Brazil Said to Be Biggest Creditor in Planned Oil-Rig Bankruptcy

  • Sete said to plan bankruptcy filing as early as this week
  • Banco do Brasil, Caixa, naval fund said to be owed $3 billion

Sete Brasil Participacoes SA may file for bankruptcy protection as early as this week, with Brazil’s state-owned banks and a government-affiliated fund accounting for more than half the oil-rig company’s 18 billion reais ($5.1 billion) in liabilities, according to people directly involved with the company’s finances.

Brazil’s naval fund, which provides a state guarantee on loans to Sete Brasil, is the biggest creditor, with about 4.5 billion reais in liabilities, the people said, asking not to be identified because the details haven’t been made public. Banco do Brasil SA, Latin America’s largest bank by assets, has 4 billion reais in outstanding loans to Sao Paulo-based Sete, and Caixa Economica Federal is owed 1.7 billion reais, according to the people.

Sete Brasil was created in 2011 to help the state-owned oil company, Petroleo Brasileiro SA, tap reserves from offshore fields. Petrobras, as the company is known, planned to lease 28 rigs from Sete Brasil before oil prices collapsed and the company was engulfed in a nationwide corruption scandal. That order was cut to just 10 rigs earlier this year, a number that wouldn’t generate enough revenue to repay Sete Brasil’s investors and would require them to inject more money into the business, two people said last week.

Sete Brasil shareholders decided on April 20 to seek bankruptcy protection, a company official said at the time, without giving details on creditors or the expected timing. 

Banco do Brasil hasn’t set aside provisions for the full amount it’s owed, a person with direct knowledge of the bank’s finances said. A spokesman for Brasilia-based Banco do Brasil declined to comment on Sete Brasil, as did an official at Caixa.

An official at Sete Brasil said the company has been meeting with its financial and legal advisers about the planned bankruptcy filing and hasn’t yet set a date.

Fund’s Role

The naval fund, created with government assets and operated by Caixa, took on the biggest portion of Sete Brasil’s liabilities in February. That’s when a group of six creditors including Banco do Brasil and Itau Unibanco Holding SA tapped the fund after the oil-rig company couldn’t repay about $3.8 billion in outstanding debt, a person familiar with the matter said in February. The creditors had repeatedly renewed a standstill loan after Brazil’s BNDES development bank froze an agreement to loan 10 billion reais to Sete Brasil last year.

The oil-rig company’s shareholders, including Grupo BTG Pactual, Banco Santander SA and pension funds, have discussed a possible bankruptcy since January as a first step toward liquidating Sete Brasil, according to people involved in the talks.

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