UPDATE 2-Bankrupt Batista oil company files restructuring plan

Fri Feb 14, 2014 11:37pm EST

* Plan was supposed to be filed in January

* Court approval needed to put plan in effect

* Oleo e Gas gives up 7 offshore oil prospects

By Jeb Blount

RIO DE JANEIRO, Feb 15 (Reuters) - Brazilian tycoon Eike Batista and his oil company Oleo e Gas Participações SA presented a plan to a Rio de Janeiro judge on Friday to restructure the bankrupt enterprise and cede control to creditors owed $5.8 billion.

The plan, based on agreements made in December and February with bondholders owed $3.8 billion, will give creditors 90 percent of Oleo e Gas and leave existing shareholders, including Batista, with 10 percent, Oleo e Gas said in a statement. Bondholders and other creditors will also provide the company with up to $215 million in new loans to finance the restructuring.

On Oct. 30, Oleo e Gas, then known as OGX Petróleo e Gás Participações SA, made Latin America's largest-ever bankruptcy-protection filing. The filing marked the nadir of Batista's EBX energy, mining, shipbuilding and port-operation group. OGX, the group's flagship, has lost more than 99 percent of its value since 2010.

The restructuring plan was originally scheduled for delivery to the court in late January, but talks with creditors and advisors forced at least two delays.

Once worth about $60 billion, EBX soared as investors bet Brazil was one of the best-placed commodities markets to benefit from China's economic boom. EBX and its companies, though, missed production targets, and project and regulatory delays put off revenue needed to pay for debt and capital investments. A global slowdown sealed EBX's fate.

Oleo e Gas was worth about $402 million on Friday, according to Thomson Reuters data, less than 1 percent of its peak of more than $43 billion in 2010.

On Friday, EBX group companies were worth only about $2.5 billion, 4 percent of their peak. Batista, once Brazil's richest man, has seen his fortune evaporate. To keep the companies alive, he has traded the bulk of his holdings for existing debts or sold them at a deep discount to investors willing to complete investment promises he can no longer keep.

The plan submitted to the 4th Commercial Section of the Rio de Janeiro-state Justice Tribunal will leave creditors in charge and Batista with about 5 percent of Oleo e Gas.

Under the plan, which requires a judge's approval and the meeting of a series of oil production, regulatory and financial goals, Oleo e Gas will exchange shares worth 25 percent of the restructured company for $3.8 billion of debt owed to bondholders, 500 million owed to suppliers and $1.5 billion owed to OSX Brasil SA, an EBX company that owns the production platforms that produce Oleo e Gas's offshore oil and gas.

Bondholders and other creditors willing to provide up to $215 million of new loans known as debtor-in-possession (DIP) finance to keep Oleo e Gas operating during the restructuring will receive 65 percent of the new company.

The existing shareholders of the bankrupt company will be left with 10 percent of Oleo e Gas. Batista will have about half of that. Batista and the other legacy shareholders will, though, have the right to buy stock equal to 15 percent of a reformed Oleo e Gas' shares within five years. The value of that stock will be determined later but based on a current valuation of the company of $1.5 billion.

Under the plan, creditors owed less than 30,000 reais ($12,500) will be repaid in cash, the Folha de S. Paulo newspaper reported on Friday without citing a source.

OIL PROSPECTS ABANDONED

On Friday Oleo e Gas also agreed to give up seven offshore oil prospects after the country's oil regulator denied a petition to extend its exploration and production rights to six of the areas.

Oleo e Gas will relinquish rights to its Itacoatiara, Viedma, Tulum and Vesúvio offshore discoveries in the Campos Basin east of Rio de Janeiro. It bought those rights at auction in 2007 from the Brazilian government.

Brazil's oil regulator, the ANP, has said that companies unable to meet their contractual obligations to explore for oil, drill wells and produce oil from commercial discoveries will lose their rights.

Oleo e Gas's only producing field, Tubarão Martelo, is in the same Campos Basin region as the bulk of the fields being returned to Brazil. The company on Thursday said average daily output from Tubarão Martelo, which began producing in December, was 13 percent lower in the first week of February than it was on average in January.

Average daily output in Tubarão Martelo in January was 1.7 percent lower than in December.

Tubarão Martelo is considered one of the only chances the company has to create enough revenue to keep the company viable if a judge approves its reorganization.

Oleo e Gas also said it would give up its Natal and Belem prospects in the Santos Basin south of Rio de Janeiro. It had asked to extend its rights in the six areas but was denied an extension by the ANP, the statement said.

The company said it would give up its rights to the Curitiba prospect in the Santos Basin after tests on the reservoir showed lower-than-expected potential.

On Friday, before the restructuring and prospect-return announcements were made, Oleo e Gas shares fell 6.5 percent to 0.29 real in Sao Paulo, the lowest close this month.