McDermott Files For Bankruptcy, Plans to Sell Lummus Unit

(Bloomberg) -- McDermott International Inc. filed for bankruptcy after the engineering and construction company reached an agreement with creditors to tackle debt acquired through a botched acquisition.

The Houston-based company has estimated liabilities of between $1 billion and $10 billion, according to the filing in the Southern District of Texas.

The firm has the support of two-thirds of the holders of its funded debt in a pact that will eliminate more than $4.6 billion of debt by swapping it for equity, according to an earlier statement.

McDermott also agreed to sell its Lummus Technology unit for at least $2.725 billion to a joint partnership between the Chatterjee Group and Rhône Group, it said.

The company’s stock fell about 10 cents a share to 60 cents before trading was halted early Tuesday morning.

McDermott specializes in building and installing large, expensive items like oil platforms and natural gas plants, a business that’s under pressure as low energy prices discourage new construction. The company’s shares and bonds cratered in 2019 as it struggled with the debt taken on from its $3.5 billion takeover of Chicago Bridge & Iron Co. in 2018.

As those woes mounted, the company skipped a Nov. 1 interest payment on its bonds, triggering a 30-day grace period to make the payment. Some of its bondholders had agreed to hold off on taking action until January 21.

The company plans to finance its bankruptcy with a $2.81 billion debtor-in-possession loan and has secured exit financing of more than $2.4 billion. McDermott expects to emerge from bankruptcy with about $500 million in debt.

--With assistance from Allison McNeely.

To contact the reporters on this story: Jeremy Hill in New York at jhill273@bloomberg.net;Nicole Bullock in New York at nbullock6@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Shannon D. Harrington

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