Altera Infrastructure files Chapter 11 to implement prearranged RSA

By Sarah Lizee

Olympia, Wash., Aug. 15 – Altera Infrastructure LP and 37 affiliates filed Chapter 11 bankruptcy Friday in the U.S. Bankruptcy Court for the Southern District of Texas to implement a prearranged restructuring, according to a press release.

The company has entered into a restructuring support agreement with about 71% of its funded debt, including ultimate parent Brookfield Business Partners LP and a super-majority of its bank lenders.

All in, the RSA has been signed, or agreed to in principle, by holders of 80% of its funded debt, which includes about 91% of its bank lenders pending some creditors’ internal credit approval processes.

RSA terms

The RSA contemplates addressing more than $1 billion of secured and unsecured holding company debt, $400 million of preferred equity, and $550 million of secured asset-level bank debt, including unsecured guarantees of debt issued by Altera Infrastructure, a comprehensive reprofiling of Altera’s bank loan facilities to better align cash flow with debt service obligations, and the continued support of equity sponsor Brookfield.

The comprehensive reprofiling of the bank facilities will include maturity extensions, interest and amortization relief, and other covenant relief. Holders will agree to the satisfaction of their Altera Parent guarantees in exchange for warrants to acquire their pro rata share of 7.6% of the new common stock of Reorganized Altera Parent.

Brookfield will equitize more than $750 million of the debt in return for 100% of the common equity in reorganized Altera Parent, together with equitization of a proposed debtor-in-possession facility, described below.

The comprehensive reprofiling of the bank facilities will include maturity extensions, interest and amortization relief, and other covenant relief. Holders will agree to the satisfaction of their Altera Parent guarantees in exchange for warrants to acquire their pro rata share of 7.6% of the new common stock of Reorganized Altera Parent.

The consenting bank lenders will agree to the debtors’ consensual use of their cash collateral.

A corporate reorganization, the result will be a “siloed” structure providing for cross-guarantees to the bank lenders and direct ownership by reorganized Altera parent of the shuttle tankers business and floating production storage and offloading (FPSO) joint ventures.

Some of the consenting bank lenders and Brookfield will agree to provide commitments for an about $183 million new-money financing facility to fund the debtors’ portion of the financing of the Knarr FPSO upgrade costs under the Knarr contract.

The Altera Parent unsecured notes will be equitized in exchange for their pro rata share of the new warrants.

In the event that any class of bank lenders votes to reject the plan, the restructuring support agreement provides for the return of the collateral securing their allowed credit agreement claims or treatment otherwise in compliance with section 1129(b)(2)(A) of the bankruptcy code.

General unsecured claims at subsidiary debtors, trade and contract claims, and administrative and priority claims will generally be paid in full in cash in the ordinary course of business.

All existing common and preferred equity in Altera Parent will be canceled without any distribution.

DIP facility

Brookfield has agreed to provide a $70 million junior DIP financing to help fund Altera’s restructuring process and ensure ordinary course operations remain unimpaired during the Chapter 11 process.

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 a $32 million secured revolver with Brookfield.

The facility is set to mature on Dec. 10, 2022 and bear interest at SOFR plus 1,100 basis points, with no SOFR floor.

DIP financing objection

An informal group of TopCo noteholders has objected to the DIP financing.

The group said that less than a year ago, its claims were identical to those of Brookfield’s, but Brookfield is set to maintain close to 100% of the equity in the reorganized company while the TopCo noteholders are receiving virtually no recovery.

The group said the differential treatment is based on a preferential insider transaction that Brookfield orchestrated in August 2021, through which Brookfield’s notes were repaid using value that formerly belongs to Altera Parent and all its unsecured noteholders.

The noteholders said the interim relief sought in the DIP financing motion would severely impair the ability of an official committee of unsecured creditors or other creditors to scrutinize the proposed plan and Brookfield’s conduct.

Through the DIP motion, Altera wants to impose an arbitrary, short-term deadline to pursue causes of action against Brookfield, and to limit the committee investigation budget to just $100,000, the noteholder group said.

Altera also wants to provide Brookfield with sweeping releases upon entry of the final DIP order, outside of a plan, regardless of the committee’s position, and before the committee and others have reasonable time for investigation, the group added.

“Those extraordinary provisions should not be permitted in an interim order, especially in the circumstances presented, where the DIP lender is a sponsor looking to retain control and to obtain releases relating to highly consequential transactions,” the group said.

Other details

Altera has filed a series of motions, which, once approved by the court, will enable the company to operate its business in the ordinary course without interruption.

These motions will also allow Altera to continue to honor obligations to its employees, customers, and suppliers on previously agreed upon schedules and terms on an uninterrupted basis.

The company reported $1 billion to $10 billion in both assets and liabilities.

Its largest unsecured creditors are Bank of New York Mellon, based in New York, with a $289.21 million unsecured bonds claim, Marsh Ltd., based in Norwich, U.K., with a $2.36 million insurance claim, and Reva Quality Group AS, based in Stavanger, Norway, with a $1.07 million trade claim.

The debtors’ proposed counsel is Kirkland & Ellis LLP, Kirkland & Ellis International LLP and Jackson Walker LLP. Its proposed financial adviser is FTI Consulting.

Altera is a Westhill, U.K.-based is a supplier of infrastructure assets to the offshore energy industry. The Chapter 11 case number is 22-90130.

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