end of June of that year, from $1.36 billion in the previous quarter. It had total debt of $9.86 billion as of November.
Last year the company raised $1.7 billion while withdrawing its full-year forecast.
McDermott also said it was being investigated by the Securities and Exchange Commission over projected loss disclosures. The company additionally faces a probe from the U.S. Department of Justice over allegedly fraudulent invoices at a Department of Energy project in South Carolina that is linked to CB&I. That project is now canceled.
The company’s shares were down 15% following the news. Overall, the company’s shares are down 91.7% for the past year, compared to a 21.7% decline for the industry.
It said it expects to be delisted from the New York Stock Exchange within the next 10 days, but its stock will trade in the over-the-counter marketplace.