Zachry Holdings is focused on its reorganization and rebuilding efforts as it aims for bankruptcy exit.
Zachry Holdings Inc. is preparing to exit Chapter 11 bankruptcy by the end of March 2024 after facing setbacks related to the $10 billion Golden Pass LNG project. The bankruptcy court has approved a reorganization plan that ensures full payment to many creditors, and support from both senior lenders and unsecured creditors is encouraging. Despite challenges with claims related to the project, Zachry remains optimistic for the future, having reported significant revenue and maintaining a large workforce.
Things are stirring in San Antonio as Zachry Holdings Inc. reveals exciting plans to pull itself out of bankruptcy by the end of March 2024. This comes after a challenging period for the company, which, along with its swarm of 20 subsidiaries, filed for Chapter 11 bankruptcy protection back in May 2023. The culprit? A series of hiccups tied to the massive $10 billion Golden Pass LNG export terminal project.
Let’s break this down a little further. The Golden Pass project, located just south of Port Arthur, Texas, kicked off in 2019 with high hopes. However, Zachry Holdings found themselves grappling with unexpected challenges, resulting in disputes over extra funding. This prompted a notice of default and breach, ultimately pushing Zachry to seek bankruptcy protection. The Golden Pass project is co-owned by QatarEnergy, which holds a whopping 70% stake, and Exxon Mobil Corporation, which possesses the remaining 30%.
The bankruptcy court has given Zachry a thumbs up to engage with certain creditors, aiming to rally support for a revised reorganization plan. If this plan receives the green light, it will set the stage for Zachry and its subsidiaries to emerge from bankruptcy stronger than ever. Excitingly, both senior lenders and the official committee of general unsecured creditors are backing this revised plan.
One of the most uplifting aspects of this plan is that it guarantees full payment of allowed general unsecured claims. This means that creditors with claims up to $25,000 will see their cash claims fully paid off, providing them much-needed peace of mind during this turbulent time.
Despite the hiccups, Zachry Holdings remains a significant player in the industry, raking in an impressive $5.4 billion in revenue in 2023 and employing over 15,000 individuals globally. Zachry Industrial Inc., a subsidiary of Zachry Holdings, was the lead general contractor on the Golden Pass project. However, as challenges mounted, Zachry found it difficult to retain its position, leading to its exit from the project last summer.
As of now, around 1,700 claims amounting to more than $23 billion have been filed in the bankruptcy case. However, not all claims are straightforward, as objections have been raised against about 1,130 of them. One of the partners in the Golden Pass project, Chiyoda International Corp., has accused Zachry of stalling over $60 million in unresolved vendor claims, but Zachry insists they are making progress on these issues.
According to the reorganization plan, there’s also a juicy $50 million capital contribution coming from Zachry’s immediate parent company. This financial injection is broken down into $20 million as forgiveness of intercompany liabilities and a further $30 million in cash to aid recovery.
Mark your calendars! Creditors have until February 20, 2024, to cast their votes in support of the reorganization plan, with a confirmation hearing slated for February 26, 2024. While various creditors are expected to recover fully, those with $62.6 million in deferred compensation claims will not be able to vote, as they are presumed to accept the plan.
Interestingly, a class-action lawsuit is also lingering against Zachry Holdings concerning the layoffs of employees from the Golden Pass LNG project. In the face of these challenges, Zachry remains committed to operational continuity throughout the bankruptcy proceedings and exudes confidence in its long-term prospects.
So, as Zachry Holdings gears up to overcome these hurdles, the company is ensuring it’s learned from its past and is ready to move towards a brighter and more stable future.
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