(Adds restructuring detail, company comment and plans,
criticism of plan)
By Jeb Blount
RIO DE JANEIRO, June 3 Creditors of Brazilian
tycoon Eike Batista's Oleo e Gas Participacoes SA approved a
restructuring plan for the oil company that could lead to a
quick resolution of the largest bankruptcy in Latin America's
history, lawyers said on Tuesday.
The plan was approved by creditors holding 90 percent of the
Rio de Janeiro-based company's nearly 12 billion reais ($5
billion) of unpaid obligations.
If a judge approves, creditors will swap debts for about 90
percent of Oleo e Gas stock, said Ricardo
Knoepfelmacher of Angra Partners, the consultancy that handled
talks with creditors. The judge's approval is expected within
days, he said.
Creditors include Newport Beach, California-based Pacific
Investment Management Co, or PIMCO, one of the world's largest
bond investment companies; Batista's shipbuilding company, OSX
Brasil SA, and suppliers such as oil services company
"This is one of the first Brazilian cases to be solved in a
coherent way, using solutions that are common in developed
countries," said Eduardo Munhoz, a lawyer with Mattos Filho
Advogados, one of the law firms representing the company.
Munhoz said the restructuring deal is important because it
shows that Brazil's 2001 corporate law rewrite has properly
tilted power away from shareholders to creditors such as
suppliers, lenders, employees and bondholders.
Coming only seven months after Oleo e Gas, then known as OGX
Petroleo e Gas Participacoes SA, filed for bankruptcy, the
approval may boost confidence in Brazil's corporate bankruptcy
legislation, he added.
In the past, Munhoz said, Brazilian shareholders often
gained a bigger share of a restructured company than they
Many economists support bankruptcy protection because it
helps investors take risks while limiting the losses if they
fail. They also warn that favoring shareholders too much will
make lenders less likely to lend at reasonable rates and
suppliers less likely to offer goods and services.
Batista, who controls 51 percent of the company's stock,
will see his stake drop to about 5 percent. Last year, Batista
lost almost all of his estimated $30 billion fortune after
shares of EBX's listed companies plunged.
Ownership transfer from Batista and other shareholders to
creditors is likely to occur by September or October,
Knoepfelmacher said. Batista and other shareholders will get
warrants to buy about 15 percent of new Oleo e Gas stock.
Some creditors were unhappy with the deal. Luiz Filipe
Tavares, a manager of the Itava Inc investment fund, a British
Virgin Islands company that bought 9 million reais of Oleo e
Gas' bonds, says bigger creditors such as Pimco prevented
smaller creditors from taking part in new loans to the company
during the bankruptcy, a move that will limit their share in the
restructured company. He plans a court challenge.
"The big creditors forced this deal and cut us out," he
said. "We wanted to invest more. Batista got warrants, but we
can't invest more."
Oleo e Gas shares closed on Tuesday at 0.20 real, unchanged
from Monday, before the vote took place.
The plan makes Oleo e Gas debt free, easing efforts to
increase output from offshore oil wells near Rio. Since the
bankruptcy, creditors have pledged $215 million of new debt to
keep the company afloat. About $90 million of that will be made
available if the judge approves, Knoepfelmacher said.
The company may also sell part of its 40 percent stake in
the Atlanta and Oliva oil field in the BS-4 exploration block in
the Santos Basin south of Rio de Janeiro and part of its 100
percent stake in the Tubarão Martelo offshore field east of Rio,
(Reporting by Jeb Blount; Writing by Reese Ewing; Editing by
Andre Grenon, Eric Walsh and Jan Paschal)