Pacific Investment Management Co. and Credit Suisse Group AG are among a group of bondholders taking another step toward securing control of the oil company that sparked Eike Batista’sfinancial collapse.
A committee of 12 creditors, which also includes Nomura International and Deutsche Bank AG, is poised to vote in favor of a plan to restructure Oleo & Gas Participacoes SA (OGXP3), the startup that once made Batista the world’s eighth-richest person, at a creditors meeting in Rio de Janeiro today. The plan, which received Brazilian antitrust approval last month, will give the group at least a 42 percent stake in the restructured oil producer, reducing the risk of liquidation.
Creditors representing most of the company’s bonds probably will take over the company after the judge ratifies the assembly’s decision, boosting its chances of survival, said Juliana Bumachar, a corporate recovery specialist and partner at law firm Bumachar Advogados Associados.
“The plan will be approved,” she said by telephone from Rio. “The company will leave intensive care but it still has to fulfill the plan.”
Credit Suisse and Deutsche Bank declined to comment in e-mailed statements on the recovery process of OGpar, as the company is known. Press officials for Pimco and Nomura didn’t reply to e-mails seeking comment.
The group of creditors also include funds managed by Spinnaker Capital Ltd., Redwood Master Fund, Ltd., Emerging Markets Special Opportunities Ltd. and DuPont Pension Trust, according to a May 8 filing by Brazil’s antitrust regulator Cade published in the official gazette. BP Brazil Investments 2 LLC, Lord Abbett Bond-Debenture Fund Inc., Moneda Deuda Latino Americana Fondo de Inversion and Knighthead Master Fund LP are also part of the committee, the filing said.
The creditor’s meeting started 2 p.m. today at the stock exchange building in downtown Rio. A second meeting is planned for June 11 if a quorum isn’t reached today.
In February, OGpar reached an deal with a group of creditors including Pimco for a $215 million debtor-in-possession agreement, in a transaction that would see Batista relinquish control of the startup formerly known as OGX. The company, which filed for bankruptcy protection in October after spending more than 10 billion reais ($4.4 billion) since its foundation in 2007, obtained a first tranche of $125 million in fresh funding from the main bondholders in March.
A group of minority bondholders filed an objection to the recovery plan in Brazilian courts as it says the proposal doesn’t treat all bond creditors equally, said Timothy Walsh, a lawyer at McDermott Will & Emery LLP who represents minority bondholders of about $300 million.
“The plan is discriminatory because it gave one portion of bondholders rights and remedies that it didn’t give others,” he said by telephone from New York. “If the judge doesn’t sustain our objection, I strongly suspect we will file an appeal to the state court.”
The opposition coincides with objections raised by other creditors including Perenco SA, the French oil producer. Another group of minority bondholders on May 30 filed a lawsuit in the Supreme Court of the state of New York against Deutsche Bank Trust Company Americas, the trustee for OGX’s $3.6 billion in bonds, alleging the Frankfurt-based bank made “grossly disproportionate distributions” to some bondholders and not to others.
“We believe this suit is without merit and Deutsche Bank intends to vigorously defend itself,” the bank said in an e-mailed reply to questions. “This is really a dispute between two bondholder groups that is pending before the Brazilian courts.”
Still, OGpar expects creditors to approve the company’s proposal to exit the bankruptcy protection process in the meeting, with the change in control taking place by November, Chief Executive Officer Paulo Narcelio said.
“The alternative of not approving the plan would be to liquidate the company,” Narcelio, 51, said in an interview May 29. “That’s not a good alternative to anyone. It would be an irrational decision.”
OGpar was unchanged at 20 centavos at the close in Sao Paulo trading. The stock slumped 86 percent in the past 12 months.
The company expects to generate 1.04 billion reais in net revenue from its Tubarao Martelo oil field this year, OGpar said in a statement yesterday. The project is scheduled to produce 352 million reais in earnings before interest, taxes, depreciation and amortization, or Ebitda, it said.
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