Oleo & Gas Participacoes SA, the Brazilian oil company that defaulted on $3.6 billion of bonds, is delaying a restructuring agreement for a second week after BlackRock Inc. and Blackstone Group LP’s GSO pulled out of the deal.
OGP now plans to finalize the agreement, which calls for bondholders to inject $200 million as debtor-in-possession financing, and present the plan to a Rio de Janeiro bankruptcy court by Feb. 7, according to a statement late yesterday. Under the proposal, bondholders will convert holdings into equity and former billionaire Eike Batista will cede control.
“The DIP financing is a priority at this moment, to overcome the company’s current financial crisis and guarantee the continuation of operations,” OGP said.
Bonds fell to a record low this week on concern OGP won’t be able to complete the deal with creditors. BlackRock was among investors that owned 55 percent of the debt in the business and negotiated a deal with Batista, the company’s founder and chairman, that would give them 65 percent of its equity. GSO, another creditor who had negotiated the deal with Batista, has also sold its bonds, said two people familiar with the restructuring process.
OGP, a startup based in Rio, surged in value in 2009 and 2010 after reporting discoveries at more than 80 percent of wells drilled, allowing Batista to tap debt markets to finance operations. Shares then crashed starting in 2012 after it missed production targets and abandoned fields it had previously declared commercially viable.
McDermott Will & Emery LLP, based in Chicago, is organizing a group of minority creditors after the investors were left out of the reorganization talks. OGP’s plan discriminates against smaller bondholders because they haven’t been given a chance to lend to the company in exchange for equity, Tim Walsh, the firm’s international head of the restructuring and insolvency practice, said by phone today.
“We want to see the company survive, but we don’t want to see it survive on the backs of minority bondholders,” Walsh said.
McDermott also objects to a $50 million bridge loan a Rio court approved this week because the bondholders he represents weren’t given a chance to participate.
OGP didn’t immediately comment on Walsh’s statements when contacted by e-mail.