Mcdermott International Ltd · OTC:MCDIF
Mcdermott International — Debt Investor Presentation (January 2020)
45 slides from Mcdermott International's debt investor presentation, Jan 21, 2020
Slide 1: Project Sprint: Business Plan Report Excerpt For Lenders
Exhibit 99.3 Confidential All post-Q3’19 information presented in this document is estimated Project Sprint: Business Plan Report Excerpt For Lenders November 13, 2019 Customer Assistance Plan Excerpt for Lenders November 21, 2019 Private and Confidential. Distribution limited to Board of Directors
Slide 2: Advisor Disclaimer
Confidential These materials have been prepared by Evercore Group L.L.C., AlixPartners UK LLP and Kirkland & Ellis LLP (collectively the “Advisors”), for the creditors (the “Creditors”) to McDermott International, Inc. (the “Company”) to whom such materials are directly addressed and delivered and m
Slide 3: Forward-Looking Statements
Confidential Forward-Looking Statements In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions that statements in these materials which are forward-looking, and provide other than historical information, involve risks, contingencie
Slide 4: Executive Summary
Confidential Executive Summary n McDermott (“MDR” or the “Company”) is currently burdened with significant funded debt as well as a large quantum of contingent obligations and stretched accounts payable n These materials analyze a number of alternatives for right-sizing McDermott’s balance sheet, in
Slide 5: Executive Summary (Cont'd)
Confidential Executive Summary (Cont’d) n The Company likely does not have the runway to grow into its capital structure due to significant ongoing operational challenges, and a sale of Technology by itself does not appear to sufficiently deleverage the balance sheet n Therefore, the Company believe
Slide 6: Segment Overview / Restructuring Alternatives / Conclusion
Confidential I Segment Overview II Restructuring Alternatives III Conclusion Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and ConfidentialConfidential I Segment Overview II Restructuring Alternatives III Conclusion Private and Confidential. Dist
Slide 7: Snapshot of Synergy Potential Between Business Segments
Confidential Snapshot of Synergy Potential Between Business Segments Synergies exist throughout MDR with the largest overlap between the Onshore EPC and Technology segments as well as between the Onshore EPC and Offshore / Subsea segments n The most significant pull-through effect is through technol
Slide 8: Overview of Business Segments
Confidential ($ in millions) Overview of Business Segments Rebound in 2020 and 2021 performance driven by stability from Tanks and Technology and significant improvement in EPC as newer backlog is realized FY 2019E Financials Revenue: $9.5 billion Adj. EBITDA: $475 million Offshore / Subsea Onshore
Slide 9: Overview of Business Segments (cont'd)
Confidential ($ in millions) Overview of Business Segments (cont’d) Rebound in 2020 and 2021 performance driven by stability from Tanks and Technology and significant improvement in EPC as newer backlog is realized FY 2019E Financials CFOA: ($527) million Backlog: $20.0 billion LCs, Bilats and Suret
Slide 10: Projected Net Working Capital Breakout by Segment
Confidential Projected Net Working Capital Breakout by Segment ($ in millions) The majority of MDR’s net working capital deficit is tied to the Onshore EPC segment Key Operating Assumptions Total Net Working Capital Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 2021E Consolidated As % of LTM Revenue (14%) (10%) (11
Slide 11: Outlook for MDR's E&C Businesses
Confidential Outlook for MDR’s E&C Businesses ($ in millions) The long-term outlook has significant upside relative to current performance (which is below where the businesses have performed historically) n Estimated results for 2019 illustrate the impact that MDR’s problem projects have had on the
Slide 12: Operating Snapshot of Offshore / Subsea
Confidential Operating Snapshot of Offshore / Subsea ($ in millions) Reduced performance in 2019 is driven by a few projects; however, 2020E is expected to rebound as a result of profitable projects that have been awarded to MDR by anchor customers Overview of Projects >$200 Million in Revenue n Off
Slide 13: Operating Snapshot of Onshore EPC
Confidential Operating Snapshot of Onshore EPC ($ in millions) Legacy problem projects will substantially roll off during 2020E, alleviating near-term headwinds and supporting long-term profitability Overview of Projects >$200 Million in Revenue n Onshore EPC consists of the legacy CB&I business EAC
Slide 14: Aggregate Credit Exposure of the Business
Confidential Aggregate Credit Exposure of the Business ($ in millions) Funded debt adds leverage and cost to the substantial unfunded credit requirements of the E&C businesses Projected LC Exposure Total Implied Credit Exposure Net Incremental LC $153 1 No anticipated excess cash until 2021 Capacity
Slide 15: AP Stretch Has Historically Been Utilized To Generate Liquidity
