One of the largest holders of MDR stock ( AMG Managers Fairpointe Mid Cap Fund) has eliminated its position ( 6.5 million shares) at the end of the third quarter. They took a 75 percent loss. Other institutional holders are expected to follow. The following is the commentary from AMG:
McDermott is a large integrated provider of engineering, construction, and
technology solutions to the energy industry. This stock was our top contributor to
performance in the second quarter. The company signed several large contracts
in 2019 and execution at two very large existing projects improved. However,
debt associated with the 2018 Chicago Bridge & Iron (CBI) acquisition was an
overhang. The company completed a strategic review and announced plans to
divest the tank storage business and the U.S. pipe fabrication business. The
proceeds would reduce leverage and improve working capital.
The sales of the tank storage business and the bulk of the U.S. pipe fabrication
business have taken longer than expected and are likely to result in less
proceeds than management anticipated. As a result, the company faces a
cashflow shortfall. It now appears that the company may be forced to sell one of
their best assets, Lummus Technology, a very profitable and stable part of the
We eliminated our remaining position in the stock during the quarter due to our
concerns about the company’s financial health.