• Deal to fund pipeline was supposed to close in July 2015
  • Brazilian company trying to sell its stake in Peru project

A unit of Odebrecht SA, the construction company whose former chief executive is serving a 19-year prison sentence as part of a sweeping corruption scandal in Brazil, still hasn’t received a $4.1 billion loan for a key project in Latin America, said two people with direct knowledge of the matter.

The credit committees for a group of 20 banks providing the syndicated loan have so far refused to sign off on the deal, originally expected to be approved last year, to fund a natural-gas pipeline project in Peru, the people said, asking not to be identified because the discussions are private. The creditors’ compliance areas aren’t comfortable lending to Gasoducto Sur Peruano, a special-purpose venture known as GSP that’s controlled by Odebrecht, because of concern over the corruption scandal and possible fines the holding conglomerate may face, the people said.

GSP, which Odebrecht controls with a 55 percent stake, won the 34-year license to build and operate the 1,080-kilometer (671-mile) pipeline in June 2014. Spain’s Enagas SA holds a 25 percent stake, and Peru’s Grana & Montero SAA bought a 20 percent share in September for $215 million.

Odebrecht is trying to sell its stake and is in talks with five potential bidders, said a press official at the Sao Paulo-based construction firm who declined to provide the names of the companies. Odebrecht has transferred GSP management to Enagas, said the official, who declined to discuss the loan. GSP also declined to comment.

GSP has been tapping more-costly bridge loans while it awaits the syndicated financing, the people said. In an interview last year, then-GSP Chief Financial Officer Marko Harasic said the company originally expected to close the loan in July.

“Our job is to ring-fence the Peru project and deliver a package of compliance reports to reassure the banks,” Harasic said at the time. Ring-fencing is a financial term in which assets are separated in order to protect them from claims against the parent company, as well as restrictions and laws in the home country.

Marcelo Odebrecht was sentenced in March to more than 19 years in prison following charges he took part in a cartel of builders that paid bribes to win contracts with Brazil’s state-run oil giant, Petroleo Brasileiro SA.

The funding delay is one more example of how Brazil’s biggest-ever corruption scandal is rippling far beyond its borders. The spreading probe into the pay-to-play scheme has strangled credit lines for infrastructure projects, helping to tip Brazil into a recession that’s forecast to be the worst in a century. Peruvian President Ollanta Humala has said the pipeline is needed to bolster energy supplies and help revive his country’s mining-dependent economy after metals prices plunged.

Fourteen banks were expected to act as “bookrunners” for the $4.1 billion syndicated loan providing $275 million in financing, Harasic said last year. They include Sumitomo Mitsui Banking Corp., Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank Ltd., Credit Agricole SA, Natixis SA, Societe Generale SA, Banco Bilbao Vizcaya Argentaria SA, Instituto de Credito Oficial, Bank of Nova Scotia, Citigroup Inc., Intesa Sanpaolo SpA, DNB ASA and ICBC Standard Bank Plc, according to Harasic.

Six other banks were also participating, including Banco Santander SA, CaixaBank SA, Banco de Sabadell SA, Korean Development Bank, KfW Development Bank and GE Energy Financial Services Inc., he said.

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