Confidential ($ in millions) AP Stretch Has Historically Been Utilized To Generate Liquidity Vendor stretch, particularly in the Onshore EPC and Offshore / Subsea business segments, is not sustainable over time 1 n Unsustainable vendor stretch currently between ~$365 - $462 million n A less stressed
Slide 16: Implied Pull-Through Preliminary Conclusions
Confidential ($ in millions) Implied Pull-Through Preliminary Conclusions Management estimates that ~$292 million in run-rate gross profit from lost EPC pull-through would be at risk without Technology Estimated Loss of EPC Pull-Through from Technology Total Gross Profit Foregone by Region Analysis
Slide 17: Assessing Impact of Potential Changes in Technology Pull-through
Confidential Assessing Impact of Potential Changes in Technology Pull-through Qualitative Assessment if MDR Losses EPC Pull-through NCSA n Would continue to pursue EPC projects in area since it has a more established track record n Any project wins would be secured on a more competitive basis and at
Slide 18: Restructuring Alternatives
Confidential I Segment Overview II Restructuring Alternatives III Conclusion Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and ConfidentialConfidential I Segment Overview II Restructuring Alternatives III Conclusion Private and Confidential. Dist
Slide 19: Restructuring Scenarios
Confidential Restructuring Scenarios n MDR and its advisors have prepared three scenarios estimating the quantum of funding necessary to facilitate a chapter 11 filing of MDR (“DIP Financing”) n The materials review and compare three alternatives: „ Scenario 1: Pre-arranged restructuring with first
Slide 20: Potential Impact of a Bankruptcy on the Financial Projections
Confidential Potential Impact of a Bankruptcy on the Financial Projections ($ in millions) Maximizing consensus and minimizing case timeline will substantially mitigate business disruption and value loss from any bankruptcy process n The analysis below illustrates the impact that a bankruptcy filing
Slide 21: Summary of Illustrative Secured Debt Equitization Analysis
Confidential ($ in millions) Summary of Illustrative Secured Debt Equitization Analysis 1 Pre-Packaged with First Lien filing scenario MDR Less Technology and 2 2 MDR Consolidated MDR Less Technology 2 Tanks 2021E $919 $660 $544 EBITDA $745 % Cash / Debt 3 2% 45% 53% Recovery $5,130 $1,477 $1,717 $3
Slide 22: Summary of Illustrative Secured Debt Equitization Analysis (cont'd)
Confidential ($ in millions) Summary of Illustrative Secured Debt Equitization Analysis (cont’d) 1 Pre-Packaged filing scenario MDR Less Technology and 2 2 MDR Consolidated MDR Less Technology 2 Tanks 2021E $1,167 $890 $749 EBITDA $745 % Cash / Debt 3 26% 65% 71% Recovery $5,130 $922 $1,112 $2,324 $
Slide 23: DIP Facility Sizing Considerations
Confidential DIP Facility Sizing Considerations n The analyses evaluate the DIP financing requirements under different bankruptcy scenarios, including: 1 Pre-arranged bankruptcy with support from first lien lenders but no agreement with bondholders Scenario 1 2 Pre-packaged bankruptcy with support f
Slide 24: Chapter Scenarios - DIP Facility Sizing Considerations (cont'd)
Confidential Chapter 11 Scenarios - DIP Facility Sizing Considerations (cont’d) General Assumptions: n Unadjusted, base case projections derived from: n the 13-week forecast for December 2019 and n the financing case model for 2020, adjusted to incorporate the superpriority financing Base Case Proje
Slide 25: Chapter Scenarios - DIP Facility Sizing Considerations (cont'd)
Confidential ($ in millions) Chapter 11 Scenarios - DIP Facility Sizing Considerations (cont’d) 1 2 3 Pre-Packaged Filing with First Pre-Packaged Filing with First Pre-Arranged Filing Lien Lien and Bonds n Duration: 6-9 month processn Duration: 4-6 month processn Duration: 2-3 month process „ Filing
Slide 26: Estimated DIP Size – Illustrative High & Low Impact Cases
Confidential ($ in millions) Estimated DIP Size – Illustrative High & Low Impact Cases ($ Millions) Scenario 1 Scenario 2 Scenario 3 st Pre-Arranged Filing Pre-Packaged w/ First Liens Pre-Packaged w/ 1 L & Bonds DIP Sizing Analysis High Low High Low High Low Cash DIP Need 1 Base Case Net Cash Need (
Slide 27: Customer Impact – Potential Impact to Future Value
Confidential Customer Impact – Potential Impact to Future Value n The impact of a chapter 11 filing is directly related to level of consensus with constituents. Less consensus may result in: „ Higher risk of relegation to ‘No-Bid’ lists during the case, particularly for government-owned entities „ I
Slide 28: Customer Impact Analysis
Confidential ($ in millions) Customer Impact Analysis n MDR and its advisors also assessed the impact on the business from lost orders during a chapter 11 filing under the scenarios noted previously n While MDR and its secured lenders are working collaboratively towards the most consensual solution
Slide 29: Customer Impact – Illustrative Impact on 2020 and 2021 Project Gross Profit
Confidential Customer Impact – Illustrative Impact on 2020 and 2021 Project Gross Profit ($ in millions) Project Gross Profit (2020 - 2021) Variance vs Prior Traditional Ch 11 (10-07-19) ($ Millions) Scenario 1 Scenario 2 Scenario 3 Scenario 1 st Financing Case Pre-Arranged Case Pre-Packaged w/ Firs
