Brazil court accepts OAS request for creditor protection

Written By Unknown on Jumat, 03 April 2015 | 16.47

SAO PAULO, April 2 (Reuters) - A Brazilian state court accepted a bankruptcy protection request filed by engineering conglomerate Grupo OAS for nine of its units, in the largest corporate failure yet related to the snowballing Petróleo Brasileiro SA corruption scandal.

The decision on Thursday by Judge Daniel Carnio Costa at São Paulo State's 1st District of Judicial Recoveries allows Grupo OAS to begin steps to renegotiate about 8 billion reais ($2.5 billion) in debt, according to a statement. OAS has 60 days to present a debt restructuring proposal to all creditors.

OAS said that every debt incurred from the start of April will be fully repaid, while the bankruptcy protection proceedings will not imperil the payment of salaries and work benefits for the group's 100,000 employees. The Brazilian unit of Alvarez & Marsal Holdings LLC was picked as advisor for the bankruptcy.

The group's decision to enter bankruptcy proceedings on Tuesday was endorsed by creditors and is considered as a prerequisite to restructure OAS' debt with banks, suppliers and bondholders. Plans to obtain a debtor-in-possession loan and talks to sell key assets are at an advanced stage, executives told Reuters that day.

Grupo OAS has struggled for months with the impact of a corruption investigation at state-controlled oil producer Petróleo Brasileiro SA, or Petrobras. Findings by prosecutors that OAS paid bribes to win contracts undercut the builder's access to financing.

The corruption scandal at Petrobras is considered as Brazil's biggest ever, affecting billions of reais in contracts between the oil firm and more than two dozen contractors. An economic downturn, government austerity and a slumping currency also took their toll on OAS in recent months.

OAS follows rivals Alumini Engenharia SA and Galvão Engenharia SA, which filed for bankruptcy protection in recent months as the scandal escalated. Prosecutors say the three firms were part of a cartel of about two dozen firms that paid bribes to Petrobras executives and politicians in exchange for contracts. (Reporting by Guillermo Parra-Bernal; Editing by Christian Plumb)


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