Brazil’s Odebrecht Oleo e Gas inks extrajudicial reorganization deal

By Caroline Salls

Pittsburgh, May 23 – Odebrecht Oleo e Gas SA (OOG) and some of its subsidiaries entered into an agreement with a group of creditors to restructure their financial debt by means of an extrajudicial reorganization, according to a news release.

The company’s reorganization plans were filed Tuesday in the Court of the State of Rio de Janeiro.

OOG said the restructuring terms were consensually agreed with a group of creditors representing more than 60% of the total amount of the restructured claims.

Plan terms

Under the plans, debt securities due 2021 and 2022 and secured by the drilling units owned by OOG’s subsidiaries, will be exchanged for new notes with revised terms based on the present cash flow of the assets.

Amortizations on the new notes will occur quarterly in two tranches.

The first tranche has a fixed amortization schedule and bears the same interest rates of 6.35% for the 2021 notes and 6.72% for the 2022 note. The maturity dates will also stay the same.

The second tranche is subordinated to the first tranche and has a 100% variable amortization based on the cash surplus of the company’s projects. The second tranche notes will bear interest at a rate 1% higher than the first tranche notes and will mature in 2026.

Corporate creditors will receive new perpetual participatory bonds that ensure the right to receive a share of any dividend distributions of OOG.

Charter issues

OOG said its talks with the noteholders began at the end of 2015 following the cancellation by Petrobras of the charter and services agreements for the ODN Tay IV drilling rig, which had been scheduled to expire in 2020. ODN Tay IV is one of the assets securing the 2022 notes together with three other drillships.

Under the 2022 notes indenture, the company said failure to obtain a new charter or services agreeing within 90 days of the cancellation of the charter or services agreement of one of the assets securing the notes results in an event of default.

OOG said it was unable to obtain new charter and services agreements because of the challenging market environment in the upstream oil and gas sector worldwide.

Since 2016, the negotiations have also included the company’s main corporate creditors, which include some of the largest Brazilian banks and large international fixed-income investment funds.

According to the release, there is no overdue outstanding debt between OOG and its suppliers and employees, and the assets of the company currently in operation remain in regular operation with favorable performance indices.

Sufficient resources

OOG said it has sufficient resources to continue operating these assets, and the restructuring is not expected to impair or affect its ability to continue performing its obligations under the existing charter and services agreements.

The restructuring of OOG’s debt is intended to enhance the company’s liquidity and strengthen its short-term and long-term financial position, adjusting its capital structure to allow for growth and to take advantage of any opportunities available once the level of investment in the oil and gas industry recovers, the release said.

Once the extrajudicial reorganization is approved by the court, the company said the terms of the restructuring will be binding on all holders of the 2021 notes, the 2022 notes and creditors of the restructured claims at the OOG level.

The company said in a presentation that it will make a Chapter 15 bankruptcy filing around the time the plans are approved to gain U.S. court recognition of the Brazilian proceedings and orders.

Odebrecht is a Rio de Janeiro-based upstream oil and gas solutions company.

© 2015 Prospect News.
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