Monthly Archives: July 2017

I have been following with strong interest recent articles about Teekay Corporation (TK) and Teekay Offshore Partners, LP (TOO), especially the deep concerns that TOO will somehow not be able to refinance upcoming maturities and even hints of a possible bankruptcy. Since I follow these names as part of my active management in fixed income issues, I have looked closely at the TOO situation, and I believe that TOO is virtually certain to take care of upcoming maturities, assuming no major meltdown in the overall credit markets. I offer my views as a former commercial banker directly involved in originating, negotiating and executing, as the lead banker, well over a billion dollars in credit facilities for companies ranging from middle market to publicly-traded large corporate. My former professional work as a banker was admittedly not in the shipping industry, which usually is handled by specialized groups, but the fundamental credit analysis cuts across most industries. Listed below are the reasons why TOO is very likely to obtain the necessary financings/refinancings and/or amendments to its various credit facilities:

In conclusion, there is really little to indicate that TOO is somehow facing a major liquidity crisis or worse, some kind of bankruptcy event. The loss of the Arendal Spirit UMS contract appears overblown. Companies lose business representing 5% of their cash flow all the time, it's hardly a crisis. $120 million of debt is small relative to the company size. A quick scan of financial performance shows that operations are normal. Cash flow from operations and after cap-ex is nicely positive in Q1-17 (and for all of 2016 as well) and CVFO has shown stability, especially in the core segments. The outlook is positive with contracted projects expected to grow CVFO by 35%, including a $1 billion project coming on line now under a 12-year contract (Libra FPSO). To assess the likelihood of refinancing, put yourself in the shoes of the banker: there is little incentive to put unnecessary pressure on TOO and its parent, TK. There is certainly enough good news on the horizon to work constructively with the company. The broader Teekay entity is a cash cow for the banks, and as long as leverage is within normal range and operations show stability and growth potential, the banks will amend & extend.

Where is the risk? The key risk I see is that since TOO is highly leveraged there is little cushion for future bad outcomes. A major credit crisis would be the biggest near-term threat to TOO. In credit crises, typical bank behavior, like what I outlined above, is abandoned, and fear takes over. When fear takes over, banks are willing to accept irrational losses, just to "get out." Upper management effectively shuts down operations and removes any flexibility bankers have to work with companies in amending credit facilities or closing new business (I have personally experienced this). These actions are usually short sighted, but it happens. Banks tend to act like a herd, and this has ripple effects across the credit industry. Another oil crash could also force some lenders to cut back on oil exposure (especially if leverage starts to tick up due to declines in EBITDA), even if not a rational move.

While I do believe that assuming a normal credit market environment TOO will be able to refinance, banks will certainly use any excuse to charge higher fees and higher rates, and perhaps force other actions, like an equity raise or dividend cut. There may be a negative impact to common shareholders if refinancing rates are high, a secondary offering or a preferred offering is required, or a JV or asset sale is completed at a discounted value. High leverage by definition means less cushion to withstand adversity and volatile equity valuations, and I do not recommend the stock of TOO for these reasons. But I also consider it extremely likely that TOO solves upcoming maturities, assuming normally functioning credit markets.

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Teekay Offshore - Refinancing Risks Appear Overblown - Seeking Alpha

The Santa Barbara City Council approved a resolution Tuesday opposing new drilling off the California coast and fracking in existing offshore oil and gas wells. The resolution is the first in a new statewide campaign to rally local governments against proposals to expand offshore fossil fuel extraction in federal waters.

The votewhich makes Santa Barbara the first California city to oppose both fracking and new offshore drillingfollows President Trump's April 28 executive order urging federal agencies to expand oil and gas leasing in federal waters. The order could expose the Pacific Ocean to new oil leasing for the first time in more than 30 years.

"I'm thrilled to be part of this community effort to protect natural resources, the water supply and community health," said Santa Barbara City Council member Jason Dominguez, who sponsored the resolution. "At the same time, we can improve our economy, develop green markets, and bring quality jobs and living wages to the area."

