August 13, 2022 – The Debtors requested Court authority to: (i) obtain debtor-in-possession (“DIP”) financing to be provided by an affiliate of Brookfield Asset Management ("Brookfield," the Debtors' ultimate parent and Plan sponsor) consisting of (a) a $50.0mn new money term loan facility ($25.0mn interim) and (b) a $20.0mn roll-up of bridge financing provided by Brookfield in January 2022 and (ii) use cash collateral [Docket No. 18, with a revised proposed interim DIP order filed at Docket No. 50]. 

The DIP Credit Agreement is attached as Exhibit D to the DIP motion.

As detailed further below, interest and fees in respect of the DIP financing are to include: (i) interest of SOFR+11.00%, (ii) a commitment fee payable upon entry of the interim DIP Order of 1.50% of the aggregate amount of commitments (excluding the roll-up), (iii) an exit fee payable in cash upon the Maturity Date or any other repayment of the DIP Loans (including the roll-up) of 1.50% and (iv) a ticking fee of 5.5% on unused DIP Commitments (excluding excluding the roll-up) payable in cash upon entry of the Final Order.

On August 12, 2022, Altera Infrastructure L.P. and 37 affiliated debtors (fka “Teekay Offshore Partners L.P.,” and together “Altera*” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case No. 22-90130 (Judge Isgur). At filing, the Debtors, “a global energy infrastructure services partnership primarily focused on the ownership and operation of critical infrastructure assets in the offshore oil regions of the North Sea, Brazil and the East Coast of Canada,” noted estimated assets between $1.0bn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn ($1.6bn of funded debt, see table below).

*Altera's preferred units trade on the New York Stock Exchange under the symbols "ALIN PR A", "ALIN PR B" and "ALIN PR E", respectively.The Debtors are controlled by Brookfield Asset Management which purchased what was then known as Teekay Offshore in January 2020 and rebranded the acquired business as Altera.

DIP Motion

The DIP motion states, “The Debtors commenced these chapter 11 cases to consummate the comprehensive balance sheet restructuring embodied in the restructuring support agreement dated as of August 12, 2022 (the ‘Restructuring Support Agreement’), a copy of which is attached to the First Day Declaration as Exhibit A. 

To facilitate the Debtors’ implementation of the restructuring transactions embodied in the Restructuring Support Agreement, the Debtors secured commitments from Brookfield to provide the proposed $70 million facility (the ‘DIP Facility’), which features several favorable terms. Most notably, the DIP Facility is being provided on a junior basis with respect to the Prepetition OpCo Collateral, such that no secured lender other than Brookfield will be primed by the DIP Facility. Further, the DIP Lenders have agreed that the proposed DIP Facility will be equitized pursuant to the restructuring transactions contemplated by the Restructuring Support Agreement (unless repaid from the proceeds of an equity rights offering).

The DIP Facility includes a $50 million superpriority new money term loan facility and a ‘roll up’ of $20 million of the outstanding principal balance under the $32 million secured revolving credit facility at IntermediateCo (the ‘IntermediateCo RCF’). The IntermediateCo RCF was provided by Brookfield prepetition to bolster the Debtors’ liquidity and to allow the Debtors time to hold the negotiations that resulted in the Restructuring Support Agreement, and is one of the central pillars of the restructuring transactions described in the Restructuring Support Agreement. The DIP Facility, which is junior to Prepetition OpCo Debt and was critical to the Prepetition OpCo Secured Parties’ support for the Restructuring Support Agreement, not only is an integral component of the Debtors’ ability to commence these chapter 11 cases in a coordinated fashion with significant consensus, but also provides the Debtors with the liquidity necessary to implement their restructuring and emerge from these chapter 11 cases as a going concern.

As described in the First Day Declaration, beginning early this year, the Debtors and their advisors commenced discussions with Brookfield and the Prepetition OpCo Secured Parties in an effort to generate support for a comprehensive balance sheet restructuring. The Debtors have sought, among other things, maturity extensions, amortization and interest relief, and the compromise of certain unsecured guarantees issued by Altera Parent in support of the Prepetition OpCo Secured Debt. These discussions continued for several months during the course of 2022."

