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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W.R. Grace settles last remaining appeal to help exit bankruptcy

By Sakthi Prasad

Mon Dec 23, 2013 10:23pm EST

Dec 23 (Reuters) - W.R. Grace & Co said it has settled the only remaining appeal for its Chapter 11 plan with a group of bank lenders, paving the way for the U.S. chemicals maker to emerge out of bankruptcy protection after 12 years.

The company reached a settlement with holders of pre-petition bank debt, who have been demanding a higher interest rate on their loans, according to a court filing on Monday.

Grace will pay the lender group $1.1 billion, comprising $971 million of principal and undisputed interest through Dec. 31 and $129 million in settlement, removing the last remaining obstacle to its emergence out of bankruptcy protection.

Grace filed for Chapter 11 protection in 2001, making it one of the longest bankruptcies in the history of the United States, after an asbestos leak at one of its mines led to a slew of lawsuits.

Through bankruptcy, Grace was able to pause debt repayments, survive two recessions and take advantage of a U.S. shale energy revolution that is fueling demand for its fine-powder catalysts, which help refiners process crude oil into gasoline, heating oil and other products.

John Bader, chairman of Halcyon Asset Management, the single largest owner of W.R. Grace bank debt, said that the hedge fund is pleased with the settlement.

"We recognize that the ability of W.R. Grace to emerge from bankruptcy benefits everyone with a stake in the company's future," Bader said in a statement to Reuters.

The case is W.R. Grace & Co, et al, Case No. 01-01139, U.S. Bankruptcy Court, District of Delaware.

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UPDATE 1-RLPC: LightSquared seeks Fortress-sponsored exit loan

Fri Dec 20, 2013 4:32pm EST

By Billy Cheung and Michelle Sierra

NEW YORK Dec 20 (Reuters) - Bankrupt wireless communications firm LightSquared Inc is seeking to raise a $2-2.5 billion senior secured first-lien term loan backing a Fortress Investment Group-sponsored bankruptcy exit plan, sources said Friday.

JP Morgan and Credit Suisse are sounding out investors on the financing that would help Fortress purchase the company out of bankruptcy, sources said. The banks are not committed or contracted to providing or arranging the credit, the same sources noted.

LightSquared declined to comment.

LightSquared had attempted to raise a $3 billion exit loan in June and July through Jefferies but pulled the financing when Dish Chairman Charlie Ergen emerged as the largest creditor for the company. The Jefferies loan would have backed an exit plan sponsored by majority shareholder Harbinger Capital Partners.

Ergen's involvement and a subsequent $2.2 billion July bid by Dish for LightSquared's operating assets, combined with the expiration of the exclusivity period for the company to put forth a restructuring plan, allowed the company's biggest creditor group to push for LightSquared's sale.

The uncertainty around LightSquared's attempt to remain independent helped derail the Harbinger financing, leading to lawsuits filed by LightSquared and Harbinger against Dish, Ergen and related investment affiliates.

As per the Fortress-sponsored exit financing plan, LightSquared is offering a three-year loan with a 12 percent coupon, all payable-in-kind. The loan would be sold at a discount price of between 95 and 97.

The maturity could be extended by a year, subject to a minimum liquidity test. Lenders would receive a 1.5 point fee for agreeing to an extension.

Given that LightSquared's wireless network build out plans remain suspended by the Federal Communications Commission (FCC), lenders have been asked to commit to the deal for six months with a potential three-month extension.

Lenders would be paid a 100bp fee upon confirmation of the Fortress-backed restructuring plan in bankruptcy court. If LightSquared exercises the commitment extension while in bankruptcy, lenders would receive a 50bp fee.

In addition, the loan would be subject to a minimum liquidity covenant during the extension period.

The exit loan would not be callable for the first year and then would have 106 and 103 call protection for the next two years.

The closing of the loan depends on additional equity injected into the company post-bankruptcy and the FCC allowing LightSquared to resume developing its spectrum.

A pre-taped roadshow will be available beginning December 26 with a lender call scheduled for January 6. Fortress and LightSquared would be available to field potential lenders' questions upon request before the lender call.

The company is asking for lender commitments by January 8.

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