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DEBT

9 Months Ended

Sep. 30, 2019

NOTE 12—DEBT

The carrying values of our debt obligations are as follows:

	September 30, 2019				December 31, 2018
	(In millions)
Current
Revolving credit facility	$	801			$	-

Term Facility	$	2,226			$	23
10.625% senior notes		1,300				-
Structured equipment financing		32				-
North Ocean 105 construction financing		12				8
Less: unamortized debt issuance costs		(120	)			(1	)
Current debt, net of unamortized debt issuance costs	$	3,450		$		30
Long-term
Term Facility	$	-			$	2,243
10.625% senior notes		-				1,300
North Ocean 105 construction financing		-				16
Less: current maturities of long-term debt		-				(30	)
Less: unamortized debt issuance costs		-				(136	)
Long-term debt, net of unamortized debt issuance costs	$	-			$	3,393

As a result of the debt compliance matters and substantial doubt regarding our ability to continue as a going concern, as discussed in Note 2, Basis of Presentation and Significant Accounting Policies, we determined that the classification of all of our long-term debt obligations, including finance lease obligations, was current as of September 30, 2019. Accordingly, those obligations have been recorded within Current Liabilities on the Balance Sheet.

Credit Agreement

On May 10, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and letter of credit issuers, Barclays Bank PLC, as administrative agent for a term facility under the Credit Agreement, and Crédit Agricole Corporate and Investment Bank, as administrative agent for the other facilities under the Credit Agreement. The Credit Agreement provides for borrowings and letters of credit in the aggregate principal amount of $4.7 billion, consisting of the following:

•

a $2.26 billion senior secured, seven-year term loan facility (the “Term Facility”), the full amount of which was borrowed, and $319.3 million of which has been deposited into a restricted cash collateral account (the “LC Account”) to secure reimbursement obligations in respect of up to $310.0 million of letters of credit (the “Term Facility Letters of Credit”);

•

a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”); and

•

a $1.44 billion senior secured letter of credit facility (the “LC Facility”), which includes a $50 million increase pursuant to an Increase and Joinder Agreement we entered into with Morgan Stanley Senior Funding, Inc. as of May 24, 2019.

The Credit Agreement provides that:

•

Term Facility Letters of Credit can be issued in an amount up to the amount on deposit in the LC Account ($320 million at September 30, 2019), less an amount equal to approximately 3% of such amount on deposit (to be held as a reserve for related letter of credit fees), not to exceed $310.0 million;

•

subject to compliance with the financial covenants in the Credit Agreement, the full unused amount of the Revolving Credit Facility is available for revolving loans;

•

subject to our utilization in full of our capacity to issue Term Facility Letters of Credit, the full unused amount of the Revolving Credit Facility is available for the issuance of performance letters of credit and up to $200 million of the Revolving Credit Facility is available for the issuance of financial letters of credit; and

•

the full unused amount of the LC Facility is available for the issuance of performance letters of credit.

Borrowings are available under the Revolving Credit Facility for working capital and other general corporate purposes. Certain existing letters of credit outstanding under our previously existing Amended and Restated Credit Agreement, dated as of June 30, 2017 (the “Prior Credit Agreement”), and certain existing letters of credit outstanding under CB&I’s previously existing credit facilities have been deemed issued under the Credit Agreement, and letters of credit were issued under the Credit Agreement to backstop certain other existing letters of credit issued for the account of McDermott, CB&I and their respective subsidiaries and affiliates.

The Credit Agreement includes mandatory commitment reductions and prepayments in connection with, among other things, certain asset sales and casualty events. In addition, we are required to make annual prepayments of term loans under the Term Facility and cash collateralize letters of credit issued under the Revolving Credit Facility and the LC Facility with 75% of excess cash flow (as defined in the Credit Agreement).

