U.S. oilfield services provider McDermott International Inc said on Tuesday it would file for prepackaged bankruptcy protection under Chapter 11, as it looks to cut debt that ballooned following a major acquisition in 2018.
The restructuring will be financed by a debtor-in-possession (DIP) financing of $2.81 billion, the company said. As part of the deal, McDermott has also entered a stalking-horse agreement to sell its Lummus Technology unit for $2.73 billion.
DIP financing packages allow bankrupt companies to remain in business and fund operations as bankruptcy case proceeds.
Texas-based McDermott’s total debt stood at $9.86 billion as of Nov. 4, 2019.
“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 a note.
McDermott’s shares were down 15% in premarket trade. Bloomberg reported on Friday the company was preparing to file for bankruptcy.. McDermott has been reeling under heavy debt since it combined its offshore engineering and construction business with Chicago Bridge & Iron Co (CB&I) in an all-stock deal valued at around $6 billion including nearly $4 billion in debt.
The company’s total liabilities jumped to $7.86 billion at the end of June 2018 after it acquired CB&I, from $1.36 billion in the previous quarter.
McDermott last year raised another $1.7 billion to support its operations and concurrently withdrew its full-year forecast.