Marketing

On efforts to secure funding elsewhere, the DIP motion continues, "…as described in the D’Souza Declaration, on August 1, 2022, Altera Parent’s disinterested directors (the ‘Restructuring Committee’) authorized Evercore to solicit third-party lenders for debtor-in-possession financing proposals. The Debtors did not receive any interest—ultimately, no party was willing to extend junior debtor-in-possession financing on any terms, much less on better terms than Brookfield, and the Debtors did not believe it was viable or prudent to seek approval of senior debtor-in-possession financing and engage in a non-consensual priming fight with the Debtors’ secured lenders. Accordingly, the Debtors and their advisors focused their efforts on negotiating the DIP Facility with Brookfield. These efforts bore fruit, and, after nearly three months of arm’s-length negotiations, the proposed DIP Facility provides the Debtors with $50 million of liquidity to use during the pendency of these chapter 11 cases, with $25 million available following entry of the Interim Order, and the remaining available following entry of the Final Order. Notably, the DIP Facility is provided on a junior basis in that it does not prime the Bank Facilities. This was a crucial concession by Brookfield vis-à-vis the Prepetition OpCo Secured Parties and is yet another indicator of their willingness to support the Debtors on a go-forward basis. Further, the proposed DIP Facility will be equitized pursuant to the terms of the Restructuring Support Agreement (unless repaid from the proceeds of an equity rights offering).   

Access to the DIP Facility is critical to signal to the Debtors’ customers, vendors, and employees that operations can and will continue in the ordinary course during the reorganization process. This is particularly important to the foreign vendor base who is less familiar with the chapter 11 process and will be particularly focused on ensuring the Debtors have sufficient liquidity and authority to continue payments in the ordinary course of business during the pendency of these chapter 11 cases. See id. In addition, vendors who are not paid may be able to assert additional mechanics liens or other priming claims, particularly in foreign jurisdictions. Without the DIP Facility and ability to use Cash Collateral, the Debtors will experience extensive disruptions and delays on existing projects, irreparable damage to customer relationships, including with counterparties with whom the Debtors are in negotiations regarding new, valuable contracts, and permanent disruption to vendor relationships, increasing operating costs, and requiring additional liquidity to convince vendors to perform.” 

Key Terms of the DIP Facility:

• Borrowers: Altera Infrastructure Holdings, L.L.C., a Republic of the Marshall Islands limited liability corporation.
• DIP Guarantors: Guaranteed, on a joint and several basis, by each Debtor entity (including Altera Infrastructure L.P.) and each entity that guarantees (or is required to guarantee) the IntermediateCo RCF or the Secured PIK Notes (each, a “Guarantor” and, collectively, the “Guarantors,” and the Guarantors, together with the Borrower, the “DIP Loan Parties”) (it being agreed and understood that not all Guarantors shall be Debtors) in each case subject to the agreed security principles (the “Agreed Security Principles”) for the DIP Facility.
• DIP Lender: Brookfield TK Loan 2 L.P., a Bermuda limited partnership, and Brookfield TK Loan 3 L.P., a Cayman Islands limited partnership (in each case in its capacity under the DIP Facility, including its registered assigns, the “DIP Lender,” and together the “DIP Lenders”).
• DIP Agent: U.S. Bank Trust Company, National Association, as administrative agent for the DIP Lenders and as collateral agent for the DIP Lenders.
• Commitment/Borrowing Limits: The DIP Facility commitments total $70.0mn (inclusive of the Prepetition IntermediateCo Credit Agreement Roll-Up) (the loans under the DIP Facility, the “DIP Loans,” and the commitments thereunder, the “DIP Commitments”).
• New Money: $50.0mn, $25.0mn interim
• Roll-Up: $20.0mn of bridge financing (which totaled $32.0mn) provided by Brookfield in January 2022 under the "IntermediateCo RCF"
• Interest Rate: The DIP Loans will bear interest at a rate equal to SOFR (secured overnight financing rate) plus 11.00%, with no SOFR floor.
• Fees and Expenses: 
  • Commitment Fee: 1.50% of the aggregate amount of commitments (excluding the roll-up) payable upon entry of the interim DIP Order
  • Exit Fee: 1.50% payable in cash upon the Maturity Date or any other repayment of the DIP Loans (including the roll-up) 
  • Ticking Fee: 5.5% on unused DIP Commitments (excluding excluding the roll-up) payable in cash upon entry of the Final Order.
  • Expenses: All reasonable and documented out-of-pocket accrued and unpaid fees, costs, disbursements and expenses of Covington & Burling LLP, as counsel to the DIP Agent, Paul, Weiss, Rifkind, Wharton & Garrison LLP, as counsel to the DIP Lenders, Porter & Hedges LLP, as Texas counsel to the DIP Lenders, and Ducera Partners, LLC, as financial advisors to the DIP Lenders required to be reimbursed or paid by the DIP Loan Parties hereunder or under any DIP Loan Document incurred in connection with the chapter 11 cases shall be paid by the Debtors on a current basis.
• Use of DIP Proceeds: Substantially in accordance with the DIP Budget (except in respect of professional fees), the proceeds of the DIP Facility and/or Cash Collateral shall be available (i) subject to and upon entry of the Interim Order, to roll up $20 million of the outstanding principal balance under the IntermediateCo RCF (which, for the avoidance of doubt, shall not reduce the $50 million new money commitment under the DIP Facility and shall not be rolled-up using cash collateral), (ii) for the Debtors’ working capital needs, including to fund the costs of the administration of the chapter 11 cases and to pay adequate protection payments as authorized by the Bankruptcy Court in the Interim Order and the Final Order, in each case in a manner consistent with the DIP Budget and in compliance with the Minimum Liquidity Covenant, (iii) to pay professional fees and expenses, and (iv) to pay obligations arising from or related to the Carve Out.
• Term: The maturity date with respect to the DIP Facility (the “Maturity Date”) shall be the earlier of:
  1. December 10, 2022;
  2. the effective date of a chapter 11 plan in the Chapter 11 Cases;
  3. the consummation of a sale of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code or otherwise;
  4. the date of acceleration or termination of the DIP Facility in accordance with the DIP Credit Agreement;
  5. dismissal of the chapter 11 cases or conversion of the chapter 11 cases into cases under chapter 7 of the Bankruptcy Code; and
  6. September 26, 2022 or such later date as agreed by the Required Lenders unless the Final Order has been entered by the Court on or prior to such date.
  7. Deadline to enter the Interim Order shall be no later than three calendar days after the Petition date.
  8. Deadline to enter the Interim Order shall be no later than five calendar days after the Petition date. 
  9. Deadline to enter the Final DIP Order, shall be no later than forty-five (45) calendar days after the Petition date.

