Teekay Offshore asks bondholders to extend maturities in refinancing

New York, May 19 – Teekay Offshore Partners LP is asking holders of its NOK 600 million floating-rate TOP02 bonds due 2017 and its NOK 800 million floating-rate TOP04 bonds due 2018 to extend the maturities of those issues as part of a refinancing of the company’s debt.

Under the proposal, the 2017 notes’ maturity will be pushed out to November 2018 from January 2017 and the 2018 notes will be extended to December 2018 from January 2018.

Teekay Offshore said that the “precipitous decline” in oil prices has adversely affected its access to the capital markets.

Although the company has “strong operating cash flow,” upcoming debt maturities and unfinanced capital expenditures are expected to create a “liquidity shortfall,” according to a notice from the company.

Following dialogue with stakeholders, the company is proposing series of measures to address the shortfall and to strengthen its balance sheet.

The plan proposes:

• New loan financings from the company’s commercial bank lenders and refinancing of the existing loans;

• The raising of new equity to partially offset distribution payments to unitholders;

• Subordinating and resetting the maturity of a $200 million loan from Teekay Corp. to beyond Dec. 31, 2018;

• $200 million of new preferred equity with distributions to be paid in common equity; and

• The extension of the maturity of the two bond issues.

A meeting of bondholders will be held at 7 a.m. ET on June 2 to approve the changes to the two issues.

In addition to lengthening the maturity of the two bond issues, Teekay Offshore is proposing the following changes to their terms:

• Interest on the TOP04 bonds will increase by 100 basis points to Nibor plus 575 bps. The rate on the TOP02 bonds will not change from its current Nibor plus 575 bps;

• The TOP02 bonds will be redeemed at 103% of par on Nov. 30, 2018. The TOP04 bonds will be redeemed at 103% of par on Dec. 31, 2018;

• Teekay Offshore will make installment payments of principal on the TOP02 bonds of NOK 180 million each at par in October 2016 and October 2017 and a single installment payment of principal on the TOP04 bonds of NOK 160 million at par in January 2018;

• The TOP02 bonds will be callable until October 2017 at 101, increasing to 102 through July 2018 and to 103 after that. The TOP04 bonds will have a call at 101 until January 2018, rising to 102 until July 2018 and 103 up to their maturity;

• Additional covenants will subordinate the loan from Teekay Corp. and limit cash interest on those borrowings to 5%, require dividends on common and preferred equity to be paid in kind and direct proceeds from new capital markets debt to repaying the TOP02 bonds first and then the TOP04 bonds.

Teekay Offshore is offering a 1% amendment fee.

DNB Markets, Nordea Markets and Swedbank Norge are the company’s financial advisers.

Teekay Offshore Partners is a Hamilton, Bermuda-based provider of marine transportation and storage services to the offshore oil industry.

© 2015 Prospect News.
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