US McDermott to sell Lummus chem unit as part of Chapter 11 restructuring

Author: Stefan Baumgarten

2020/01/21

HOUSTON (ICIS)--McDermott International has agreed to sell its Lummus chemical technologies business for $2.725bn to a partnership between The Chatterjee Group and Rhone Group, the US energy and chemicals engineer said on Tuesday.

The sale is part of a major restructuring that will be implemented through the US Chapter 11 bankruptcy protection process.

The Chapter 11 application will be filed later on Tuesday with US Bankruptcy Court for the Southern District of Texas.

The agreement to sell Lummus is therefore subject to higher or otherwise better bids received through a court-supervised auction process, McDermott said.

The restructuring transaction will be financed by a “debtor-in-possession” (DIP) financing facility of $2.81bn.

Subject to court approval, McDermott expects the DIP financing, combined with cash generated by McDermott, to enable the company to stabilise its cash flows, continue operating in the normal course and fulfill its commitments to key stakeholders, including customers, suppliers, joint-venture partners, business partners and employees, it said.

McDermott also has secured committed “exit financing” of more than $2.4bn in letter of credit facility capacity and will emerge from Chapter 11 with about $500m in funded debt, it said.

All of McDermott's businesses are expected to continue to operate as normal for the duration of the restructuring.

“The restructuring transaction will strengthen the company's balance sheet, normalise its trade debt and position the company for long-term growth,” it added.

LUMMUS AUCTION
McDermott expects to hold an auction in about 45 days to solicit higher or better bids for the Lummus business.

Either the Chatterjee-Rhone joint partnership or the winning bidder at the auction will purchase Lummus as part of the Chapter 11 process, subject to regulatory and court approval.

Proceeds from the sale of Lummus are expected to repay the DIP financing in full, as well as fund emergence costs and provide cash to the balance sheet for long-term liquidity.

Last September, McDermott had already said it was exploring a possible sale of Lummus after it received unsolicited approaches to acquire all or part of that business.

Lummus is a licensor of proprietary petrochemicals, refining, gasification and gas processing technologies, and a supplier of proprietary catalysts and related engineering.

Lummus’ petrochemical technology portfolio includes building block processes for a wide range of products derived from olefins and aromatics, including plastics, resins, fibres, solvents, detergents and adhesives, as well as a large range of chemical intermediates and polymers.

SHARES TO BE DELISTED
As a result of the upcoming Chapter 11 filing, McDermott expects to be delisted from the New York Stock Exchange (NYSE) within the next 10 days.

The company's common stock will continue to trade in the over-the-counter marketplace during the Chapter 11 process, it said.