McDermott in Talks With Lenders to File for Bankruptcy: Reports

December 31, 2019 Updated: December 31, 2019
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Engineering company and oilfield services provider McDermott International, which employs about 40,000 people, said it is talking to lenders about possibly filing for bankruptcy in the coming weeks, it was reported.

The Wall Street Journal and Bloomberg reported Monday that the Houston-based firm, which builds oil platforms and plants for energy companies, is discussing receiving a $2 billion bankruptcy loan from lenders Baupost Group LLC and HPS Investment Partners LLC. The media outlets cited people close to the discussions.

In the reports, representatives with the three companies declined to issue a comment on the talks.

Shares of the company dropped by as much as 45 percent on Monday, Reuters noted.

McDermott posted a $1.9 billion loss during the third quarter, according to the Houston Chronicle, which also reported that it was attributed to about $1.5 billion in impairments related to its stock price drop. It also cited cost overruns on several projects.

Since early November, McDermott’s stock was trading for less than $1 per share. The New York Stock Exchange issued a warning to the company that it would be delisted and gave it six months to get its stock price above the threshold of $1.

The bankruptcy financing will help the company provide letters of credit, which are crucial for the company to continue financing projects, the Journal reported.

Most of McDermott’s letters of credit expire within a year and need to be renewed for the company to continue its work on projects, the newspaper said. McDermott will continue to pursue a sale process for its Lummus Technology unit in bankruptcy as part of its restructuring plan, according to the report.

Earlier in September, the company received takeover interests for all or part of the business that could value the unit at over $2.5 billion.

According to McDermott’s website, the firm operates in more than 54 countries and employs at least 40,000 people, including more than 5,000 engineers.

Reuters contributed to this report.