Today's resolution, cosponsored by Dominguez and Santa Barbara City Council member Harwood "Bendy" White, is supported by more than 20 local businesses, the Pacific Coast Federation of Fishermen's Associations, Wishtoyo Chumash Foundation and several environmental organizations, including the Center for Biological Diversity and Food & Water Watch. The groups are working with other California cities to pass similar resolutions.

"The last thing Californians want is more drilling and fracking off our coast," said Blake Kopcho, an organizer with the Center for Biological Diversity's oceans program. "Santa Barbara took a stand because the city has seen the horrific damage offshore drilling can cause. Trump is delusional if he thinks we'll stand idly by and let him recklessly endanger wildlife and our communities with oil spills and toxic fracking chemicals."

The Santa Barbara Channel has some of richest biological diversity on the planet, along with significant fossil fuel deposits and dozens of oil and gas wells. A massive offshore oil spill in 1969 helped create the modern environmental movement and led California to ban new offshore leasing in state waters. In 2015 the Plains All American oil spill covered Santa Barbara area beaches and killed hundreds of seabirds and marine mammals.

"Santa Barbara residents know firsthand the devastation that can come from offshore drilling," said Alena Simon of Food & Water Watch. "This City Council resolution is the first step in shutting down all drilling and fracking off our coast and another step in transitioning to a 100 percent renewable energy economy."

The Santa Barbara resolution calls for:

The last offshore lease in federal waters off California was granted in 1984, but Trump's order seeks to renew the leasing program. There are more than 30 offshore drilling platforms and hundreds of miles of underwater oil and gas pipelines off California's coast. Operators want permits to frack offshore wells using chemicals that are toxic to wildlife. Separate lawsuits filed by the state of California and the Center for Biological Diversity challenging the federal government's approval of offshore fracking are pending in federal district court.

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Santa Barbara Becomes First California City to Pass Resolution Against Offshore Oil and Gas Drilling - EcoWatch

Why would Congressman Andy Harris (R-MD1) want to stand in the way of bringing clean, renewable offshore wind power to his home state of Maryland by trying to stop two projects that would create nearly 10,000 good jobs and revitalize Marylands ports? This is the question that Maryland citizens should be asking after Rep. Harris inserted an amendment into the 2018 House Interior-EPA spending package last week that would imperil the first two offshore wind projects that Maryland has approved.

Deepwater Wind

With the support of Republican Governor Larry Hogan, Maryland is moving ahead with an ambitious offshore wind program. In May, after a lengthy review process that offered a wide range of opportunities for public participation, the Maryland Public Service Commission (PSC) gave the green light to two offshore wind projects to be located in federal waters off the Maryland and Delaware coasts. Environmentalists and many in Marylands business and labor communities have been big boosters.

The projects are being developed by two separate companies: U.S. Wind and Deepwater Wind. U.S. Wind plans a 248-megawatt project to be located at least 17 miles east of Ocean City, Maryland. Deepwaters project would include 15 turbines and would be sited at least 19.5 miles from shore and 26 miles from the Ocean City Pier. Both projects will be subject to the federal governments Bureau of Ocean Energy Management permitting and environmental review process. Together, they can generate enough renewable electricity to power more than 100,000 homes and can create almost 9,700 Maryland jobs. They can add $74 million in tax revenue over the next 20 years, will result in more than $1.8 billion in in-state investment, and will help make the areas electric supply more reliable and resilient. As part of a package of conditions required by the Maryland PSC, U.S. Wind and Deepwater have also agreed to: (1) use port facilities in the Baltimore region and in Ocean City for construction, operations and maintenance; (2) a joint investment of at least $76 million in a steel fabrication plant in Maryland; and, (3) finance almost $40 million in upgrades to the Tradepoint Atlantic Shipyard in Baltimore County.

