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MDR down 25%

8,774 Views | 41 Replies | Last: 4 yr ago by Vernada
LostInLA07
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AG
What is going on with those guys? Another big write down due to Cameron LNG. I wonder how many other skeletons CB&I shoved into the closet before they were sold? CB&I was clearly watching a bankruptcy clock ticking. Last quarter MDR took a $482mm hit due to Cameron and this quarter another $168mm. And that's only their 50% of the JV...so $1.3B cost increase (probably more because they likely got some $ out of the owner) in 6 months. Ouch.

http://www.prnewswire.com/news-releases/mcdermott-offers-comment-on-cameron-lng-project-300794944.html
cgh1999
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I'm hopeful that MDR management successfully stabilizes the CB&I side of the business like they did when they took over MDR. IF they can do so, this is a great opportunity to make some money.

My strategy has been to buy in the money calls around 12 months out. It has made me a bunch of money over the last few years. I just bought several $4 strike Jan 2020 calls.
cgh1999
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Huge earnings miss for Q4, but strong guidance for 2019. I just bought a handful more of January 2020 $4 strike calls that I think will pay off.
cgh1999
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Up almost 25% from opening low yesterday.
LostInLA07
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Another huge earnings miss for MDR and their share price is dropping like a rock. They are also not going to be able to capture as much cash from the asset sales as their were hoping for...so possible liquidity issues for them if they have to continue lighting cash on fire to fund Cameron?

Are their issues really isolated to legacy CB&I projects or do they have a larger issue with estimating, execution and cost/schedule predictability? They have solid backlog but is it profitable? I'm tempted to try to catch the falling knife here but curious if anyone else has thoughts on this company.
cgh1999
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To me their problems are almost exclusively related to CB&I. That was a horrible acquisition. I like MDR management and they did a great job stabilizing that company and working their way through some bad jobs. I hope they have the liquidity to make it through CB&I's issues. They just committed $50MM on a new HQ, so hopefully they are optimistic and not just dumb.

I've got about 1500 shares at $9 cost. Will probably buy another 500 or so here.
coastalaggie
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I use to work for J Ray and cannot understand what attracted them to CBI. They have a lot of backlog indeed and good portion in KSA so that is a plus. Hopefully they can pluck what they want from CBI and sell the remaining. They need to stick to their core business which is fabrication and installation of offshore O&G projects.
oldarmy1
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Guys if you bought AKAM calls today move target to $3.50 from $2.10. Sometimes you just hit it right.

badharambe
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People that work there speculated that they acquired for backlog but also to scare off hostile take overs of just the MDR side.

I bought some today. But now that I think about MDR being 10x higher in price a year ago, I realize I shouldn't hold this thing.
Ciboag96
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Oh, it's just silly old "bad backlog". The CEO says they have a "strategic rationale for an EPC pullthrough." Heh? And they're trying to sell the division that sells a small stack of paper for 8 figures a pop.

Ride it all the way up, friend!

Quote:

but also to scare off hostile take overs of just the MDR side.
.

Worked nicely, I'd say.
badharambe
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Lol. Made 50% on the trade in 14 hours.
Gonna let this bad boy do it's thing and won't be apart of it.
LostInLA07
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No news on Lummus sale or a bridge loan...guess things aren't going well.
FarmerJohn
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At this point the decision to reject the Subsea 7 offer and proceed with closing the CB&I deal seems to have only benefited the McDermott senior management. If I were a shareholder, I would be curious about what kind of claw-back provisions are tied to any bonuses paid out. We are only a little over a year removed from that offer, so I don't know that passing this off as Monday Morning QB-ing is really accurate.
Cyp0111
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LOL. Good luck w the claw back.
FarmerJohn
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I realize, that unless an executive is caught on tape and there is a written memo where they are explicitly stating that they are deliberately trying to screw over the shareholders for their benefit, a clawback isn't happening. It's just that it seemed so obvious at the time that rejecting the Subsea 7 offer was their CEO and directors saying, "No thanks, we'd like to still be in charge."
LostInLA07
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Well great news recently
Dr. Doctor
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You don't think you can get 95% of lenders to line up for a haircut on their interest rates?

