McDermott International, Inc. – Seeks Approval for $2.81bn of DIP financing, Including $1.743bn of New Money and $1.066bn of Roll-Ups

January 22, 2020 – The Debtors requested Court authority to access (i) $2.81bn of debtor-in-possession (“DIP”) financing and (ii) use cash collateral  [Docket No. 56].

The DIP financing is comprised of (i) a $2.067bn term loan facility (the "DIP Term Loan Facility") and (ii) a $743.0mn DIP letter of credit facility (the "DIP Letter of Credit Facility"). 

Breaking the DIP financing down further, the DIP Term Loan Facility includes (a) $1.2bn in new money term loans, with $550.0mn of that to be made available upon issuance of the interim DIP order, and (b) the roll-up of $866.0mn in pre-petition term loans ($66.0mn of which relates to interest and all of which is to be rolled-up upon issuance of a final DIP order). The DIP Letter of Credit Facility includes (a) $543.0mn in new letters of credit, with $300.0mn of that available upon issuance of the interim DIP order, and (b) the roll-up of $200.0 in pre-petition letters of credit upon issuance of a final DIP order. So, across the two facilities, $1.743bn of new money to be made available upon issuance of the interim DIP order.

The DIP motion summarizes the arrangements as follows (although the $66.0mn of interest relating to the DIP Term Loan Facility is not referenced): "The proposed DIP financing facility provides for an additional $1.2 billion of liquidity and $543 million of new LC capacity during the pendency of these chapter 11 cases. The Debtors are seeking to draw $550 million of the new term loans and have access to up to $300 million of new LC capacity upon entry of the Interim DIP Order. Effective upon entry of the proposed Final DIP Order, the Debtors are seeking to ‘roll-up’ the amounts provided under the Prepetition Superpriority Credit Agreement, as well as draw on the remaining $650 million of term loan capacity and obtain access to the incremental $243 million of LC capacity, putting the total amount of the DIP financing facility at approximately $2.0 billion in term loans and $743 million of LC capacity."

The DIP motion continues, “The Debtors commenced these cases with a restructuring transaction memorialized in its prepackaged chapter 11 plan, which is supported by super-majorities of its secured and unsecured funded and unfunded debt creditors….The proposed $2.81 billion debtor-in-possession financing facility (the ‘DIP Facility’) is one of the central pillars of the proposed restructuring transaction, and is an integral piece to the Debtors’ ability to commence these chapter 11 cases in a coordinated fashion with a high-degree of consensus, as well as emerge with committed financing to support the Debtors’ long-term business plan. 

As detailed in the Castellano Declaration, the Debtors faced a liquidity crisis in October 2019 and required an immediate infusion of capital. The Debtors responded by negotiating a financing facility in a matter of days that provided runway to explore value-maximizing, strategic alternatives and potentially implement a consensual restructuring transaction. On October 21, 2019, the Debtors executed a $1.7 billion bridge financing facility with their secured lenders under the Prepetition Super-priority Credit Agreement, which provided consensual priming liens on all of the collateral securing the Prepetition Credit Agreement.

As further detailed in the Castellano Declaration, the Debtors’ businesses require both significant working capital and letter of credit (‘LC’) capacity. The Debtors use working capital to fund their operations and the LC capacity to direct LC issuing banks to provide LCs to the Debtors’ customers that support performance and financial metric commitments in the Debtors’ contracts with its customers. The Debtors’ need for both liquidity and LC support to successfully prosecute its business plan is reflected in the design of the Debtors’ existing financial agreements as well as the contemplated DIP and exit facilitates.

The DIP Facility provides the Debtors with critical liquidity and LC support. Importantly, no other financing was available to the Debtors on better (or any) terms and no potential DIP Lender offered to lend on any basis other than as contemplated by the DIP Facility. As of the Petition Date, without access to the DIP Facility, the Debtors are cash-flow negative with a total unrestricted cash balance insufficient to operate their business and continue paying their debts as they come due. The relief requested by this Motion is necessary both to preserve the Debtors’ operations as well as to provide the Debtors with a path forward for negotiating and consummating a restructuring transaction. Absent entry into the DIP Facility, the Debtors will have insufficient liquidity to continue operating in the ordinary course and their restructuring efforts will come to a grinding halt. The Debtors have been, and remain, committed to evaluating all value-maximizing paths forward, both with respect to the DIP Facility and with respect to the terms of overall restructuring transaction. Additionally, the DIP Facility is a critical component of the overall restructuring as well as the Debtors’ proposed exit financing commitments.”