On October 21, 2019, we entered into Consent and Amendment No. 1 to the Credit Agreement (the “Credit Agreement Amendment”). The Credit Agreement Amendment, among other things, amended our leverage ratio, fixed charge coverage ratio and minimum liquidity covenant for each fiscal quarter through December 31, 2021. The Credit Agreement Amendment also modified certain affirmative covenants, negative covenants and events of default to, among other things, make changes to allow for the incurrence of indebtedness and pledge of assets under the Superpriority Credit Agreement (as defined below) and eliminate our reinvestment rights with respect to proceeds from asset sales. The Credit Agreement Amendment also modified the participation fees we are charged for letters of credit, as described below.

Term Facility—As of September 30, 2019, we had $2.2 billion of borrowings outstanding under the Term Facility. Proceeds from our borrowing under the Term Facility were used, together with proceeds from the issuance of the Senior Notes and cash on hand, (1) to consummate the Combination in 2018, including the repayment of certain existing indebtedness of CB&I and its subsidiaries, (2) to redeem $500 million aggregate principal amount of our 8.000% second-lien notes, (3) to prepay existing indebtedness under, and to terminate in full, the Prior Credit Agreement, and (4) to pay fees and expenses in connection with the Combination, the Credit Agreement and the issuance of the Senior Notes.

Principal under the Term Facility is payable quarterly and interest is assessed at either (1) the Eurodollar rate plus a margin of 5.00% per year or (2) the base rate (the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin of 4.00%, subject to a 1.0% floor with respect to the Eurodollar rate and is payable periodically dependent upon the interest rate in effect during the period. On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on $1.94 billion of the $2.26 billion Term Facility. This resulted in a weighted average interest rate of 7.70%, inclusive of the applicable margin during the three months ended September 30, 2019. The Credit Agreement requires us to prepay a portion of the term loans made under the Term Facility on the last day of each fiscal quarter in an amount equal to $5.65 million.

The future contractually scheduled maturities of the Term Facility are:

	(In millions)
2019	$	6
2020		23
2021		23
2022		23
2023		23
Thereafter		2,128
	$	2,226

Additionally, as of September 30, 2019, there were approximately $300 million of Term Facility letters of credit issued (including $45 million of financial letters of credit) under the Credit Agreement, leaving approximately $10 million of available capacity under the Term Facility.

Revolving Credit Facility and LC Facility—We have a $1.0 billion Revolving Credit Facility which is scheduled to expire in May 2023. As of September 30, 2019, we had approximately $801 million in borrowings and $194 million of letters of credit outstanding (including $49 million of financial letters of credit) under the Revolving Credit Facility, leaving $5 million of available capacity under this facility. During the nine months ended September 30, 2019, the maximum outstanding borrowing under the Revolving Credit Facility was $801 million. We also have a $1.440 billion LC Facility that is scheduled to expire in May 2023. As of September 30, 2019, we had approximately $1.435 billion of letters of credit outstanding, leaving $5 million of available capacity under the LC Facility. Under the Revolving Credit Facility, interest will be assessed at either the base rate plus a floating margin ranging from 2.75% to 3.25% (3.25% at September 30, 2019) or the Eurodollar rate plus a floating margin ranging from 3.75% to 4.25% (4.25% at September 30, 2019), in each case depending on our leverage ratio (calculated quarterly). We are charged a commitment fee of 0.50% per year on the daily amount of the unused portions of the commitments under the Revolving Credit Facility and the LC Facility. Additionally, with respect to all letters of credit outstanding under the Credit Agreement, we are charged a fronting fee of 0.25% per year and, with respect to all letters of credit outstanding under the Revolving Credit Facility and the LC Facility, we are charged a participation fee of (i) between 3.75% to 4.25% (4.25% at September 30, 2019) per year in respect of financial letters of credit and (ii) between 1.875% to 2.125% (2.125% at September 30, 2019) per year in respect of performance letters of credit, in each case depending on our leverage ratio (calculated quarterly). Pursuant to the Credit Agreement Amendment, we are now charged a 5% participation fee on any outstanding letter of credit for any newly issued letter of credit and with respect to any increase in the amount of any existing letter of credit. We are also required to pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement.

