Exclusive: OSX, bondholders in talks to delay interest payment - sources

SAO PAULO/RIO DE JANEIRO Thu Dec 5, 2013 4:36pm EST

Eike Batista, Chairman and CEO of EBX Group speaks at a dinner panel discussion at the Milken Institute Global Conference in Beverly Hills, California April 30, 2012. REUTERS/Mario Anzuoni

Eike Batista, Chairman and CEO of EBX Group speaks at a dinner panel discussion at the Milken Institute Global Conference in Beverly Hills, California April 30, 2012.

Credit: Reuters/Mario Anzuoni

SAO PAULO/RIO DE JANEIRO (Reuters) - Tycoon Eike Batista's OSX Brasil SA (OSXB3.SA) and holders of the ailing shipbuilder's $500 million in bonds are in talks to delay an interest payment due on December 20, three sources with direct knowledge of the situation said.

A group of creditors that own about 95 percent of the debt, which matures in 2015, may waive the $11.6 million payment under certain conditions, said two of the sources, who declined to be identified because of the sensitivity of the issue. OSX filed for bankruptcy protection on November 11 after failing to get debt relief from creditors.

One of the conditions is that OSX give up control, but not ownership, of the specialized ship that secured the bonds - the OSX-3 - to a captain and crew under the control of creditors, a third source added. OSX declined to confirm whether the talks are taking place.

Parent company OSX and subsidiaries OSX Construção Naval SA and OSX Serviços Operacionais Ltda declared bankruptcy earlier this month. Meanwhile, OSX Leasing Ltd, the leasing unit through which the shipbuilder owns the ship securing the debt, was left out of the bankruptcy filing, in Rio de Janeiro.

The debt was issued by OSX-3 Leasing BV, a unit of OSX Leasing.

OSX shares, which have lost 96 percent of their value this year, fell 6.1 percent to 0.46 reais in Sao Paulo on Thursday.

The ship is one of three converted oil tankers known as floating, production, storage and offloading ships, or FPSOs, built to harness and process output from three Brazilian offshore fields owned by OSX sister company OGX Petróleo e Gás Participações SA (OGXP3.SA) - OSX's only significant source of revenue.

TUBARÃO AZUL FIELD

The crisis of investor confidence in Batista's industrial empire pushed Batista off his perch as the world's seventh-richest man and led to a struggle between shareholders, banks and bondholders over remaining assets. The unraveling has become a symbol of Brazil's economic woes after a decade-long boom made it one of the world's hottest emerging economies.

The Rio de Janeiro-based shipbuilder had debts of 5.3 billion reais as of June, with about 1.1 billion reais of that amount coming from Caixa Econômica Federal, Brazil's largest mortgage lender. OSX has been racing to refinance those debts in recent weeks as it considered whether to file for bankruptcy protection as well, according to four sources familiar with the negotiations.

The failure of OGX's first field, Tubarão Azul, to produce expected amounts of oil and natural gas in 2012 led to a more than 90 percent plunge in the value of its shares, the meltdown of Batista's wider EBX industrial group and the bankruptcy of OGX and OSX.

The OSX-3 is anchored in OGX's Tubarão Martelo field northeast of Rio de Janeiro, which is expected to start output in the coming days. OSX-1 is in the mostly inactive Tubarão Azul field nearby and OSX-2, which has never been used, is mothballed in Asia, where it was built.

The fact that the OSX-3 and OSX-1 are anchored in Brazilian waters and linked to wells in a field considered commercially viable by Brazil's energy regulator would make taking control of the vessels and removing them from the country extremely difficult, a source with direct knowledge of the situation said.

The OSX-3, like other FPSOs, is also a highly specialized vessel with hundreds of millions of dollars of equipment designed and calibrated to handle the petroleum, natural gas and other fluids and gasses that are in Tubarão Martelo's subsea reservoirs.

There are only a handful of fields in the world with similar characteristics, one of the sources said. If the OSX-3 were seized, any future owner would likely have to spend several hundred million dollars at least to adapt the ship for a new field.

(Reporting by Guillermo Parra-Bernal and Jeb Blount; Additional reporting by Sabrina Lorenzi in Rio de Janeiro; Editing by Alden Bentley and Steve Orlofsky)

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