Item 1.01
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Entry into a Material Definitive Agreement.
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10.625% Senior Unsecured Notes Offering
On April 18, 2018, McDermott Escrow 1, Inc. and McDermott Escrow 2, Inc. (together, the Escrow Issuers) completed the previously announced
offering (the Offering) of $1,300,000,000 in aggregate principal amount of 10.625% senior unsecured notes due 2024 (the notes) pursuant to the terms of a purchase agreement dated April 4, 2018, by and among McDermott
International, Inc. (McDermott), the Escrow Issuers, McDermott Technology (Americas), Inc. (McDermott Technology (Americas)) and McDermott Technology (US), Inc. (together with McDermott Technology (Americas), the
Post-Merger
Co-Issuers)
and Barclays Capital Inc., as the representative of the several initial purchasers named on Schedule A thereto.
The notes were offered to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the Securities
Act), and to certain
non-U.S.
persons in transactions outside the United States in reliance on Regulation S under the Securities Act. The notes are scheduled to mature on May 1, 2024.
Pursuant to an escrow agreement (the Escrow Agreement), by and among the Escrow Issuers and Wells Fargo Bank, National Association, as escrow
agent (the Escrow Agent), the proceeds of the Offering, together with $27.625 million, to provide funds sufficient to pay interest on the notes through June 29, 2018, were deposited into a segregated escrow account (the Escrow
Account) with the Escrow Agent. The proceeds will remain in escrow until the date on which certain escrow conditions are satisfied and the escrow proceeds are released. Concurrent with the satisfaction of those escrow conditions, the Escrow
Issuers will merge with and into the Post-Merger
Co-Issuers,
with each Post-Merger
Co-Issuer
being a surviving entity that will assume, by operation of law, the
obligations of the applicable Escrow Issuer under the notes and the Indenture (as defined below). The notes will be subject to a special mandatory redemption at a redemption price equal to 100% of the initial issue price of the notes plus accrued
interest to, but not including, the redemption date if the escrow conditions are not satisfied or the issuers of the notes determine in their discretion that the escrow conditions are incapable of being satisfied on or prior to the specified outside
date, which is June 29, 2018.
Indenture
The notes were issued pursuant to an Indenture, dated April 18, 2018 (the Indenture), by and among the Escrow Issuers and Wells Fargo Bank,
National Association, as Trustee (the Trustee).
Interest
Interest on the notes is payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018.
Ranking
Prior to the release of proceeds from escrow,
the notes will be secured by a first-priority security interest in the Escrow Account and the deposits therein. At the time of and after the release of the proceeds from escrow, the notes will be unsecured and will be jointly and severally
guaranteed on a senior unsecured basis by McDermott and certain of McDermotts existing and future restricted subsidiaries. The notes and the related guarantees will rank: senior in right of payment to all of the applicable obligors
future subordinated indebtedness; equally in right of payment with all of the applicable obligors existing and future unsecured indebtedness; effectively junior to all of the applicable obligors existing and future indebtedness that is
secured by liens to the extent of the value of the collateral that is subject to liens securing such indebtedness; and structurally subordinated to all liabilities of McDermotts subsidiaries that do not guarantee the notes.
Optional Redemption
After May 1, 2021, the issuers, at their option, may redeem the notes, in whole or in part, at the redemption prices (expressed as percentages of
principal amount of the notes to be redeemed) set forth below, together with accrued and unpaid interest to (but excluding) the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the
12-month
period beginning May 1 of the years indicated:
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Year
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Percentage
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2021
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105.313
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%
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2022
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102.656
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%
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2023 and thereafter
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100.000
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%
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Equity Clawback
Prior to
May 1, 2021, the issuers, at their option, may on any one or more occasions, redeem up to 35.0% of the aggregate principal amount of the outstanding notes issued under the Indenture (calculated after giving effect to any issuance of Additional
Notes (as defined therein)), in an amount not greater than the net cash proceeds of one or more Qualified Equity Offerings (as defined therein) (which have not been applied to permanently repay other Indebtedness (as defined therein)) at a
redemption price equal to 110.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to (but excluding) the date of redemption (subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date);
provided
that: (1) at least 65.0% of the aggregate principal amount of notes issued under the Indenture on the Issue Date remains outstanding immediately after giving effect to any
such redemption; and (2) the redemption occurs not more than 180 days after the date of the closing of any such Qualified Equity Offering.
Make-Whole Redemption
The notes may also be redeemed, in
whole or in part, at any time prior to May 1, 2021 at the option of the issuers, at a redemption price equal to 100% of the principal amount of the notes redeemed, plus the Applicable Premium (as defined in the Indenture) as of, and accrued and
unpaid interest to (but excluding) the applicable redemption date (subject to the right of the holders of record on the relevant record date to receive interest due on the relevant interest payment date).
Certain Covenants
The Indenture governing the notes
contains covenants that, among other things, limit McDermotts ability and the ability of its restricted subsidiaries to: (1) incur or guarantee additional indebtedness or issue preferred stock; (2) make investments or certain other
restricted payments; (3) pay dividends or distributions on its capital stock or purchase or redeem its subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of its restricted subsidiaries to pay dividends
or make other payments to McDermott; (6) create certain liens; (7) sell all or substantially all of its assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create
unrestricted subsidiaries. Many of those covenants would become suspended if the notes were to attain an investment grade rating from both Moodys Investors Service, Inc. and S&P Global Ratings and no default has occurred. The covenants
mentioned above are subject to a number of important exceptions and limitations.
Change of Control
Upon a change of control, holders of the notes will have the right to require the issuers to make an offer to purchase each holders notes at a price in
cash equal to 101% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the date of purchase.
The foregoing descriptions of the Indenture and the notes are only summaries and are qualified in their entirety by reference to the full text of the
Indenture and the form of note, copies of which are filed as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form
8-K,
and are incorporated herein by reference.