Bankrupt LightSquared sues Deere & Co, GPS industry titans

By Nick Brown

NEW YORK | Fri Nov 1, 2013 6:51pm EDT

NEW YORK Nov 1 (Reuters) - Bankrupt LightSquared on Friday sued leaders in the GPS industry, including Deere & Co and Garmin International Inc, saying they kept mum about interference concerns stemming from LightSquared's wireless network until the company had already pumped $4 billion into building it.

In a 65-page lawsuit in U.S. Bankruptcy Court in New York, where LightSquared is fighting to keep control of its spectrum, the company alleged that farm equipment maker Deere, and GPS companies Garmin and Trimble Navigation Ltd led it to believe its network would not interfere with global positioning system devices.

The complaint comes on the heels of a similar lawsuit against the GPS industry by Phil Falcone's Harbinger Capital, LightSquared's controlling shareholder.

Last month, LightSquared received permission from the bankruptcy judge overseeing its Chapter 11 case to pause the Harbinger lawsuit so that LightSquared could decide whether it wanted to join the suit or bring claims of its own.

In Friday's filing, LightSquared says the companies made "promises, agreements and representations" over the 10 years that LightSquared spent building its network, all to the effect that a wireless network would not cause interference with GPS devices.

But in 2010, when LightSquared was close to deploying its network, the GPS industry changed its tune, the lawsuit says. As a result, the Federal Communications Commission revoked LightSquared's license to operate its spectrum, and the company was forced into bankruptcy in 2012.

"This case ... is about how those three GPS manufacturers waited until those billions were invested in the necessary network infrastructure before then breaking their prior promises, reneging on their prior agreements, and disavowing their prior representations," LightSquared says.

The lawsuit alleges that the only reason the interference concerns exist is that the GPS devices encroach upon the spectrum that LightSquared is licensed to operate. The nine-count complaint, which also names industry groups the U.S. GPS Industry Council and the Coalition to Save Our GPS as defendants, alleges breach of contract, tortious interference and other claims.

A spokesman for Deere declined to comment, while a spokeswoman for Trimble did not immediately respond to a request for comment. A representative for Garmin could not immediately be reached.

LightSquared's bankruptcy has become a messy fight for control between Falcone and Charles Ergen, the chairman of DISH Network Corp, which is making a hard push to acquire the company's valuable spectrum.

The assets are likely to be auctioned off to the highest bidder, with Dish having already made a baseline offer for some of the spectrum.

LightSquared and its lenders have pushed competing proposals for the parameters of a sale, while Harbinger has put forth a plan that would restructure LightSquared without a sale. The plans are being voted on by creditors.

Doug Smith, LightSquared's chief executive, in a statement noted his company's "fiduciary duty" to "ensure that parties understand all of the assets of our estates more specifically."

"The unfortunate reality is that this company unnecessarily lost billions of dollars, and this lawsuit provides for interested bidders the factual background between LightSquared and the GPS industry," Smith said.

Last week, Ergen and Dish won dismissal of a lawsuit by Harbinger that had accused them of amassing loans to become LightSquared's biggest lender and then unlawfully using that position to try to wrest control of the company.

In September, LightSquared's bankruptcy judge nixed one of Harbinger's nominees to a committee to oversee the company's auction, citing a possible bias against Dish. The woman, Donna Alderman, had lost her job when Dish acquired her former employer, and said in emails that she felt "screwed" by the process.

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UBS says Itaú, Bradesco cut loan exposure to Batista's Grupo EBX

SAO PAULO | Sat Nov 2, 2013 10:28am EDT

SAO PAULO Nov 2 (Reuters) - The loan exposure of Brazil's two largest private-sector banks to former billionaire Eike Batista's debt-laden Grupo EBX is falling, UBS Securities said in a report, signaling that the risk of additional bad loan provisions or significant writedowns is declining.

Collateral put forth by Batista and EBX, a mining, energy and logistics conglomerate, is proving enough to reduce the probability of losses at Itaú Unibanco Holding SA and Banco Bradesco SA, London-based strategist Philip Finch said in a client note.

A 3.5 billion reais ($1.5 billion) wave of takeover activity targeting some of Grupo EBX's main companies is also helping to reduce bank exposure risk to EBX, UBS said.

