SAO PAULO/RIO DE JANEIRO, Sept 30 (Reuters) - Brazilian oil producer OGX Petróleo e Gas Participações SA is on track to forego a $44.5 million interest payment due on Tuesday, two sources with knowledge of the plans said, moving the company closer to the largest Latin American corporate debt default ever.
Should the company decide to miss the coupon payment, an announcement will be made within a few days, said one of the sources. The other said OGX wants to use a 30-day grace period that starts when the company misses the payment to conclude debt restructuring talks with bondholders.
The most likely path for OGX, controlled by former billionaire Eike Batista, is to file for bankruptcy protection in late October following the decision to forego the payment, the second source added.
The sources spoke on condition of anonymity because they were not authorized to speak publicly about the situation.
A spokeswoman for OGX declined to comment.
OGX hired Blackstone Group LP and investment banking firm Lazard Ltd to help the ailing oil producer “review its capital structure.” A group of bondholders, preparing for a contentious negotiation with the cash-strapped oil company, hired financial advisory firm Rothschild to advise them on a potential debt restructuring.
Pacific Investment Management Co, the world’s largest bond fund known as Pimco, and BlackRock Inc, the world’s largest money manager, are part of the group. Combined, bondholders on that group own more than half of OGX’s $3.6 billion in outstanding bonds.
Tuesday’s payment is on $1.1 billion of bonds due in 2022 . OGX faces an approximately $100 million coupon payment on its debt due in 2018 this December.
Bondholders were irked after Brazil’s biggest banks refinanced maturing debt and stretched out debt repayments for Batista’s cash-strapped mining, logistics and energy conglomerate, Grupo EBX. Banks have also been repaid some of the debt with proceeds from asset sales.
The pressure exerted by state and private-sector banks on EBX could enable them to virtually eliminate any significant loss on their exposure to the struggling group. But bondholders are set to face hefty losses on their investments with Batista, who less than two years ago had the world’s seventh-largest fortune worth about $35 billion.
Prices on the bonds have tumbled more than 80 percent this year, making them the worst performing emerging-market bonds, according to Thomson Reuters data. Shares of OGX slumped 25 percent on Monday.