By jumpstarting offshore wind power in Maryland, these projects can help the state earn the important first-mover advantage in the growing offshore wind power industry that is now gaining traction along the East Coast. Last December, off Rhode Island, the nations first offshore wind power project came online, the Block Island Wind Farm. In Massachusetts, Republican Governor Charlie Baker has signed legislation that will bring 1,600 megawatts of offshore wind power to the Bay State by 2027. New York State plans to get 2,400 megawatts by 2030enough to power 1.25 million homes. And Virginia is involved, too, with utility Dominion Energy Virginia two weeks ago announcing a plan to build a 12-megawatt project in nearby federal waters. Whichever state moves fastest and furthest in attracting the needed port and supply facilities will also be the first to reap the benefits from an industry that can employ as many as 160,000 by 2050, the U.S. Department of Energy estimates.

Rep. Harris rider would stop the use of federal funding for reviewing site assessments or construction plans for turbines located within 24 nautical miles of the Maryland shoreline. This would imperil at least one, if not both, of these projects. Harris maintains that the projects could impact tourists enjoyment of the beaches in Ocean City, Maryland. Thats hard to credit. Both projects will be located so far from shore that they will be hard to see under most conditions. And the Deepwater project, 26 miles northeast of Ocean City, will barely be visible, if at all. The Maryland Public Service Commission has already required U.S. Wind, the developer of the larger project, to locate its turbines as far away from shore as possible and has required that each developer to use the best available technology to lessen views of the wind turbines by beach-goers and residents, both during the day and at night. Any remaining concerns about visibility can be addressed as part of the upcoming federal environmental review and permitting process.

Maryland has crafted a well-thought-out, bipartisan plan to advance offshore wind responsibly, a plan the Harris amendment now endangers. But the harm from the amendment, if it becomes law, could be broader and impact the U.S. offshore wind industry as a whole by disrupting investor confidence. That would be a grave mistake. Both Republican and Democratic governors want to move forward with offshore wind power, as does U.S. Department of the Interior Secretary Zinke, who has called offshore wind one tool in the all-of-the-above energy toolbox that will help power America with domestic energy, securing energy independence, and bolstering the economy. Under Secretary Zinkes watch, the federal government moved ahead this year with awarding offshore wind leases in the waters off North Carolina.

An irrational, last-minute amendment in a little-discussed appropriations bill shouldnt stand in the way of the development of a major new source of American-made renewable energy, renewable energy that has a promising level of bipartisan support. Neither should this amendment jeopardize the infrastructure jobs that offshore wind power can create. Congress should ensure that Harris damaging amendment does not become law.

Director, Energy & Transportation program

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How Congress Can Protect Maryland's Offshore Wind Projects - Natural Resources Defense Council

Exclusive Hundreds of IT roles at the BBC are to be offshored to cheaper wage locations, under a 560m contract renewal coming into force with its incumbent outsourcing giant Atos.

In a conference call with 300 staff - heard by The Register - Atos bosses said the new Aurora IT contract model will involve a "significant amount of offshoring and new tooling".

The workers were warned they will be pushed into an "availability pool", where some may be redeployed to another role within the company.

But only a fraction are expected to be retained on the BBC account, with most of those local roles to be exported to Atos centres in Poland and India, sources told us.

The vast majority of the Infrastructure and Data Management team and the professional services team (B&PS) will be relocated, staff were warned, but the media practice team and service desk will continue to operate from their current locations.

In total, around 400 Atos staff have worked on Auntie's tech support agreement, and may have done so for the past decade when the agreement was first reached. The renewal was agreed in May.

Last week James Purnell, BBC director of Radio and Education, told presenter Kirsty Walk on Newsnight (at 5:15 on this video) the 75m expected to be saved from the IT programme with Atos could help address the gender pay gap exposed after the Beeb revealed the salaries of stars earning more than 150,000.