"We do not expect higher provisions on coming quarters while guarantees could reduce potential losses," Finch wrote in the note, which was released late on Friday. Even after Bancpo Santander Brasil SA's exposure to Grupo EBX rose by the end of June, "we think earnings risk for these banks is limited."

The banks that financed the rise of Batista, who just 18 months ago was the world's seventh-richest man, led the struggling group's debt refinancing efforts and were able to limit potential losses, as opposed to bondholders who could be left with very little.

Itaú and peers refinanced maturing debt and stretched out debt repayments for some EBX companies with the condition of getting more collateral in the form of assets and additional stock, a source with knowledge of the situation told Reuters in July.

The note comes a few days after OGX Petróleo e Gás Participações SA, the oil producer that for years was Batista's and Grupo EBX's flagship company, filed for creditor protection in a Brazilian court. The decision fanned concerns among investors over the financial health of Batista-controlled companies, the combined or crossed loan exposure of local listed lenders to companies in Grupo EBX and the risk of additional provisioning.

Calls to media officials at Rio de Janeiro-based Grupo EBX for comment were not immediately answered.

According to estimates by Finch and his team, combined loan exposure by Itaú, Bradesco and Santander Brasil to OGX, Eneva SA , which was formerly known as MPX Energia SA and now has E.ON SE as its largest shareholder, LLX Logística SA, shipbuilder OSX Brasil SA and CCX Carvão da Colômbia SA, fell to 1.93 billion reais at the end of June, from 2.27 billion reais in March.

Still, the number may be underestimated due to the difficulty of knowing how much of that exposure is collateralized. Investors have for months balked at Grupo EBX's complex structure, its appetite for debt and, in the case of banks, the existence of guarantees and undrawn, committed credit lines.

The pressure exerted by state and private-sector banks on EBX enabled them to virtually eliminate any significant loss on their exposure to the struggling group. Bradesco is the most exposed bank to companies in the group, the note said.

Outstanding Itaú loans to companies in Grupo EBX fell 21 percent to 802 million reais on a quarter-on-quarter basis in the second quarter, Finch estimated. Bradesco's exposure fell 14 percent to 868 million reais while Santander Brasil's increased 4 percent to 254 million reais.

Itaú, Bradesco and Santander Brasil are the country's largest private-sector banks, respectively.

DEBT TRIPLED

For years, Batista put shares of some of the companies he controls through EBX as collateral in exchange for loans that he used to build oil platforms, develop wells, build ports and mine for iron ore. In recent months, Batista reversed course and is currently selling assets and repaying debt to reduce requirements on some of that collateral.

At the end of the second quarter, Batista's six publicly traded companies had a combined net debt of about 25 billion reais, according to Thomson Reuters data. UBS estimated that amount at 24.6 billion reais in the same period. That number, which almost tripled since 2010, rose as the companies posted losses exceeding 1 billion reais last year.

The total amount of debt in Batista's EBX by bank is not clear because Brazilian law prevents banks from disclosing their exposure by individual clients due to secrecy.

Most of the loans and financing are backed by guarantees, both cash as well as stocks of EBX companies. "We recognize the recent devaluation of the companies'stock price, but still, banks could be able to execute the cash guarantees," the note said.

According to Finch, "Itaú has better guarantees than does Bradesco." The lenders could use the excess provisions to absorb an eventual loss and limit the impact of a potential credit event at any of Grupo EBX companies on net income. Bradesco has around 4 billion reais in excess bad loan provisions, while Itaú has 5 billion reais and Santander Brasil about 700 million reais.

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Risqué website seeks naming rights to Detroit landmark

By Joseph Lichterman

DETROIT | Sat Nov 2, 2013 12:27pm EDT

DETROIT Nov 2 (Reuters) - Detroit Emergency Manager Kevyn Orr has said he would listen to just about any suggestion on ways to restructure the city's $18.5 billion debt, but one he is not taking seriously: extramarital dating website Ashley Madison's offer to buy naming rights to Belle Isle park.

Ashley Madison on Thursday sent the city an official letter of intent to buy the right for $10 million to name the Detroit River's island park AshleyMadison.com Island for 10 years.

The website, which gets about 1 million unique visitors a month according to Compete.com, has the tagline: "Life is short. Have an affair."

Orr's office appeared to receive the letter with a grin.

"Should we suggest a higher amount and 'Orrville' or 'Orr Else' or 'Orr Isle?'" Kenneth Buckfire, one of the city's top financial consultants, said in an email to Orr and several others, including an Ashley Madison executive.

