Lupatech Plunges to Record After Missing Bond Payment: Rio MoverBoris Korby and Peter Millard
Lupatech SA’s stock plunged to a record low after the Brazilian oil services provider missed a $6.79 million interest payment two weeks after reporting annual losses that doubled from a year earlier.
Shares sank 8.5 percent to 1.30 reais at the close of trading in Sao Paulo. The stock is down 67 percent over the past twelve months.
The Caxias do Sul, Brazil-based company said in a regulatory filing yesterday that it couldn’t make the payment due on $275 million of perpetual bonds and it hired Bank of America Corp. as a financial adviser as it seeks to sell assets. Standard & Poor’s downgraded Lupatech to D, or payment default, from selective default following the missed payment.
Lupatech said in March that its 2012 net loss surged to 574 million reais ($291 million) on lower revenue and higher costs. It made 17 acquisitions from 2007 to 2010 anticipating an increase in sales as Brazilian producers led by Petroleo Brasileiro SA sought to tap the largest crude discoveries in a decade. The company began selling assets in 2011 and raised cash from shareholders last year.
“We do not expect the company to pay the interest due within the 30-day cure period established by the bond indenture,” Standard & Poor’s credit analyst Renata Lotfi said in a statement.
The company failed to benefit from record investments at Petrobras, as Petroleo Brasileiro is also known, because it focused operations on supplying production projects at a time the state-controlled company increased spending on exploration. Local content laws, designed to boost Brazil’s oil-service and shipping industries, oblige producers to use minimum amounts of locally manufactured products.
“The company depends too much on Petrobras,” Oswaldo Telles, an equity analyst at Banco Espirito Santo SA, said by phone from Sao Paulo. “They have not managed well the risks of having only Petrobras as a partner.”
An official at FSB Comunicacoes, an external communications company that represents Lupatech, declined to comment beyond the filing.
“Lupatech has been intensely working to balance its capital structures with its capitalization executed in 2012 in selling assets that are not considered strategic,” Lupatech said in yesterday’s filing.
Lupatech’s restructuring marks at least the fourth time a Brazilian company has halted payments on dollar bonds since February 2012.
Electric utility Centrais Eletricas do Para SA, parent Rede Energia SA and lender Banco Cruzeiro do Sul SA defaulted on a combined $2.3 billion last year, according to data compiled by Bloomberg.
Lupatech’s $275 million of 9.875 percent perpetual bonds last traded at 51.5 cents on the dollar on April 9, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.