Teekay Tankers Ltd. Announces Acquisition of 13 Vessels From Teekay Corporation

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HAMILTON, BERMUDA--(Marketwire -04/16/12)- Teekay Tankers Ltd. (NYSE: TNK - News) ("Teekay Tankers" or "the Company") announced today that it has reached an agreement to acquire from Teekay Corporation (NYSE: TK - News) ("Teekay"), a fleet of 13 double-hull conventional oil and product tankers and related time-charter contracts, debt facilities and other assets and rights, for an aggregate purchase price of approximately $455 million.

Transaction Summary

 

--  Teekay Tankers to acquire from Teekay a fleet of seven crude oil tankers
    and six product tankers, along with related time-charter out contracts,
    debt facilities and an interest rate swap, for an aggregate price of
    approximately $455 million.
--  As partial consideration, Teekay will receive $25 million in new Teekay
    Tankers Class A shares issued at a price of $5.60 per share.
--  Nine of the 13 vessels to be acquired currently operate under favorable
    fixed-rate time-charters. Immediately following the transaction, Teekay
    Tankers' fixed coverage is expected to increase from approximately 29
    percent to approximately 43 percent for the 12 months commencing July 1,
    2012.
--  Acquisition includes the assumption by Teekay Tankers of outstanding
    debt of approximately $180 million in term loans and approximately $290
    million in available revolving credit facilities, of which approximately
    $40 million will be undrawn. As a result of the transaction, Teekay
    Tankers' liquidity is expected to increase to approximately $400
    million, which the Company believes will provide flexibility to pursue
    further accretive growth opportunities.
--  Transaction is expected to be accretive to Teekay Tankers' Cash
    Available for Distribution(1) per share and dividend per share.
--  Teekay will grant Teekay Tankers a right of first refusal on any
    conventional tanker opportunities developed by Teekay for a period of
    three years from the closing date.
--  Additional details of the transaction will be provided by management
    during a conference call scheduled for Tuesday, April 17, 2012 at 9 am
    (ET).

The table below summarizes the vessels to be acquired as well as the time-charter out contract details:

 

----------------------------------------------------------------------------
                      Year                          Charter          Charter
    Vessel           Built  Class     Employment    Expiry              Rate
----------------------------------------------------------------------------
Crude Oil Tankers
----------------------------------------------------------------------------
1.  Zenith Spirit     2009  Suezmax   Spot          n/a                  n/a
----------------------------------------------------------------------------
2.  Pinnacle Spirit   2008  Suezmax   Time-charter  Oct 30, 2014     $21,000
----------------------------------------------------------------------------
3.  Summit Spirit     2008  Suezmax   Time-charter  Oct 30, 2014     $21,000
----------------------------------------------------------------------------
4.  Godavari Spirit   2004  Suezmax   Time-charter  Dec 31, 2012     $21,000
----------------------------------------------------------------------------
5.  Australian
     Spirit           2004  Aframax   Time-charter  Jan 30, 2016     $21,000
----------------------------------------------------------------------------
6.  Axel Spirit       2004  Aframax   Time-charter  Dec 29, 2016     $19,500
----------------------------------------------------------------------------
7.  Americas Spirit   2003  Aframax   Time-charter  Sep 30, 2015     $21,000
----------------------------------------------------------------------------
Product Tankers
----------------------------------------------------------------------------
8.  Galway Spirit     2007  LR2       Spot          n/a                  n/a
----------------------------------------------------------------------------
9.  Limerick Spirit   2007  LR2       Spot          n/a                  n/a
----------------------------------------------------------------------------
10. Donegal Spirit    2006  LR2       Spot          n/a                  n/a
----------------------------------------------------------------------------
11. Hugli Spirit      2005  MR        Time-charter  Mar 1, 2015   $30,600(i)
----------------------------------------------------------------------------
12. Teesta Spirit     2004  MR        Time-charter  Mar 25, 2013     $21,500
----------------------------------------------------------------------------
13. Mahanadi Spirit   2000  MR        Time-charter  May 12, 2013     $21,500
----------------------------------------------------------------------------
(i)Charter rate covers incremental Australian crewing expenses of
approximately $14,000 per day above international crewing costs.

1.  Cash Available for Distribution represents net income (loss) excluding
    depreciation and amortization, unrealized (gains) losses from
    derivatives, any non-cash items or write-offs of other non-recurring
    items, and net income attributable to the historical results of vessels
    acquired by the Company from Teekay for the period when these vessels
    were owned and operated by Teekay.

As part of the transaction, Teekay Tankers and Teekay will enter into a non-competition agreement, which will provide Teekay Tankers with a right of first refusal to participate in any new conventional crude oil tanker and product tanker developed by Teekay for a period of three years from the closing date of this transaction.

The transaction, which is expected to be accretive to Teekay Tankers' Cash Available for Distribution and dividend per share, will be partially financed with the issuance to Teekay of $25 million of newly issued shares of Teekay Tankers Class A common stock, and the remaining amount will be financed through a combination of cash payments to Teekay and the assumption by Teekay Tankers of existing debt secured by the acquired vessels. The number of Teekay Tankers Class A common shares to be issued to Teekay as partial consideration for the acquired vessels was based on an aggregate value of $25 million and a price per share of $5.60 per share, which represents the trailing 20-day volume-weighted average price for the period immediately preceding today's announcement of the transaction (inclusive of April 16, 2012). As a result of this share issuance, Teekay's economic interest in Teekay Tankers will increase from approximately 20 percent to approximately 25 percent and its voting interest as a result of its combined ownership of Class A and Class B shares will increase from approximately 51 percent to approximately 53 percent.