Key Terms of the DIP Financing:

• Borrowers: McDermott Technology (Americas), Inc., McDermott Technology (US), Inc., and McDermott Technology, B.V
• DIP Guarantors: Certain of the Debtors identified in the DIP Documents (together with the Borrowers, the “DIP Loan Parties”)
• Administrative Agent for the DIP Term Loan Facilities: Barclays Bank PLC (in such capacity, together with its successors and permitted assigns, the “Term DIP Agent”).
• Administrative Agent for the DIP LC Facilities: Crédit Agricole Corporate and Investment Bank (in such capacity, together with its successors and permitted assigns, the “DIP LC Agent”).
• DIP Lenders: The several banks and other financial institutions or entities from time to time party to the DIP Term Loan Facilities (in such capacities, the “DIP Term Loan Lenders”) and the DIP LC Facilities (in such capacities, “DIP Letter of Credit Lenders,” and collectively, the “DIP Lenders” and, together with the DIP Agents, the “DIP Secured Parties”) pursuant to the DIP Credit Agreement
• Commitment:
• DIP Term Loan Facilities
  • DIP New Money Term Loan Facility: A new money term loan facility, in the aggregate principal amount of up to $1.2bn. 
  • DIP Term Roll-Up Facility: Subject to the entry of the Final DIP Order, a refinanced term loan facility rolling up (a) an aggregate principal amount of $800.0mn of the Prepetition Superpriority Term Loan Credit Facility and (b) approximately $66.0mn in respect to certain unpaid interest and fees and the Make-Whole Amount.
• DIP LC Facilities
  • DIP Letter of Credit Facility: A revolving letter of credit facility consisting of aggregated commitments to issue up to $543.0mn of aggregated commitments of new letters of credit.
  • DIP Roll-Up LC Facility: Subject to the entry of the Final DIP Order, a refinanced revolving letters of credit facility rolling up an aggregate principal amount of $200.0mn of letters of credit outstanding under the Prepetition Super-priority Revolving Credit Facility, plus certain unpaid interest and fees.
• Interest Rates: 
  • The DIP Term Loan Facilities shall bear interest as follows: If a Base Rate Loan, at a rate per annum equal to the sum of (A) the Base Rate as in effect from time to time plus (B) 8.00%; and if a Eurodollar Rate Loan, at a rate per annum equal to the sum of (A) the Eurodollar Rate determined for the applicable Interest Period plus (B) 9.00%.
  • The DIP LC Facilities shall bear interest as follows: 9.00 % on the daily maximum amount available to be drawn.
• Term: The maturity date with respect to the DIP Facility (the “Termination Date”) shall be the earliest of:
  • nine months after the Petition Date, which date shall be extended automatically by an additional 90 days if the following conditions are satisfied on the date that is ten business days prior to the date that is nine months after the Petition Date:
  • the Plan Effective Date; and
  • acceleration of the DIP Term Loans and DIP Letters of Credit following the occurrence of an Event of Default.
• Fees:
  • Upfront Fee: The Borrowers shall pay (a) a fee of 2.25% of the entire commitment amount of the DIP New Money Term Loan Facility and (b) a fee of 2.25% of the entire commitment amount of the DIP New Money Letters of Credit, each earned and payable in full upon Initial Funding;
  • Backstop Fee: The Borrowers shall pay (a) a fee of 2.25% of the entire commitment amount of the DIP New Money Term Loan Facility and (b) a fee of 2.25% of the entire commitment amount of the DIP New Money Letters of Credit, each earned and payable in full upon Initial Funding; 
  • Unused Commitment Fee: The Borrowers shall pay to the DIP LC Agent for the account of the DIP Letters of Credit Lenders a fee of 0.50% on unused commitments under the DIP Letter of Credit Facility; and 
  • Fronting Fee: The Borrowers shall pay to the DIP LC Agent for the account of the DIP Letters of Credit Lenders 0.50% for fronting fees in respect of DIP Letters of Credit (other than DIP Cash Secured LCs) and 0.50% for DIP Cash Secured LCs.

Pre-Petition Debt

As of January 21st, the Debtors have approximately $5.12bn in aggregate outstanding secured and unsecured funded debt obligations, approximately $3.44bn in aggregate outstanding unfunded secured and unsecured letter of credit obligations, and approximately $588.0mn in aggregate surety-related obligations, including the following: 

In addition, MDR has outstanding preferred equity with a stated aggregate liquidation preference of approximately $330.0mn. 

Read more Bankruptcy News

The post McDermott International, Inc. – Seeks Approval for $2.81bn of DIP financing, Including $1.743bn of New Money and $1.066bn of Roll-Ups appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.