Teekay and Brookfield have agreed to enter into a strategic partnership. The transaction is part of a comprehensive solution for Teekay Offshore, which includes a 640 mill. $ equity investment and other financing initiatives.
Brookfield and Teekay will invest 610 mill. $ and 30 m[ds_preview]ill. $, respectively, in Teekay Offshore (TO) at a price of 2.50 $ per common unit and receive 65.5 mill. $ warrants on a pro rata basis. Following the investment, Brookfield will own approximately 60 % and Teekay will own approximately 14 % of the common units of TO.
Brookfield will acquire from Teekay Parent both a 49 % interest in Teekay Offshore GP LLC (TOO GP), the general partner of Teekay Offshore, and an option to acquire an additional 2 % of TOO GP. On closing, Brookfield will have the right to elect four members to the nine-member Board of Directors of TOO GP.
TO will repurchase and cancel all 304 mill. $ of the outstanding Series C-1 and Series D preferred units from the existing unitholders for an aggregate amount of approximately 250 mill. $ in cash, which will save approximately 28 mill. $ in annual distributions.
Brookfield will acquire from Teekay Parent an existing 200Â mill. $ intercompany loan previously extended to TO in exchange for 140Â mill. $ in cash and 11.4 mill. $ of the Warrants to be issued to Brookfield. Brookfield has agreed to extend the maturity date of the intercompany loan from 2019 to 2022.
Shuttle Tankers transferred to new subsidiary
Teekay Offshore will transfer its shuttle tanker business into a new, wholly-owned, non-recourse subsidiary, Teekay Shuttle Tankers (ShuttleCo). A majority of TO’s shuttle tanker fleet will be refinanced with a new 600 mill. $, five-year debt facility, and two 50 %-owned vessels will be refinanced with a new 71 mill. $, four-year debt facility. In addition, an existing 250 mill. $ debt facility secured by the three East Coast Canada newbuildings, and an existing 143 mill. $ private placement project bond financing secured by two vessels, will be transferred from Teekay Offshore to ShuttleCo.
A significant portion of TO’s Norwegian Kroner (NOK) bond series due to mature in late-2018 and early-2019 is expected to be repurchased with proceeds from a new five-year, up to 250 mill. $ U.S. dollar denominated bond offering by ShuttleCo in the Norwegian bond market.
Shuttle Tanker Newbuilding Order
In addition to the formation of ShuttleCo, Teekay Offshore has entered into conditional shipbuilding contracts with Samsung Heavy Industries to construct two Suezmax-size, DP2 shuttle tanker newbuildings, with options to order up to two additional vessels. These newbuilding vessels will be constructed based on the Partnership‘s New Shuttle Spirit design which incorporates proven technologies to increase fuel efficiency and reduce emissions, including LNG propulsion technology. Upon delivery in 2019 and 2020, these new vessels will provide shuttle tanker services in the North Sea under the Partnership‘s existing Master Agreement with Statoil.