Orr responded: "Have you ever visited their website. Maybe a $100 (million offer) would work."

Bill Nowling, Orr's spokesman, did not respond to a request for comment.

It was a lighter moment concerning Belle Isle, which has become a sticking point in Detroit's financial struggle. The state of Michigan and Orr reached an agreement last month for the state to lease the city-owned park for up to 60 years, saving the city at least $4 million in annual maintenance costs. But the Detroit City Council rejected that and proposed a maximum 30-year deal.

A state emergency loan board will choose which deal to accept this month. (Reporting by Joseph Lichterman; Editing by Vicki Allen)

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Hedge fund interest could spur Portuguese bank debt revival

Fri Nov 1, 2013 10:24am EDT

* Hedge funds seek out high-yielding bank capital trades

* Market conditions rather than necessity to drive issuance

* Economic concerns weigh on mainstream investors' minds

By Aimee Donnellan

LONDON, Nov 1 (IFR/Reuters) - Hedge funds are clamouring for Portuguese banks to end a four-year absence from the junior bond market after successful issues from Italy's UniCredit and Spain's CaixaBank, debt bankers said on Friday.

Selling so-called subordinated debt would be a big mark of confidence for Portugal's lenders such as state-owned Caixa Geral, Millennium BCP and Banco Espirito Santo (BES) , ahead of the European Central Bank's (ECB) health check of major euro zone banks next year.

Keen to lock in high yields, hedge funds, who normally listen to banks' sales pitches, have instead been picking up the phone to tell bankers they are keen to buy Portuguese bank junior debt.

With such interest from London's Mayfair district, where many hedge funds are based, debt bankers say a new Tier 2 bond could be issued by a Portuguese lender before Christmas.

"There are a lot of Mayfair-based investors that have expressed reverse interest for a name like BES, and it's easy to see where it would price," said a London-based syndicate banker.

"We have had Tier 2 deals from Italian, Irish and Spanish banks now, which makes pricing a Portuguese deal a lot easier as all these reference points are now available."

CRISIS EASING

Portuguese banks have not raised subordinated debt in the last four years as the financial crisis drove the cost of insuring it to 1,650 basis points (bps) at the end of 2010.

But an easing of the crisis has seen this figure drop to a more reasonable 550 bps, and soaring demand for European bank capital may spur them into action.

"The question for Portuguese banks is whether they are willing to pay for Tier 2 today. I think they could issue around 500-750 million euros of Tier 2," said Khalid Krim, Managing Director, Head of European Capital Solutions at Morgan Stanley.

A source in the Portuguese financial sector said some of the banks might want to wait for the Portuguese state to issue bonds before dipping back into the junior debt market.

Portugal made its first benchmark bond issue since its mid-2011 international bailout in May, encouraged by the lowest yields since 2010, but is yet to return to the market after yields shot up again in July.

"It would be good to see the sovereign come out first and show there is appetite for Portuguese debt," said Krim, but added: "Given that there is so much demand for CaixaBank and UniCredit, I don't think people would be surprised to see Portuguese banks in the market."

Millennium BCP, the country's largest listed bank, declined to comment on its capital plans, but a source close to the lender said its financing needs were covered until the end of the year and there was no pressure to go to market.

Banco BPI declined to comment, while BES and Caixa Geral were not immediately available to comment.

BES and Caixa Geral have made tentative steps back into the market for less risky senior and covered bonds since the end of 2012, selling some 2.7 billion euros' ($3.7 billion) worth of paper.

WHILE THE GOING IS GOOD

Strong prices for debt, as fears subside of an imminent cut in the supply of cheap money from the U.S. Federal Reserve, have also meant conditions are good for banks to issue debt.

Since the end of September, the iTraxx subordinated index, which tracks the cost of insuring junior debt, has fallen by almost 40 bps from 213 bps to 177 bps, and Portuguese banks' spreads over the pricing benchmark have tightened by over 70 bps in the same period.

"The market is so strong that banks can sell just about anything at the moment," said Neil Williamson, head of EMEA credit research at Aberdeen.

"If (Spain's Banco Popular Espanol) BPE can sell Additional Tier 1, I don't see why we couldn't see a Portuguese issuer selling Tier 2."

