US contractor McDermott has announced it will file for chapter 11 bankruptcy, a restructuring move that the firm says will eliminate $4.6bn of debt.
The move is supported by over two-thirds of McDermott’s funded debt creditors.
The company says exit financing – money provided to debtors to allow the firm to continue operating – will amount to $2.4bn.
Following Chapter 11 bankruptcy proceedings, McDermott will have an estimated $500m in funded, long-term debt.
McDermott’s petrochemicals subsidiary Lummus Technology will be sold to a joint partnership between two New York headquartered companies, Chatterjee Group and Rhône Group.
McDermott announced plans to sell Lummus Technology in September 2019.
The Lummus Technology sale is expected to fund the “debtor-in-possession” deal of $2.81bn, as well as financing emergence costs.
Following restructuring, McDermott says it expects its business to continue as normal, for both clients and employees.
Due to the bankruptcy filing, McDermott is due to be delisted from the New York Stock Exchange within the next 10 days.
David Dickson, McDermott’s president and chief executive, said: “The restructuring transaction, which has the full support from all of our funded creditors, including our unsecured bondholders, is further recognition of McDermott’s fundamentally solid operating business and proven strategy.
“Our record backlog, the majority of which has been booked in the last two years, and high rate of new project awards demonstrates our customers’ continued confidence in our business, the demand for our skills and our long-term opportunities ahead.
“This financial restructuring will create a sustainable capital structure that matches the strength of our operating business.
“As a result of the transaction, we are eliminating over $4.6bn in debt from our balance sheet and we will emerge with robust liquidity and significant financing to execute on customer projects in our backlog.
“Throughout this process, which we expect to complete expeditiously, McDermott will continue all business operations as normal and deliver on our commitments to our customers.
“I would like to thank our customers, employees, suppliers and partners for their ongoing dedication, and our lenders for their continued collaboration in reaching this comprehensive and definitive balance sheet solution.
“McDermott will emerge a stronger, more competitive company with a solid financial foundation, and we will build upon our reputation as a premier, fully integrated provider of technology, engineering and construction solutions to the energy industry.”
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