Eike Batista’s shipbuilding company intends to leave out from a bankruptcy protection filing three oil vessels used as collateral for $1.77 billion of debt, said two people with direct knowledge of the matter.
OSX Brasil SA (OSXB3) is planning to file a judicial recovery petition, as the process is known in Brazil, by early next week, the people said, asking not to be named because the decision hasn’t been made public. The company’s leasing unit, through which it owns the OSX-1, OSX-2 and OSX-3 platforms, won’t form part of the filing, they said.
Credit Suisse Group AG was hired to help sell OSX-1 and OSX-2 that guarantee two syndicated loans with a total value of $1.27 billion, people familiar with the matter said last month. OSX’s sole international bond of $500 million is also guaranteed by a vessel, OSX-3, whose value was booked at 1.1 billion reais ($480 million) as of June 30.
The decision to file for creditor protection has already been made and while it may be lodged as soon as this week, next week is more likely, one of the people said. OSX would follow Batista’s oil company and its biggest client, OGX Petroleo & Gas Participacoes SA (OGXP3), into bankruptcy protection proceedings.
In an Oct. 31 statement, the shipbuilder said it was ready to seek bankruptcy protection if management decided that was the best way to protect its interests. OSX continues to study the measure, a press department official said by phone yesterday, asking not to be named in line with company policy.
OSX and OGX were the only two of Batista’s six publicly listed companies that sold bonds in international markets. Batista either relinquished control of, or agreed to sell key assets and stakes in, the four other startups. OSX was building three vessels for OGX before the explorer’s tests uncovered an absence of oil in a series of non-commercial wells.
OSX, the last of Batista’s companies to undertake an initial public offering, was created to profit from Brazil’s local content rules, which limit the use of imported equipment and services by the oil and gas industry. The company’s shares never recovered the March 2010 IPO price even as Batista promised to create “the Embraer of the seas,” referring to the world’s largest regional-jet maker.
Until Sept. 2012 the company was saying it had firm orders for vessels worth $7 billion. Since then, OSX has been shrinking projects, firing staff and putting units on sale after contracts were canceled and losses mounted. In March, OSX shelved plans to sell a second international debt security amid a rout in its securities, according to a memo from underwriters obtained by Bloomberg News at the time.
Shares of OSX lost 95 percent in the past 12 months, reducing its market value to about 200 million reais. The stock fell 19 percent to 52 centavos in Sao Paulo today, giving back most of the ground made yesterday in a 21 percent surge.
OSX extended the maturity for a year on a 461 million-real loan from state-run Caixa Economica Federal, which is guaranteed by Banco Santander SA, according to a regulatory filing today. Since Aug. 18 state development bank BNDES has been pushing out maturities on a loan for 518 million reais.
OSX’s dollar bonds due 2015, which are backed by a contract to lease the platform to OGX, have fallen 24 cents this year to 80 cents on the dollar yesterday. The notes rose to 83 cents at today. Bondholders hired AlixPartners LLP to advise on a possible restructuring, according to two people with knowledge of the matter.
AlixPartners, the New York-based firm that advised General Motors Co. on its restructuring when the automotive giant filed for bankruptcy protection in 2009, will work alongside the creditors’ legal adviser Bingham McCutchen LLP, said the people, asking not to be identified as the contract is private.
Tim Yost, a spokesman for AlixPartners, declined to comment. OSX’s press office said it wouldn’t comment on a contract made by its bondholders.
Timothy DeSieno, a partner at Boston-based Bingham, didn’t reply to an e-mail and voice-mail seeking comment.
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