Item 1.01 Entry into a Material Definitive Agreement.
Restructuring Support Agreement
On January 21, 2020, McDermott International, Inc. (the "Company") and certain
of its subsidiaries (the "Filing Subsidiaries," and together with the Company,
the "Debtors") entered into that certain Restructuring Support Agreement
(together with all exhibits and schedules thereto, the "RSA"), by and among:
(i) the Debtors; (ii) certain lenders (the "Consenting Barclays Lenders") under
the Debtors' Letter of Credit Agreement, dated October 30, 2018 (as amended,
restated, supplemented or otherwise modified from time to time, the "Barclays
Sidecar"), by and among the Company, McDermott Technology (Americas), Inc.
("MTA"), McDermott Technology (US), Inc. ("MTUS") and McDermott Technology, B.V.
("MTBV"), the guarantors party thereto and Barclays Bank PLC ("Barclays"); (iii)
certain lenders (the "Consenting 2023 LC Lenders") under the Debtors' letter of
credit facility (the "2023 LC Facility") under the Credit Agreement, dated
May 10, 2018 (the "Credit Agreement"), by and among MTA, MTUS and MTBV, the
Company, the guarantors party thereto, a syndicate of lenders and letter of
credit issuers, Barclays and Crédit Agricole Corporate and Investment Bank
("CACIB"); (iv) certain lenders (the "Consenting Revolving Lenders") under the
revolving credit facility (the "Revolving Credit Facility") under the Credit
Agreement; (v) certain lenders (the "Consenting Term Lenders") under the term
loan facility (the "Term Loan Facility") under the Credit Agreement;
(vi) certain letter of credit issuers (the "Consenting Superpriority LC
Lenders") under the letter of credit facility under the Debtors' Superpriority
Senior Secured Credit Agreement, dated October 21, 2019 (the "Superpriority
Credit Agreement"), with MTA, MTUS and MTBV, a syndicate of lenders and letter
of credit issuers, Barclays and CACIB; (vii) certain lenders (the "Consenting
Superpriority Term Lenders") under the term loan facility under the
Superpriority Credit Agreement; and (viii) certain holders (the "Consenting
Noteholders" and, together with the Consenting Barclays Lenders, the Consenting
2023 LC Lenders, the Consenting Revolving Lenders, the Consenting Term Lenders,
the Consenting Superpriority LC Lenders, the Consenting Superpriority Term
Lenders and the Consenting Noteholders, the "Restructuring Support Parties") of
the Company's 10.625% senior notes due 2024 (the "Senior Notes") issued pursuant
to that certain Indenture, dated April 18, 2018, by and among MTA, MTUS, the
Company, the other guarantors party thereto, and UMB Bank, N.A. (as successor to
Wells Fargo Bank, National Association), as trustee.
The RSA contains certain covenants on the part of the Debtors and the
Restructuring Support Parties, including that the Restructuring Support Parties
(i) vote in favor of the Joint Prepackaged Chapter 11 Plan of Reorganization of
the Debtors (as proposed, the "Prepackaged Plan") under chapter 11 of the United
States Bankruptcy Code ("Chapter 11") contemplated by the RSA, (ii) act in good
faith and use reasonable best efforts to support and complete successfully the
related solicitation of votes to obtain sufficient acceptances of the
Prepackaged Plan (the "Solicitation"), and (iii) otherwise support and take all
actions that are necessary and appropriate to facilitate approval of the
disclosure statement related to the Solicitation (the "Disclosure Statement"),
confirmation of the Prepackaged Plan and consummation of the Debtors'
restructuring in accordance with the RSA. The RSA further provides that the
Restructuring Support Parties shall have the right, but not the obligation, to
terminate the RSA upon the occurrence of certain events, including the failure
of the Debtors to achieve certain milestones.
In addition to a $2.81 billion debtor-in-possession financing facility (the
material terms of which are described in the DIP Term Sheet attached as Exhibit
2 to the Restructuring Term Sheet attached to the RSA), the RSA contemplates
that, on the effective date of the Prepackaged Plan (the "Effective Date"), the
Debtors will enter into new exit credit facilities ("Exit Facilities"),
consisting of (i) a super senior exit facility comprised of a letter of credit
facility in an amount of $743 million (the "Super Senior Exit
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Facility"), (ii) a super senior term loan facility in an amount of any portion
of the Make Whole Amount (as defined in the RSA) outstanding and not repaid at
emergence (the "Make Whole Exit Facility"); (iii) a senior secured letter of
credit exit facility in an amount up to $1.326 billion for new letters of credit
(the "Senior LC Exit Facility"), (iv) a senior secured letter of credit exit
facility reflecting existing letters of credit (the "Roll-Off LC Exit Facility"
and, together with the Super Senior Exit Facility and the Senior LC Exit
Facility, the "LC Exit Facilities"), (v) a senior secured term loan facility in
an amount of $500 million of take-back debt (the "Term Loan Exit Facility"), and
(vi) a cash secured letter of credit exit facility in an amount up to
$371 million (the "Cash Secured LC Facility"). The aggregate amount of
commitments under the LC Exit Facilities and the Cash Secured LC Exit Facility
will be approximately $2.4 billion.
Additionally, in connection with the Sellers' (as defined below) entry into the
Purchase Agreement (as defined below) with a "stalking horse" bidder, it is
anticipated that the Sellers will sell the Company's Lummus Technology division
(the "Technology Business"), subject to the approval of the Court (as defined
below), and subject to an auction to solicit superior bids for the Technology
Business to be conducted approximately 45 days after the commencement of the
Chapter 11 cases, or on such date as otherwise ordered by the Court.
