Detroit mediators ask judge to approve swaps deal

By Joseph Lichterman

DETROIT Mon Dec 30, 2013 2:50pm EST

DETROIT Dec 30 (Reuters) - The mediators who oversaw negotiations between Detroit and two banks to strike a deal to end a costly interest-rate swap agreement recommended on Monday that the judge in charge of Detroit's bankruptcy approve the agreement, arguing the deal is a critical first step toward resolving the historic case.

The city struck a deal with UBS AG and Bank of America Corp's Merrill Lynch Capital Services on Dec. 24 to end the interest-rate swap agreements at a 43 percent discount. The negotiations happened after U.S. Bankruptcy Judge Steven Rhodes, who is overseeing the case, encouraged Detroit to negotiate better terms for the deal.

Rhodes still must approve the agreement and he will hold a hearing on Jan. 3 to consider the arrangement.

In a document filed with the bankruptcy court on Monday, U.S. District Judge Gerald Rosen and U.S. Bankruptcy Judge Elizabeth Perris, two of the mediators in the case, recommended that Rhodes sign off on the deal because it is in the interest of both the banks and the city.

"As is the case in almost all settlements in bankruptcy (or indeed, in most litigation), this settlement, and the Mediators' recommendation of it, can best be captured and characterized by the admonition, 'Do not allow the perfect to become the enemy of the good,'" they wrote.

"Although it is not a perfect settlement, the mediators believe ... it represents a fair and equitable solution that is advantageous to all concerned."

Detroit will pay $165 million, plus up to $4.2 million in costs, to end the interest-rate swap agreements that were supposed to hedge interest rate risk for some of the $1.4 billion in pension debt that the city sold in 2005 and 2006.

Initially, the city landed a $350 million loan from Barclays Plc and planned to use about $230 million to end the swaps with Merrill and UBS at a 25 percent discount.

Detroit will now take out a $285 million loan from Barclays to end the swaps. About $120 million of the loan will be used to improve city services.

Despite the mediators' recommendation, the deal still faces opposition from some city creditors, including Detroit's two pension funds. In an email last week, attorney Robert Gordon, who represents the funds, said they will continue to oppose the deal because "the revised deal is better, but that is not saying a lot."

Detroit, which is weighed down by $18.5 billion in debt, filed the largest municipal bankruptcy in U.S. history in July. Earlier this month Rhodes declared the city eligible for bankruptcy and Detroit Emergency Manager Kevyn Orr has said he plans to submit an initial plan to restructure Detroit's debt to the bankruptcy court in early January.

The two mediators characterized the swaps deal as a "significant first step" in resolving the city's case.

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BONDNEWS LATAM-Barclays says OGX creditors should make DIP loan

Mon Dec 30, 2013 1:53pm EST

Owners of the $3.8 billion in bonds sold by Brazilian tycoon Eike Batista's Oleo e Gas Participações SA, formerly known as OGX Petroleo e Gas Participações SA, should take part in their share of a planned $215-million, debtor-in-posession (DIP) loan for the bankrupt company, Barclays said in a report on Monday.

Bond holders, who are not part of the majority group that approved a restructuring plan last week, will only have to pay about 1.62 cents per bond to take part in the financing, an amount that should allow them to take a stake in the company that will be worth more than their defaulted debt, the report says. Barclays, though, did not recommend buying more bonds.

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Fisker founders, managers sued for misleading investor

By Tom Hals and Deepa Seetharaman

Mon Dec 30, 2013 5:51pm EST

Dec 30 (Reuters) - The founders and top managers of now-bankrupt Fisker Automotive never told potential investors that the green car startup lost access to federal funds that were crucial to the company's financial strength, according to an investor lawsuit.

Co-founder Henrik Fisker, board members and executives kept quiet that the U.S. Department of Energy cut access to a $529 million green-technology loan in June 2011, according to the lawsuit, filed on Friday by Atlas Capital Management LP.

As a result, the firm wants a federal court in Delaware to order the defendants to repay the nearly $2 million Atlas invested in Fisker, which filed for Chapter 11 bankruptcy protection in late November.

Other defendants include Kleiner Perkins Caufield & Byers, a venture capital firm and early Fisker backer, Ray Lane, the former Fisker chairman and Kleiner partner emeritus, and Richard Li, an investor poised to buy Fisker out of bankruptcy.

Fisker raised more than $1.4 billion in public and private funds after its founding in 2007, but lavish spending, quality and engineering blunders and other mistakes drained Fisker's coffers and delayed the launch of its Karma plug-in hybrid, several people close to the company told Reuters earlier this year.

Much of Fisker's funds came after it won an Energy Department loan in September 2009. This government loan was continually used to entice investors to back the company and to generate favorable press, according to the Atlas lawsuit.

Fisker tapped $192 million from its Energy Department loan but lost access to the remainder in June 2011 after it privately disclosed to U.S. officials that it failed to meet a Karma production milestone required by the government. This was never disclosed to investors, the Atlas lawsuit said.

Atlas also said that Fisker used an "obscure" provision of its previous offering to carry out a "pay to play" capital call. If investors did not participate in follow-on rounds, their previous investment would be severely diluted.

Just one day after closing on a "pay to play" round of financing in late 2012, Atlas said, Fisker disclosed it was recalling hundreds of its Karmas because of a potential for battery fires, a problem the carmaker had known about for weeks.

"Had plaintiff known the truth regarding the default of the ATVM (government) loan covenants, the December 2011 recall due to battery fires and Fisker's default of the DOE confidential 'key personnel' loan covenant, which were not disclosed, plaintiff would not have purchased or otherwise acquired its Fisker securities, or if it had purchased such securities, it would not have done so at the artificially inflated prices which it paid," Atlas said in the complaint.

A Fisker spokesman, Kleiner and an attorney who represents Li's affiliate in the bankruptcy did not immediately return requests for comment.

Fisker's finances began to unravel after the loss of the Energy Department funding in mid-2011, but the company kept this and other troubling information from potential investors for several months, Reuters reported in June.

Fisker's financial woes worsened this year after a botched attempt to find a buyer and the exit of executives, including Henrik Fisker. In April, Fisker fired the bulk of its workforce to save cash.

Just prior to Fisker's November bankruptcy filing, a company affiliated with Li bought the Energy Department's loan for $30 million. Li is using the money owed on that loan, about $168 million, to acquire Fisker's assets in a bankruptcy court-supervised sale.

The U.S. bankruptcy court in Wilmington, Delaware, will hold a hearing Friday to approve the sale and the company's plan to repay its creditors, which are likely to collect next to nothing.

Monday was the deadline to object to the repayment plan and sale, and Atlas asked the court to block both unless Fisker established a way to preserve the company's books and records.

More than a dozen other objections were filed, mostly by suppliers unhappy with the handling of their contracts.

A Karma owner, Robert Diamond of Syosset, New York, objected because the sale would leave Karma owners without the ability to obtain warranty service on their cars.

"It is patently unfair to sell the assets and business of the debtors without requiring the purchaser to assume warranty obligations arising in the ordinary course of business," wrote Diamond.

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UPDATE 1-Fortress backs new LightSquared bankruptcy exit plan

Thu Dec 26, 2013 4:08pm EST

By Tom Hals and Liana B. Baker

Dec 26 (Reuters) - LightSquared is proposing a new bankruptcy exit plan with financing from Fortress Investment Group and other backers, as the U.S. wireless communications company seeks to avoid a sale to highest bidder Dish Network Corp.

LightSquared would receive $2.75 billion in fresh loans and at least $1.25 billion in equity investment from private equity firms Fortress and Melody Capital Advisors LLC, as well as JPMorgan Chase & Co and Harbinger Capital Partners, court documents filed late Tuesday show.

Harbinger, billionaire Philip Falcone's hedge fund, is LightSquared's controlling shareholder.

The investment firms' participation highlights the fierce competition for wireless spectrum, or broadband frequencies, in the United States. Many U.S. mobile operators are buying spectrum to boost their networks as customers use more and more bandwidth-hungry data services on phones and tablets.

The plan, filed in Manhattan's U.S. Bankruptcy Court, replaces one based on an auction of the company's assets earlier this year. LightSquared scrapped that sale after Dish emerged as the only qualified bidder, with a $2.2 billion offer and terms that LightSquared found unappealing.

It is unclear whether Dish would try to outbid the new group of investors. A Dish spokesman declined to comment on the company's plans on Thursday.

Dish Chairman Charlie Ergen has been acquiring billions of dollars worth in wireless airwaves to diversify his satellite television business, and has been battling Falcone for control of the company. Falcone had sued Ergen for illegally trying to take control of LightSquared, alleging that Ergen had made improper trades and violated a key credit agreement by buying up about $1 billion of LightSquared's debt in secret.

