Brazil's OSX to seek bankruptcy protection

[November 11, 2013]  SAO PAULO (AP) -- OSX Brasil S.A, the shipbuilding company of Brazil's one-time richest man Eike Batista, said Friday evening it will file for bankruptcy protection in a Rio de Janeiro court.

The company said on its website that its board of directors agreed Friday to file for bankruptcy protection and that a special meeting of shareholders will be held on Nov. 28 to ratify the decision.

Ten days ago, Batista's OGX oil company filed for bankruptcy protection after it failed to reach an agreement to delay payment to holders of $3.6 billion in bonds.

According to Vanessa Guerra, an OSX press officer, the shipbuilding company owes the equivalent of $2.3 billion to state and private banks as well as to suppliers.

If the court accepts OSX's request, the company will have 60 days to come up with a restructuring plan. Creditors will then have 180 days to decide if they accept the plans.

For Adriano Pires, one of Brazil's top energy analysts, the OGX and OSX bankruptcy protection filings hurt Brazil's image overseas "at a time when the country needs to attract investments for its oil industry as well as for infrastructure projects like highways, airports, ports, and railways."

He said that in the minds of foreign investors, the OSX and OGX filings increased their "uncertainty and their fears of the rising risks involved in investing in the country."

Cassia Pontes, an oil industry analyst with the Rio-based Lopes Filho e Associados consulting firm, has said that OSX was in a "very worrisome" situation because it was created to supply oil tankers and platforms to Batista's petroleum concern."

"This was the company's business plan and it started collapsing when it was learned that OGX's oil production had fallen short of expectations," she said, adding that OSX depended on Batista's oil company for "most if not all of its revenue. They are like conjoined twins."

OGX was the backbone of Batista's empire, which includes steel, mining, energy, infrastructure and real estate companies.

OGX failed to deliver on promises to produce large amounts of offshore oil even though it has reported many finds since 2010, when its market value reached $34 billion. In the first half of this year, the company averaged output of just 8,500 barrels a day and racked up more than $2.5 billion in losses.

[Associated Press; By STAN LEHMAN]

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