BPE managed to sell Additional Tier 1 debt in October, but it had to offer a chunky 11.5 percent coupon. For the likes of BES and Millennium BCP, bankers say they are unlikely to go beyond an 8 percent coupon for a Tier 2 to begin with.

While hedge funds may be keen, it might be difficult to convince more risk-averse credit investors such as pension funds and asset managers that there is value in one of the highest risk instruments from one of Europe's most troubled economies.

Holders of junior debt are among the first to be hit if a bank gets into trouble, and while Portuguese banks are not at the heart of their country's debt woes - unlike Spanish and Irish peers - Portugal's central bank chief warned this week that the sector faced a tough road ahead.

"Our interest would definitely depend on the type of issuer that was looking to access the market, but I think BES is definitely considered to be stronger than the rest," said a London-based fixed-income investor.

Following the country's bailout by the IMF and the European Union in 2011, Portugal's banks have shrunk loan books to reduce reliance on short-term funding markets and boosted their defences against loan losses.

"Portugal never really had a boom, so it hasn't really had a bust; it's just a very troubled economy that has ruled out a number of investors from looking at it. It is the next weakest economy in Europe after Greece and Cyprus, which warrants caution," said Williamson.

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UPDATE 1-Energy Future interest payment buys time to restructure

Fri Nov 1, 2013 3:33pm EDT

By Nick Brown and Bill Cheung

NEW YORK Nov 1 (Reuters) - Energy Future Holdings made an interest payment of about $270 million to subordinated bondholders on Friday, setting the stage for a few more months of restructuring talks that are likely to come to a head early next year.

The Texas power generator has been negotiating for months with creditors to restructure its $40 billion in debt ahead of an expected bankruptcy filing.

Friday was expected to be a deadline in those talks, with senior lenders hoping the company would skip the payment to subordinated bondholders and file for Chapter 11 instead.

But the company made the payment on schedule, EFH spokesman Allan Koenig said, two days after a source close to the matter told Reuters the company was leaning toward paying it.

The company also said in a filing with the U.S. Securities & Exchange Commission that talks with creditors have for the time being broken off.

Lawyers and financial advisers representing the creditors are still engaged in negotiations with the company, and the company expects talks with creditors to resume, saying in the filing it would "continue to explore all available restructuring alternatives."

Energy Future Holdings was created in October 2007 in a $45 billion buyout of Dallas-based TXU Corp, the biggest electricity generating and distribution company in Texas.

The buyout, led by KKR & Co, TPG Capital Management LP and the private equity arm of Goldman Sachs, left the company with debt just as natural gas prices were about to plunge, making its coal-fired plants unprofitable.

The next interest payment to those bondholders is due in May. But the company likely must reach an agreement with creditors before then.

In the first quarter of next year, EFH expects to receive an opinion from auditors on whether it can survive as a going concern based upon its annual financial statements. It may have trouble convincing auditors to grant a positive opinion, given that $3.8 billion of bank debt matures in October 2014 and the company has only around $1.8 billion of cash. Failure to secure such an opinion would trigger a default of EFH's $20 billion of bank debt, meaning lenders could push the company into bankruptcy.

That means restructuring talks will likely come to a head sometime in the first quarter of 2014, people close to the discussions told Reuters.

Friday's interest payment to subordinated bondholders had surprised some creditors, who said EFH would not want to upset lenders of $20 billion in secured debt.

The lender group viewed the payment as money out of its own pocket because it would have had first claim on certain of the company's assets in the event of a Chapter 11 filing, two people close to the matter told Reuters on Thursday.

The move may have put a chill in relations between the company and the lenders as restructuring talks carry on. The lenders, through sheer size of their claim, have more bargaining power than other creditors, which could make life difficult for the company if the lenders are dissatisfied with developments.

COMPETING PROPOSALS

Friday's filing with the SEC detailed a few different restructuring proposals advanced by the company and its creditors, all of which would have included a voluntary bankruptcy filing by EFH or its subsidiaries. While none were agreed to, they could form the basis of future discussions.

EFH's plan, which would be funded by a $3.6 billion bankruptcy loan, would allow the buyout group to retain ownership of 4 percent of the company. The lenders would get the rest of the equity, along with $7 billion of debt split into two tranches.

Secured debt at Energy Future Intermediate Holdings (EFIH), a subsidiary that owns EFH's regulated transmission and distribution business, would largely be refinanced into new bonds with lower coupons. The bondholders would also receive so-called make-whole payments to compensate for the value of foregone interest.