That case was thrown out in October but LightSquared has sued Ergen in an effort to revive the case.

Wunderlich Securities analyst Matt Harrigan said Dish is likely to bow out, but Ergen's wireless plans are far from over.

"This was not unexpected but I have to believe that Ergen really wanted LightSquared. It would have been nice for Dish to use that spectrum," Harrigan said.

He added that Dish is still involved in a government auction for additional spectrum and could try to acquire T-Mobile as well.

SoftBank is in talks to buy T-Mobile early through its investment in Sprint, Reuters has reported. Dish is also said to be exploring a bid for carrier T-Mobile, and regulators say that tie-up would face much less regulatory scrutiny than a Sprint bid.

FCC APPROVAL NEEDED

The latest proposal is subject to approval of LightSquared's license application by the Federal Communications Commission, which could take many months.

LightSquared would borrow at least $285 million from Melody to cover the period between court's approval of the new plan, which could come as soon as January, and the FCC approval.

LightSquared filed for bankruptcy last year after the FCC blocked its plan for a 4G LTE terrestrial wireless network because the regulator feared it would interfere with GPS navigation.

In November, LightSquared sued GPS industry leaders including Garmin International Inc for reneging on representations to LightSquared that its network would not interfere with global positioning systems devices.

U.S. Bankruptcy Court Judge Shelley Chapman ordered a hearing on LightSquared's motion to modify its reorganization plan for 10 a.m. EST Monday.

LightSquared argued it should be allowed to implement the new plan without going back to creditors to get their approval because the latest deal increases the recovery for creditors.

A hearing to confirm LightSquared's proposed plan is scheduled for Jan. 9.

The company's assets would be worth $8.4 billion, assuming the plan goes into effect on Sept. 30 and the FCC approves the company's license, the documents show.

The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.

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UPDATE 2-Batista's OSX reaches $1.5 bln deal on OGX contracts

Thu Dec 26, 2013 7:27pm EST

By Jeb Blount and Walter Brandimarte

RIO DE JANEIRO Dec 26 (Reuters) - Brazilian tycoon Eike Batista's troubled shipbuilder OSX Brasil SA and oil company Oleo e Gas Participações SA have taken another step toward emerging from Latin America's largest-ever bankruptcy with a deal to swap Oleo e Gas debt for stock.

Under the agreement announced late on Wednesday, OSX will convert $1.5 billion owed it by Oleo e Gas into a 7 percent stake in the reformulated oil company, formerly known as OGX Petróleo e Gas Participações SA.

OSX gets all its revenue from leasing oil-production vessels to Oleo e Gas, which was the flagship company of Batista's EBX Group industrial conglomerate.

The deal fleshes out a wider debt-for-stock accord between Batista's Oleo e Gas and holders of $3.8 billion of bonds announced on Tuesday. Under that agreement, bondholders will lend between $200 million and $215 million of new capital known as debtor in possession financing to keep the company going. In exchange for the loans, bondholders will get 65 percent of the stock in a restructured Oleo and Gas.

OSX shares rose 35 percent on Thursday to close at their highest level in more than a month. Oleo e Gas jumped 16 percent to close at a 10-day high.

"This looks very good. The parties are coming to agreement rapidly," Paulo Rabello de Castro, chief executive of SR Rating, a independent Brazilian credit rating agency told Reuters.

"While it won't get investors money back, the parties appear to want to settle," Rabello, who has advised creditors in some of Brazil's largest bankruptcy cases said.

"The only thing worse than losing money is a long, drawn out fight over the scraps," he said.

OGX's bankruptcy filing on Oct. 30 and was the largest ever in Latin America and that led to OSX filing for bankruptcy in November.

If approved by a Jan. 24 deadline, the accords will likely seal the end of Batista's once-giant EBX industrial conglomerate even as the companies are allowed to continue operating. The accords will leave Batista with controlling stakes in only three of the six publicly traded EBX companies.

They will also free Batista from fulfilling a pledge to put as much as $1 billion into Oleo e Gas to keep it operating until new fields can be brought on line.

Before rebranding itself as Oleo e Gas earlier this month, OGX sought court protection on Oct. 30 from creditors owed 11.2 billion reais ($4.75 billion), the biggest corporate default in emerging markets this year.

The restructuring process is expected to strip Batista of control of his flagship oil company and leave existing minority shareholders with about 10 percent of Oleo e Gas stock.

Non-bondholder creditors will have a total of 25 percent of a new Oleo e Gas after the restructuring according to securities filings.

Rabello de Castro cautioned that the companies' statements on this week's accords do not make it clear if Batista is really giving up a day-to-day role in OSX or Oleo e Gas.

"If he's still the captain he must go down with his ship, if he's giving up control, he must be first off the boat," Rabello de Castro said.

LAST CHANCE TO RECOUP MONEY?

Once worth more than $50 billion, EBX and its oil, energy, shipbuilding, mining and port-operation units saw their value collapse in the last 18 months in one of the most spectacular corporate reversals in history. Batista's advisers have sold the deals to creditors as the last chance to recover anything, even pennies on the dollar, from their investments.

It's still unclear how much bondholders will recover on their investments in OGX and OSX. OGX bonds were worth about 8.75 cents on the dollar on Thursday, according to Thomson Reuters prices

Operations in the Tubarão Martelo field, which began in early December, are expected to generate an operating profit, or generate cash from operations, in April and generate cash in every month to the end of the year after that except May, OGX said in a statement on Thursday.

Those cash flows will be the basis of any potential profit that OGX will be able to provide its new shareholders after debt is converted into shares and the source of future revenue at OSX.

OGX's fate was sealed in mid-2012 after the company failed to produce more than about 10,000 barrels a day from its first field, which it expects to abandon next year. OGX once said it would produce 1.4 million barrels of oil a day, more than two-thirds of Brazil's current output, by the end of 2018.

The OSX accord with Oleo e Gas terminates contracts to lease oil production vessels to Oleo e Gas when it was still called OGX.

The name change to Oleo e Gas, while symbolic, underlines Batista's departure from the companies that made him, during the glory years of a decade-long Brazilian commodities boom, Brazil's richest man.

Other EBX Group companies also changed their names after Batista sold or gave up control. LLX Logística SA, a port operator, is now Prumo Logística SA and controlled by Washington-based EIG. MPX Energia SA is now Eneva SA, led by German utility E.ON.

Batista had baptized his companies with an "X" to symbolize the multiplication of value. In the last year most of them lost about 90 percent of their value or more.

The $1.5 billion OSX will convert into Oleo e Gas stock, is divided into several parts: $414 million for the cancelling of the contract to lease the OSX-1 floating, production, storage and offloading ship (FPSO), $55.3 million for the end of a contract for the OSX-2 FPSO, and $528.6 million for the cancelling of a contract to lease a well-head platform known as WHP-2.

OSX is still in talks with holders of bonds sold to finance the OSX-3 FPSO, which began producing oil for Oleo e Gas in the Tubarão Martelo offshore field east of Rio de Janeiro in early December.

OSX, which operates a shipyard north of Rio, filed for protection from creditors on liabilities of 5.34 billion reais days after OGX's bankruptcy protection filing. The filing did not include its ship-leasing unit that operates the vessels involved in the accord.

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Detroit pension funds seek expedited bankruptcy appeal

DETROIT Fri Dec 27, 2013 5:06pm EST

DETROIT Dec 27 (Reuters) - Detroit's two pension funds have asked the U.S. 6th Circuit Court of Appeals to hear an expedited appeal of a judge's ruling that the city is eligible for bankruptcy protection.

The General Retirement System and Police and Fire Retirement System. Detroit's two largest unsecured creditors, filed the appeal with the 6th Circuit late Thursday. The expedited appeal would bypass the U.S. District Court for the Eastern District of Michigan.

"Resolution of the City's eligibility will have life-changing consequences for active and retired police officers, firefighters, librarians, government clerks, public works employees and many others," attorneys for the pension funds wrote.

Earlier this month, U.S. Bankruptcy Judge Steven Rhodes ruled that Detroit met the federal requirements for bankruptcy because the city, with $18.5 billion in debt, was insolvent and could not negotiate with all its creditors. Rhodes also ruled that pension benefits could be cut as part of Detroit's restructuring efforts.

The pension funds, and others objecting to the Detroit bankruptcy, have maintained that Michigan's constitution protects pensions from being slashed.

In their appeal, the pension funds said Detroit's plan to cut pensions could set a precedent and cause other troubled U.S. cities to also cut pension benefits as a way to reduce debt.

Last week Rhodes said groups objecting to the bankruptcy could appeal directly to the 6th circuit. But he said it would be best for the bankruptcy court to decide on the merits of Detroit's debt adjustment plan without the distraction of any appeals.

