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McDermott stock pops higher as lenders agree to not call event of default

McDermott International Inc.'s stock jumped Jan. 15 as lenders agreed to not demand full repayment of outstanding balances on notes following the expiration of a forbearance agreement.

The company's stock on the NYSE closed at 78 cents per share Jan. 15, up 12% on the day as the company amended its credit agreement with lenders for the third time.

After missing a Nov. 1, 2019, interest payment on its senior unsecured notes due 2024, McDermott entered into a forbearance agreement in December 2019 with about 35% of its senior unsecured noteholders that is set to expire without an extension at 11:59 p.m. ET on Jan. 15. Under the agreement, holders of the notes agreed to forbear from exercising any rights on the interest payment due Nov. 1, 2019, subject to certain conditions.

Lenders subsequently agreed that through Jan. 21, they will not call an event of default on a potential repayment acceleration of McDermott's 10.625% senior notes due 2024, according to a Jan. 15 filing with the SEC.

McDermott, which provides engineering and construction services to the oil and gas exploration and production industry, is financially strapped and in bankruptcy talks, according to reports.

The Wall Street Journal reported Dec. 30, 2019, that a group of lenders including HPS Investment Partners and Baupost Group LLC could provide McDermott with a loan of about $2 billion to maintain the company's operations during bankruptcy.

The company began to falter in 2014 when surging shale production coupled with a crash in global demand cut Brent crude prices by roughly 40%. Its troubles accelerated with the 2018 acquisition of Chicago Bridge & Iron Co. NV, which increased the company's debt burden to about $4.3 billion.

For the third quarter of 2019, McDermott reported a net loss of nearly $1.89 billion on revenue of $2.12 billion, compared to net income of $2 million on revenue of almost $2.29 billion in the year-ago period. A date for its fourth-quarter 2019 and full-year 2019 earnings not been announced.

McDermott's share price closed at a near two-month low of 62 cents on Jan. 13 before jumping on the latest news.

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