Proposed Joint Prepackaged Chapter 11 Plan of Reorganization
Pursuant to the RSA, the Company commenced the Solicitation on January 21, 2020.
In connection with the commencement of the Solicitation, copies of the
Disclosure Statement and the Prepackaged Plan were distributed to certain
institutional investor and lender creditors of the Company entitled to vote on
the Prepackaged Plan. The Prepackaged Plan, which remains subject to the
approval of the United States Bankruptcy Court for the Southern District of
Texas (the "Court"), provides that, among other things, on the Effective Date:
• holders of claims arising under the DIP New-Money Term Loans (as defined
in the RSA) shall be paid in full, in cash on the Effective Date funded
from the Technology Business Sale Proceeds (as defined in the RSA) or, to
the extent not paid in full from the Technology Business Sale Proceeds,
(a) claims arising under the DIP New Money Term Loans other than the Make
Whole Amount and hedging obligations that will be rolled into the DIP
Facilities and Exit Facilities shall receive cash on hand and proceeds
from the Exit Facilities, and (b) claims arising under the Make Whole
Amount shall receive participation in the Make Whole Exit Facility;
• holders of claims arising under the DIP Letters of Credit (as defined in
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Retention Bonus Award Agreements
As previously disclosed by the Company, the board of directors of the Company
approved a form of Retention Bonus Award Agreement (the "Retention Bonus Award
Agreement") for David Dickson, President and Chief Executive Officer, and Samik
Mukherjee, Group Senior Vice President, Projects, which provided for the payment
of certain cash retention bonuses (each, a "Retention Bonus"). In accordance
with the Retention Bonus Award Agreements, upon the Company's good faith
determination on January 17, 2020 that the Company was likely to commence a
voluntary proceeding under Chapter 11 of title 11 of the United States Code, the
unpaid portion of the Retention Bonus was paid immediately.
Item 7.01 Regulation FD Disclosure.
Press Release
On January 21, 2020, the Company issued a press release announcing the signing
of the RSA and the solicitation of votes relating to the Prepackaged Plan, as
described in Item 1.01. A copy of the press release is being furnished as
Exhibit 99.1 and is incorporated into this Item 7.01 by reference. As described
above, the Disclosure Statement was distributed to certain creditors of the
Company on January 21, 2020. A copy of the Disclosure Statement is being
furnished as Exhibit 99.2 and is incorporated into this Item 7.01 by reference.
This Current Report on Form 8-K is not a solicitation of votes to accept or
reject the Prepackaged Plan or an offer to sell securities of the Company. Any
solicitation of votes or offer to sell or solicitation of an offer to buy any
securities of the Company will be made only pursuant to and in accordance with
the Disclosure Statement.
Cleansing Materials
Beginning in September 2019, the Company commenced discussions with certain
holders of the Company's Senior Notes, certain lenders under the Superpriority
Credit Agreement, certain lenders under the Term Loan Facility and legal and
financial advisors for such lenders and holders (the "Ad Hoc Group") regarding
the possibility of a potential financing, recapitalization, material sale of
assets or equity of one of the Company's subsidiaries, or alternative
transactions for the Company.
The Company entered into confidentiality agreements (collectively, the "NDAs")
with certain members of the Ad Hoc Group. Pursuant to the NDAs, the Company
agreed to publicly disclose certain information, including material non-public
information disclosed to the Ad Hoc Group (the "Cleansing Material") upon the
occurrence of certain events set forth in the NDAs. Copies of the Cleansing
Material, including (i) a strategic alternatives presentation and update on the
Company's Customer Assistance Plan and (ii) the Company's 2020 Business Plan and
accompanying supplemental materials are attached hereto as Exhibits 99.3 and
99.4, respectively.
The descriptions in this Form 8-K of the Cleansing Material do not purport to be
complete and are qualified in their entirety by reference to the complete
presentation of the Cleansing Material attached as Exhibits 99.3 and 99.4
hereto.
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The information in the Cleansing Material is dependent upon assumptions with
respect to commodity prices, development capital, operating expenses, backlog,
availability and cost of capital and performance as set forth in the Cleansing
Material. Any financial projections or forecasts included in the Cleansing
Material were not prepared with a view toward public disclosure or compliance
with the published guidelines of the Securities and Exchange Commission or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections or forecasts. The projections do not purport to present
the Company's financial condition in accordance with accounting principles
generally accepted in the United States. The Company's independent accountants
have not examined, compiled or otherwise applied procedures to the projections
and, accordingly, do not express an opinion or any other form of assurance with
respect to the projections. The inclusion of the projections herein should not
be regarded as an indication that the Company or its representatives consider
the projections to be a reliable prediction of future events, and the
projections should not be relied upon as such. Neither the Company nor any of
its representatives has made or makes any representation to any person regarding
the ultimate outcome of the Company's proposed restructuring compared to the
projections, and none of them undertakes any obligation to publicly update the
projections to reflect circumstances existing after the date when the
projections were made or to reflect the occurrence of future events, even in the
event that any or all of the assumptions underlying the projections are shown to
be in error.
The information included in this Form 8-K under Item 7.01 and Exhibits 99.1,
99.2, 99.3 and 99.4 attached hereto is being furnished and shall not be deemed
"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to liabilities of that
Section, unless the registrant specifically states that the information is to be
considered "filed" under the Exchange Act or incorporates it by reference into a
filing under the Exchange Act or the Securities Act of 1933, as amended.
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