Beleaguered engineering and construction giant McDermott International has agreed to sell its Lummus Technology business to a partnership of US-headquartered investment company The Chatterjee Group and private equity firm Rhone Group for $2.75 billion.

The sale is part of a major restructuring that will be implemented through the Chapter 11 bankruptcy protection process in the US. The application for Chapter 11 was due to be filed on Jan. 21 in the US Bankruptcy Court for the Southern District of Texas.

McDermott revealed last September that it was mulling a potential sale of its Lummus arm, which it inherited in the acquisition of rival engineering and construction group CB&I in May 2018. The Chicago-headquartered group has suffered a string of losses and has been taking action to improve cash flow and strengthen its balance sheet.

Supported by more than two-thirds of McDermott’s funded debt creditors, the restructuring is expected to wipe out more than $4.6 billion of debt and will be financed by a debtor-in-possession (DIP) financing facility of $2.81 billion.

The agreement to sell Lummus remains subject to higher or better bids through a court-supervised auction, which will be held in around 45 days. Proceeds from the sale are expected to repay the DIP financing in full as well as fund emergence costs and provide cash for long-term liquidity.

Subject to court approval, McDermott expects this financing, combined with its own cash generation, to stabilize its cash flows, continue normal operations and fulfill its business obligations. In addition, it has secured committed exit financing of more than $2.4 billion in a letter of credit facility and plans to emerge from Chapter 11 with about $500 million in funded debt.

David Dickson, McDermott’s president and CEO, said the restructuring transaction is further recognition of the engineering group’s “fundamentally solid operating business and proven strategy.  “Our record backlog, the majority of which has been booked in the last two years, and high rate of new project awards demonstrates our customers' continued confidence in our business, the demand for our skills and our long-term opportunities ahead.”

As a consequence of the Chapter 11 filing, McDermott anticipates being delisted from the New York Stock Exchange by Jan. 31.