OGX offers debt-for-stock exchange to bondholders, Folha says
SAO PAULO (Reuters) - Eike Batista, the controlling shareholder of OGX Petróleo e Gas Participações SA, is offering some holders of the Brazilian oil company's $3.6 billion in bonds the chance to exchange their securities for stock, newspaper Folha de S. Paulo said on Wednesday.
In early July, a source with direct knowledge of Batista's thinking told Reuters that OGX (OGXP3.SA) considered the bonds-for-stock swap as one of many options in a potential debt restructuring plan. If implemented, the exchange would leave Batista as a minority shareholder in OGX, Folha said.
Folha said Pacific Investment Management Co, or Pimco, the world's largest bond investor, as well as BlackRock Inc (BLK.N), the world's largest money manager, indicated their willingness to accept Batista's proposal. The newspaper did not say how it obtained the information.
Prices on OGX's 2018 and 2022 bonds have tumbled more than 80 percent this year alone, making them the worst-performing emerging market securities in the period, according to Thomson Reuters data.
The news comes after a creditors' committee formed by about a dozen investment funds picked investment bank Rothschild to advise on a potential debt restructuring. OGX recently hired Blackstone Group LP (BX.N) to help the ailing oil producer review its capital structure.
OGX faces bond interest payments of about $40 million in October and more than $100 million in December. Analysts, including Marcus Sequeira of Deutsche Bank Securities, have warned that the company might run out of cash within the next two months.
The press offices of Rio de Janeiro-based OGX and BlackRock in Brazil did not have an immediate comment on the Folha report. Calls to the offices of Pimco in Newport Beach, California, and BlackRock in New York were not immediately returned.
With a growing imbalance between assets and liabilities, dwindling cash and limited fundraising options, investors see little value in OGX stocks and bonds. They worry that worsening market conditions have left Batista unable to persuade potential partners, the government or creditors to help him save OGX.
The 6-year-old company is struggling to turn offshore discoveries into producing fields. Output from the Tubarão Azul offshore field has disappointed since drilling began in 2012, fanning concerns that OGX will lack the cash to finance ships and investments, drill new wells and honor its debt.
OGX has repeatedly said it will not restructure its debt.
According to Folha, a potential negotiation to restructure the company's bond obligations may last at least two months.
(Reporting by Guillermo Parra-Bernal; Additional reporting by Alberto Alerigi Jr; Editing by Lisa Von Ahn)
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