Credit Agreement Covenants— The Credit Agreement, as amended by the Credit Agreement Amendment, includes the following financial covenants that are tested on a quarterly basis:

•

the minimum permitted fixed charge coverage ratio (as defined in the Credit Agreement) is (i) 0.70:1.00 for the fiscal quarters ending December 31, 2019 through June 30, 2020; (ii) 1.10:1.00 for the fiscal quarters ending September 30, 2020 and December 31, 2020; (iii) 1.20:1.00 for the fiscal quarter ending March 31, 2021; (iv) 1.40:1.00 for the fiscal quarter ending June 30, 2021; (v) 1.30:1.00 for the fiscal quarters ending September 30, 2021 and December 31, 2021; and (vi) 1.50:1.00 for each fiscal quarter ending after December 31, 2021.

•

the maximum permitted leverage ratio is (i) 11.70:1.00 for the fiscal quarter ending December 31, 2019; (ii) 11.60:1.00 for each fiscal quarter ending March 31, 2020; (iii) 10.30:1.00 for the fiscal quarter ending June 30, 2020; (iv) 6.50:1.00 for the fiscal quarter ending September 30, 2020; (v) 6.00:1.00 for the fiscal quarter ending December 31, 2020; (vi) 5.30:1.00 for the fiscal quarter ending March 31, 2021; (vii) 4.80:1.00 for the fiscal quarter ending June 30, 2021; (viii) 4.70:1.00 for the fiscal quarter ending September 30, 2021; (ix) 4.80:1.00 for the fiscal quarter ending December 31, 2021; and (x) 3.25:1.00 for each fiscal quarter ending after December 31, 2021.

•

the minimum liquidity (as defined in the Credit Agreement, but generally meaning the sum of McDermott’s unrestricted cash and cash equivalents plus unused commitments under the Credit Agreement available for revolving borrowings) is $200 million.

In addition, the Credit Agreement contains various covenants that, among other restrictions, limit our ability to:

•

incur or assume indebtedness;

•

grant or assume liens;

•

make acquisitions or engage in mergers;

•

sell, transfer, assign or convey assets;

•

make investments;

•

repurchase equity and make dividends and certain other restricted payments;

•

change the nature of our business;

•

engage in transactions with affiliates;

•

enter into burdensome agreements;

•

modify our organizational documents;

•

enter into sale and leaseback transactions;

•

make capital expenditures;

•

enter into speculative hedging contracts; and

•

make prepayments on certain junior debt.

The Credit Agreement contains events of default that we believe are customary for a secured credit facility. If an event of default relating to bankruptcy or other insolvency event occurs, all obligations under the Credit Agreement will immediately become due and payable. If any other event of default exists under the Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Credit Agreement and exercise other rights and remedies. In addition, if any event of default exists under the Credit Agreement, the lenders may commence foreclosure or other actions against the collateral.

If any default exists under the Credit Agreement, or if we are unable to make any of the representations and warranties in the Credit Agreement at the applicable time, we will be unable to borrow funds or have letters of credit issued under the Credit Agreement.

Credit Agreement Covenants Compliance— As discussed in Note 2, Basis of Presentation and Significant Accounting Policies, in September 2019 we determined that there was a significant level of uncertainty as to whether we would be in compliance with several financial covenants in the second half of 2019, including as of September 30, 2019. The Credit Agreement, as subsequently amended by the Credit Agreement Amendment on October 21, 2019, does not require testing any financial covenants under the Credit Agreement as of September 30, 2019.

Future compliance with our financial and restrictive covenants under the Credit Agreement could be impacted by circumstances or conditions beyond our control, including, but not limited to, the delay or cancellation of projects, decreased letter of credit capacity, decreased profitability on our projects, changes in currency exchange or interest rates, performance of pension plan assets or changes in actuarial assumptions. Further, we could be impacted if our customers experience a material change in their ability to pay us or if the banks associated with the Credit Agreement were to cease operations, or if there is a full or partial break-up of the European Union (“EU”) or its currency, the Euro.