"It is time now to begin that discussion, unfettered by piecemeal appellate litigation," Rhodes wrote in his opinion last week.

Detroit Emergency Manager Kevyn Orr has said he intends to submit to the court in early January the city's plan to deal with its debt.

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UPDATE 1-Fortress backs new LightSquared bankruptcy exit plan

Thu Dec 26, 2013 4:08pm EST

By Tom Hals and Liana B. Baker

Dec 26 (Reuters) - LightSquared is proposing a new bankruptcy exit plan with financing from Fortress Investment Group and other backers, as the U.S. wireless communications company seeks to avoid a sale to highest bidder Dish Network Corp.

LightSquared would receive $2.75 billion in fresh loans and at least $1.25 billion in equity investment from private equity firms Fortress and Melody Capital Advisors LLC, as well as JPMorgan Chase & Co and Harbinger Capital Partners, court documents filed late Tuesday show.

Harbinger, billionaire Philip Falcone's hedge fund, is LightSquared's controlling shareholder.

The investment firms' participation highlights the fierce competition for wireless spectrum, or broadband frequencies, in the United States. Many U.S. mobile operators are buying spectrum to boost their networks as customers use more and more bandwidth-hungry data services on phones and tablets.

The plan, filed in Manhattan's U.S. Bankruptcy Court, replaces one based on an auction of the company's assets earlier this year. LightSquared scrapped that sale after Dish emerged as the only qualified bidder, with a $2.2 billion offer and terms that LightSquared found unappealing.

It is unclear whether Dish would try to outbid the new group of investors. A Dish spokesman declined to comment on the company's plans on Thursday.

Dish Chairman Charlie Ergen has been acquiring billions of dollars worth in wireless airwaves to diversify his satellite television business, and has been battling Falcone for control of the company. Falcone had sued Ergen for illegally trying to take control of LightSquared, alleging that Ergen had made improper trades and violated a key credit agreement by buying up about $1 billion of LightSquared's debt in secret.

That case was thrown out in October but LightSquared has sued Ergen in an effort to revive the case.

Wunderlich Securities analyst Matt Harrigan said Dish is likely to bow out, but Ergen's wireless plans are far from over.

"This was not unexpected but I have to believe that Ergen really wanted LightSquared. It would have been nice for Dish to use that spectrum," Harrigan said.

He added that Dish is still involved in a government auction for additional spectrum and could try to acquire T-Mobile as well.

SoftBank is in talks to buy T-Mobile early through its investment in Sprint, Reuters has reported. Dish is also said to be exploring a bid for carrier T-Mobile, and regulators say that tie-up would face much less regulatory scrutiny than a Sprint bid.

FCC APPROVAL NEEDED

The latest proposal is subject to approval of LightSquared's license application by the Federal Communications Commission, which could take many months.

LightSquared would borrow at least $285 million from Melody to cover the period between court's approval of the new plan, which could come as soon as January, and the FCC approval.

LightSquared filed for bankruptcy last year after the FCC blocked its plan for a 4G LTE terrestrial wireless network because the regulator feared it would interfere with GPS navigation.

In November, LightSquared sued GPS industry leaders including Garmin International Inc for reneging on representations to LightSquared that its network would not interfere with global positioning systems devices.

U.S. Bankruptcy Court Judge Shelley Chapman ordered a hearing on LightSquared's motion to modify its reorganization plan for 10 a.m. EST Monday.

LightSquared argued it should be allowed to implement the new plan without going back to creditors to get their approval because the latest deal increases the recovery for creditors.

A hearing to confirm LightSquared's proposed plan is scheduled for Jan. 9.

The company's assets would be worth $8.4 billion, assuming the plan goes into effect on Sept. 30 and the FCC approves the company's license, the documents show.

The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.

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UPDATE 2-Batista's OSX reaches $1.5 bln deal on OGX contracts

Thu Dec 26, 2013 7:27pm EST

By Jeb Blount and Walter Brandimarte

RIO DE JANEIRO Dec 26 (Reuters) - Brazilian tycoon Eike Batista's troubled shipbuilder OSX Brasil SA and oil company Oleo e Gas Participações SA have taken another step toward emerging from Latin America's largest-ever bankruptcy with a deal to swap Oleo e Gas debt for stock.

Under the agreement announced late on Wednesday, OSX will convert $1.5 billion owed it by Oleo e Gas into a 7 percent stake in the reformulated oil company, formerly known as OGX Petróleo e Gas Participações SA.

OSX gets all its revenue from leasing oil-production vessels to Oleo e Gas, which was the flagship company of Batista's EBX Group industrial conglomerate.

The deal fleshes out a wider debt-for-stock accord between Batista's Oleo e Gas and holders of $3.8 billion of bonds announced on Tuesday. Under that agreement, bondholders will lend between $200 million and $215 million of new capital known as debtor in possession financing to keep the company going. In exchange for the loans, bondholders will get 65 percent of the stock in a restructured Oleo and Gas.

OSX shares rose 35 percent on Thursday to close at their highest level in more than a month. Oleo e Gas jumped 16 percent to close at a 10-day high.

"This looks very good. The parties are coming to agreement rapidly," Paulo Rabello de Castro, chief executive of SR Rating, a independent Brazilian credit rating agency told Reuters.

"While it won't get investors money back, the parties appear to want to settle," Rabello, who has advised creditors in some of Brazil's largest bankruptcy cases said.

"The only thing worse than losing money is a long, drawn out fight over the scraps," he said.

OGX's bankruptcy filing on Oct. 30 and was the largest ever in Latin America and that led to OSX filing for bankruptcy in November.

If approved by a Jan. 24 deadline, the accords will likely seal the end of Batista's once-giant EBX industrial conglomerate even as the companies are allowed to continue operating. The accords will leave Batista with controlling stakes in only three of the six publicly traded EBX companies.

They will also free Batista from fulfilling a pledge to put as much as $1 billion into Oleo e Gas to keep it operating until new fields can be brought on line.

Before rebranding itself as Oleo e Gas earlier this month, OGX sought court protection on Oct. 30 from creditors owed 11.2 billion reais ($4.75 billion), the biggest corporate default in emerging markets this year.

The restructuring process is expected to strip Batista of control of his flagship oil company and leave existing minority shareholders with about 10 percent of Oleo e Gas stock.

Non-bondholder creditors will have a total of 25 percent of a new Oleo e Gas after the restructuring according to securities filings.

Rabello de Castro cautioned that the companies' statements on this week's accords do not make it clear if Batista is really giving up a day-to-day role in OSX or Oleo e Gas.

"If he's still the captain he must go down with his ship, if he's giving up control, he must be first off the boat," Rabello de Castro said.

LAST CHANCE TO RECOUP MONEY?

Once worth more than $50 billion, EBX and its oil, energy, shipbuilding, mining and port-operation units saw their value collapse in the last 18 months in one of the most spectacular corporate reversals in history. Batista's advisers have sold the deals to creditors as the last chance to recover anything, even pennies on the dollar, from their investments.

It's still unclear how much bondholders will recover on their investments in OGX and OSX. OGX bonds were worth about 8.75 cents on the dollar on Thursday, according to Thomson Reuters prices

Operations in the Tubarão Martelo field, which began in early December, are expected to generate an operating profit, or generate cash from operations, in April and generate cash in every month to the end of the year after that except May, OGX said in a statement on Thursday.

Those cash flows will be the basis of any potential profit that OGX will be able to provide its new shareholders after debt is converted into shares and the source of future revenue at OSX.

OGX's fate was sealed in mid-2012 after the company failed to produce more than about 10,000 barrels a day from its first field, which it expects to abandon next year. OGX once said it would produce 1.4 million barrels of oil a day, more than two-thirds of Brazil's current output, by the end of 2018.

The OSX accord with Oleo e Gas terminates contracts to lease oil production vessels to Oleo e Gas when it was still called OGX.

The name change to Oleo e Gas, while symbolic, underlines Batista's departure from the companies that made him, during the glory years of a decade-long Brazilian commodities boom, Brazil's richest man.

Other EBX Group companies also changed their names after Batista sold or gave up control. LLX Logística SA, a port operator, is now Prumo Logística SA and controlled by Washington-based EIG. MPX Energia SA is now Eneva SA, led by German utility E.ON.

Batista had baptized his companies with an "X" to symbolize the multiplication of value. In the last year most of them lost about 90 percent of their value or more.

The $1.5 billion OSX will convert into Oleo e Gas stock, is divided into several parts: $414 million for the cancelling of the contract to lease the OSX-1 floating, production, storage and offloading ship (FPSO), $55.3 million for the end of a contract for the OSX-2 FPSO, and $528.6 million for the cancelling of a contract to lease a well-head platform known as WHP-2.

OSX is still in talks with holders of bonds sold to finance the OSX-3 FPSO, which began producing oil for Oleo e Gas in the Tubarão Martelo offshore field east of Rio de Janeiro in early December.

