UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report: December 20, 2002
McDERMOTT INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 1-8430 72-0593134
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(State or other jurisdiction (Commission) (IRS Employer
of incorporation) File No.) Identification No.)
1450 Poydras Street, New Orleans, Louisiana 70112-6050
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (504) 587-5400
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Item 5. OTHER EVENTS
In a press release dated December 19, 2002, McDermott International,
Inc. (NYSE: MDR) ("McDermott" or the "Company") announced that the
Company, together with the Asbestos Claimants' Committee ("ACC") and
the Legal Representative for Future Asbestos-Related Claimants
("FCR"), has filed a substantially complete consensual plan of
reorganization and settlement agreement ("Settlement Agreement") in
the Chapter 11 Bankruptcy Proceedings involving The Babcock & Wilcox
Company ("B&W") with the U.S. Bankruptcy Court for the Eastern
District of Louisiana ("Bankruptcy Court").
The Settlement Agreement between McDermott and certain of its
subsidiary companies, the ACC and the FCR is subject to various
conditions, including the requisite approval of the asbestos
claimants, the Bankruptcy Court's confirmation of the plan of
reorganization and approval of McDermott's shareholders.
"The filing of the consensual plan of reorganization is a reflection
of the time and effort we have dedicated to bringing the B&W Chapter
11 proceedings to a close. We are pleased to have made this filing
and with the progress we have made so far," said Bruce W. Wilkinson,
Chairman of the Board and Chief Executive Officer of McDermott.
A summary of the key terms of the Settlement Agreement, which are
substantially the same as those previously reported, are as follows:
o McDermott would assign all of its equity in B&W to a trust
to be created for the benefit of asbestos-related personal
injury claimants ("Trust").
o McDermott and all of its subsidiaries would assign,
transfer or otherwise make available to the Trust their
rights to certain applicable insurance proceeds.
o McDermott would issue 4.75 million shares of restricted
McDermott common stock to the Trust. The resale of the
shares would be subject to certain limitations in order to
provide for an orderly means of selling the shares to the
public. Certain sales by the Trust would also be subject to
McDermott's right of first refusal. If any of the shares
issued to the Trust are still held by the Trust three years
after the date of plan confirmation, and to the extent those
shares could not have been sold in the market at a price
greater than or equal to $19 per share (based on quoted
market prices) taking into account the restrictions on sale
and any waivers of those restrictions that may be granted by
McDermott from time to time, McDermott
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would effectively guarantee that those shares would have a
value of $19 per share. McDermott would be able to satisfy
this guaranty obligation by making a cash payment or through
the issuance of additional shares of its common stock. If
McDermott elects to issue shares to satisfy this guarantee
obligation, it generally would not be required to issue more
than 12.5 million shares.
o McDermott or one of its U.S. subsidiaries would issue an
aggregate of $92 million of promissory notes to the Trust.
The notes would be unsecured obligations with principal
payments of $8.36 million per year, for eleven years, and a
7.5% interest rate.
o McDermott and all of its past and present directors,
officers and affiliates would receive the full benefit of
Section 524 (g) of the Bankruptcy Code with respect to all
pending and future personal injury asbestos-related claims
relating to B&W and would be released and protected from all
other pending and future asbestos-related claims stemming
from B&W's operations, as well as claims of any other kind
relating to B&W, including claims relating to the 1998
corporate reorganization that has been the subject of
litigation in the Chapter 11 bankruptcy proceedings.
o The settlement would be conditioned on the approval by
McDermott's stockholders of the terms of the settlement
outlined above.
The Company expects the Bankruptcy Court will schedule further
proceedings concerning this matter. The Company anticipates that the
process of finalizing and implementing this settlement could take up
to nine months, depending on the nature and extent of any objections
or appeals in the bankruptcy case. There are certain issues that the
Company is continuing to negotiate with the ACC and FCR. When a final
settlement becomes probable, the Company currently estimates that,
subject to further negotiations, it would record an after-tax charge
against earnings of between $100 million to $130 million, reflecting
the present value of the Company's contributions and contemplated
payments to the Trust as outlined above. This charge would be in
addition to the $220.9 million after-tax charge the Company recorded
in the quarter ended June 30, 2002 when it wrote off its investment
in B&W and other related assets.
ABOUT THE COMPANY
McDermott International, Inc. is a leading worldwide energy services
company. The Company's subsidiaries provide engineering, fabrication,
installation, procurement, research, manufacturing, environmental
systems, project management and facility management services to a
variety of customers in the energy and power industries, including
the U.S. Department of Energy.
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In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, McDermott International,
Inc. cautions that statements in this press release which are
forward-looking and which provide other than historical information,
involve risks and uncertainties that may impact the Company's actual
results of operations. The forward-looking statements in this press
release include, among other things, statements about the estimated
charges and timing for the settlement of the B&W Chapter 11. Although
McDermott's management believes that the expectations reflected in
those forward-looking statements are reasonable, McDermott can give
no assurance that those expectations will prove to have been correct.
Those statements are made by using various underlying assumptions and
are subject to numerous uncertainties and risks. If one or more of
these risks materialize, or if underlying assumptions prove
incorrect, actual results may vary materially from those expected.
For a more complete discussion of these risk factors, please see
McDermott's annual report on Form 10-K for the year ended December
31, 2001 and its quarterly report on Form 10-Q for the period ended
September 30, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
McDERMOTT INTERNATIONAL INC.
By: /s/ Thomas A. Henzler
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Thomas A. Henzler
Vice President Finance
and Corporate Controller
December 20, 2002
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