Teekay's FPSO Buy to Keep Sevan Marine Afloat
SEVAN Marine was pleased to announce on Sept. 30 an agreement for financial restructuring and industrial partnership with Teekay Corporation. This agreement involves the sale of FPSO Sevan Voyageur, FPSO Sevan Piranema and FPSO Sevan Hummingbird to Teekay, the raising of new equity in Sevan Marine and a restructuring of the Company’s indebtedness. The details of the Agreement were disclosed in the stock exchange notice dated Oct. 18, which is available on the Company's website.
The final approval and execution of the Teekay Transactions and hence the restructuring itself is, at the date of this report, still subject to uncertainties which would impact the assumptions applied in the preparation of the Q3 2011 financial statements. In a situation where the Company was not to succeed in executing the Teekay Transactions, or any alternative and unlikely alternative restructuring, the Company will most likely be required to file for bankruptcy.
The proposed Teekay Transactions result in the disposal of substantial assets and operations of the Company. As of Sept. 30, these operations have been reclassified as discontinued operations in accordance with International Financial Reporting Standards (IFRS) with the current and historical financial statements being restated accordingly.
The Teekay Transactions result in impairment and accounting losses that have adversely impacted the third quarter results by US $284.9 million. The impairments and accounting losses are of a non-cash nature.
The impairments and losses are specified as follows:
- FPSOs, $162.1 million
- Other fixed assets, $3.6 million
- Operating income/expense, $24.0 million
- Def. Tax Assets, $15.3 million
- Drilling Shares, $79.9 million
TOTAL: $284.9 million
The impairments on the FPSOs are specified as follows:
- Piranema $14.9 million
- Hummingbird $116 million
- Voyageur $61 million
TOTAL: $162.1 million
Following the impairments and accounting losses, net loss for the quarter amounted to US $295.7 million. In accordance with IFRS, the gains from any debt remission as contemplated in the Agreement can only be accounted for at the time of the formal release of obligations by the bondholders.
Subject to formal approval, the gains from the debt remission will be accounted for within the fourth quarter of 2011 with respect to all but the FPSO Sevan Voyageur Bond. Gains from the FPSO Sevan Voyageur Bond remission will be accounted for upon the sale of the FPSO Sevan Voyageur, which is expected to take place in Q3 2012. Gains from the debt remission and debt to equity conversion arising out of the Teekay Transactions are forecast to be approximately USD $216 million, of which approximately USD $33 million relates to the FPSO Voyageur Bond as of September 30, 2011.
The net equity as of September 30, 2011 is negative by US $173 million due to the adverse accounting effects arising from the proposed Teekay Transactions. The accounting gains on debt remission as well as the contemplated capital increase are expected to restore the Company’s equity position in the fourth quarter of 2011.
At the date of this report, the Company is in breach of several covenants under its financing arrangements. On October 18, 2011, bondholders representing more than 2/3 in each of the Company’s bond loans confirmed agreement to the terms set out in the Agreement by entering into a lock-up and voting agreement with the Company under which they have, inter alia and subject to certain terms and conditions, committed to vote in favour of the proposed Teekay Transactions in their respective bondholders’ meetings and agreed not to exercise any acceleration rights available to them under the bond loans.
In addition, in October 2011, E.ON together with the US $230 million bank facility syndicate led by ING and the US $82.3 million securitization facility led by Investec entered into standstill agreements where under they agreed, subject to certain terms and conditions, not to exercise any acceleration rights or other remedies available to them under the relevant agreements for the period up until November 30, 2011.
The proposed Teekay Transactions including the capital increase of minimum US $25 million from the Teekay Placement and net proceeds from the US $25 million Stakeholder Placement, which is yet to be subscribed for, would provide the Company with sufficient working capital to support its requirements going forward and significantly reduce its debt burden.
The Teekay Transactions will lead to a substantial reduction of the Company’s debt burden. The Company will retain its core intellectual property rights and engineering core competence, which it intends to leverage by seeking additional license agreements and projects that utilise Sevan’s unique cylindrical hull concept. It will also be supported by a strong industrial partner and shareholder in the form of Teekay. The Board believes that the Teekay Transaction represents a positive restructuring outcome for all parties, including creditors, customers, staff and shareholders.
Read more in the attached report .
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