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.
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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