McDermott to file Chapter 11 today, plans to sell Lummus unit

NEW YORK (Bloomberg) - McDermott International Inc. will file 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 said that it 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 a 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 plans to file for Chapter 11 bankruptcy in the Southern District of Texas on Tuesday.

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