TK 2020 Bonds: A High Conviction Long Yielding 12%

Teekay (NYSE: TK) is an energy shipping company with three daughter companies as follows:
TGP - Liquefied Natural Gas (LNG) shipping TOO - offshore oil extraction logistics TNK - crude oil tankers TK derives roughly one-third of its enterprise value from owned ships, one-third from its stake in TGP, and one-third from interests in its other two daughters.
Intro: The Butterfly Effect Nails Teekay
It is said that a butterfly in Brazil can cause a tornado in Texas. The butterfly effect does a good job of explaining why TK's stock price has suffered greatly since the start of the year. But before discussing butterflies and tornadoes, let's rewind to the start of our story.
Meet the Arendal Spirit HMS:

Source: Marinetraffic.com
I am sure Teekay management rues the day it laid eyes on this cursed ship. In fact, some claim the Arendal has blown a hole into the cash flow hull that protects Teekay's entire capital stack from sinking.
However, as with all relationships, Teekay's marriage to the Arendal started out just fine. TK's daughter TOO took delivery of the Arendal in early 2015, and TOO signed a three-year contract to lease the ship to Petrobras (NYSE: PBR). Shortly thereafter, the following global events created a very local effect on the Arendal and TOO/TK:
Oil prices continued plummeting Many deepwater drilling projects were cancelled, and others scaled back PBR faced a liquidity crisis PBR was central to corruption scandals... Read more