OSX, which operates a shipyard north of Rio, filed for protection from creditors on liabilities of 5.34 billion reais days after OGX's bankruptcy protection filing. The filing did not include its ship-leasing unit that operates the vessels involved in the accord.

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Detroit pension funds seek expedited bankruptcy appeal

DETROIT Fri Dec 27, 2013 5:06pm EST

DETROIT Dec 27 (Reuters) - Detroit's two pension funds have asked the U.S. 6th Circuit Court of Appeals to hear an expedited appeal of a judge's ruling that the city is eligible for bankruptcy protection.

The General Retirement System and Police and Fire Retirement System. Detroit's two largest unsecured creditors, filed the appeal with the 6th Circuit late Thursday. The expedited appeal would bypass the U.S. District Court for the Eastern District of Michigan.

"Resolution of the City's eligibility will have life-changing consequences for active and retired police officers, firefighters, librarians, government clerks, public works employees and many others," attorneys for the pension funds wrote.

Earlier this month, U.S. Bankruptcy Judge Steven Rhodes ruled that Detroit met the federal requirements for bankruptcy because the city, with $18.5 billion in debt, was insolvent and could not negotiate with all its creditors. Rhodes also ruled that pension benefits could be cut as part of Detroit's restructuring efforts.

The pension funds, and others objecting to the Detroit bankruptcy, have maintained that Michigan's constitution protects pensions from being slashed.

In their appeal, the pension funds said Detroit's plan to cut pensions could set a precedent and cause other troubled U.S. cities to also cut pension benefits as a way to reduce debt.

Last week Rhodes said groups objecting to the bankruptcy could appeal directly to the 6th circuit. But he said it would be best for the bankruptcy court to decide on the merits of Detroit's debt adjustment plan without the distraction of any appeals.

"It is time now to begin that discussion, unfettered by piecemeal appellate litigation," Rhodes wrote in his opinion last week.

Detroit Emergency Manager Kevyn Orr has said he intends to submit to the court in early January the city's plan to deal with its debt.

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UPDATE 1-Fortress backs new LightSquared bankruptcy exit plan

Thu Dec 26, 2013 4:08pm EST

By Tom Hals and Liana B. Baker

Dec 26 (Reuters) - LightSquared is proposing a new bankruptcy exit plan with financing from Fortress Investment Group and other backers, as the U.S. wireless communications company seeks to avoid a sale to highest bidder Dish Network Corp.

LightSquared would receive $2.75 billion in fresh loans and at least $1.25 billion in equity investment from private equity firms Fortress and Melody Capital Advisors LLC, as well as JPMorgan Chase & Co and Harbinger Capital Partners, court documents filed late Tuesday show.

Harbinger, billionaire Philip Falcone's hedge fund, is LightSquared's controlling shareholder.

The investment firms' participation highlights the fierce competition for wireless spectrum, or broadband frequencies, in the United States. Many U.S. mobile operators are buying spectrum to boost their networks as customers use more and more bandwidth-hungry data services on phones and tablets.

The plan, filed in Manhattan's U.S. Bankruptcy Court, replaces one based on an auction of the company's assets earlier this year. LightSquared scrapped that sale after Dish emerged as the only qualified bidder, with a $2.2 billion offer and terms that LightSquared found unappealing.

It is unclear whether Dish would try to outbid the new group of investors. A Dish spokesman declined to comment on the company's plans on Thursday.

Dish Chairman Charlie Ergen has been acquiring billions of dollars worth in wireless airwaves to diversify his satellite television business, and has been battling Falcone for control of the company. Falcone had sued Ergen for illegally trying to take control of LightSquared, alleging that Ergen had made improper trades and violated a key credit agreement by buying up about $1 billion of LightSquared's debt in secret.

That case was thrown out in October but LightSquared has sued Ergen in an effort to revive the case.

Wunderlich Securities analyst Matt Harrigan said Dish is likely to bow out, but Ergen's wireless plans are far from over.

"This was not unexpected but I have to believe that Ergen really wanted LightSquared. It would have been nice for Dish to use that spectrum," Harrigan said.

He added that Dish is still involved in a government auction for additional spectrum and could try to acquire T-Mobile as well.

SoftBank is in talks to buy T-Mobile early through its investment in Sprint, Reuters has reported. Dish is also said to be exploring a bid for carrier T-Mobile, and regulators say that tie-up would face much less regulatory scrutiny than a Sprint bid.

FCC APPROVAL NEEDED

The latest proposal is subject to approval of LightSquared's license application by the Federal Communications Commission, which could take many months.

LightSquared would borrow at least $285 million from Melody to cover the period between court's approval of the new plan, which could come as soon as January, and the FCC approval.

LightSquared filed for bankruptcy last year after the FCC blocked its plan for a 4G LTE terrestrial wireless network because the regulator feared it would interfere with GPS navigation.

In November, LightSquared sued GPS industry leaders including Garmin International Inc for reneging on representations to LightSquared that its network would not interfere with global positioning systems devices.

U.S. Bankruptcy Court Judge Shelley Chapman ordered a hearing on LightSquared's motion to modify its reorganization plan for 10 a.m. EST Monday.

LightSquared argued it should be allowed to implement the new plan without going back to creditors to get their approval because the latest deal increases the recovery for creditors.

A hearing to confirm LightSquared's proposed plan is scheduled for Jan. 9.

The company's assets would be worth $8.4 billion, assuming the plan goes into effect on Sept. 30 and the FCC approves the company's license, the documents show.

The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.

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UPDATE 2-Batista's OSX reaches $1.5 bln deal on OGX contracts

Thu Dec 26, 2013 7:27pm EST

By Jeb Blount and Walter Brandimarte

RIO DE JANEIRO Dec 26 (Reuters) - Brazilian tycoon Eike Batista's troubled shipbuilder OSX Brasil SA and oil company Oleo e Gas Participações SA have taken another step toward emerging from Latin America's largest-ever bankruptcy with a deal to swap Oleo e Gas debt for stock.

Under the agreement announced late on Wednesday, OSX will convert $1.5 billion owed it by Oleo e Gas into a 7 percent stake in the reformulated oil company, formerly known as OGX Petróleo e Gas Participações SA.

OSX gets all its revenue from leasing oil-production vessels to Oleo e Gas, which was the flagship company of Batista's EBX Group industrial conglomerate.

The deal fleshes out a wider debt-for-stock accord between Batista's Oleo e Gas and holders of $3.8 billion of bonds announced on Tuesday. Under that agreement, bondholders will lend between $200 million and $215 million of new capital known as debtor in possession financing to keep the company going. In exchange for the loans, bondholders will get 65 percent of the stock in a restructured Oleo and Gas.

OSX shares rose 35 percent on Thursday to close at their highest level in more than a month. Oleo e Gas jumped 16 percent to close at a 10-day high.

"This looks very good. The parties are coming to agreement rapidly," Paulo Rabello de Castro, chief executive of SR Rating, a independent Brazilian credit rating agency told Reuters.

"While it won't get investors money back, the parties appear to want to settle," Rabello, who has advised creditors in some of Brazil's largest bankruptcy cases said.

"The only thing worse than losing money is a long, drawn out fight over the scraps," he said.

OGX's bankruptcy filing on Oct. 30 and was the largest ever in Latin America and that led to OSX filing for bankruptcy in November.

If approved by a Jan. 24 deadline, the accords will likely seal the end of Batista's once-giant EBX industrial conglomerate even as the companies are allowed to continue operating. The accords will leave Batista with controlling stakes in only three of the six publicly traded EBX companies.

They will also free Batista from fulfilling a pledge to put as much as $1 billion into Oleo e Gas to keep it operating until new fields can be brought on line.

Before rebranding itself as Oleo e Gas earlier this month, OGX sought court protection on Oct. 30 from creditors owed 11.2 billion reais ($4.75 billion), the biggest corporate default in emerging markets this year.

The restructuring process is expected to strip Batista of control of his flagship oil company and leave existing minority shareholders with about 10 percent of Oleo e Gas stock.

Non-bondholder creditors will have a total of 25 percent of a new Oleo e Gas after the restructuring according to securities filings.

Rabello de Castro cautioned that the companies' statements on this week's accords do not make it clear if Batista is really giving up a day-to-day role in OSX or Oleo e Gas.

"If he's still the captain he must go down with his ship, if he's giving up control, he must be first off the boat," Rabello de Castro said.

LAST CHANCE TO RECOUP MONEY?

Once worth more than $50 billion, EBX and its oil, energy, shipbuilding, mining and port-operation units saw their value collapse in the last 18 months in one of the most spectacular corporate reversals in history. Batista's advisers have sold the deals to creditors as the last chance to recover anything, even pennies on the dollar, from their investments.

