Davis Polk is advising an ad hoc group of term lenders (the “Ad Hoc Group”) holding $1.55 billion, or about 70% of the term loan under certain Credit Agreement, dated as of May 10, 2018 (and all loans thereunder collectively, the “2018 Term Loans”), and $966 million, or about 74% of the term loan under certain Superpriority Senior Secured Credit Agreement, dated as of October 21, 2019 (and all loans thereunder collectively, the “Suerpriority Term Loans”), in connection with the chapter 11 restructuring of McDermott International, Inc. (together with certain of its subsidiaries, “McDermott”). On January 21, 2020, the Ad Hoc Group, the prepetition LC lenders, the bondholder group, McDermott, and other parties entered into a comprehensive restructuring support agreement (the “RSA”) that contemplates a prepackaged bankruptcy that will restructure McDermott’s debt and liabilities. The prepackaged chapter 11 plan or reorganization (the “Plan”) provides for an equitization of approximately $4 billion of debt, with lenders of the 2018 Term Loans receiving 94% of reorganized equity and $500 million of take-back debt. The Plan also envisions the sale of McDermott’s Lummus Technology business for $2.725 billion to the Chatterjee Group and Rhône Group (subject to higher bids and regulatory approvals) to repay the DIP facility and provide liquidity upon exit, and a $2.81 billion debtor-in-possession financing (“DIP financing”), to be provided by the Ad Hoc Group and the prepetition LC lenders, consisting of $1.2 billion in new term loans, $543 million in new LC capacity, and a rollup of $800 million in Superpriority Term Loans and $200 million in prepetition LCs. The LC lenders also agreed to provide extended LC support during the chapter 11 cases and upon exit. The RSA is supported by holders of approximately 74% of the 2018 Term Loans, approximately 95% of 2021 LC claims, approximately 85% of 2023 LC claims, approximately 85% of revolving credit claims and approximately 67% of senior notes claims.
On January 21, 2020, McDermott filed its voluntary chapter 11 petitions in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. On January 23, 2019, McDermott obtained all of the “first day” relief it sought, including interim approval of a DIP financing facility consisting of $1.2 billion in new term loans, $543 million in new LC capacity, and a rollup of $800 million in Superpriority Term Loans and $200 million in prepetition LCs, of which $550 million new money term loan and $300 million new money letters of credit is available on an interim basis. The proceeds of the DIP financing will be used to support McDermott’s business during the reorganization.
McDermott is a fully integrated provider of engineering, procurement, construction and installation and technology solutions to the energy industry. McDermott’s proprietary technologies and services are utilized for offshore, subsea, power, liquefied natural gas, and downstream energy projects around the world. Their customers include national, major integrated and other oil and gas companies and producers of petrochemicals and electric power.
The Davis Polk restructuring team includes partner Damian S. Schaible, counsel Natasha Tsiouris and associates Stephen D. Piraino, Daniel Rudewicz and Mary A. Prager. The finance team includes partner Monica Holland, counsel Benjamin Cheng and associate Michael Fan. The corporate team includes partner Brian Wolfe. Partner Adam Kaminsky provided executive compensation advice. Members of the Davis Polk team are based in the New York and Washington DC offices.