McDermott International has filed for a pre-packaged Chapter 11 bankruptcy after months of deteriorating business prospects.
The key highlights of the restructuring are;
- elimination of $4.6 billion of debt. The secured lenders will get 94% of the new equity, unsecured bondholders the remaining 6%.
- Unsecured trade creditors will be paid in full
- Existing shareholders are wiped out
- Lummus to be sold for $2.725 billion
However, worry not, the senior management have looked after themselves. Back in October McDermott announced they had obtained $1.7 billion in additional new financing (at 12% interest rates).
At the same time, the senior management were awarded large retention bonuses. David Dickson, CEO, got $3.375 million. Samik Mukherjee, COO (the one who acknowledged taking TechnipFMC trade secrets) got $1.4 million. The funding and the bonuses were to be paid in tranches. So far, two-thirds of the bonus have already been paid out. The Board of Directors have decided to pay the remaining one third to Dickson and Mukherjee as a gesture of ‘good faith’ even though Tranche C of that financing agreement never got paid.
CFO Stuart Spence resigned in November. He got to keep all his retention bonus of $1.3 million.
Business prospects have deteriorated considerably in the second half of 2019 due to the uncertainties surrounding the company. Bookings were only $3 billion in the second half, versus $14 billion in the first half. Customers have canceled contracts or placed McDermott on the disqualified to bid list. Vendors have placed liens and withdrawn from job sites.