By Paul A. Harris
Portland, Ore., June 26 – Teekay Offshore Partners LP and Teekay Offshore Finance Corp. priced a twice-upsized $700 million issue of five-year senior notes (Caa2/B/B) at par to yield 8½% on Tuesday, according to an informed source.
The issue was increased from $600 million after having been previously raised from $500 million.
The yield printed on top of yield talk and at the wide end of initial talk in the low to mid 8% area.
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.
Proceeds will be used to repay a promissory note due 2022 held by Brookfield which will roll $200 million into the new offering.
Teekay will also use proceeds to fund a tender currently under way for its Norwegian krone-denominated bond due 2019 and a tender also under way for at least $208 million of its dollar-denominated bond due 2019, of which $300 million is outstanding.
Teekay will additionally use proceeds to repay its cross-currency hedge and to fund a make-whole premium.
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 consent.
Hamilton, Bermuda-based Teekay Offshore is a provider of transportation and services to the offshore oil industry.
| Issuer: | Teekay Offshore Partners LP and Teekay Offshore Finance Corp.
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| Amount: | $700 million, increased from $500 million, then $600 million
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| Maturity: | July 15, 2023
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| Securities: | Senior notes
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| Bookrunners: | Citigroup, DNB Markets, Credit Suisse, Credit Agricole
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| Co-managers: | ABN Amro, BNP Paribas, ING, NIBC, Nordea
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| Coupon: | 8½%
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| Price: | Par
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| Yield: | 8½%
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| Spread: | 576 bps
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| First call: | Make-whole call at Treasuries plus 50 bps until June 15, 2020, the callable at 104.25
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| Equity clawback: | 35% at 108.5 until June 15, 2020
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| Trade date: | June 26
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| Settlement date: | July 2
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| Ratings: | Moody’s: Caa2
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| S&P: B
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| Fitch: B
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| Distribution: | Rule 144A and Regulation S for life
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| Price talk: | 8½%
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| Marketing: | Roadshow
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