It's still unclear how much bondholders will recover on their investments in OGX and OSX. OGX bonds were worth about 8.75 cents on the dollar on Thursday, according to Thomson Reuters prices

Operations in the Tubarão Martelo field, which began in early December, are expected to generate an operating profit, or generate cash from operations, in April and generate cash in every month to the end of the year after that except May, OGX said in a statement on Thursday.

Those cash flows will be the basis of any potential profit that OGX will be able to provide its new shareholders after debt is converted into shares and the source of future revenue at OSX.

OGX's fate was sealed in mid-2012 after the company failed to produce more than about 10,000 barrels a day from its first field, which it expects to abandon next year. OGX once said it would produce 1.4 million barrels of oil a day, more than two-thirds of Brazil's current output, by the end of 2018.

The OSX accord with Oleo e Gas terminates contracts to lease oil production vessels to Oleo e Gas when it was still called OGX.

The name change to Oleo e Gas, while symbolic, underlines Batista's departure from the companies that made him, during the glory years of a decade-long Brazilian commodities boom, Brazil's richest man.

Other EBX Group companies also changed their names after Batista sold or gave up control. LLX Logística SA, a port operator, is now Prumo Logística SA and controlled by Washington-based EIG. MPX Energia SA is now Eneva SA, led by German utility E.ON.

Batista had baptized his companies with an "X" to symbolize the multiplication of value. In the last year most of them lost about 90 percent of their value or more.

The $1.5 billion OSX will convert into Oleo e Gas stock, is divided into several parts: $414 million for the cancelling of the contract to lease the OSX-1 floating, production, storage and offloading ship (FPSO), $55.3 million for the end of a contract for the OSX-2 FPSO, and $528.6 million for the cancelling of a contract to lease a well-head platform known as WHP-2.

OSX is still in talks with holders of bonds sold to finance the OSX-3 FPSO, which began producing oil for Oleo e Gas in the Tubarão Martelo offshore field east of Rio de Janeiro in early December.

OSX, which operates a shipyard north of Rio, filed for protection from creditors on liabilities of 5.34 billion reais days after OGX's bankruptcy protection filing. The filing did not include its ship-leasing unit that operates the vessels involved in the accord.

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Detroit pension funds seek expedited bankruptcy appeal

DETROIT Fri Dec 27, 2013 5:06pm EST

DETROIT Dec 27 (Reuters) - Detroit's two pension funds have asked the U.S. 6th Circuit Court of Appeals to hear an expedited appeal of a judge's ruling that the city is eligible for bankruptcy protection.

The General Retirement System and Police and Fire Retirement System. Detroit's two largest unsecured creditors, filed the appeal with the 6th Circuit late Thursday. The expedited appeal would bypass the U.S. District Court for the Eastern District of Michigan.

"Resolution of the City's eligibility will have life-changing consequences for active and retired police officers, firefighters, librarians, government clerks, public works employees and many others," attorneys for the pension funds wrote.

Earlier this month, U.S. Bankruptcy Judge Steven Rhodes ruled that Detroit met the federal requirements for bankruptcy because the city, with $18.5 billion in debt, was insolvent and could not negotiate with all its creditors. Rhodes also ruled that pension benefits could be cut as part of Detroit's restructuring efforts.

The pension funds, and others objecting to the Detroit bankruptcy, have maintained that Michigan's constitution protects pensions from being slashed.

In their appeal, the pension funds said Detroit's plan to cut pensions could set a precedent and cause other troubled U.S. cities to also cut pension benefits as a way to reduce debt.

Last week Rhodes said groups objecting to the bankruptcy could appeal directly to the 6th circuit. But he said it would be best for the bankruptcy court to decide on the merits of Detroit's debt adjustment plan without the distraction of any appeals.

"It is time now to begin that discussion, unfettered by piecemeal appellate litigation," Rhodes wrote in his opinion last week.

Detroit Emergency Manager Kevyn Orr has said he intends to submit to the court in early January the city's plan to deal with its debt.

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UPDATE 1-Fortress backs new LightSquared bankruptcy exit plan

Thu Dec 26, 2013 4:08pm EST

By Tom Hals and Liana B. Baker

Dec 26 (Reuters) - LightSquared is proposing a new bankruptcy exit plan with financing from Fortress Investment Group and other backers, as the U.S. wireless communications company seeks to avoid a sale to highest bidder Dish Network Corp.

LightSquared would receive $2.75 billion in fresh loans and at least $1.25 billion in equity investment from private equity firms Fortress and Melody Capital Advisors LLC, as well as JPMorgan Chase & Co and Harbinger Capital Partners, court documents filed late Tuesday show.

Harbinger, billionaire Philip Falcone's hedge fund, is LightSquared's controlling shareholder.

The investment firms' participation highlights the fierce competition for wireless spectrum, or broadband frequencies, in the United States. Many U.S. mobile operators are buying spectrum to boost their networks as customers use more and more bandwidth-hungry data services on phones and tablets.

The plan, filed in Manhattan's U.S. Bankruptcy Court, replaces one based on an auction of the company's assets earlier this year. LightSquared scrapped that sale after Dish emerged as the only qualified bidder, with a $2.2 billion offer and terms that LightSquared found unappealing.

It is unclear whether Dish would try to outbid the new group of investors. A Dish spokesman declined to comment on the company's plans on Thursday.

Dish Chairman Charlie Ergen has been acquiring billions of dollars worth in wireless airwaves to diversify his satellite television business, and has been battling Falcone for control of the company. Falcone had sued Ergen for illegally trying to take control of LightSquared, alleging that Ergen had made improper trades and violated a key credit agreement by buying up about $1 billion of LightSquared's debt in secret.

That case was thrown out in October but LightSquared has sued Ergen in an effort to revive the case.

Wunderlich Securities analyst Matt Harrigan said Dish is likely to bow out, but Ergen's wireless plans are far from over.

"This was not unexpected but I have to believe that Ergen really wanted LightSquared. It would have been nice for Dish to use that spectrum," Harrigan said.

He added that Dish is still involved in a government auction for additional spectrum and could try to acquire T-Mobile as well.

SoftBank is in talks to buy T-Mobile early through its investment in Sprint, Reuters has reported. Dish is also said to be exploring a bid for carrier T-Mobile, and regulators say that tie-up would face much less regulatory scrutiny than a Sprint bid.

FCC APPROVAL NEEDED

The latest proposal is subject to approval of LightSquared's license application by the Federal Communications Commission, which could take many months.

LightSquared would borrow at least $285 million from Melody to cover the period between court's approval of the new plan, which could come as soon as January, and the FCC approval.

LightSquared filed for bankruptcy last year after the FCC blocked its plan for a 4G LTE terrestrial wireless network because the regulator feared it would interfere with GPS navigation.

In November, LightSquared sued GPS industry leaders including Garmin International Inc for reneging on representations to LightSquared that its network would not interfere with global positioning systems devices.

U.S. Bankruptcy Court Judge Shelley Chapman ordered a hearing on LightSquared's motion to modify its reorganization plan for 10 a.m. EST Monday.

LightSquared argued it should be allowed to implement the new plan without going back to creditors to get their approval because the latest deal increases the recovery for creditors.

A hearing to confirm LightSquared's proposed plan is scheduled for Jan. 9.

The company's assets would be worth $8.4 billion, assuming the plan goes into effect on Sept. 30 and the FCC approves the company's license, the documents show.

The case is In re: LightSquared Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-12080.

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UPDATE 1-Batista's OSX reaches $1.5 bln deal on OGX contracts

Thu Dec 26, 2013 2:56pm EST

By Jeb Blount and Walter Brandimarte

RIO DE JANEIRO Dec 26 (Reuters) - Brazilian tycoon Eike Batista's troubled shipbuilder OSX Brasil SA and oil company Oleo e Gas Participações SA have taken another step toward emerging from Latin America's largest-ever bankruptcy with a deal to swap Oleo e Gas debt for stock.

Under the agreement announced late on Wednesday, OSX will convert $1.5 billion owed it by Oleo e Gas into a 7 percent stake in the reformulated oil company, formerly known as OGX Petróleo e Gas Participações SA.

OSX gets all its revenue from leasing oil-production vessels to Oleo e Gas.

The deal fleshes out a wider debt-for-stock accord between Batista's Oleo e Gas and holders of $3.8 billion of bonds announced on Tuesday. Under that agreement, bondholders will contribute between $200 million and $215 million of loans known as in debtor in possession finance in exchange for 65 percent of the stock in a restructured Oleo and Gas.

If approved by a Jan. 24 deadline, the accords will seal the end of Batista's once-giant EBX industrial conglomerate even as the companies are allowed to continue operating.

The accords leave Batista with controlling stakes in only three of the six publicly traded EBX companies.