Another plan, put forward by the secured lenders, would give lenders all the equity, plus $8 billion in new debt, with any potential recovery for the buyout group to be determined. Classes of bondholders at EFIH would receive $225 million and $375 million in cash respectively.

While those plans would attempt to keep the company intact, a third proposal would separate the regulated transmission unit, EFIH, from the parent, handing its ownership instead to some of the unit's unsecured bondholders and paying off more senior bondholders with proceeds from a new bankruptcy loan and a rights offering.

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Bankrupt LightSquared sues Deere & Co, GPS industry titans

By Nick Brown

NEW YORK | Fri Nov 1, 2013 6:51pm EDT

NEW YORK Nov 1 (Reuters) - Bankrupt LightSquared on Friday sued leaders in the GPS industry, including Deere & Co and Garmin International Inc, saying they kept mum about interference concerns stemming from LightSquared's wireless network until the company had already pumped $4 billion into building it.

In a 65-page lawsuit in U.S. Bankruptcy Court in New York, where LightSquared is fighting to keep control of its spectrum, the company alleged that farm equipment maker Deere, and GPS companies Garmin and Trimble Navigation Ltd led it to believe its network would not interfere with global positioning system devices.

The complaint comes on the heels of a similar lawsuit against the GPS industry by Phil Falcone's Harbinger Capital, LightSquared's controlling shareholder.

Last month, LightSquared received permission from the bankruptcy judge overseeing its Chapter 11 case to pause the Harbinger lawsuit so that LightSquared could decide whether it wanted to join the suit or bring claims of its own.

In Friday's filing, LightSquared says the companies made "promises, agreements and representations" over the 10 years that LightSquared spent building its network, all to the effect that a wireless network would not cause interference with GPS devices.

But in 2010, when LightSquared was close to deploying its network, the GPS industry changed its tune, the lawsuit says. As a result, the Federal Communications Commission revoked LightSquared's license to operate its spectrum, and the company was forced into bankruptcy in 2012.

"This case ... is about how those three GPS manufacturers waited until those billions were invested in the necessary network infrastructure before then breaking their prior promises, reneging on their prior agreements, and disavowing their prior representations," LightSquared says.

The lawsuit alleges that the only reason the interference concerns exist is that the GPS devices encroach upon the spectrum that LightSquared is licensed to operate. The nine-count complaint, which also names industry groups the U.S. GPS Industry Council and the Coalition to Save Our GPS as defendants, alleges breach of contract, tortious interference and other claims.

A spokesman for Deere declined to comment, while a spokeswoman for Trimble did not immediately respond to a request for comment. A representative for Garmin could not immediately be reached.

LightSquared's bankruptcy has become a messy fight for control between Falcone and Charles Ergen, the chairman of DISH Network Corp, which is making a hard push to acquire the company's valuable spectrum.

The assets are likely to be auctioned off to the highest bidder, with Dish having already made a baseline offer for some of the spectrum.

LightSquared and its lenders have pushed competing proposals for the parameters of a sale, while Harbinger has put forth a plan that would restructure LightSquared without a sale. The plans are being voted on by creditors.

Doug Smith, LightSquared's chief executive, in a statement noted his company's "fiduciary duty" to "ensure that parties understand all of the assets of our estates more specifically."

"The unfortunate reality is that this company unnecessarily lost billions of dollars, and this lawsuit provides for interested bidders the factual background between LightSquared and the GPS industry," Smith said.

Last week, Ergen and Dish won dismissal of a lawsuit by Harbinger that had accused them of amassing loans to become LightSquared's biggest lender and then unlawfully using that position to try to wrest control of the company.

In September, LightSquared's bankruptcy judge nixed one of Harbinger's nominees to a committee to oversee the company's auction, citing a possible bias against Dish. The woman, Donna Alderman, had lost her job when Dish acquired her former employer, and said in emails that she felt "screwed" by the process.

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UPDATE 4-Batista's OGX sells stake in gas unit to Brazil fund, E.ON

Thu Oct 31, 2013 6:44pm EDT

By Jeb Blount and Guillermo Parra-Bernal

RIO DE JANEIRO/SAO PAULO Oct 31 (Reuters) - Brazilian tycoon Eike Batista's oil company OGX Petróleo e Gas Participações SA agreed on Thursday to sell its 67 percent stake in its natural gas unit for 344 million reais ($156 million), the day after it filed for bankruptcy protection.

