February 20, 2016 / 1:05 AM / 4 years ago

UPDATE 1-Sete Brasil plans bankruptcy in week if no Petrobras lease proposal -sources

(Adds details on meeting, company background, details on dispute within Petrobras)

By Guillermo Parra-Bernal

SAO PAULO, Feb 19 (Reuters) - Sete Brasil Participações SA plans to file for bankruptcy protection if state-controlled oil producer Petróleo Brasileiro SA, the rig builder’s sole client, fails to present a final lease contract proposal in a week’s time, three sources with direct knowledge of the matter said on Friday.

Both Sete Brasil and Petrobras declined to comment.

Petrobras, as the oil company is known, asked for seven days to deliver the proposal, shareholders of Rio de Janeiro-based Sete Brasil were told at a meeting earlier on Friday, said the sources, who requested anonymity to speak freely about the matter.

Luiz Carneiro, Sete Brasil’s chief executive officer, delivered the message on behalf of Petrobras, the sources said. The fate of Sete Brasil, which was created in 2008 by Petrobras, pension funds, banks and other partners to build the world’s biggest deep-water drilling fleet order, hinges on Petrobras’ willingness to sign a long-term rent contract for the rigs.

Shareholders, who have their combined 95 percent stake in an investment vehicle known as FIP Sondas, will request a judge to accept their bankruptcy protection request should Petrobras fail to deliver the proposal, as promised, one of the sources said. The shareholders include pension funds Previ, Funcef and Petros, banks Grupo BTG Pactual SA and Banco Bradesco SA , and investment firms.

“If no proposal is extended within the agreed deadline, Sete Brasil will ask for creditor protection,” the same source said.

A bankruptcy filing by Sete Brasil would be devastating not only for the banks, funds and investors that backed the project, but also for dozens of shipbuilders and manufacturers supplying the company. More than 800,000 local shipbuilding jobs could be lost, sparking about 40 billion reais ($10 billion) in losses for the economy, the same source added.

Sete Brasil owes about 18 billion reais to banks, a national workers’ severance fund and suppliers, according to company data.

Other Sete Brasil shareholders include Caixa’s workers pension fund Funcef, EIG Global Energy Partners and Fundação Valia, the workers’ pension fund of mining company Vale SA . None of them had an immediate comment.


The $80 billion, government-backed project began to sour in 2014 when Petrobras and Sete Brasil became engulfed in a massive corruption scandal in Brazil. Fallout from the so-called Operation Car Wash scandal deprived Sete Brasil from obtaining long-term financing, forcing Brazil’s top lenders to roll over about 14 billion reais ($3.48 billion) in loans for the past 1-1/2 years.

Petrobras Chief Executive Officer Aldemir Bendine and officials at the company’s exploration and production division are at loggerheads over the Sete Brasil contract, Reuters has reported, citing sources. The tussle has forced BTG Pactual and creditors, which include Itaú Unibanco Holding SA and Bradesco, to write off part of the value of their investments and loans to Sete Brasil.

This month, Itaú, Bradesco, Banco Santander Brasil SA and state lenders Caixa Econômica Federal and Banco do Brasil SA agreed to renew almost 15 billion reais’ worth of standstill loans until May in exchange for access to 4.3 billion reais in collateral at government-backed naval fund CDFMM, two of the sources said.

According to the sources, about 2.8 billion reais were already withdrawn from the fund, with the remaining likely to be available within days.

Petrobras, which owns 5 percent of Sete Brasil, also requested Sete Brasil to replace restructuring adviser Alvarez & Marsal Holdings LLC with Rothschild & Co, two of the sources said. ($1 = 4.0199 Brazilian reais) (Reporting by Guillermo Parra-Bernal; Editing by Andrew Hay and Matthew Lewis)

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