Of the remaining three, he has had to sell off key assets of iron ore miner MMX Mineração e Metálicos SA and coal miner CCX Carvão da Colombia SA. A final OSX agreement over bonds sold to finance an oil production ship is expected to see Batista's stake in the shipbuilder sharply reduced.

Both Oleo e Gas and OSX shares rallied on Thursday, as the agreements could help convince a Brazilian bankruptcy judge that the companies can emerge from restructuring as viable businesses and thus should not be liquidated. Oleo e Gas shares rose more than 21 percent and OSX more than 30 percent.

"The deal is crucial for the continuity of our activities as our largest client OGX seeks to reestablish its financial position, allowing it to fulfill its obligations with OSX," the shipbuilder said in a statement late on Wednesday.

It will also free Batista from fulfilling a pledge to put as much as $1 billion into Oleo e Gas to keep it operating until new fields can be brought on line.

Before rebranding itself as Oleo e Gas earlier this month, OGX sought court protection from creditors owed 11.2 billion reais ($4.74 billion), the largest bankruptcy in Latin America and the biggest corporate default in emerging markets this year.

The restructuring process will strip Batista of control of his flagship oil company and leave existing minority shareholders with about 10 percent of Oleo e Gas stock. Non-bondholder creditors will have a total of 25 percent of a new Oleo e Gas after the restructuring.

Once worth more than $50 billion, EBX and its oil, energy, shipbuilding, mining and port-operation units saw their value collapse in the last 18 months in one of the most spectacular corporate reversals in history. Batista's advisers have sold the deals to creditors as the last chance to recover anything, even pennies on the dollar, from their investments.

It's still unclear how much bondholders will recover on their investments in OGX and OSX.

OGX's fate was sealed in mid-2012 after the company failed to produce more than about 10,000 barrels a day from its first field, which it expects to abandon next year. OGX once said it would produce 1.4 million barrels of oil a day, more than two-thirds of Brazil's current output, by the end of 2018.

VESSEL AGREEMENT REACHED

The OSX accord with Oleo e Gas allows for the termination of several contracts to lease oil production vessels to Oleo e Gas, which filed for court protection on Oct. 30 when it was still called OGX.

Other EBX Group companies also changed their names after Batista sold or gave up control. Batista had baptized all his companies with an "X" to symbolize the multiplication of value.

The $1.5 billion is divided into several parts, $414 million for the cancelling of the contract to lease the OSX-1 floating, production, storage and offloading ship (FPSO), $55.3 million for the end of a contract for the OSX-2 FPSO, and $528.6 million for the cancelling of a contract to lease a well-head platform known as WHP-2.

OSX is still in talks with holders of bonds sold to finance the OSX-3 FPSO, which began producing oil for Oleo e Gas in the Tubarão Martelo offshore field east of Rio de Janeiro in early December.

OSX, which operates a shipyard north of Rio, filed for protection from creditors on liabilities of 5.34 billion reais ($2.30 billion) days after OGX's bankruptcy protection filing. The filing did not include its ship-leasing unit that operates the vessels involved in the accord.

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UPDATE 2-Batista's OSX reaches $1.5 bln deal on OGX contracts

Thu Dec 26, 2013 7:27pm EST

By Jeb Blount and Walter Brandimarte

RIO DE JANEIRO Dec 26 (Reuters) - Brazilian tycoon Eike Batista's troubled shipbuilder OSX Brasil SA and oil company Oleo e Gas Participações SA have taken another step toward emerging from Latin America's largest-ever bankruptcy with a deal to swap Oleo e Gas debt for stock.

Under the agreement announced late on Wednesday, OSX will convert $1.5 billion owed it by Oleo e Gas into a 7 percent stake in the reformulated oil company, formerly known as OGX Petróleo e Gas Participações SA.

OSX gets all its revenue from leasing oil-production vessels to Oleo e Gas, which was the flagship company of Batista's EBX Group industrial conglomerate.

The deal fleshes out a wider debt-for-stock accord between Batista's Oleo e Gas and holders of $3.8 billion of bonds announced on Tuesday. Under that agreement, bondholders will lend between $200 million and $215 million of new capital known as debtor in possession financing to keep the company going. In exchange for the loans, bondholders will get 65 percent of the stock in a restructured Oleo and Gas.

OSX shares rose 35 percent on Thursday to close at their highest level in more than a month. Oleo e Gas jumped 16 percent to close at a 10-day high.

"This looks very good. The parties are coming to agreement rapidly," Paulo Rabello de Castro, chief executive of SR Rating, a independent Brazilian credit rating agency told Reuters.

"While it won't get investors money back, the parties appear to want to settle," Rabello, who has advised creditors in some of Brazil's largest bankruptcy cases said.

"The only thing worse than losing money is a long, drawn out fight over the scraps," he said.

OGX's bankruptcy filing on Oct. 30 and was the largest ever in Latin America and that led to OSX filing for bankruptcy in November.

If approved by a Jan. 24 deadline, the accords will likely seal the end of Batista's once-giant EBX industrial conglomerate even as the companies are allowed to continue operating. The accords will leave Batista with controlling stakes in only three of the six publicly traded EBX companies.

They will also free Batista from fulfilling a pledge to put as much as $1 billion into Oleo e Gas to keep it operating until new fields can be brought on line.

Before rebranding itself as Oleo e Gas earlier this month, OGX sought court protection on Oct. 30 from creditors owed 11.2 billion reais ($4.75 billion), the biggest corporate default in emerging markets this year.

The restructuring process is expected to strip Batista of control of his flagship oil company and leave existing minority shareholders with about 10 percent of Oleo e Gas stock.

Non-bondholder creditors will have a total of 25 percent of a new Oleo e Gas after the restructuring according to securities filings.

Rabello de Castro cautioned that the companies' statements on this week's accords do not make it clear if Batista is really giving up a day-to-day role in OSX or Oleo e Gas.

"If he's still the captain he must go down with his ship, if he's giving up control, he must be first off the boat," Rabello de Castro said.

LAST CHANCE TO RECOUP MONEY?

Once worth more than $50 billion, EBX and its oil, energy, shipbuilding, mining and port-operation units saw their value collapse in the last 18 months in one of the most spectacular corporate reversals in history. Batista's advisers have sold the deals to creditors as the last chance to recover anything, even pennies on the dollar, from their investments.

It's still unclear how much bondholders will recover on their investments in OGX and OSX. OGX bonds were worth about 8.75 cents on the dollar on Thursday, according to Thomson Reuters prices

Operations in the Tubarão Martelo field, which began in early December, are expected to generate an operating profit, or generate cash from operations, in April and generate cash in every month to the end of the year after that except May, OGX said in a statement on Thursday.

Those cash flows will be the basis of any potential profit that OGX will be able to provide its new shareholders after debt is converted into shares and the source of future revenue at OSX.

OGX's fate was sealed in mid-2012 after the company failed to produce more than about 10,000 barrels a day from its first field, which it expects to abandon next year. OGX once said it would produce 1.4 million barrels of oil a day, more than two-thirds of Brazil's current output, by the end of 2018.

The OSX accord with Oleo e Gas terminates contracts to lease oil production vessels to Oleo e Gas when it was still called OGX.

The name change to Oleo e Gas, while symbolic, underlines Batista's departure from the companies that made him, during the glory years of a decade-long Brazilian commodities boom, Brazil's richest man.

Other EBX Group companies also changed their names after Batista sold or gave up control. LLX Logística SA, a port operator, is now Prumo Logística SA and controlled by Washington-based EIG. MPX Energia SA is now Eneva SA, led by German utility E.ON.

Batista had baptized his companies with an "X" to symbolize the multiplication of value. In the last year most of them lost about 90 percent of their value or more.

The $1.5 billion OSX will convert into Oleo e Gas stock, is divided into several parts: $414 million for the cancelling of the contract to lease the OSX-1 floating, production, storage and offloading ship (FPSO), $55.3 million for the end of a contract for the OSX-2 FPSO, and $528.6 million for the cancelling of a contract to lease a well-head platform known as WHP-2.

OSX is still in talks with holders of bonds sold to finance the OSX-3 FPSO, which began producing oil for Oleo e Gas in the Tubarão Martelo offshore field east of Rio de Janeiro in early December.

OSX, which operates a shipyard north of Rio, filed for protection from creditors on liabilities of 5.34 billion reais days after OGX's bankruptcy protection filing. The filing did not include its ship-leasing unit that operates the vessels involved in the accord.

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UPDATE 1-Detroit reaches deal to end interest-rate swaps

Tue Dec 24, 2013 3:50pm EST

DETROIT Dec 24 (Reuters) - The city of Detroit reached an agreement on Tuesday with two banks to end a costly interest-rate swap agreement, a significant step as the city negotiates with creditors to put together a plan to exit the largest municipal bankruptcy in U.S. history.

