Offshore Energy Service Company Altera Files Pre-Arranged Bankruptcy
Altera Infrastructure is the latest of a string of companies in the service industry related to offshore energy to seek a financial restructuring through a bankruptcy filing. The UK-based company announced today through a complex series of filings in the U.S. Bankruptcy Court for the Southern District of Texas it is planning a “pre-arranged Chapter 11 process,” to deleverage the corporate balance sheet and improve liquidity. These types of pre-packed transactions are entered into with the agreement of the lenders as a means of using the bankruptcy laws to facilitate the restructuring.
A week ago announcing a large second quarter loss in part due to impairment charges, the company said it was seeking a restructuring agreement with its debt holders. They reported skipping a July 15 interest payment on outstanding bonds as the talks were proceeding. The restructuring involves its business units including the storage and offloading units, towage, offshore vessels, and service, maintenance, and safety businesses, but not the shuttle tankers and FPSO joint ventures.
Altera’s largest investor, Toronto’s Brookfield Business Partners, a private equity firm, has agreed to the terms and is committed to providing a $50 million debtor in possession financing to ensure that the company’s operations continue unaffected by the restructuring. The company said it plans to operate in the normal course of business during the restructuring expecting it will not impact employees.
A supermajority of the company’s bank lenders and 71 percent of the overall debt holders have agreed to the terms of the refinancing. The company said it will address the more than $1 billion of secured and unsecured debt on the holding company’s books as well as $400 million of preferred equity, and $550 million of secured asset-level bank debt.
“We are confident that this Chapter 11 process will result in a comprehensive recapitalization transaction that will not only stabilize liquidity but also deleverage our balance sheet and better position Altera for future growth,” said Ingvild Sæther, Chief Executive Officer of Altera Infrastructure Group in a written statement announcing the filing.
The terms of the agreement call for Brookfield and certain of its affiliates and institutional partners to equitize more than $750 million of debt upon consummation of the transactions. The filing reports that the process will better align cash flow with debt service obligations.
The company joins a long list of others in sectors related to the offshore energy industry that have sought to restructure through bankruptcy. Formerly known as Teekay Offshore Partners, Brookfield acquired the company in 2020 and as part of the new strategy rebranded the company Altera Infrastructure. The operations include Eastern Canada, Brazil, and the North Sea. Brookfield first invested in the company in 2017 with a strategic partnership with its parent company Teekay Corporation and in 2019 announced plans to acquire the remaining interests from Teekay.