Under the deal, São Paulo-based buyout firm Cambuhy Investimentos Ltda will end up with 73 percent of OGX gas-unit OGX Maranhão Petróleo e Gas SA, statements from the companies involved said. Half that stake will come from buying 200 million reais of new stock in OGX Maranhão. The rest will come from a 200 million real payment to OGX for its remaining share of the gas producer.

German utility E.ON SE will provide another 50 million reais of investment and hold 9 percent of OGX Maranhão when the deal is complete. The multi-step transaction also includes a 144 million real payment to OGX from OGX Maranhão to repay the cost of joint expenses.

Without new money, OGX is expected to run out of cash by the end of 2013. The proceeds from the sale of OGX Maranhao come as OGX scrambles to raise at least $250 million that it said it needed to keep operations running through at least April.

Investors, such as the world's largest asset manager BlackRock and the world's biggest bond investor Pimco, have shown increased concern that OGX may use cash to fund inviable operations rather than repay $3.6 billion in debt.

The parties agreed to the deal hours before OGX sought court protection from creditors, a source with direct knowledge of the matter told Reuters. The company left OGX Maranhão out of the bankruptcy protection filing because the gas unit was in talks for a potential capital injection or a buyout.

Power company Eneva SA's stake in OGX Maranhão will shrink to 18 percent from 33 percent as a result of the deal. E.ON is Eneva's largest shareholder.

"This new deal allows for smooth operations of OGX Maranhão amid OGX's insolvency and implies no equity disbursements by Eneva, which had committed to inject 200 million reais in case of a Maranhão credit default," wrote UBS Securities analyst Lilyanna Yang.

A renowned entrepreneur who once said he would become the world's richest man, 56-year-old Batista has seen his personal fortune tumble by more than $30 billion in the last 18 months as share prices of his listed companies sank. This has forced him to start breaking up his Grupo EBX conglomerate, which also included a port operator, mining and energy interests, and an entertainment company.

OGX needs new capital to avoid losing its rights to its exploration areas and existing fields, its principal assets. While bankruptcy proceedings will not automatically result in their loss, Brazil's oil regulator has warned OGX that it must meet all its contractual agreements with the government, including making investments, or risk losing its oil rights.

The bankruptcy filing came after OGX spent about 10 billion reais exploring for offshore fields that failed to deliver on output expectations, the company said in court documents. It is scrambling, though, to hook up a second offshore field, Tubarão Martelo, by the end of November.

BEST PERFORMER

OGX Maranhão, with its on-shore gas fields, is OGX's best-performing asset and sells natural gas to Eneva's power plants. OGX's share of OGX Maranhão gas sales is about 2.1 million cubic meters a day.

The offshore troubles led to a more than 98 percent drop in the value of OGX stock in the last 16 months. Worth about $45 billion in October 2010, the shares fell 24 percent on Thursday to close at 0.13 reais, giving the company a market valuation of about $190 million.

Eneva, originally founded by Batista as MPX Energia SA, is led by E.ON, which bought 38 percent of the company from Batista earlier this year. Batista retains a 27 percent stake.

Some analysts said OGX's planned sale of OGX Maranhão and other assets such as the Tubarão Martelo field might reduce the amount of money that creditors could recover if the bankruptcy restructuring fails and OGX is liquidated. OGX has about $5.1 billion in debt, $3.6 billion of which is in the hands of bondholders such as Pacific Investment Management Co, BlackRock Inc and Loomis Sayles & Co.

When OGX Maranhão is sold, OGX's main assets will be Tubarão Martelo, which is expected to generate about $11 billion of revenue over its lifetime, and a 40 percent stake in the BS-4 offshore block, which has the potential to generate $6.2 billion, OGX's bankruptcy filing said, citing reserve certification reports.

PETRONAS DEAL IN DOUBT

Based on those values, Tubarão Martelo is worth $890 million and OGX's share in BS-4 is worth $437 million, Deutsche Bank analyst Marcus Sequeira wrote in a report to investors Thursday. While he said creditors might get something from the bankruptcy, he said shareholders were likely to get nothing.

In May, Malaysia's state oil company Petroliam Nasional , also known as Petronas, agreed to buy 40 percent of Tubarão Martelo and an adjacent area for $850 million. In August, Petronas' chief executive officer Shamsul Azhar Abbas said the company would not complete the deal without an agreement with bondholders.