On the briefing call, staff were told that a large mix of offshore versus onshore was necessary in order for Atos to win the bid against Fujitsu and CSC.

Employees were also told the new IT model is supposed to begin in October this year, however, those plans are "subject to change" with an overhaul done "in a more staged manner" rather than a "big bang" approach.

"The original plan was to deliver significant milestones and key deliverables in October. That is still the plan of record, but we are re-baselining some of those activities," staff were told.

One staffer told The Register that although the company was not making employees redundant, there was some uncertainty as to what would happen if they remain in the "availability pool" for too long.

The new Aurora IT programme, supposedly a "tower contract", will replace the original 2.3bn deal the BBC signed with Siemens back in 2004, which was transferred to Atos when it acquired Siemens' Solutions and Services unit in 2010.

Aurora was scheduled to begin in 2015, but the existing contract with Atos had been extended for another two years at a cost of 285m.

In addition to Atos, the other main supplier to win a place on Aurora is BT, which will pocket 100m over the next seven years to supply its internal network.

El Reg asked the BBC and Atos about the changes.

A BBC spokesman said the structure of the outsourcing arrangement was up to Atos in terms of how it chooses to provide services under the shiny new model. He said:

"As planned, these services will be provided to us by Atos from October."

Atos didn't directly answer the points we raised. A mouthpiece said it was in the "very early stages" of the new contract with the license-fee-payer-funded broadcaster.

"We look forward to delivering the new service which will provide a fantastic end user experience taking advantage of new technologies, whilst also providing significant cost savings."

Link:

Take that, gender pay gap! Atos to offshore hundreds of BBC roles - The Register

Apex court seeks details about PTI leader Jahangir Tareens offshore company

PTI General Secretary Jahangir Tareen. PHOTO: APP/File

ISLAMABAD:The Supreme Court cannot disqualify any parliamentarian on mere presumptions, Chief Justice of Supreme Court Mian Saqib Nisar observed on Wednesday.

The three-judge bench of the apex court, headed by the chief justice himself, took up PML-N leader Hanif Abbasis case, seeking disqualification of PTIs general secretary Jahangir Khan Tareen.

The bench also directed Tareens counsel to supply details regarding his clients offshore company, including details regarding creation and interest in the Trust, any receipt transmitted by the Trust, creation of the offshore company, names of the owners of the company or owners of the title of the company, legal and beneficial owner of the company, the quantum of assets the company created abroad and how much amount was sent from Pakistan for creating the company.

How do we apply Article 62, judge asks Imrans counsel

However, the court observed that the money was transferred via banking channels and Tareen paid taxes. It also questioned how it could be established that Jehangir Tareen is the beneficial owner of the company.

Hanif Abbasis lawyer Azid Nafees argued that Jehangir Tareen had admitted in an interview that he had offshore assets, but did not declare them in his nomination papers.

In response, the bench said Jehangir Tareen might have accepted that there was an offshore company, but it was in the name of his children and he had nothing to do with it and he is just the settler of Trust.

The counsel said Tareen admitted that his company was named Shinny Limited and owned a flat in London which he acquired after selling his property in Canada.

However, Tareens lawyer Sikandar Bashir told the bench that the petitioner, instead of raising such questions, should himself prove the veracity of his allegations because he had levelled them in the first place. He also contended that the petitioner had no legal cause to file the case against his client and that they were ready to reply all queries on the question of the offshore company.

Azid Nafees maintained that Tareens children were acting as his proxy.

SC to hear petitions against Imran, Tareen on May 13

The counsel said Jehangir Tareen also gave and received huge amounts as gift from his children.

In response, the bench remarked there was nothing illegal if the father was giving or receiving funds from his children.

It also pointed out that Tareen received Rs87,500,000 in 2010 and Rs69,750,000 in 2015 from his children, while gifted Rs1.4 billion to his children from 2010 to 2015 according to his income tax and wealth tax returns.

