McDermott International, Inc. announced that it has satisfied all conditions to the amendment to the Company’s Senior Secured Credit Agreement (“Amendment No. 3”) which in part extends the maturity date of the letter of credit facility under the Senior Secured Credit Agreement to April 22, 2019 (or January 15, 2019 if the term loan remains outstanding or is not refinanced by that date). An 8-K filing with the SEC notes that Credit Agricole is the agent on the credit facility amendment.
Amendment No. 3 provides $450 million of letter of credit capacity with the potential to increase to $600 million under an accordion feature. The Amendment also provides flexibility by increasing the baskets for purchase money indebtedness, acquisitions and purchases of junior priority debt and extending the window to mortgage the DLV 2000 by one year to allow the Company to consider potential financing options.
In April, McDermott announced that other provisions of Amendment No. 3 had become effective, including an amendment to replace the existing minimum EBITDA requirement with a covenant package comprised of two leverage ratios and a fixed charge ratio and removed or reduced certain reporting requirements to the Credit Agreement lenders.
Stuart Spence, McDermott Executive Vice President and Chief Financial Officer, said, “We are pleased with the outcome of this amendment process. We expect the extension of our letter of credit facility to 2019, increased basket capacity, and an extended window to mortgage the DLV 2000, along with our amended financial covenants, to provide maximum flexibility and letter of credit support to position us for continued steady bidding activity.”
In connection with obtaining term lender consents to Amendment No. 3, the Company prepaid $75 million of the term loan and entered into Amendment No. 4 to the Company’s Senior Secured Credit Agreement. Amendment No. 4 increased the applicable margin on the term loan by 300 basis points per annum and requires the Company to apply the proceeds from any financing of the DLV 2000 to repay the term loan. “We believe the overall package associated with term lender consents is favorable given the current energy capital market conditions and provides a benefit through reduction in leverage,” Spence said.
The prepayment will decrease 2016 Ending Cash and corresponding Gross Debt by approximately $75 million. The change in interest rate will increase 2016 Net Interest Expense and Cash Interest by approximately $2 million.
McDermott is a leading provider of integrated engineering, procurement, construction and installation (EPCI) services for upstream field developments worldwide. The Company delivers fixed and floating production facilities, pipelines and subsea systems from concept to commissioning for complex Offshore and Subsea oil and gas projects to help oil companies safely produce and transport hydrocarbons.