Prepetition Indebtedness

As of the Petition date, the Debtors were liable for approximately $1.6bn in aggregate principal amount of funded debt obligations, and, through Altera Parent, had issued approximately $408.0mn of outstanding preferred equity. In addition, the entities comprising the Shuttle Tankers business, the FPSO joint ventures, and certain other non-Debtors are liable for approximately $2.1bn in additional funded debt obligations. The table below summarizes the prepetition capital structure of the Debtors and that of Altera Parent’s affiliated non-Debtor subsidiaries:

About the Debtors

According to the Debtors: “Altera Infrastructure L.P. is a leading global energy infrastructure services partnership primarily focused on the ownership and operation of critical infrastructure assets in the offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Altera has consolidated assets of approximately $3.8 billion comprised of 44 vessels, including floating production, storage and offloading (FPSO) units, shuttle tankers, floating storage and offtake (FSO) units, long-distance towing and offshore installation vessels and a unit for maintenance and safety (UMS). The majority of Altera’s fleet is employed on medium-term, stable contracts."

The Declaration adds: "Altera is a leading international midstream services provider to the oil and gas industry, supplying critical infrastructure assets to its customers primarily in offshore regions of the North Sea, Brazil, and the East Coast of Canada. Altera has approximately 2,450 employees who either serve as crew or in onshore support roles for Altera’s 41 vessels around the world. 

Altera operates in five principal business segments:

1. the processing and storage of hydrocarbons through Altera’s four wholly owned and two joint-venture floating production, storage, and offloading vessels
   ('FPSO'), as well as the management of FPSOs owned by third parties;
2. the provision of supplementary storage capabilities through Altera’s two floating storage and off-take vessels ('FSO');
3. the deployment of eight long-distance towage vessels to assist with, among other things, the tow from yard to operating area and installation of large floating production facilities, storage units, exploration units, and other vessels ('Towage');
4. the operation of one unit to provide accommodations and maintenance and safety services to projects on offshore installations ('Accommodation' and together with FPSO, FSO and Towage, 'FFTA'); and 
5. the transportation of hydrocarbons from offshore oil field installations to terminals and refineries located onshore, as well as conventional tanking operations, using Altera’s 24 shuttle tanker vessels ('Shuttle Tankers').

The Debtors consist only of FFTA entities. The FPSO joint ventures and the Shuttle Tankers entities are not Debtors in these chapter 11 cases."

Capital Structure (see also Exhibit B to Docket No. 17 for a second more detailed/complete chart]

Altera’s corporate and capital structure, along with the goals of its restructuring process, are summarized in the chart below.

Initial Budget (see p. 242 of motion, Docket No. 18)

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