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Odebrecht’s oil and gas group files for Chapter 15

Por: Latin LawyerImprimirVisualizar em PDF

Brazilian oil services company Odebrecht Óleo e Gás (OOG) has filed for Chapter 15 protection in New York, in a bid to implement a US$5 billion debt restructuring agreement that was sanctioned by a court in Rio de Janeiro last month.

Together with 10 of its Austria and Cayman Islands-registered subsidiaries, OOG filed a petition in the US Bankruptcy Court for the Southern District of New York on 3 November.

The filings come after a Rio de Janeiro court approved OOG's multibillion-dollar restructuring plans on 19 October and dismissed objections lodged by New York-headquartered Citibank and French investment bank Credit Agricole.

OOG's Brazilian counsel E Munhoz Advogados submitted the extrajudicial reorganisation plans – which operate in a similar way to pre-packaged cases under US bankruptcy law – to the Brazilian court on 23 May, to finalise what lawyers described as "the biggest and most complex extrajudicial restructuring" to be completed in Brazil.

Under Brazilian bankruptcy law, OOG was required to gain approval of the plans from creditors representing more than 60% of the total amount of the restructured claims. Speaking in June, E Munhoz partner Gabriel Buschinelli said the company had secured approval from almost 69% of the creditors after a "complex negotiation".

The oil drilling group has been struggling to stay afloat since the wider Odebrecht conglomerate was embroiled in the "Lava Jato" investigation into money laundering in Brazil that began in 2014.

The group has negotiated settlements with Brazilian, US and Swiss prosecutors over the last couple of years, and has been forced to sell some of its assets to stay solvent.

In a declaration filed with the New York bankruptcy court, OOG CFO Rogerio Ibrahim, who has applied to be recognised as the foreign representative of OOG, said the oil and gas company's financial distress "stems from general market conditions" and variations in the Brazilian real exchange rate over the past few years.

The Chapter 15 filings are necessary "to avoid potentially irreparable harm to the debtors' creditors and businesses" and to prevent creditors from circumventing the foreign proceeding by taking action against Odebrecht in the US, Ibrahim said.

Under the terms of the approved plans, New York-governed law notes due in 2021 and 2022, with almost US$3 billion outstanding debt, will be exchanged for two new tranches of notes – one with the same maturity and the second maturing in 2026.

Financial claims amounting to nearly US$2 billion will also be exchanged with OOG's corporate creditors for new perpetual participatory bonds that will allow them to receive payments tied to OOG's dividend distributions.

Counsel to OOG, Davis Polk & Wardwell partner Eli Vonnegut, submitted a host of first-day motions with the Chapter 15 petitions, including for joint administration of the proceedings, and for recognition and enforcement of the Brazilian reorganisation plans.

The matter has not yet been listed for a hearing.

Davis Polk & Wardwell did not respond to request for comment.

In the US Bankruptcy Court for the Southern District of New York

In re Odebrecht Óleo e Gás, et al

Judge James Garrity

 

Counsel to Odebrecht Óleo e Gás and the foreign representative

Davis Polk & Wardwell

Partner Eli Vonnegut in New York

 

In the Court of Justice, 4th Commercial Court of Rio de Janeiro

In re Odebrecht Óleo e Gás, et al

Judge Paulo Assed Estefan

 

Counsel to Odebrecht Óleo e Gás

E Munhoz Advogados

Partners Eduardo Munhoz, Gabriel Buschinelli and Ana Elisa Laquimia in São Paulo

 

Davis Polk & Wardwell

Partner Manuel Garciadiaz and counsel Drew Glover with associates Rebecca Roman and Elliot de Carvalho in São Paulo

 

Stocche Forbes Advogados

Partner Frederico Moura with associates Yves Dutra and Beatriz Mazzi in São Paulo

 

Counsel to the ad hoc group of bondholders

Cleary Gottlieb Steen & Hamilton

Partner Francisco Cestero with associates Jonathan de Oliveria and Christina Chinloy in São Paulo

 

Pinheiro Neto Advogados

Partner Giuliano Colombo with associate Janaína Vaz in São Paulo

 

Counsel to Banco do Brasil and Banco Bradesco

Machado Meyer Sendacz Opice Advogados

Partners Adriano Schnur, Pedro Jardim, José Prado and Renata Oliveria with associates Fernanda Piva, Marcos Costa and Emily Oliveira in São Paulo

 

Counsel to Swiss Re International (payment guarantee issuer)

Clifford Chance

Senior associates Bryony Theaker and Seema Shukla in London

 

Souza Cescon Barrieu & Flesch Advogados

Partner Fábio Rosas with associate Guilherme França in São Paulo

 

Counsel to ING Bank (credit issuer)

Santos Neto Advogados

Partners Fernando Ferreira and Gabriel Leutewiler in São Paulo

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