McDermott’s high yield bond arrangers circulated pricing indications today for an all-in yield around 11.125%, after setting official talk yesterday at 10.5%, said three buysiders following the deal. The heftier yield on the proposed USD 1.3bn six-year unsecured note would be achieved through a 10.625% coupon and a 98 OID, two of the sources said.

The syndicate, led by Barclays and Credit Agricole, with Goldman Sachs, MUFG, ABN AMRO and RBC on the right, launched the bonds last Thursday (20 March) and initially suggested price whispers in the low-8% area for the six-year tranche. The industrial services provider originally planned to place an eight-year piece but nixed that yesterday. Barclays also attempted a bridge loan syndication earlier this month.

The leads had aimed to price the bonds this morning, but given the ongoing pricing discovery, the deal is now expected to stretch into next week, all the sources said. The company could also make changes to covenants to put the bonds more in line with its restructured loan covenants, one of the sources said.

The market’s skeptical response to McDermott’s bonds stems from the volatile history of Chicago Bridge & Iron (CBI), which McDermott is acquiring with proceeds of the new financing. While McDermott management is well-regarded, CBI has been hamstrung by repeated cost overruns and mis-priced bids for projects.

The company asked for commitments on a concurrent USD 2.26bn loan facility backing the acquisition by yesterday following the covenant changes, resizing, and wider price talk.

The company is marketing pro forma leverage at 2.7x, based on USD 3.7bn in total debt and USD 1.4bn in EBITDA including USD 250m of synergies.

McDermott did not respond to calls. A spokesperson for Barclays declined to comment.

2018 Debtwire