Detroit will pay $165 million, plus up to $4.2 million in costs, to end the interest-rate swap agreements with UBS AG and Bank of America Corp's Merrill Lynch Capital Services at a 43 percent discount. The new agreement, which was reached after the judge overseeing the case implored the city to negotiate better terms than it first proposed, will save the city about $65 million.

As part of the arrangement, Detroit will also take out a $285 million loan from Barclays PLC to pay to end the swaps. It will use $120 million of that toward improvements to services in the city, which is hampered by $18.5 billion in debt.

Terms of the agreement were announced by Robert Hertzberg, of the law firm Pepper Hamilton, which represents Detroit, before U.S. District Judge Gerald Rosen, the chief mediator in the bankruptcy case. The deal must still be approved by the U.S. bankruptcy judge overseeing the case, Steven Rhodes.

Robert Gordon, an attorney representing the city's two pension funds, said the funds would continue to oppose the deal even with the changes. "The revised deal is better, but that is not saying a lot," Gordon, of the law firm Clark Hill, wrote in an email.

The deal was reached after two days of mediation this week, led by Rosen.

"This is - I think it's the first, I think it's fair to say, significant agreement in the bankruptcy," Rosen said, according to a court transcript.

Detroit had initially secured a $350 million loan from Barclays, of which about $230 million would be used to end the swap agreements with UBS and Merrill Lynch at 75 cents on the dollar. The remainder of the cash was slated to be used to improve city services.

The swaps had been intended to hedge interest rate risk for a portion of $1.4 billion of pension debt Detroit sold in 2005 and 2006.

A spokesman for Bank of America declined to comment. UBS could not be reached immediately for comment.

Rhodes last week encouraged Detroit to negotiate better terms with the banks after he halted a hearing at which the city was seeking approval of the deal.

The agreement can be terminated if it is not approved by Jan. 31, 2014. Detroit plans to file a request with Rhodes to approve the deal by Friday, said Hertzberg, the city's attorney.

Detroit Emergency Manager Kevyn Orr, in a statement, called the deal an "important development. This agreement represents a significant reduction from the original deal struck with the banks," Orr said. "The banks and the City, through mediation, and with the mediator's recommendation, have accepted the reduction in terms."

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Brazilian tycoon Batista's Oleo e Gas says reaches deal with majority of holders of $3.8 bln in bonds

RIO DE JANEIRO Tue Dec 24, 2013 6:35pm EST

RIO DE JANEIRO Dec 24 (Reuters) - Brazilian tycoon Eike Batista's 0leo E Gas Participacoes SA, formerly known as OGX, has reached a deal with the majority of holders in a total of $3.8 billion in bonds, the company said in a statement late on Tuesday.

OGX said the deal will allow the Rio de Janeiro-based oil and gas company to move forward with a restructuring. The company filed for Latin America's biggest bankruptcy protection program in October. (Reporting by Jeb Blount; Editing by Gary Hill)

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UPDATE 2-Batista's Oleo e Gas strikes deal on $3.8 bln of bonds

Tue Dec 24, 2013 11:01pm EST

* Agreement backed by majority of Oleo e Gas's bondholders

* Deal could pave way for successful bankruptcy restructuring

* Accord may release Batista from $1 bln put-option pledge (Adds agreement details and context)

By Jeb Blount and Alonso Soto

RIO DE JANEIRO, Dec 24 (Reuters) - Brazilian tycoon Eike Batista's Oleo e Gas Participacoes SA, formerly known as OGX, said on Tuesday it reached a deal with the majority of holders of bonds worth $3.8 billion, a breakthrough that could open the door for a successful restructuring of the bankrupt oil company.

Under the deal, bondholders will be able to take part in a loan of between $200 million and $215 million to keep the Rio de Janeiro-based company operating, according to a company statement.

Bondholders have also agreed in principle to release controlling-shareholder Batista from his commitment to put as much as $1 billion of new investment into the company.

The loan, known as debtor-in-possession, or DIP, finance would be convertible into stock representing 65 percent of a restructured Oleo e Gas.

The deal with bondholders is part of a so-called "plan support agreement" or PSA. Batista and other controlling shareholders of Oleo e Gas and its sister company OSX Brasil SA have also agreed to the plan. Bondholders, though, will withhold approval of the agreement if OSX does not reach a deal with its own bondholders that they support it, the statement said.

Oleo e Gas's 11.2-billion-real ($4.75 billion) bankruptcy filling on Oct. 30 was the largest ever in Latin America and the biggest emerging-market bond default in the last 12 months. A deal with bondholders is needed before the company can convince a judge that any restructuring effort will succeed.

The company said that under the plan the final proposal for judicial restructuring has to be accepted by all parties by Jan. 24.

Bondholders are not obligated to take part in the loan, but those who do will go to the top of the list of creditors to be repaid if a restructuring agreement is accepted.

The DIP loan will be disbursed in two tranches. Creditors who are not bondholders will be allowed to participate in the second tranche of the loan on a "pro rata" basis, the company said.

Those who participated in the first part of the loan will be required to participate in the second one.

The agreement is dependent on Oleo e Gas obtaining bridge loans of between $10 million and $50 million that must be repaid by Jan. 31.

If the deal is implemented in full, $5.8 billion in other company liabilities including money owed to OSX will be converted to shares, the company said.

After the conversion of the DIP loan into stock, other Oleo e Gas creditors will receive 25 percent of the stock in a restructured company.

After the swap of the DIP loan and other credits into stock existing shareholders will be left with 10 percent of the restructured company.

Existing shareholders will be given the right to purchase up to $1.5 billion of new stock in the restructured company for five years, but those rights are not to exceed 15 percent of the restructured company.

The agreement also sets Oleo e Gas's liabilities with OSX at $1.5 billion, the statement said.

Last week, OSX said it expected a deal in the coming days to delay an interest payment on bonds sold to finance the OSX-3, an oil production ship.

The OSX-3 began producing oil and gas from Oleo e Gas's Tubarao Martelo offshore field east of Rio de Janeiro in early December. Tubarao Martelo is Oleo e Gas's only significant source of revenue.

Oleo e Gas's failure to produce as much oil as expected at its first offshore oilfield, Tubarao Azul, led to the meltdown of EBX and nearly wiped out Batista's fortune. That undermined his ability to finance other companies in his group with capital as they tried to transform from start-ups to revenue producing concerns.

OSX, also controlled by Batista, sought court protection from creditors in November in the wake of Oleo e Gas's filing. (Reporting by Jeb Blount and Alonso Soto; Editing by Gary Hill and Ken Wills)

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Brazilian tycoon Batista's Oleo e Gas says reaches deal with majority of holders of $3.8 bln in bonds

RIO DE JANEIRO Tue Dec 24, 2013 6:35pm EST

RIO DE JANEIRO Dec 24 (Reuters) - Brazilian tycoon Eike Batista's 0leo E Gas Participacoes SA, formerly known as OGX, has reached a deal with the majority of holders in a total of $3.8 billion in bonds, the company said in a statement late on Tuesday.

OGX said the deal will allow the Rio de Janeiro-based oil and gas company to move forward with a restructuring. The company filed for Latin America's biggest bankruptcy protection program in October. (Reporting by Jeb Blount; Editing by Gary Hill)

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UPDATE 1-Detroit reaches deal to end interest-rate swaps

Tue Dec 24, 2013 3:50pm EST

DETROIT Dec 24 (Reuters) - The city of Detroit reached an agreement on Tuesday with two banks to end a costly interest-rate swap agreement, a significant step as the city negotiates with creditors to put together a plan to exit the largest municipal bankruptcy in U.S. history.

Detroit will pay $165 million, plus up to $4.2 million in costs, to end the interest-rate swap agreements with UBS AG and Bank of America Corp's Merrill Lynch Capital Services at a 43 percent discount. The new agreement, which was reached after the judge overseeing the case implored the city to negotiate better terms than it first proposed, will save the city about $65 million.

As part of the arrangement, Detroit will also take out a $285 million loan from Barclays PLC to pay to end the swaps. It will use $120 million of that toward improvements to services in the city, which is hampered by $18.5 billion in debt.

Terms of the agreement were announced by Robert Hertzberg, of the law firm Pepper Hamilton, which represents Detroit, before U.S. District Judge Gerald Rosen, the chief mediator in the bankruptcy case. The deal must still be approved by the U.S. bankruptcy judge overseeing the case, Steven Rhodes.

Robert Gordon, an attorney representing the city's two pension funds, said the funds would continue to oppose the deal even with the changes. "The revised deal is better, but that is not saying a lot," Gordon, of the law firm Clark Hill, wrote in an email.

The deal was reached after two days of mediation this week, led by Rosen.

