Schahin Petroleo & Gas SA, a rig and platform supplier to Brazil’s state-run producer, is seeking a credit line to avoid filing for bankruptcy protection, said two people familiar with the matter. Bonds tumbled.
Schahin, which supplies Petroleo Brasileiro SA with offshore drilling rigs and production platforms, is temporarily halting operations at five of the units it has leased to Petrobras, it said in an e-mailed statement. The company could file for bankruptcy protection, known as judicial recovery in Brazil, as early as this week, said one of the people, who asked not to be named because the information isn’t public.
The company’s Schahin II Finance Co. notes due in 2022 tumbled 11.92 cents to 48 cents on the dollar. That’s the biggest drop and the lowest price since they were sold in March 2012. The $651.5 million in notes are backed by flows related to a long-term charter and services agreement signed with Petrobras for a drill ship called Sertao.
Newspaper Estado de Sao Paulo reported the potential bankruptcy filing earlier Monday. Petrobras is working with Shahin to shut operations safely, and is reviewing contractual measures it can take, it said. Schahin declined to comment on a potential bankruptcy filing and the status of its rig fleet in an e-mailed response.
Last month, Fitch Ratings cut Schahin II Finance by two notches to BB-, three steps below investment grade, citing higher leverage and more difficult credit conditions.
The group’s engineering unit, Schahin Engenharia SA, is among more than 20 companies that have been temporarily banned from bidding on new Petrobras projects amid allegations that suppliers and builders paid bribes to inflate contract values. HSBC Holdings Plc is suing Schahin Engenharia for 173.6 million reais ($56 million) related to unpaid promissory notes.