By Sabrina Lorenzi
RIO DE JANEIRO Nov 8 Brazilian shipbuilder OSX
Brasil SA said on Friday it will file for bankruptcy
protection, another step in the decline of former billionaire
Eike Batista's empire.
The company said in a securities filing its shareholders
approved the bankruptcy filing, which is expected to take place
next week in a Rio de Janeiro court. The company also announced
the ouster of Chief Executive Marcelo Gomes.
OSX has 5.34 billion reais ($2.29 billion) in debt and could
seek to restructure part or all of that, becoming the second
company of Batista's to file for bankruptcy. Batista's oil
producer company, OGX Petróleo e Gas Participações SA
, sought protection from creditors on Oct. 30.
The OGX petition, citing 11.2 billion reais in debt, was the
largest corporate bankruptcy filing in Latin America.
The OSX bankruptcy decision follows more than a year during
which Batista's EBX Group - a sprawling empire of energy,
minerals and logistics companies, including OGX and OSX -
collapsed under a mountain of debt after missing production
EBX was once valued at more than $60 billion, and Batista
was a swaggering symbol of Brazil's rise as an emerging-market
powerhouse over the past decade.
Yet, as problems mounted, they fulfilled predictions made by
skeptics of Batista's breakneck expansion in recent years.
Critics warned that interdependence between EBX companies would
make them vulnerable to each other's problems, the opposite of
Batista's contention that the links would generate business
helping the companies flourish.
Once OGX filed for court protection, an OSX filing became
more likely and thus did not come as a surprise. The shipbuilder
depends on its sister company, to which it leases oil production
vessels, for all its revenue.
OSX depends on OGX, to which it leases oil production ships,
for all its revenue. OSX is 10 percent owned by South Korea's
Hyundai Heavy Industry.
Parent company OSX and two subsidiaries OSX Construção Naval
S.A. and OSX Serviços Operacionais Ltda. will jointly file for
protection from creditors, the filing said.
The company did not mention a third unit, OSX Leasing, which
owns three platforms that are leased for oil exploration
purposes. OSX's $500 million in secured dollar-denominated bonds
have rallied in recent days on speculation that OSX Brasil would
keep OSX Leasing off the filing so that the company can freely
decide what to do with the leasing company's assets.
If the court approves the bankruptcy request OSX plans to
file, the company will have 60 days to present a restructuring
plan. OSX creditors will then have 30 days to endorse or reject
the plan, though legal experts warn the proceedings could drag
on for much longer than that.
Brazilian Development Bank BNDES said in a statement that it
granted OSX a $228 million bridge loan, but added that the loan
is backed by bank guarantees and presents no risk to the BNDES.
OSX, whose assets include an unfinished shipyard on the
northern coast of Rio de Janeiro state, is also one of OGX's
biggest creditors. OGX owes OSX at least 2.45 billion reais,
according to documents filed with the bankruptcy court.
Before the OGX and OSX filings, Batista had already agreed
to sell stakes and assets of the other four publicly traded
companies in the ailing EBX conglomerate.
Like other Batista companies, OSX's troubles stem from the
failure of OGX to meet any of its ambitious oil production
targets. After starting output at its first field in early 2012,
OGX repeatedly missed goals despite reassuring investors that
copious amounts of oil would soon flow.
Having once said OGX would produce 1.4 million barrels of
oil and natural gas equivalent a day by 2018, or more than half
Brazil's current output, the company never produced more than 1
percent of that.
According to Batista's plan, the oil was supposed to have
provided tens of billions of dollars to build several dozen oil
platforms and other vessels at the OSX shipyard. The facility
was modeled on shipyards operated by Hyundai Heavy Industry
and was designed to be the largest shipyard in the
Bankruptcy protection could help OSX salvage its shipyard
unit, part of which is almost ready to begin operations at the
port of Açu complex on the Rio de Janeiro coast.
The port's operator LLX Logística SA, another
company founded by Batista, has agreed to renegotiate its
contracts with OSX for the use of the port, reducing OSX's
investment obligations, Friday's filing said.