MDR stock is down over 5.5% today amid reports that McDermott International Inc (NYSE:MDR) is seeking a bridging loan to avoid bankruptcy.
MDR Stock Down Nearly 70% This Year
The company is seeking a loan to help it cover a working-capital deficit of $1.7 billion USD so that it can sell assets such as its Lummus Technology unit. The Houston-based oil and gas engineering firm has seen its fair share of struggles in recent quarters and recently brought in turnaround specialists AlixPartners LLP to help stem heavy losses and avoid bankruptcy. McDermott’s latest earnings report showed a net loss of $146 million USD and an operating loss of $61 million USD, which contributed to MDR stock tanking nearly 70% in the year-to-date.
The company’s struggles originate from an ill-advised $3.5 billion USD acquisition of Chicago Bridge & Iron last year, mostly stemming from overrunning costs related to legacy projects at CBI. MDR has a $69 million USD interest payment due on November 1, which could mean that restructuring could take place sooner than most speculators envision. The company has also enlisted the services of Evercore to explore unsolicited interest in Lummus Technologies; however, attempts to offload this asset are seen as somewhat of a hail mary attempt and are unlikely to succeed.
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Reduced Guidance and a Nightmare 12 Months
MDR stock has endured a nightmare 12 months, which was made even worse after McDermott International lowered its guidance for the year. CEO David Dickinson warned investors that 2019 will be worse than many have been expecting. McDermott now expects the full-year net loss to be $310 million USD, compared to the $170 million USD net income previously expected. Dickinson did offer 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.”
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