Superpriority Credit Agreement

On October 21, 2019, McDermott, as a guarantor, entered into a superpriority senior secured credit agreement (the “Superpriority Credit Agreement”) with three of our wholly owned subsidiaries, McDermott Technology (Americas), Inc. (“MTA”), McDermott Technology (US), Inc. (“MTUS”), and McDermott Technology, B.V. (“MTBV”), as co-borrowers (collectively, the “Borrowers”), a syndicate of lenders and letter of credit issuers, Barclays Bank PLC, as administrative agent for the New Term Facility (as defined below), and Crédit Agricole Corporate and Investment Bank, as administrative agent for the New LC Facility (as defined below).

The Superpriority Credit Agreement provides for borrowings and letters of credit in an aggregate principal amount of $1.7 billion, consisting of (1) a $1.3 billion term loan facility (the “New Term Facility”) and (2) a $400 million letter of credit facility (the “New LC Facility”). Proceeds of the loans under the New Term Facility are to be used for general corporate purposes and to pay fees and expenses in connection with the Superpriority Credit Agreement and related transactions.

Upon the closing of the Superpriority Credit Agreement, we were provided access to $650 million of capital, comprised of $550 million under the New Term Facility, before reduction for related fees and expenses, and $100 million under the New LC Facility (“Tranche A”). Subject to satisfaction of certain conditions specified in the Superpriority Credit Agreement (and detailed below), including, certain conditions that require approval of the lenders (in their discretion), a second tranche of $350 million of capital (comprised of $250 million under the New Term Facility and $100 million under the New LC Facility) (“Tranche B”) will be made available to the Borrowers between November 30, 2019 and December 31, 2019, a third tranche of $150 million under the New Term Facility (“Tranche C”) will be made available to the Borrowers between December 30, 2019 and March 31, 2020 and a fourth tranche of $550 million of capital (comprised of $350 million under the New Term Facility and $200 million under the New LC Facility) (“Tranche D”) will be made available to the Borrowers between January 31, 2020 and March 31, 2020. The New Term Facility and the New LC Facility are scheduled to mature on October 21, 2021.

The indebtedness and other obligations under the Superpriority Credit Agreement are unconditionally guaranteed by McDermott and substantially all of its direct and indirect wholly owned subsidiaries (the “Superpriority Guarantors”), other than several captive insurance subsidiaries and certain other designated or immaterial subsidiaries. The indebtedness and other obligations under the

Superpriority Credit Agreement are secured by super-priority liens on substantially all of the Borrowers’, McDermott’s and the other Superpriority Guarantors’ assets.

The New Term Facility and the New LC Facility will bear interest at the Borrowers’ option at either (1) the Eurodollar rate plus a margin of 10.00% per year or 10.00%, respectively, or (2) the base rate plus a margin of 9.00% per year in each case. The Borrowers are charged a commitment fee of 1.50% per year on the daily amount of the unused portions of the commitments under the New LC Facility. Additionally, with respect to all letters of credit outstanding under the New LC Facility, the Borrowers are charged a fronting fee of 0.50% per year. The Borrowers are also required to pay issuance fees and other fees and expenses in connection with the issuance of letters of credit under the New LC Facility. We paid upfront fees, commitment fees, agent fees and other fees to certain lenders, arrangers and agents for the Superpriority Credit Agreement.

The Superpriority Credit Agreement includes mandatory commitment reductions and prepayment requirements in connection with certain asset sales and casualty events. In addition, the Borrowers will be required to make an annual prepayment of loans under the New Term Facility and reduce commitments under the New LC Facility with 75% of “excess cash flow” (as defined in the Superpriority Credit Agreement). The Superpriority Credit Agreement otherwise only requires periodic interest payments until maturity. Certain mandatory prepayments and voluntary prepayments of loans under the New Term Facility must be accompanied by the payment of a premium of (x) during the first six months after the closing (other than with respect prepayments for certain asset sales), up to the greater of 3.0% of the aggregate principal amount of term loans being repaid and the sum of the present values of the term loans, being repaid, the accrued interest on such term loans and 3.0% of the principal amount of such term loans and (y) during the period after the first six months after the closing but prior to the end of the first 18 months (and with respect to prepayments for certain asset sales), 3.0% of the aggregate principal amount of term loans being repaid. The Borrowers may terminate in whole or reduce in part the unused portion of the New LC Facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

The Superpriority Credit Agreement requires us to comply with the following financial covenants:

•

limitations on specified variances from receipts and disbursements set forth in our budget;

•

minimum Adjusted EBITDA (as defined in the Superpriority Credit Agreement), tested on a trailing four-quarters basis at the end of each fiscal quarter;

•

minimum liquidity of no less than $75 million at any time; and

•

maximum project charges to specified projects for the quarter ended September 30, 2019 not to exceed $260 million.

