In the summer of 1999, Husky Terra Nova Partnership completed a US$250 million project financing of its interest in the Terra Nova offshore oil project. The transaction is worth reporting now due to a number of unique features. The transaction represented the first non-recourse financing of an upstream oil and gas project in Canada’s growing east coast petroleum industry. Those involved in structuring this transaction, on behalf of Husky, encountered many challenges including the fact that ownership of the Terra Nova Project is divided among seven different parties and the fact that Husky does not operate the project. This financing was both complex and innovative and involved the creation of a special purpose vehicle which issued senior secured bonds and then lent the proceeds to Husky Terra Nova Partnership. Proceeds from the bonds will be used to fund Husky’s share of the development costs for the Terra Nova Project. The bonds are secured by a third priority lien on Husky Terra Nova Partnership’s working interest in the project and associated crude oil. Major challenges faced by the team of lawyers involved in the project included the need to obtain an investment grade rating for the bonds without a completion guarantee during a period of low oil prices. Credit Suisse First Boston acted as manager of the bond issue. This transaction has attracted a lot of attention in the United States and will serve as an important benchmark for future project financings of offshore oil projects.
James D. Girgulis, General Counsel for Husky Oil Limited, was responsible for the transaction. Canadian counsel for Husky were Harold R. Huber and Douglas J. Black of Donahue & Partners as well as Howard MacKichan of Macleod Dixon. Edwin S. Maynard of New York’s Paul, Weiss, Rifkin, Wharton & Garrison was U.S. counsel for Husky. Osler, Hoskin & Harcourt LLP was Canadian counsel to Credit Suisse. The Oslers team was comprised of Jack Thrasher, Q.C., Christopher W. Nixon, Christian B.L. Erickson (corporate/securities), Donald H. Watkins, Ian D. Bock (tax), Ray Quesnel, and Sherri Fountain (structural aspects). Harold F. Moore and Katharine M. O’Leary of Skadden, Arps, Slate, Meagher & Flom in New York acted as U.S. counsel for Credit Suisse. Bruce C. Grant of Stewart McKelvey Stirling Scales acted as Atlantic Canada counsel for Husky and Credit Suisse.