MDR Stock Sinks as Outlook Concern Outweighs Financing Lifeline

MDR Stock

MDR stock is down 12% today despite McDermott International (NYSE:MDR) coming to an agreement with lenders to access up to $1.7 billion USD in financing in order to help the embattled energy engineering and construction firm avoid bankruptcy.

MDR Stock Soared in Pre-Market Trading

Last month, McDermott revealed it has brought in turnaround experts AlixPartners LLP to help negotiate a bridging loan to cover a working-capital deficit of $1.7 billion USD following a nightmare 12 months. Under the terms of the deal, McDermott will have immediate access to $650 million USD of financing, comprised of $550 million USD under a term loan facility and $100 million USD under a letter of credit facility. MDR stock initially soared 25% following the announcement of the deal.

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“The agreement provides near-term liquidity for the company to manage working capital and provide performance guarantees on expected new awards,” Chief Executive Officer David Dickson said. McDermott will continue to pursue the sale of its Lummus Technologies unit and had previously brought in investment advisory firm Evercore to explore unsolicited interest in the asset. MDR stock has been in decline since an ill-advised $3.5 billion USD acquisition of Chicago Bridge & Iron (CBI) last year, which resulted in overruling costs related to legacy projects at CBI.

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MDR Brought Back Down on Withdrawn Guidance

While MDR shares made early gains as a result of the loan agreement, MDR stock was brought crashing back down on news that the Houston, Texas company was withdrawing its guidance for the year as high-debt costs continue to weigh it down. McDermott International had previously forecast 2019 revenue of $9.5 billion USD and an adjusted loss of 32 cents per share.

In September, the company lowered its guidance, but Dickinson offered some hope for investors, saying, “we expect to see a sharp improvement in the company’s operating income by the fourth quarter of this year, as we build momentum heading into 2020.” Following today’s loan agreement, those words might just ring through as the company staves off the threat of bankruptcy for the foreseeable future.

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