The Superpriority Credit Agreement contains various affirmative covenants, including requirements that:

•

McDermott appoint a Chief Transformation Officer, to report to McDermott’s CEO and Board of Directors (the “Board”);

•

prior to the funding of Tranche B, McDermott refinance at least 95% of the outstanding aggregate principal amount of our Senior Notes (as defined below), with similar 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 McDermott’s and its applicable subsidiaries’ obligations under the Superpriority Credit Agreement, the Credit Agreement and the Letter of Credit Agreement;

•

concurrently with the funding of Tranche B, Tranche C and Tranche D as described above, McDermott issue equity, so that participating lenders receive equity in McDermott totaling up to an aggregate of 15% of McDermott’s issued and outstanding shares of common stock (on a pro rata basis relative to each lender’s commitment amount); and

•

in addition to customary periodic financial reporting obligations, McDermott deliver periodic cash flow forecasts and variance reports to the lenders under the Superpriority Credit Agreement.

The Lenders’ obligation to fund Tranche B, Tranche C and Tranche D under the Superpriority Credit Agreement is subject in all cases to their consent (in their discretion). McDermott expects that, prior to approving the funding of Tranche B, Tranche C or Tranche D, the Lenders will require McDermott to deliver additional financial information to the Lenders and their advisors about McDermott, including updates on McDermott’s short-term cash flows and McDermott’s progress in evaluating all potential alternatives to reduce leverage.

Superpriority Credit Agreement Covenants—The Superpriority Credit Agreement includes the following financial covenants:

•

as of any Variance Testing Date (as defined in the Superpriority Credit Agreement), we shall not allow (i) our aggregate cumulative actual total receipts for such variance testing period to be less than the projected amount therefor set forth in the most recently delivered Approved Budget (as defined in the Superpriority Credit Agreement) by more than 15%, (ii) the aggregate cumulative actual total disbursements (A) for the variance testing period to exceed the projected amount therefor set forth in the most recently delivered Approved Budget by more than 15% and (B) for each week within such variance testing period, to exceed the projected amount therefor set forth in the most recently delivered Approved Budget by more than (x) 20%, with respect to each of the first week and on a cumulative basis for the two-week period ending with the second week of such variance testing period and (y) 15% on a cumulative basis with respect to the three-week period ending with the third week and the four-week period ending with the fourth week, in each case of such variance testing period and (b) at any time, our liquidity shall not be less than $100 million.

•

beginning with the fiscal quarter ending December 31, 2019, our adjusted EBITDA (as defined in the Superpriority Credit Agreement) for the most recently ended four fiscal quarter period for which financial statements have been delivered pursuant to the Superpriority Credit Agreement shall not be less than the minimum amount set forth below as set forth opposite such ended fiscal quarter:


Test Period End Date	Adjusted EBITDA (In millions)
December 31, 2019	$	430
March 31, 2020		470
June 30, 2020		530
September 30, 2020		880
December 31, 2020		960
March 31, 2021		1,090
June 30, 2021		1,210

•

The minimum liquidity (as defined in the Superpriority Credit Agreement, but generally meaning the sum of McDermott’s unrestricted cash and cash equivalents plus unused commitments under the Superpriority Credit Agreement available for revolving borrowings) shall be $75 million.

In addition, the Superpriority Credit Agreement contains various covenants that, among other restrictions, limit our ability to:

•

incur or assume indebtedness;

•

grant or assume liens;

•

make acquisitions or engage in mergers;

•

sell, transfer, assign or convey assets;

•

make investments;

•

repurchase equity and make dividends and certain other restricted payments;

•

change the nature of our business;

•

engage in transactions with affiliates;

•

enter into burdensome agreements;

•

modify our organizational documents;

•

enter into sale and leaseback transactions;

•

make capital expenditures;

•

enter into speculative hedging contracts; and

•

make prepayments on certain junior debt.

