Foster Wheeler, Ltd

In December 2003, Foster Wheeler Ltd., a publicly traded global engineering and construction company with large capital requirements, was on the brink of bankruptcy. In the midst of restructuring efforts, it had accumulated a shareholder deficit of $872 million. Going forward, management he had to decide whether or not to pursue a Chapter 11 bankruptcy filing and how to approach the ongoing negotiations with the company's creditors. Excerpt UVA-QA-0634 Foster Wheeler, Ltd. In December 2003, Foster Wheeler, Ltd., a global engineering and construction company headquartered in Clinton, New Jersey, and incorporated in Bermuda, was on the brink of bankruptcy. For several years, the company had been experiencing a significant downturn in its operating revenue and significant net operating losses (Exhibit 1). Additionally, the company's backlog and new bookings had been depressed during the same period, and its working capital had been dangerously restricted. In the midst of restructuring efforts, it had accumulated a shareholder deficit of $ 872 million. Going forward, the company had to decide which approach it should take in the ongoing negotiations with its creditors (Exhibit 2). Company Groups Foster Wheeler was an international player in the heavy construction industry and a leading provider of advanced steam-generation equipment to the power industry. Foster Wheeler was created in 1927 through the merger of the Power Speciality Company, founded in 1884, and the Wheeler Condenser and Engineering Company, founded in 1891. The resulting company was structured into two groups: the engineering and construction group, and the energy group. The engineering and construction group designed and constructed processing facilities for the chemical, petrochemical, and pharmaceutical industries. The infrastructure of such facilities often included power generation, yielding synergistic effects with the energy group. The engineering and construction group was an industry leader in its technology for delayed coking, solvent de-asphalting, and hydrogen production. The energy group designed, manufactured, and erected steam-generating and auxiliary equipment for power stations and industry applications. Its steam-generating equipment included a full range of different types of boilers. In addition to standard boilers fired by coal, oil, and gas, the company was well known for its boilers fired by “difficulty fuels,” including biomass, waste wood, and gases low in Btu. Along with its customized boilers, the company's energy group also provided services related to these products, ranging from plant construction and maintenance to plant upgrading. The group supported these activities with in-house research and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering, and solids mechanics. Both business groups used patents and trademarks owned by Foster Wheeler, but neither group relied substantially on any particular patent or trademark. Foster Wheeler had granted patent and trademark licenses to companies throughout the world, with an especially large number of licenses to those in Japan and China. . . .