Goliath Crushes Tugboats in Oceanografia Default Split

Oceanografia SA's Website
The Oceanografia SA website is arranged for a photograph on a computer monitor in Mexico City. The company’s $335 million of bonds due 2015 have plummeted to just 16.3 cents. Photographer: Susana Gonzalez/Bloomberg

Bondholders of defaulted oil contractor Oceanografia SA are learning just how good it is to have Goliath on your side.

OSA Goliath is a 591-foot-long construction ship that can lift 1,600 tons and accommodate 300 people. It’s worth an estimated $245 million and serves as collateral for $160 million of defaulted Oceanografia bonds due in 2018. The notes, which have soared 11 cents on the dollar since Mexico seized Oceanografia last week, are now being bid at par. The company’s $335 million of bonds due 2015, backed by less-valuable vessels including a pair of almost 30-year-old tugboats, have plummeted to just 16.3 cents.

The diverging fortunes of Oceanografia’s bondholders underscore one of the pitfalls facing investors looking to capitalize on President Enrique Pena Nieto’s vision of an oil-fueled economic boom over the next decade. Citigroup Inc. said Feb. 28 that it took a $360 million loss on loans to Oceanografia against receivables that didn’t exist as the government took control to avoid a lapse in support and maintenance services it provides to state oil producer Petroleos Mexicanos.

“The quality of the collateral will play a big part,” Revisson Bonfim, the head of global emerging-markets analysis at Sterne, Agee & Leach Inc., said in a telephone interview from New York. The 2018 bonds “are over-collateralized, whereas the 2015 bonds are backed by a bunch of old, old assets where nobody really knows what the value is.”

Physically Taken

Jorge Betancourt, Ciudad del Carmen-based Oceanografia’s head of investor relations, referred questions regarding the Goliath to Mexico’s Asset Transfer and Administration Service, known in Spanish by its acronym SAE.

Marcia Fuentes, an official with the federal agency now managing Oceanografia, didn’t respond to e-mailed requests seeking comment.

While the government hasn’t disclosed how it will balance bondholder claims, the trustee for the 2018 bonds said March 5 it took ownership of the Goliath and $8.9 million from the shipowner’s bank accounts. Oslo-based Norsk Tillitsmann ASA also declared the securities in default this week, according to letters on its website.

The SAE is reviewing the terms of the contract between Oceanografia and the trustee, a government official with knowledge of the probe said yesterday. The Goliath was physically taken by Norsk Tillitsmann with Pemex pipes aboard, said the person, who asked not to be identified because he isn’t authorized to speak publicly about the investigation.

Mexican Law

Oceanografia’s notes due in 2015 are secured by first-priority liens on two tugboats, two offshore-support vessels, two diving-support vessels and one 36-year-old pipe layer. They have an average age of 24 years.

“The proceeds from the sale of the collateral, in whole or in part, would not be sufficient to satisfy payments due in respect of the notes,” Oceanografia said in the offering memorandum for the bonds.

The liens and any effort to foreclose on them would be governed by Mexican law, according to the securities’ prospectus. The company didn’t provide a value for the ships in the document.

Singapore Structure

Mexico’s peso fell 0.2 percent to 13.1730 per U.S. dollar at 11:33 a.m. in New York.

Oceanografia had failed to make ship-charter payments to OSA Goliath Pte. Ltd., a separate legal unit of Oceanografia based in Singapore that served as the holding company for the ship backing the 2018 bonds, according to the letters.

The failure to pay constituted grounds for default, since the charter payments are used to make interest payments on the bonds, according to Norsk Tillitsmann. The trustee appointed a new board for OSA Goliath, which promptly terminated Oceanografia’s charter.

“You had a Singapore company formed whose sole purpose was to hold the mortgage of the Goliath,” Michael Roche, a credit analyst at Seaport Global Holdings LLC, said in a telephone interview from New York. That structure “allowed for the clean and rapid enforcement once Oceanografia failed to pay the charter rate to the Singapore company.”

Creditors are now seeking to sell the vessel and recoup $215 million of principal, accrued interest and other fees, according to the letters. The ship was about 33 kilometers off the Gulf of Mexico coast, in the area of the Bay of Campeche where Pemex has its biggest concentration of offshore drilling rigs, according to Bloomberg ship-tracking data through March 1.

Reviewing Terms

The Goliath, which Oceanografia bought from a unit of CarVal Investors LLC with proceeds from the bond sale, has a value of $245 million, according to estimates from independent shipbrokers Kennedy Marr Ltd. and Offshore Shipbrokers Ltd. provided in the bonds’ prospectus.

“There’s probably a lot of hands reaching in for the kill at the same time,” Russ Dallen, the Miami-based head trader at Caracas Capital Markets, said in a telephone interview. “It makes sense for the government to freeze everything and figure out who owns what.”

Luis Maizel, who manages about $5 billion of fixed-income securities as president of San Diego-based LM Capital Group LLC, said in a telephone interview that preserving the sanctity of the collateral will be seen as a positive for the investment environment.

“It is a definite message to the world that every boat that rides in with the tide doesn’t necessarily ride the wave of success,” he said.

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