The Superpriority Credit Agreement contains events of default that we believe are customary for a senior secured credit facility. If an event of default relating to a bankruptcy or other insolvency event occurs, all obligations under the Superpriority Credit Agreement will immediately become due and payable. If any other event of default exists under the Superpriority Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Superpriority Credit Agreement and exercise other rights and remedies. In addition, if any event of default exists under the Superpriority Credit Agreement, the lenders may commence foreclosure or other actions against the collateral.

Letter of Credit Agreement

On October 30, 2018, we, as a guarantor, entered into a Letter of Credit Agreement (the “Letter of Credit Agreement”) with MTA, MTUS and MTBV, each a wholly owned subsidiary of ours, as co-applicants, and Barclays Bank PLC, as administrative agent. The Letter of Credit Agreement provides for a facility for extensions of credit in the form of performance letters of credit in the aggregate face amount of up to $230 million (the “$230 Million LC Facility”). The $230 Million LC Facility is scheduled to expire in December 2021. The obligations under the Letter of Credit Agreement are unconditionally guaranteed on a senior secured basis by us and substantially all of our wholly owned subsidiaries, other than the co-applicants (which are directly obligated thereunder) and several captive insurance subsidiaries and certain other designated or immaterial subsidiaries. The liens securing the $230 Million LC Facility will rank equal in priority with the liens securing obligations under the Credit Agreement. The Letter of Credit Agreement includes financial and other covenants and provisions relating to events of default that are substantially the same as those in the Credit Agreement. As of September 30, 2019, there were approximately $220 million of letters of credit issued (or deemed issued) under the $230 million LC Facility, leaving approximately $10 million of available capacity.

On October 21, 2019, we entered into Consent and Amendment No. 1 to the Letter of Credit Agreement (the “LC Agreement Amendment”). The LC Agreement Amendment amends, among other things, the compliance levels for McDermott’s leverage ratio and fixed charge coverage ratio for each fiscal quarter through December 31, 2021. The LC Agreement Amendment also modifies (i) the event of default provisions and (ii) covenant provisions in the same manner as provided in the Credit Agreement Amendment. The LC Agreement Amendment also modifies the participation fee we are charged for newly issued letters of credit or with respect to any increase in the amount of any existing letter of credit to 5%.

Letter of Credit Agreement Covenants Compliance— As discussed in Note 2, Basis of Presentation and Significant Accounting Policies, in September 2019 we determined that there was a significant level of uncertainty as to whether we would be in compliance with several financial covenants in the second half of 2019, including as of September 30, 2019. The LC Agreement, as subsequently amended by the LC Agreement Amendment on October 21, 2019, does not require testing any financial covenant as of September 30, 2019.

Senior Notes

On April 18, 2018, we issued $1.3 billion in aggregate principal of 10.625% senior notes due 2024 (the “Senior Notes”), pursuant to an indenture we entered into with Wells Fargo Bank, National Association, as trustee (the “Senior Notes Indenture”). Interest on the Senior Notes is payable semi-annually in arrears, and the Senior Notes are scheduled to mature in May 2024. However, at any time or from time to time on or after May 1, 2021, we may redeem the Senior Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Senior 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 on May 1 of the years indicated:

Year	Optional redemption price
2021		105.313	%
2022		102.656	%
2023 and thereafter		100.000	%

In addition, prior to May 1, 2021, we may redeem up to 35.0% of the aggregate principal amount of the outstanding Senior Notes, in an amount not greater than the net cash proceeds of one or more qualified equity offerings (as defined in the Senior Notes Indenture) 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), subject to certain limitations and other requirements. The Senior Notes may also be redeemed, in whole or in part, at any time prior to May 1, 2021 at our option, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus the applicable premium (as defined in the Senior Notes 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).

