SAO PAULO, April 4 (Reuters) - State-controlled Petróleo Brasileiro SA unsuccesfully sought the appointment of arbiters to rework a long-term contract with debt-laden drilling rig leaser Sete Brasil Participações SA, according to three sources with knowledge of the situation.
The proposal, made in recent weeks, called on each party to name three mediators to rework the contract, said the sources, who requested anonymity since the plan is private. The contract between Petrobras and Sete Brasil has been in dispute for two years.
The fate of Sete Brasil, which Petrobras helped create in 2008 to manage the world’s biggest deepwater drilling fleet with $89 billion in orders, hinges on Petrobras’ willingness to sign the contract. Petrobras is Sete Brasil’s sole client and owns 5 percent of the company.
Sete Brasil’s main shareholders shunned the latest proposal and say the company should file for bankruptcy protection to press Petrobras into signing more favorable terms, the sources added.
The arbitration proposal suggests Petrobras wants to thwart Sete Brasil’s threat to file for creditor protection, the sources said. However, no arbitration “could fly at this point” because two separate Sete Brasil shareholders have sued Petrobras over the contract impasse, and they are not willing to drop it, said the first source.
Sete Brasil and Petrobras, both based in Rio de Janeiro, declined to comment.
According to the sources, Petrobras will present a reworked contract proposal in coming weeks.
A collapse of Sete Brasil would be devastating not only for the investors that backed the project but for dozens of local suppliers. More than 800,000 local shipbuilding jobs could be lost, triggering $10 billion in losses at a time when Brazil’s economy is already wrestling with a deep recession, industry estimates show.
The government-backed project began to sour when Petrobras and Sete Brasil became engulfed in a corruption scandal known as “Operation Car Wash,” in 2014. The scandal has deprived Sete Brasil of long-term financing, forcing Brazil’s top banks to roll over 14 billion reais ($3.9 billion) in loans.
A draft proposal that Petrobras presented Sete Brasil in February failed to assure the rig leaser’s survival. Under that proposal, Petrobras would rent 10 rigs for five years, instead of 19 for 15 years originally, and cut lease rates by one-third.
Petrobras Chief Executive Officer Aldemir Bendine and officials at the company’s exploration and production division remain at loggerheads over the issue, with the latter wanting a collapse of the rig leaser, the same sources added.
$1 = 3.5760 Brazilian reais Editing by Frances Kerry
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