OGX on Thursday said the two companies may end up in arbitration if Petronas doesn't honor its agreement.

The only new money so far available to OGX comes from the OGX Maranhão sale: 200 million reais from Cambuhy and 144 million reais from OGX Maranhão in three payments through 2015 for OGX's part of shared costs in the gas unit.

The companies did not say whether proceeds from the deal would go to help repay OGX Maranhão's 600 million reais of debt with lenders Itaú Unibanco Holding SA, Morgan Stanley and Banco Santander Brasil SA.

Eneva wants to ensure a supply of gas as demand for power in Brazil is growing faster than the expansion of hydroelectric generation. New dams with smaller, less ecologically damaging reservoirs need to be supplemented with backup power from gas and coal during dry seasons.

The investment in OGX Maranhão will help secure access to gas for Eneva's power plants in Maranhão, E.ON said in a statement. Eneva will have the right to buy part or all of Cambuhy's shares in OGX Maranhão during the next two years.

Cambuhy was founded in 2011 by Brazilian banker Pedro Moreira Salles and three partners to oversee assets of clients and some of his family members. Moreira Salles is the chairman of Itaú Unibanco, Brazil's largest bank by market value.

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UPDATE 2-Bankrupt Alabama county gets $300 million more

Thu Oct 31, 2013 6:47pm EDT

By Melinda Dickinson

BIRMINGHAM, Ala. Oct 31 (Reuters) - Alabama's bankrupt Jefferson County on Thursday approved a reworked settlement plan for its landmark $4.2 billion municipal bankruptcy that increases already stiff losses for Wall Street creditors by $300 million.

With a 4-to-1 vote, the county commission kept Alabama's most populous county on track for a targeted 2013 end of its nearly 2-year-old bankruptcy case. Jefferson County's case had been the biggest by any U.S. local government until Detroit, with debts more than $18 billion, filed for bankruptcy in July.

The revised terms mean JPMorgan, hedge funds and creditors will recover around 53 cents on the dollar, as opposed to about 60 cents under the previously agreed terms. It also cuts the size of a bond sale the county must hold to complete its exit from bankruptcy.

County officials two weeks ago said they needed $350 million more in concessions, arguing that jumps in interest rates had made a planned $1.9 billion bond sale meant to replace $3.1 billion of soured sewer debt too expensive. They threatened to scuttle a negotiated agreement reached in June.

The creditors agreed to $300 million in new concessions, with the revised settlement calling for a smaller debt sale of about $1.74 billion, county officials said.

The revised deal hands an additional $100 million loss to JPMorgan, which already made substantial concessions in the original agreement, according to Commission President David Carrington.

JPMorgan also agreed to provide the county with a 40-year letter of credit, which will allow the county to skip borrowing for a debt service fund for its planned bond deal and save an estimated $140 million over four decades, Carrington said.

A spokesman for JPMorgan was not immediately available, but insurer Assured Guaranty Municipal said in a news release it had agreed to insure $500 million worth of the county's new sewer debt. Carrington said bond insurers had agreed to $40 million of concessions, while hedge funds agreed to concessions of $17.5 million.

"The county may now take the final steps to exit the bankruptcy we entered in 2011," Jefferson County Commissioner Joe Knight said at a county commission meeting in Birmingham.

A federal judge, scheduled to review the revised plan on Nov. 12, still must approve the renegotiated deal. A bond sale is expected late this year, if the judge approves the plan.

The average recovery for defaulted municipal bonds since 1970 has been nearly 80 cents on the dollar, Moody's Investors Service said.

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EFH payment gives little recourse to frustrated creditors

By Nick Brown

Thu Oct 31, 2013 7:37pm EDT

Oct 31 (Reuters) - Senior lenders to Energy Future Holdings are upset that the company plans to make a critical interest payment to junior bondholders on Friday, but they likely have no legal recourse to prevent it, according to experts and people close to the matter.

The lenders, who hold about $20 billion in secured bank debt, had hoped EFH would skip the $270 million interest payment to the bondholders and instead file for bankruptcy to restructure its $40 billion debt load.

A bankruptcy would have given the senior lenders - which include Apollo Global Management, Oaktree Capital Management and Centerbridge Partners, among others - first claim on the money being paid to the bondholders.

