McDermott is said to hire restructuring firm for turnaround advice

By Allison McNeely and David Wethe on 9/19/2019

NEW YORK (Bloomberg) - McDermott International hired restructuring firm AlixPartners for strategic and operational advice as the company seeks to shore up its balance sheet, according to a person with knowledge of the matter.

The Houston-based company’s stock plunged as much as 76% Wednesday -- trading was halted for volatility at least five times -- while its bonds dropped more than 30 cents to 37 cents on the dollar, making them Tuesday’s most actively traded debt in the U.S. high-yield market, according to Trace.

The company said in a statement it “routinely hires external advisors to evaluate opportunities.” A company spokeswoman didn’t return messages seeking comment. The Wall Street Journal previously reported the hiring of AlixPartners.

McDermott has struggled since the 2014-2016 oil-market collapse saw new orders dry up and a squeeze on cash flow. Its challenges grew with the 2018 acquisition of Chicago Bridge & Iron Co. and a debt burden that’s ballooned to about $4.3 billion, 14 times McDermott’s market value.

Even after the worst of the crude-market collapse receded, the recovery has been too tepid to rejuvenate companies that design, build and provide crews for oil installations and LNG projects. McDermott’s malaise has been particularly acute because it absorbed a slate of Chicago Bridge projects that have been stung by costly labor shortages, construction delays and writedowns.

The worst crude crash in a generation has taken a toll on the hired hands of the global energy industry. Weatherford was among the biggest to file for bankruptcy protection when it did so in July. Oilfield contractors in North America especially have been hurt by subdued spending by their exploration customers, who are under pressure from investors to return more profits.

McDermott “has experienced substantial cost overages on LNG and power projects they inherited through that acquisition, notably the Cameron LNG project” sponsored by Sempra Energy and other partners, Scott Levine, a Bloomberg Intelligence analyst, said in an email. Sempra shares dropped as much as 1.9% Wednesday.

McDermott has seen highs and lows during oil-market bust

The plunge in shares and bonds comes just weeks after Chief Executive Officer David Dickson warned investors that 2019 will be worse than expected because of delays at some of McDermott’s biggest projects. Earlier this month, the company canceled an appearance at a Barclays conference, citing the need to focus on asset sales and other unspecified priorities.

McDermott’s $2.23 billion term loan due in 2025, its biggest piece of debt, also plunged, falling by about 17 cents on the dollar to trade at a bid of around 75 cents, a person familiar with the pricing said.

The company has also brought Evercore Inc. on board to help evaluate strategic options, Debtwire reported earlier.

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