Azid also argued that in the Panama case this was the manner of the acquisition of property which was the main issue and the source of the money and for this, the Joint Investigation Team had been constituted to probe it. Justice Umar Atta Bandial remarked that in that case, the existence of foreign assets was admitted.

Disqualification: SC issues notices to Imran, Tareen

Azid said in this case Jehangir also admitted that he had an offshore company and owned assets and he had sent money abroad to his children and they invested the same in the company.

He alleged that Tareens investment had come from children in the shape of gift. He said Jehangir became the public officeholder in 2002 and has since been giving gift to his children.

Regarding commission of offence in the Securities and Exchange Commission of Pakistan, the counsel contended that by depositing gains and fine Tareen had accepted his culpability in the offence and he should be disqualified.

He said under Section 25 of the National Accountability Ordinance 1999, the accused returned the money in plea bargain. He said that the Supreme Court in Dr Mubashir Hassan case declared that even if the accused returned the money in such a plea bargain, he or she would still be considered an accused.

However, the bench observed that every member of Parliament who was served a notice by the SECP could not be disqualified just because he or she had been served a notice. It also wondered if all parliamentarians could be directly disqualified under Article 184(3) of the Constitution. It also wondered if the SC could adjudicate such matters in the presence of other forums.

The case was later adjourned until today (Thursday).

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Offshore assets: Conjecture not enough to disqualify MPs: Supreme Court - The Express Tribune

about 16 hours ago Updated: about 14 hours ago

Allied Irish Bank: no longer plans to offshore roles in its IT operations unit, where 129 staff were outsourced to Wipro more than two years ago. Photograph: Paul McErlane

AIB has changed its mind on offshoring certain IT functions to India as part of its five-year outsourcing arrangement with Wipro. It is understood that the bank decided that such a move was too risky in the current environment.

The bank confirmed to The Irish Times it no longer planned to offshore roles in its IT Operations unit, where 129 staff were outsourced to Wipro more than two years ago.

In a statement, the bank said: On an ongoing basis we review our IT operating model to ensure we are delivering to our changing customer needs. In 2015, AIB outsourced some IT operations to multiple partners, including Wipro.

As part of our agreement with Wipro, we recently considered offshoring a small number of IT operations roles. Following an evaluation, AIB has decided not to offshore these particular roles at this point in time.

Informed sources suggested that some 100 roles had been earmarked by Wipro for India but the bank put the figure at about 30.

AIB is believed to have spent a large sum of money on implementing the outsourcing arrangement, with EY engaged as consultants on the project.

The outsourcing plan was originally conceived during David Duffys time as chief executive. Since then, AIB has returned to sustained profitability, paid a dividend to shareholders, and regained a main stock market listing in Dublin and London.

The transfer of roles to India would also have resulted in a number of long-serving staff, who moved from AIB to Wipro in 2015, being offered redundancy packages. The banks change of heart means those offers are now off the table.

The Financial Services Union welcomed the retention of the jobs in Ireland.

The FSU was advised on Monday of the decision by AIB to direct Wipro to retain jobs in Ireland that had been earmarked for offshoring to India, its general secretary Larry Broderick said. This is welcome news and provides job security to staff in the ITO section of Wipro who carry out work for AIB.

This development strengthens the unions view that we need a strategic approach to banking services in Ireland that includes the issue of outsourcing and offshoring technical support and other functions. This is important for employment in the sector and also for customer confidence and security.

In addition, Mr Broderick said AIB had advised the union that a review of the work that Wipros application, development and maintenance section undertakes for AIB was under way. We expect clarification on this in the coming months, he said.

It is understood that about 100 roles are involved in this area, with 28 of them already offshored.

Founded in India in 1945, Wipro is a listed company specialising in global IT, consulting and business process services. Its website says it has a dedicated workforce of more than 170,000 staff.

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AIB scraps plans to offshore IT roles to India - Irish Times