But aside from trying to flex their muscles in future negotiations, there is not much the lenders can do to hit back. Pushing EFH into an involuntary bankruptcy is likely impossible at present, and filing a lawsuit to claw the money back would be difficult, according to experts and people close to the talks who declined to be named because discussions are private.

The company is preparing a U.S. Securities and Exchange Commission filing as soon as Friday, detailing the latest on restructuring talks with creditors, according to a third person familiar with the matter.

Energy Future Holdings was created in October 2007 in a $45 billion buyout of Dallas-based TXU Corp, the biggest electricity generating and distribution company in Texas.

The buyout, led by KKR & Co, TPG Capital Management LP and the private equity arm of Goldman Sachs, saddled the company with debt just as natural gas prices were about to plunge, making its coal-fired plants unprofitable.

EFH is widely expected to file for bankruptcy eventually and has been negotiating with creditors in hopes of having the framework of an agreement in place before filing, saving it time and the cost of a lengthy spell in Chapter 11.

The next interest payment to the bondholders in question falls due in May, but the company may have to act before then.

In the first quarter of next year, EFH expects to receive an opinion from auditors on whether it can survive as a going concern based upon its annual financial statements. It may have trouble convincing auditors to grant a positive opinion, given that $3.8 billion of bank debt matures in October 2014 and the company has only around $1.5 billion of cash. Failure to secure such an opinion would trigger a default of EFH's $20 billion of bank debt, meaning lenders could push the company into bankruptcy.

That means restructuring efforts are likely to come to a head sometime in the first quarter of 2014, the people close to the matter said.

TO PAY OR NOT TO PAY

Friday's interest payment date had been viewed by creditors as a deadline for EFH's efforts toward a consensual restructuring, and the company had been expected to skip the $270 million payment and file for bankruptcy regardless of whether it had the framework of a deal.

But Reuters reported on Wednesday that EFH was leaning toward making the payment and avoiding a default, which would delay any expected bankruptcy filing.

The senior lenders view the payment to subordinated bondholders as money out of their own pockets, because they would have had first claim on certain of the company's assets in the event of a Chapter 11 filing, said the two people close to the matter.

The move may chill relations between the company and the lenders as restructuring talks carry on. The lenders, through sheer size of their claim, have more bargaining power than other creditors, which could make life difficult for the company if the lenders are dissatisfied with developments.

"If this undermines the lenders' faith in management, that might well outweigh any benefit of delaying the bankruptcy," Stephen Lubben, a bankruptcy expert and professor at Seton Hall University School of Law, told Reuters.

But from a legal standpoint, EFH is probably safe from backlash. While the lenders could sue to try to recover the money as a so-called fraudulent transfer, they would have to prove that the payment was made to injure them, and that it rendered EFH insolvent - a difficult prospect, said the two people familiar with negotiations.

Besides, Lubben said, "paying a debt that is actually due, according to its terms, is not a fraudulent transfer" under bankruptcy laws.

Likewise, the lenders would be hard-pressed to force EFH into an involuntary bankruptcy to avoid the payment, said John Penn, a bankruptcy lawyer at Perkins Coie in Texas.

Under bankruptcy laws, creditors who want to force debtors into bankruptcy must prove that the debtor is generally not making its interest payments as they come due.

"You can't prevail in an involuntary petition unless you show that a debtor is not paying debts," Penn told Reuters. "It's not just a balance sheet test."

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PRESS DIGEST- Financial Times - Oct 31

Wed Oct 30, 2013 9:22pm EDT

Oct 31 (Reuters) - The following are the top stories in the Financial Times. Reuters has not verified these stories and does not vouch for their accuracy.

Google said it was "outraged" by allegations that the U.S. government attempted to siphon information about millions of its users from its network.

Intel has held talks with Verizon Communications about offloading the chipmaker's web-based television streaming service just months before it was due to launch.

Big Four audit firm PriceWaterhouseCoopers said it would buy independent management consultant Booz & Co, in a deal understood to be worth at least the $1 billion that Booz makes in annual revenues.

Brazilian tycoon Eike Batista on Wednesday filed for bankruptcy protection for his oil exploration and production company OGX in Latin America's largest-ever corporate default.

Nokia on Wednesday won a patent infringement case against Taiwan-based HTC Corp, which may no longer be able to sell various handsets - including its flagship HTC One - in Britain.

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