Teekay Offshore upsizes to $600 million, talks five-year notes to yield 8½%, pricing Tuesday

By Paul A. Harris

Portland, Ore., June 25 – Teekay Offshore Partners LP and Teekay Offshore Finance Corp. upsized their offering of five-year senior notes (Caa2/B/B) to $600 million from $500 million and set price talk at 8½%, according to market sources.

Official talk comes at the wide end of initial talk in the low to mid 8% area.

Books close at 11 a.m. ET Tuesday.

Brookfield Business Partners LP, with which Teekay Offshore has a strategic relationship, along with Brookfield’s co-investors, has committed to an order of up to $500 million of the notes, subject to a lockup agreement.

Citigroup Global Markets Inc., DNB Markets, Credit Suisse Securities (USA) LLC and Credit Agricole CIB are the joint bookrunners.

ABN Amro, BNP Paribas, ING, NIBC and Nordea are the co-managers.

The notes feature a make-whole call at Treasuries plus 50 basis points for the first two years, then become callable at a premium. They also feature a 101% poison put.

Following the upsize, the revised use of proceeds sees Teekay repaying a promissory note due 2022 held by Brookfield which will roll $200 million into the new offering.

Teekay will also use $130 million of the proceeds to fund its current tender for its NOK-denominated bond due 2019 as well as to fund a current tender for at least $208 million of its dollar-denominated bond due 2019, of which $300 million is outstanding.

Teekay will use a further $40 million of proceeds to repay its cross-currency hedge, $12 million to fund a make-whole premium and $5 million to pay transaction fees and expenses.

According to provisions in the lockup agreement, Brookfield will not sell, transfer or dispose of the notes for the first six months and will not sell, transfer or dispose of the notes below par within six to 12 months.

Brookfield may privately transfer the notes, only half of which would subsequently be subject to the lockup.

With respect to voting rights, Brookfield will not have voting rights in majority-only votes, but will have voting rights in situations requiring unanimous consents.

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

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