McDermott board brings on bankruptcy experts – Construction Dive

Dive Brief:

It has been a tumultuous few months for the energy construction giant. On Nov. 4, CFO Stuart Spence resigned to pursue other opportunities, on the same day the company reporteda third-quarter net loss of nearly $1.89 billion on revenue of $2.12 billion. That number is down from net income of $2 million on revenue of nearly $2.29 billion in the third quarter of 2018.

Spence was replaced earlier this month by McDermott chief accounting officer Chris Krummel, who has 25 years of experience in various leadership roles including as CFO of EnTrans International and had served as McDermott's chief accounting officer for the past three years, according to LinkedIn. Senior Director of Financial Planning and Analysis Dale Suderman was named to take over the chief accounting officer role.

McDermott, which merged with Chicago Bridge & Iron Co. (CBI) in May 2018, isthe country's second largest petroleum contractor after Fluor, according to Engineering News-Record. The firm reported $6.7 billion in revenue last year.

Since the merger, the company has been in financial difficulties, cutting guidance and losing 35% of its share price in a single day this summer, according to Energy New Bulletin.

While McDermott is "pursuing different avenues to get its debt down to a sustainable level,"it appears that the company is doing what it can to avoid a bankruptcy filing, Moody's Investors Service Analyst Michael Carelli told Construction Dive. He noted that the firm's $20.5 billion backlog is strong and "from what I can tell they've been doing right by their customers, making sure they complete their projects effectively," he said.

"If that wasnt the case they wouldn't be continuing to win bids and build backlog," he said.

In the event that the company does declare bankruptcy, it could potentially lose customers and projects, Carelli said, although many clients would probably stay on.

"For many of their customers on projects that are already underway, they are already invested with the work," he said."It would entail some work on the part of the customer to rebid the project or negotiate with another bidder."

All in all, company leaders seem to be working on alternatives to filing bankruptcy, "even though the easiest thing might be to file and restructure debts," Carelli said.

McDermott is building one of the largestenergy projects in Texas,the $10 billion LNG export facilitythat Exxon Mobil and Qatar Petroleum awarded to McDermott in March, along with joint venture partners Chiyoda International Corp. and Zachry Group. McDermott said the facility in Sabine Pass will have three 5.2-million-tons-per-year trains and that the team will provide engineering, procurement, construction and commissioning services.

In related news, the Houston Business Journal reported that construction work on McDermott's new headquarters in Houston has stopped. The general contractor filed a lien on the improvements to the building on Oct. 30, saying that McDermott was $14.2 million behind on its payments.

McDermott confirmed that work on the building has been delayed, but spokesperson Gentry Brann told the Houston Business Journal that the company still plans to move the first group of employees to the building before Thanksgiving.

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McDermott board brings on bankruptcy experts - Construction Dive