~egon
LostInLA07
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They should have gone to the payday loan shark. Terms would have been better.
LostInLA07
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Another big ouch today. I would guess chapter 11 by end of the month.

From the 10-Q:

"Our applicable subsidiaries elected not to make the payment, when due, of approximately $69 million in interest due on their 10.625% senior notes due 2024 (the "2024 Notes") on November 1, 2019.
As a result of the non-payment, a 30-day grace period following non-payment of the interest has commenced. During that grace period, we intend to continue discussions with representatives of holders of the 2024 Notes regarding the interest payment.
The non-payment of the interest will not trigger an event of default under the Senior Notes Indenture unless the grace period expires without an agreed-upon resolution and the interest payment then remains unpaid.
If such an event of default occurs, then the trustee under the Senior Notes Indenture or the holders of at least 25% in aggregate principal amount of the 2024 Notes may declare the principal of and accrued interest on the 2024 Notes to be immediately due and payable.
In addition, such an event of default would result in cross defaults under the Superpriority Credit Agreement, the Credit Agreement and the Letter of Credit Agreement.
The conditions precedent to funding of Tranche B include, among other things, the refinancing of at least 95% of the 2024 Notes with similar new senior notes which must have interest payable only by an increase in the principal amount, and which may be secured by a lien on the collateral securing obligations under the Superpriority Credit Agreement only on a basis junior to our obligations under the Superpriority Credit Agreement, the Credit Agreement and the Letter of Credit Agreement."
LostInLA07
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cgh1999
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Whoever signed off on the CB&I deal owes me some money!!
LostInLA07
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Executive greed. CB&I was basically a rushed poison pill so they could keep their C-suite jobs and board seats and avoid being acquired (I think it was Subsea 7 who was going to acquire MDR).
FarmerJohn
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Yep, hence my wish for clawback up above. (Though I know that is a pipe dream). It's just been so inevitable for so long now.
The Debt
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badharambe said:

Lol. Made 50% on the trade in 14 hours.
Gonna let this bad boy do it's thing and won't be apart of it.

Went in at .88 out at 1.55....felt so good.
LostInLA07
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Chapter 11 today, even with $2.7B Lummus sale.

Lasted longer than I expected.
Vernada
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Staff - please rename thread to MDRQ
Dr. Doctor
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Who got Lummus?

~egon
nonameag99
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Also, subsidiaries of McDermott have reached an agreement with a joint partnership between The Chatterjee Group and Rhne Group, under which the joint partnership is committed to acquire Lummus Technology for a base purchase price of $2.725 billion. McDermott plans to use the proceeds from the sale of Lummus to repay the DIP financing in full, as well as fund emergence costs. McDermott said it has secured committed exit financing of over $2.4 billion in letter of credit facility capacity and will emerge from Chapter 11 with approximately $500 million in funded debt. "As a result of the transaction, we are eliminating over $4.6 billion in debt from our balance sheet and we will emerge with robust liquidity and significant financing. Throughout this process, McDermott will continue all business operations as normal," said David Dickson, CEO of McDermott.

Vernada
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Wonder how big of a bonus he'll take home?
LostInLA07
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I'm interested to see if he is fired after the reorganization.
Vernada
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LostInLA07 said:

I'm interested to see if he is fired after the reorganization.


Why!? He just made $4.6B in debt vanish!
Ciboag96
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Down goes Fraish-eh!
Whatthefunyo
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Vernada said:

Wonder how big of a bonus he'll take home?


Since it's mostly stock, not much.
LostInLA07
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There was a cash retention bonus in traunch 1 of the bridge loan. There is also new equity for management in the pre-pack reorg.
Ciboag96
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Public company execs. Incompetence gets rewarded.
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