McDermott expects to obtain financing by end of year

By Carlise Newman

Chicago, Nov. 5 - McDermott International Inc. said its liquidity problems may be solved if it obtains financing from a commercial bank that has already submitted a commitment letter to the company.

The company is in the process of refinancing BWX Technologies Inc. and has received a commitment letter to underwrite a three-year $125 million revolving credit facility, which may be increased to $150 million.

The commitment is subject to the successful refinancing of subsidiary J. Ray McDermott Inc. on a stand-alone basis. The company is developing new financing arrangements for J. Ray and expects to close the BWX and J. Ray financings simultaneously during the fourth quarter of 2003.

"We expect to move forward with the financings and anticipate having them wrapped up by the end of the year," said Bruce Wilkinson, chief executive officer, in a conference call to investors to discuss the company's third-quarter results.

McDermott's ability to obtain the new financing for J. Ray will depend on numerous factors, including J. Ray's operating performance and overall market conditions.

If the company is unable to obtain new financing arrangements, J. Ray's ability to pursue additional projects, which often require letters of credit, and its liquidity will be adversely impacted, the company said. Those factors continue to cause "substantial doubt" about J. Ray's ability to continue as a going concern, according to a news release.

On a consolidated basis, the company reported Wednesday that it incurred negative cash flows for the first three quarters of 2003 and expects to incur negative cash flows from operations during the remainder of 2003 and in the first three quarters of 2004.

Completion of the Spar projects and the Carina Aries project in Argentina "has and will continue to put a strain on J. Ray's liquidity," McDermott added. For 2003, the company anticipates negative operating cash flows before capital expenditures of between $100 million to $120 million.

At Oct. 28, the company had liquidity of $199 million, which included unrestricted cash of $139 million and borrowing capacity under its existing credit facilities of $60 million.

McDermott is a New Orleans-based energy services company.

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