McDermott International Inc (NYSE:MDR) Expects To File For Bankruptcy: McDermott Seeks Bankruptcy Loan Of $2 Billion From HPS Investment Partners

McDermott International Inc (NYSE:MDR) expects to file for bankruptcy in the next few weeks. The company is in discussions with Baupost Group LLC and HPS Investment Partners for a bankruptcy loan of $2 billion. The company will use the funds for continuing its regular operations. McDermott stock trades $0.67 (down 0.98%) on January 2, 2019.

Receives a warning from NYSE

The shares of McDermott have been trading above $1 since December 18, 2019, after it received warning from The New York Stock Exchange that its shares trade below $1 for a longer period. It is on the backdrop of McDermott signed a forbearance agreement after one month of this news with a group of creditors. The company skipped the payment of interest in November 201 on the loans within the grace period.

The forbearance allows the company to postpone payment of interests until January 15, 2020. As per the terms of the forbearance agreement, McDermott will discuss restructuring plan with the secured creditors. The company needs to submit a restructuring plan by the end of this year.

Facing troubles since acquisition in 2018

McDermott is facing liquidity issues after it took over Chicago Bridge & Iron in the year 2018. Its stock tumbled after the news broke out on its engagement with AlixPartners LLP, which is reputed to make turnarounds, to improve cash flow and mitigate the losses. To arrest the free-falling of the stock, McDermott issued a clarification that it regularly hires external advisors for evaluating the opportunities.

Shares spike above 50%

McDermott’s shares have spiked above 50% in the pre-market trade after the news of the proposed sale of the Lummus Technology business line and closed at $2.01 (up 27.22%) on September 20, 2019.

McDermott finalized a debt financing deal for $1.7 billion on October 21, 2019. The company has accessed the second tranche of $1.7 billion loan for working capital needs and to support performance bank guarantees for upcoming projects. According to a filing with the US SEC, the loan solved its immediate liquidity problems and could focus on long term solutions.

McDermott has appointed Managing Director of AlixPartners, John Castellano, as the Chief Transformation Officer as per the credit accord.

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