"This is - I think it's the first, I think it's fair to say, significant agreement in the bankruptcy," Rosen said, according to a court transcript.

Detroit had initially secured a $350 million loan from Barclays, of which about $230 million would be used to end the swap agreements with UBS and Merrill Lynch at 75 cents on the dollar. The remainder of the cash was slated to be used to improve city services.

The swaps had been intended to hedge interest rate risk for a portion of $1.4 billion of pension debt Detroit sold in 2005 and 2006.

A spokesman for Bank of America declined to comment. UBS could not be reached immediately for comment.

Rhodes last week encouraged Detroit to negotiate better terms with the banks after he halted a hearing at which the city was seeking approval of the deal.

The agreement can be terminated if it is not approved by Jan. 31, 2014. Detroit plans to file a request with Rhodes to approve the deal by Friday, said Hertzberg, the city's attorney.

Detroit Emergency Manager Kevyn Orr, in a statement, called the deal an "important development. This agreement represents a significant reduction from the original deal struck with the banks," Orr said. "The banks and the City, through mediation, and with the mediator's recommendation, have accepted the reduction in terms."

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UPDATE 2-Batista's Oleo e Gas strikes deal on $3.8 bln of bonds

Tue Dec 24, 2013 11:01pm EST

* Agreement backed by majority of Oleo e Gas's bondholders

* Deal could pave way for successful bankruptcy restructuring

* Accord may release Batista from $1 bln put-option pledge (Adds agreement details and context)

By Jeb Blount and Alonso Soto

RIO DE JANEIRO, Dec 24 (Reuters) - Brazilian tycoon Eike Batista's Oleo e Gas Participacoes SA, formerly known as OGX, said on Tuesday it reached a deal with the majority of holders of bonds worth $3.8 billion, a breakthrough that could open the door for a successful restructuring of the bankrupt oil company.

Under the deal, bondholders will be able to take part in a loan of between $200 million and $215 million to keep the Rio de Janeiro-based company operating, according to a company statement.

Bondholders have also agreed in principle to release controlling-shareholder Batista from his commitment to put as much as $1 billion of new investment into the company.

The loan, known as debtor-in-possession, or DIP, finance would be convertible into stock representing 65 percent of a restructured Oleo e Gas.

The deal with bondholders is part of a so-called "plan support agreement" or PSA. Batista and other controlling shareholders of Oleo e Gas and its sister company OSX Brasil SA have also agreed to the plan. Bondholders, though, will withhold approval of the agreement if OSX does not reach a deal with its own bondholders that they support it, the statement said.

Oleo e Gas's 11.2-billion-real ($4.75 billion) bankruptcy filling on Oct. 30 was the largest ever in Latin America and the biggest emerging-market bond default in the last 12 months. A deal with bondholders is needed before the company can convince a judge that any restructuring effort will succeed.

The company said that under the plan the final proposal for judicial restructuring has to be accepted by all parties by Jan. 24.

Bondholders are not obligated to take part in the loan, but those who do will go to the top of the list of creditors to be repaid if a restructuring agreement is accepted.

The DIP loan will be disbursed in two tranches. Creditors who are not bondholders will be allowed to participate in the second tranche of the loan on a "pro rata" basis, the company said.

Those who participated in the first part of the loan will be required to participate in the second one.

The agreement is dependent on Oleo e Gas obtaining bridge loans of between $10 million and $50 million that must be repaid by Jan. 31.

If the deal is implemented in full, $5.8 billion in other company liabilities including money owed to OSX will be converted to shares, the company said.

After the conversion of the DIP loan into stock, other Oleo e Gas creditors will receive 25 percent of the stock in a restructured company.

After the swap of the DIP loan and other credits into stock existing shareholders will be left with 10 percent of the restructured company.

Existing shareholders will be given the right to purchase up to $1.5 billion of new stock in the restructured company for five years, but those rights are not to exceed 15 percent of the restructured company.

The agreement also sets Oleo e Gas's liabilities with OSX at $1.5 billion, the statement said.

Last week, OSX said it expected a deal in the coming days to delay an interest payment on bonds sold to finance the OSX-3, an oil production ship.

The OSX-3 began producing oil and gas from Oleo e Gas's Tubarao Martelo offshore field east of Rio de Janeiro in early December. Tubarao Martelo is Oleo e Gas's only significant source of revenue.

Oleo e Gas's failure to produce as much oil as expected at its first offshore oilfield, Tubarao Azul, led to the meltdown of EBX and nearly wiped out Batista's fortune. That undermined his ability to finance other companies in his group with capital as they tried to transform from start-ups to revenue producing concerns.

OSX, also controlled by Batista, sought court protection from creditors in November in the wake of Oleo e Gas's filing. (Reporting by Jeb Blount and Alonso Soto; Editing by Gary Hill and Ken Wills)

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CORRECTED-Committee for unsecured creditors appointed in Detroit bankruptcy

Mon Dec 23, 2013 3:00pm EST

(Corrects first sentence to reflect the committee was named by the bankruptcy trustee, not the judge)

DETROIT Dec 23 (Reuters) - An independent federal trustee helping to administer Detroit's historic bankruptcy case on Monday named a committee to represent interests of the unsecured creditors as the city prepares to submit a plan to the court to readjust its debt.

United States Trustee Daniel McDermott named five creditors to the committee: Detroit's two pension funds, which are its largest unsecured creditors, bond insurer Financial Guaranty Insurance Company, contract administrator Wilmington Trust Company and an individual creditor, Jessie Payne.

The committee was created in order to ensure all unsecured creditors are ably represented.

"Its primary power... is to have a stronger voice than an individual creditor, while actively participating in the negotiation of a plan for the adjustment of the debtor's financial obligations," said a Dec. 6 letter sent to all prospective committee members by the U.S. Trustee.

The city is not obligated to pay for the committee's lawyers or advisers, and a spokesman for Emergency Manager Kevyn Orr did not immediately respond when asked if Detroit would pick up the tab.

U.S. Bankruptcy Judge Steven Rhodes appointed a creditors' committee of retired workers in August to represent the more than 20,000 city retirees throughout the bankruptcy proceedings. Detroit is paying the retiree committee's expenses.

Detroit filed the largest municipal bankruptcy in U.S. history on July 18, and it has more than $18 billion in debt. Detroit has until March 1 to submit its plan to readjust its debt, but Orr has said the city plans to enter its proposed plan to the court in early January.

(Reporting by Joseph Lichterman; Editing by Dan Grebler)

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Settlement reached over deadly U.S. meningitis outbreak

By Jonathan Stempel

Mon Dec 23, 2013 8:01pm EST

Dec 23 (Reuters) - Owners and insurers of a now-bankrupt Massachusetts pharmacy linked to a deadly meningitis outbreak have agreed to pay more than $100 million to compensate victims, families of victims and creditors.

The preliminary settlement announced on Monday, which requires court approval, would resolve many claims arising from tainted steroid injections linked to New England Compounding Pharmacy Inc of Framingham, Massachusetts.

According to the Centers for Disease Control and Prevention, at least 64 people died and 751 were sickened in 20 U.S. states by injections of methylprednisolone acetate, a drug typically used to ease back pain.

The outbreak occurred after NECC shipped tainted vials of the steroid to medical facilities throughout the United States.

NECC filed for bankruptcy protection Dec. 21, 2012, two months after shutting down as the outbreak began.

Thomas Sobol, a partner at Hagens Berman Sobol Shapiro representing a plaintiffs' steering committee, called the accord "a big step forward in getting justice for victims."

Kristen Johnson Parker, another Hagens Berman partner, in a phone interview said, "All victims of the NECC tragedy should be able to share in the funds."

NECC's owners, bankruptcy trustee Paul Moore and lawyers for a committee of unsecured NECC creditors also confirmed the settlement in a joint statement. The owners denied liability or wrongdoing.

Settlement funds are expected to come from the owners, insurers, tax refunds and proceeds from the sale of a related business.

"We are pleased that a significant amount of funds will become available for distribution to victims and their families as compensation for the deaths, injuries and suffering they endured as a result of this tragic meningitis outbreak," said Moore, a partner at Duane Morris.

The accord requires final documentation and does not cover claims against various clinics that sold the tainted steroid or various vendors used by NECC.

According to NECC's bankruptcy filing, the company's equity shareholders were Carla Conigliaro with a 55 percent stake, Barry Cadden and Lisa Conigliaro Cadden each with a 17.5 percent stake, and Gregory Conigliaro with a 10 percent stake.

A lawyer for the owners did not immediately respond to a request for comment.

The case is In re: New England Compounding Pharmacy Inc, U.S. Bankruptcy Court, District of Massachusetts, No. 12-19882. (Reporting by Jonathan Stempel in New York; Editing by Bill Trott)

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