Pimco-Led Creditors Near Control of Batista Oil ProducerJuan Pablo Spinetto
Pacific Investment Management Co. and Credit Suisse Group AG are among a group of bondholders that took a major step toward securing control of the oil company that sparked Eike Batista’s financial collapse.
Eighty-two percent of creditors present at a meeting yesterday in Rio de Janeiro approved a restructuring plan for the main unit of Oleo & Gas Participacoes SA, Chief Executive Officer Paulo Narcelio told reporters after the meeting. If ratified by a bankruptcy court in Rio and approved by shareholders, the plan will give a group of 12 creditors led by Pimco that provided the company with emergency financing at least a 42 percent stake in the restructured oil producer.
The startup known formerly as OGX that once made Batista the world’s eighth-richest person will also get $90 million in financing from creditors in 15 to 30 days to help cover operating costs once the plan is ratified by the court, Narcelio said. Nomura International and Deutsche Bank AG were also part of the group that provided debtor-in-possession financing in exchange for shares.
“The company would have been liquidated without the approval of the plan, something that wasn’t in the interest of the creditors,” Narcelio said. “We saw a positive attitude from a large majority of the company’s suppliers, both past and present, and quite a significant majority from the financial creditors.”
Under the plan, OGpar, as the Rio-based company is known, will convert liabilities of $5.8 billion into equity, freeing the venture of debt and allowing it to focus on exploration and production, the company said in a statement late yesterday.
The decision gives OGpar time to fix operations while litigation and claims are frozen, said Luana Helsinger, an oil and gas analyst at brokerage GBM Grupo Bursatil Mexicano SA.
“The company is now granted two years to restructure itself under the supervision of a judge,” she said in a note to clients today. “All lawsuits and debts being suspended for 180 days, gives it some breathing room.”
In February, OGpar reached a deal with creditors for a $215 million debtor-in-possession agreement, in a transaction that would see Batista relinquish control of the startup. The company, which filed for bankruptcy protection in October after spending more than 10 billion reais ($4.4 billion) since its foundation in 2007, obtained a first tranche of $125 million in fresh funding from the main bondholders in March.
The creditor group also includes funds managed by Spinnaker Capital Ltd., Redwood Master Fund, Ltd., Emerging Markets Special Opportunities Ltd. and DuPont Pension Trust, according to a May 8 filing by Brazil’s antitrust regulator Cade published in the official gazette. BP Brazil Investments 2 LLC, Lord Abbett Bond-Debenture Fund Inc., Moneda Deuda Latino Americana Fondo de Inversion and Knighthead Master Fund LP are also part of the committee, the filing said.
The plan stipulates that creditors will own 90 percent of the company and existing shareholders, including Batista, will have the remainder, effectively ending Batista’s control of the company. The former billionaire’s direct ownership will shrink to about 5 percent from 50 percent.
A total of 201 creditors including bondholders and suppliers representing about 62 percent of OGpar’s debt attended yesterday’s meeting at the stock exchange building in downtown Rio, according to lawyer Darwin Correa, who advises the company.
OGpar fell 5 percent to 19 centavos at the close in Sao Paulo today. The stock slumped 86 percent in the past 12 months. Pimco’s press office didn’t reply to an e-mail seeking comment on the plan’s approval. Credit Suisse declined to comment.
The company expects to generate 1.04 billion reais in net revenue from its Tubarao Martelo, or Hammerhead Shark, oilfield this year, OGpar said in a June 2 statement. The project is scheduled to produce 352 million reais in earnings before interest, taxes, depreciation and amortization, it said.
OGpar, which was listed by Batista in 2008, surged in value to as much as 75.2 billion reais in 2010 after reporting discoveries at more than 80 percent of wells drilled, allowing the Brazilian entrepreneur to tap debt markets to finance operations. Worse-than-expected production and reserves results eroded cash and triggered an investor confidence crisis that ended in Latin America’s largest corporate default after the company missed a $45 million bond interest payment in October.
The company’s market value has slumped to 647.2 million reais.