Super-Priority Term Facilities Agreement
The S-P facility in McDermott had an impact on our first Lien debt collection ratings, as it based them on the bulk of all of the company`s assets. In addition, an exchange of unsecured priority bonds was expected, with a risk of interest payments, and at that time a possible agreement on a restructuring plan was still very uncertain. With the emergence of the S-P facility, we revised the first Link debt recovery rating to “4” on “2” to reflect average recoveries in the 30% -50% range, while the recovery rating for unsecured priority bonds remained “6”. Super-priority maturity loans (S-P) are a credit facility for debtors who are in default and need liquidity to run their businesses while negotiating a debt restructuring plan with creditors. Like devious-in-possession facilities, S-P loans are generally very well secured and set up front-line lenders and unsecured debt, lenders agree, in the hope that the liquidity they have provided and the time they buy will help them maximize the recovery of their debt investments, with better control of the negotiations , unlike a more formal and time-consuming and costly bankruptcy process. As noted below, the S-P loan and the LOC mechanism were introduced into the DIP facility as a result of the company`s bankruptcy application. Finally, thanks to the turnaround plan and the proceeds from the subsequent sale of Lummus, the IDPs were awaiting full cash refunds or participated in the super senior release facility. One of the key requirements of the “S-P” facility was that the company must comply with maintenance agreements, comply with strict reporting obligations and reach certain restructuring miles, which meant that restructuring negotiations had to continue, while the company operated under leniency agreements for existing and imminent contracts and interest payments. The financing of the S-P loan was staggered in tranches and was conditional on full compliance with agreements and milestones.