Babcock & Wilcox Enterprises Inc. (NYSE: BW), a 158-year-old energy technology firm, is actively working with investment bank Evercore and law firm O’Melveny & Myers to address its substantial debt obligations, which total nearly $500 million. This strategic move comes as the company faces declining stock prices, potential delisting from the New York Stock Exchange (NYSE), and legal challenges stemming from past liabilities.
The company is in advanced discussions with bondholders to restructure its liabilities, potentially through a bond swap.Additionally, Babcock & Wilcox has completed a minor asset sale and is pursuing a larger transaction to raise funds.These steps are part of a broader strategy to manage its debt and improve financial stability.
A significant portion of the company’s debt includes $300 million in senior unsecured notes due in 2026. Failure to refinance or restructure these notes could lead to bankruptcy, as indicated in the company’s 2024 annual report.
On April 10, Babcock & Wilcox received a notice from the NYSE warning of potential delisting due to its share price falling below the $1 minimum threshold. The company has six months to regain compliance to avoid being removed from the exchange.
Complicating matters, a recent court ruling could make Babcock & Wilcox liable for damages related to a 2019 refinery explosion at a facility owned by the now-defunct Philadelphia Energy Solutions. The explosion was caused by a part manufactured by Babcock & Wilcox in the 1970s. Although the company argued that any liability was discharged in its 2000 bankruptcy, a judge ruled that it could still be held responsible. This potential liability could be on par with the company’s existing unsecured debt.
In response to these challenges, Babcock & Wilcox is undertaking a strategic realignment to focus on more predictable revenue streams, particularly from its aftermarket businesses. The company aims to utilize these cash flows to strengthen its balance sheet and reduce debt. As part of this strategy, Babcock & Wilcox sold its Denmark-based renewable parts and services subsidiary to Hitachi Zosen Inova AG for $87 million in June 2024. The proceeds from this sale are intended to reduce long-term debt and optimize the company’s capital structure.
Despite these efforts, Babcock & Wilcox faces liquidity challenges, primarily due to losses recognized on its B&W Solar loss contracts. As of December 31, 2023, the company had total debt of $379.5 million and a cash balance of $71.3 million. These factors have raised substantial doubt about the company’s ability to continue as a going concern.
Babcock & Wilcox’s engagement with financial and legal advisers marks a critical step in addressing its financial challenges. The company’s ability to successfully restructure its debt, manage legal liabilities, and realign its business strategy will be pivotal in determining its future viability. Investors and stakeholders will be closely monitoring developments as the company navigates this complex financial landscape.