On November 1, 2019, a scheduled interest payment of approximately $69 million was due on the Senior Notes. On November 1, 2019, we did not pay the scheduled interest payment and entered into a 30-day grace period to defer the interest payment in accordance with the Senior Notes Indenture. If we do not make the interest payment within the 30-day grace period, an event of default will have occurred pursuant to the terms of the Senior Notes Indenture. Upon an event of default, the trustee of the Senior Notes or the holders of at least 25% in aggregate principal amount of the Senior Notes then outstanding may declare the principal of and accrued interest on the Senior Notes to be immediately due and payable. Our failure to pay the interest payment on the Senior Notes by the end of the grace period would also result in cross defaults under the Superpriority Credit Agreement, the Credit Agreement and the Letter of Credit Agreement.

Senior Notes Covenants—The Senior Notes Indenture contains covenants that, among other things, provide limits around our ability 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 our capital stock or purchase or redeem our subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; (6) create certain liens; (7) sell all or substantially all of our assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create unrestricted subsidiaries. Those covenants are subject to various exceptions and limitations.

Senior Notes Covenants Compliance—As of September 30, 2019, we were in compliance with all our restrictive covenants under the Senior Notes Indenture. Future compliance with our restrictive covenants under the Senior Notes Indenture could be impacted by circumstances or conditions beyond our control, including, but not limited to, those discussed above with respect to the November 1, 2019 scheduled interest payment and the Credit Agreement.

Other Financing Arrangements

North Ocean (“NO”) Financing―On September 30, 2010, McDermott International, Inc., as guarantor, and NO 105 AS, one of our subsidiaries, as borrower, entered into a financing agreement to pay a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of NO 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of NO 105 AS. As of September 30, 2019, the outstanding borrowing under this facility was approximately $12 million. Future maturities are approximately $4 million for the remainder of 2019 and $8 million in 2020.

Receivables Factoring―During the nine months ended September 30, 2019, we sold, without recourse, approximately $65 million of receivables under an uncommitted receivables purchase agreement in Mexico at a discount rate of applicable LIBOR plus a margin of 1.40% - 2.00% and Interbank Equilibrium Interest Rate in Mexico plus a margin of 1.40% - 1.70%. We recorded approximately $2 million of factoring costs in Other operating income (expense) during the nine months ended September 30, 2019. Ten percent of the receivables sold are withheld and received on the due date of the original invoice. We have received cash, net of fees and amounts withheld, of approximately $57 million under these arrangements during the nine months ended September 30, 2019.

Structured Equipment Financing―In the second quarter of 2019, we entered into a $37 million uncommitted revolving re-invoicing facility for the settlement of certain equipment supplier invoices. As of September 30, 2019, we received approximately $32 million under this arrangement, with repayment obligations maturing in January 2020. Interest expense and origination fees associated with this facility were not material.

Uncommitted Facilities—We are party to a number of short-term uncommitted bilateral credit facilities and surety bond arrangements (the “Uncommitted Facilities”) across several geographic regions, as follows:

	September 30, 2019				December 31, 2018
	Uncommitted Line Capacity		Utilized		Uncommitted Line Capacity		Utilized
	(In millions)
Bank Guarantee and Bilateral Letter of Credit ⁽¹⁾	$	1,850	$	1,380	$	1,669	$	1,060
Surety Bonds ⁽²⁾		842		588		842		475

⁽¹⁾	^{Approximately $175 million of this capacity is available only upon provision of an equivalent amount of cash collateral.}

⁽²⁾

^{Excludes approximately $326 million of surety bonds maintained on behalf of CB&I’s former Capital Services Operations, which were sold to CSVC Acquisition Corp (“CSVC”) in June 2017. We also continue to maintain guarantees on behalf of CB&I’s former Capital Services Operations business in support of approximately $28 million of RPOs. We are entitled to an indemnity from CSVC for both the surety bonds and guarantees.}

The financial institutions that provide the Uncommitted Facilities have no obligation to issue letters of credit or bank guarantees, or to post surety bonds, on our behalf, and they may be able to demand that we provide them with cash or other collateral to backstop these liabilities.