"We are pleased to announce Teekay Tankers' most significant transaction since its initial public offering," commented Bruce Chan, Teekay Tankers' Chief Executive Officer. "The addition of 13 modern vessels nearly doubles our fleet size and provides a larger and broader platform for Teekay Tankers in the mid-size crude oil tanker segment. The transaction also introduces product tankers into our fleet mix, a segment which we believe has favorable fundamentals. In addition, the substantial time-charter coverage that we are acquiring with these vessels increases our estimated fixed-cover for the 12-month period commencing July 1, 2012 from approximately 29 percent to approximately 43 percent, which provides further downside protection for Teekay Tankers' full payout dividend during this period and is well-aligned with our outlook for improving spot tanker market fundamentals in 2013."

Mr. Chan added, "The assumption of existing low-cost debt facilities secured by these vessels also includes a portion of undrawn revolver capacity. As a result, upon completion of this transaction, Teekay Tankers' liquidity will increase to approximately $400 million, which we believe will provide Teekay Tankers with significant financial flexibility and positions us well to pursue further accretive growth opportunities."

"With our new three-year non-competition agreement," Mr. Chan continued, "we are pleased to formalize our strong sponsorship relationship with Teekay Corporation, and look forward to working together towards the continued growth of Teekay Tankers' business."

The transaction was negotiated on Teekay Tankers' behalf by the Conflicts Committee of its Board of Directors, which is comprised of Teekay Tankers' independent directors. DNB Markets acted as financial advisor to the Conflicts Committee and also provided a fairness opinion to the Conflicts Committee in connection with this transaction. The transaction is subject to final documentation, receiving relevant third party consents, as well as other customary closing conditions, and is expected to be completed in the second quarter of 2012.

Conference Call

Management plans to hold a conference call to discuss the details of the transaction on Tuesday April 17, 2012 at 9:00 am (ET). All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:

 

--  By dialing (866) 322-8032 or (416) 640-3406, if outside North America,
    and quoting conference ID code 1594223.
--  By accessing the webcast, which will be available on Teekay Tankers'
    website at www.teekaytankers.com (the archive will remain on the website
    for a period of 30 days).

An accompanying presentation will also be available on Teekay Tankers' website at www.teekaytankers.com in advance of the conference call.

About Teekay Tankers

Teekay Tankers currently owns a fleet of nine double-hull Aframax tankers, six double-hull Suezmax tankers, and charters in an additional two Aframax tankers, all of which an affiliate of Teekay Corporation (NYSE: TK - News) manages through a mix of short- or medium-term, fixed-rate time-charter contracts and spot tanker market trading. In addition, the Company owns a VLCC newbuilding, through a 50 percent joint venture which is scheduled to deliver in April 2013. In addition, Teekay Tankers recently agreed to acquire a fleet of 13 crude oil and product tankers from Teekay Corporation, which is expected to be completed in the second quarter of 2012. Teekay Tankers Ltd. was formed in December 2007 by Teekay Corporation as part of its strategy to expand its conventional oil tanker business. Since inception, Teekay Tankers has distributed on a quarterly basis all of its Cash Available for Distribution, less scheduled principal payments related to the Company's debt facilities and reserves for estimated dry docking costs and other reserves established by its Board of Directors.

Teekay Tankers' common stock trades on the New York Stock Exchange under the symbol "TNK".

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: the Company's pending acquisition of 13 conventional tankers from Teekay Corporation, including the purchase price, timing and certainty of completing the transaction, and the effect of this transaction on the Company's cash available for distribution per share, dividend per share, and liquidity; tanker market fundamentals and the Company's outlook for an improving spot tanker market commencing in 2013; the Company's financial position and ability to pursue further accretive growth opportunities; the Company's mix of spot market and time-charter trading; and fixed-rate cover for the 12-month period commencing July 1, 2012.

The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: failure to satisfy the closing conditions or obtain the necessary third party consents for the Company's pending 13-vessel acquisition from Teekay Corporation or unexpected results from the technical inspection of these vessels which would result in a change to the transaction purchase price; changes in the production of or demand for oil or petroleum products; changes in trading patterns significantly affecting overall vessel tonnage requirements; lower than expected level of tanker scrapping; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of time-charter out contracts and inability of the Company to renew or replace time-charter out contracts; changes in interest rates and the capital markets; the ability of the owner of the two VLCC newbuildings securing the two first-priority ship mortgage loans to continue to meet its payment obligations; increases in the Company's expenses, including any dry docking expenses and associated off-hire days; the ability of Teekay Tankers' Board of directors to establish cash reserves for the prudent conduct of Teekay Tankers' business or otherwise; failure of Teekay Tankers Board of Directors and its Conflicts Committee to accept future acquisitions of vessels that may be offered by Teekay Corporation or third parties; the number of additional conventional and product tanker opportunities, if any, Teekay Corporation develops and offers to the Company under the three-year non-competition agreement; market opportunities to acquire additional assets; and other factors discussed in Teekay Tankers' filings from time to time with the United States Securities and Exchange Commission, including its Report on Form 20-F for the fiscal year ended December 31, 2011. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

Contact:

Teekay Tankers Ltd.
Kent Alekson
Investor Relations
+1 (604) 844-6654
www.teekaytankers.com

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