Slide 30: Customer Assistance Plan Excerpt for Lenders
Confidential Customer Assistance Plan Excerpt for Lenders November 21, 2019 Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and Confidential Distribution limited to Board of Directors and Meeting Attendees. Private and ConfidentialConfidential Cust
Slide 31: Agenda
Confidential Agenda 1. Executive Summary 2. Portfolio Review 27 Private and ConfidentialConfidential Agenda 1. Executive Summary 2. Portfolio Review 27 Private and Confidential
Slide 32: 1. Executive Summary
Confidential 1. Executive Summary Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and ConfidentialConfidential 1. Executive Summary Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and Confidential
Slide 33: Executive Summary
Confidential Executive Summary n McDermott International, Inc. (“MDR” of the “Company”) continues to evaluate options and alternatives to enhance the value of its portfolio given the economic challenges it continues to face n Recognizing its liquidity and leverage challenges, the Company has develop
Slide 34: Selected Onshore Projects
Confidential Selected Onshore Projects n Projects were identified based on significant projected negative cash flow or by virtue of being early-stage LNG projects n The objectives include (a) minimize cash burn on these projects over the next six weeks (tranche B funding period), (b) de-risk the LNG
Slide 35: Overall Risk Mitigation Levers
Confidential Overall Risk Mitigation Levers McDermott is actively pursuing two forms of mitigation levers n Cash Mitigation Levers: Requests to improve MDR’s financial position within the existing contract structure n Risk Mitigation / L/C Levers: Fundamental shifts in a contract’s structure or exec
Slide 36: Contract Improvement Projections
Confidential Contract Improvement Projections Summary of potential aggregate liquidity improvement customer asks identified by management ($ in millions) Gross Contemplated Customer Ask Incr. Contract Subtotal Cash Total Liquidity Project Price L/D Relief JV Recovery Improvement L/C Relief Relief Ca
Slide 37: Risk Mitigation Assessment for LNG Portfolio
Confidential Risk Mitigation Assessment for LNG Portfolio MDR has preliminarily assessed potential risk mitigations across its LNG portfolio and believes that there are some opportunities Project Cameron Freeport Golden Pass Mozambique Woodfibre Conversion to Reimbursable Conversion to Flat Fee Assu
Slide 38: 2. Portfolio Review
Confidential 2. Portfolio Review Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and ConfidentialConfidential 2. Portfolio Review Private and Confidential. Distribution limited to Board of Directors and Meeting Attendees. Private and Confidential
Slide 39: Onshore Portfolio Summary
Confidential Onshore Portfolio Summary Onshore portfolio is comprised of over 40 onshore projects (plus ~240 Tanks projects) with a total backlog of US ~$10Bn and est. GP of $780MM Number of Projects by Product Backlog by Product Line GP by Product Line (US $MM) Contingency by Product Line Line (US
Slide 40: Offshore Portfolio Summary
Confidential Offshore Portfolio Summary Offshore portfolio is comprised of more than 70 projects with a total backlog of US ~$9Bn and est. GP of $500MM Number of Projects by Area Backlog by Area (US $Bn) GP by Area (US $MM) Contingency (US $MM) NCSA NCSA 6% EARC EARC 25% APAC APAC APAC 11% 0% 17% 26
Slide 41: LNG Market Overview
Confidential LNG Market Overview The LNG Contractor landscape is small. “Tier 1” contractors in the LNG space include: LNG Projects – FEEDs under Pre-FEEDs under EPC Projects under FEEDs under Contractor Under Construction execution execution Pursuit pursuit McDermott 4 / (1) 1 1 3 2 Chiyoda 5 / (1)
Slide 42: Contract Structure and Risk Management
Confidential 2. Contract Structure and Risk Management n The new portfolio of early stage LNG projects has been negotiated to mitigate the risks confronted at Cameron and Freeport, through: higher price points; longer permitted schedules; and, mitigated labor and execution risks Contract Structure a
Slide 43: Actions taken to de-risk Mozambique project
Confidential Actions taken to de-risk Mozambique project Structured, continuous feedback process Win IT Do IT Run IT EP/EPC Ongoing (post- Retrofits and Scope Technology FEED EPC Execution Start-up bid EPC) services Extensions Specific actions Current Mozambique project financial plan § Soil conditi
Slide 44: Actions taken to de-risk Golden Pass project
Confidential Actions taken to de-risk Golden Pass project Structured, continuous feedback process Win IT Do IT Run IT EP/EPC Ongoing (post- Retrofits and Scope Technology FEED EPC Execution Start-up bid EPC) services Extensions Specific actions 1. Assessed soil conditions and site characteristics fr
Slide 45: Actions taken to de-risk Woodfibre project
Confidential Actions taken to de-risk Woodfibre project Structured, continuous feedback process Win IT Do IT Run IT EP/EPC Ongoing (post- Retrofits and Scope Technology FEED EPC Execution Start-up bid EPC) services Extensions Specific actions Current Woodfibre project financial plan McDermott took o
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