Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

a)Vessels Under Construction and Upgrades

Teekay LNG's share of commitments to fund equipment installation and other construction contract costs as at September 30, 2021 are as follows:


	Total $	Remainder of 2021 $	2022 $
Certain consolidated LNG carriers (i)	20,557	5,843	14,714
Bahrain LNG Joint Venture (ii)	11,339	—	11,339
	31,896	5,843	26,053

(i)In June 2019, Teekay LNG entered into an agreement with a contractor to supply reliquefication equipment on certain of Teekay LNG's LNG carriers in 2021 and 2022, for an estimated installed cost of $53.5 million. As at September 30, 2021, the estimated remaining cost of this installation is $20.6 million.

(ii)Teekay LNG has a 30% ownership interest in the Bahrain LNG Joint Venture which has an LNG receiving and regasification terminal in Bahrain. As at September 30, 2021, Teekay LNG's proportionate share of the estimated remaining cost of $11.3 million relates to the final construction installment on the LNG terminal. The Bahrain LNG Joint Venture has remaining undrawn debt financing of $23.5 million, which is undrawn, of which $7.1 million relates to Teekay LNG's proportionate share of the construction commitments included in the table above.

b)Liquidity

Management is required to assess whether the Company will have sufficient liquidity to continue as a going concern for the one-year period following the issuance of its financial statements. The Company had consolidated net income of $13.5 million and consolidated cash flows from operating activities of $44.3 million during the nine months ended September 30, 2021 and had a working capital deficit of $306.9 million as at September 30, 2021. This working capital deficit included approximately $384.8 million related to scheduled maturities and repayments of debt in the next 12 months.

Based on Teekay Tankers' liquidity as at the date these unaudited consolidated financial statements were issued, including the liquidity generated from the completion of the sale-leaseback of four vessels in November 2021 (see Note 20), Teekay Tankers' working capital loan that is expected to be renewed in May 2022 and from the expected cash flows from operations over the following year, Teekay Tankers estimates that it will have sufficient liquidity to meet its minimum liquidity requirements under financial covenants and to continue as a going concern for at least a one-year period following the issuance of these unaudited consolidated financial statements.

Teekay LNG had a working capital deficit of $378.5 million as at September 30, 2021, which includes $350.4 million related to scheduled maturities and repayments of long-term debt during the one-year period following the issuance of these unaudited consolidated financial statements. Teekay LNG expects that it will have sufficient liquidity to continue as a going concern for at least the one-year period following the issuance of these unaudited consolidated financial statements, based on its liquidity at the date these unaudited consolidated financial statements were issued, the liquidity it expects to generate from operations over the following year, the cash distributions it expects to receive from its equity-accounted joint ventures, and two expected debt refinancings which Teekay LNG considers probable based on its history of refinancing similar debt.

Based on the Company’s liquidity at the date these unaudited consolidated financial statements were issued, and the liquidity the Company expects to generate from operations over the following year, the Company expects that it will have sufficient liquidity to continue as a going concern for at least the one-year period following the issuance of these unaudited consolidated financial statements.

c)Legal Proceedings and Claims

The Company may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. The Company believes that any adverse outcome of existing claims, individually or in the aggregate, would not have a material effect on its financial position, results of operations or cash flows, when taking into account its insurance coverage and indemnifications from charterers. For information about recent legal proceedings, please read “Item 18 – Financial Statements: Note 16c – Legal Proceedings and Claims” in the Company's Annual Report on Form 20-F for the year ended December 31, 2020.

d)Other

The Company enters into indemnification agreements with certain officers and directors. In addition, the Company enters into other indemnification agreements in the ordinary course of business. The maximum potential amount of future payments required under these indemnification agreements is unlimited. However, the Company maintains what it believes is appropriate liability insurance that reduces its exposure and enables the Company to recover future amounts paid up to the maximum amount of the insurance coverage, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material.

Teekay LNG guarantees its proportionate share of certain loan facilities and obligations on interest rate swaps for its equity-accounted joint ventures for which the aggregate principal amount of the loan facilities and fair value of the interest rate swaps as at September 30, 2021 was $1.3 billion. As at September 30, 2021, with the exception of debt service coverage ratio breaches for three of the vessels in Teekay LNG's 33%-owned joint venture with NYK and Mitsui & Co. Ltd. (or the Angola Joint Venture), all of Teekay LNG's equity-accounted joint ventures were in compliance with all covenants relating to these loan facilities that Teekay LNG guarantees. In October 2021, the Angola Joint Venture obtained a waiver from its lenders for the covenant requirement that was not met, with such waiver being valid until the next covenant test at December 31, 2021.