MDR stock is soaring today after troubled energy engineering firm McDermott International (NYSE:MDR) announced that it had gained access to the second tranche of the $1.7 billion secured credit facility announced on October 21, 2019.
MDR Stock Recovering as Turnaround Efforts Continue
MDR had been tanking badly in 2019 following a difficult 12 months, which saw the Houston-based firm brought to the brink of bankruptcy. In September, the firm announced that it had brought in turnaround experts AlixPartners LLP to help negotiate a bridging loan to cover a working-capital deficit of $1.7 billion USD. In October, McDermott International announced that it had secured the necessary financing from creditors and was initially given immediate access to $650 million USD of the secured funds.
Today, MDR stock is up 5% after the company was given access to the second tranche of the financing, through a $250 million USD term loan facility and a $100 million USD credit letter. This provides the embattled engineering company with crucial necessary working capital and supports the issuance of required performance guarantees on new projects.
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In addition to the financing, McDermott International also announced that it has entered into a forbearance agreement with holders of over 35% of McDermott’s 10.625 percent senior notes due 2024. This agreement will see holders of the notes forbear from exercising any rights related to the interest payment due on November 1 until at least January 15, 2020. MDR shares are currently trading for $0.84.
Difficult 12 Months
MDR stock has fallen over 90% from a July peak of $10.62 after an ill-advised $3.5 billion USD acquisition of Chicago Bridge & Iron (CBI) last year, which resulted in overrunning costs related to legacy projects at CBI. As a result, the company has been involved in a turnaround strategy that looks to be yielding results, although there is still a long way to go for McDermott International. The company is continuing to weigh up a sale of its Lummus Technologies unit and had previously brought in investment advisory firm Evercore to explore unsolicited interest in the asset.
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