U.S. investor sues OAS, Brazil builder tied to Petrobras scandal

SAO PAULO, March 5 Thu Mar 5, 2015 5:54pm EST

SAO PAULO, March 5 (Reuters) - U.S. investment firm Huxley Capital Corp filed a lawsuit on Thursday in a New York court against Brazilian construction group OAS SA, alleging the debt-ladden company is hiding assets from creditors at two valuable subsidiaries.

The defendants in the lawsuit, filed in Manhattan federal court, are OAS and subsidiaries Construtora OAS SA, OAS Investimentos SA, OAS Infraestrutura SA and OAS Engenharia e Construção SA, court documents showed.

Huxley alleged that OAS transferred assets from Construtora OAS and OAS Investimentos to protect them from bondholders. Huxley owns debt issued by two of the subsidiaries, which he said might prove unable to make good on their obligations because of the asset transfers.

The transfers occurred as OAS plunged into "disarray" after the company was named in a corruption probe in Brazil that subsequently cut access to financing, the lawsuit said. An executive at a public relations firm representing OAS did not have an immediate comment.

The New York lawsuit comes as OAS struggles with the impact of a graft and money-laundering scandal afflicting key client Petrobas (Petróleo Brasileiro SA ), which has cut OAS's revenue flow and access to financing.

Some of Brazil's largest civil construction companies are facing increased scrutiny and limited access to credit markets after federal prosecutors found that executives at Petrobras negotiated bribes in exchange for building, leasing and other contracts.

In January, a Brazilian judge in São Paulo ordered the seizure of some the shares that OAS SA holds in infrastructure company Investimentos e Participações em Infraestrutura SA, or Invepar. The ruling came at the behest of holders of 160 million reais ($53 million) in local notes.

Early this year, OAS failed to pay interest on $400 million of global bonds and on 100 million reais of debt, and bankers are speculating that a sale of the stake in Invepar could help OAS raise cash to honor some obligations. OAS controls a 25 percent stake in Invepar through unit OAS Infraestrutura. (Reporting by Guillermo Parra-Bernal; Editing by Steve Orlofsky)

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Audit confirms BES breached Bank of Portugal's orders on exposure

By Sergio Goncalves

LISBON, March 5 Thu Mar 5, 2015 1:31pm EST

LISBON, March 5 (Reuters) - Banco Espirito Santo (BES) breached the Bank of Portugal's orders by increasing exposure to its founding family's collapsing businesses in the months before the state rescued the bank last August, a forensic audit report showed.

The central bank, worried about the financial state of the family empire's holding ESI, had told BES in late 2013 not to increase exposure to the Espirito Santo Group and not to pass any of the group's debt on to BES' retail clients.

In a report seen by Reuters and prepared by Deloitte, the auditor said it saw "potential practice of illegal acts of ruinous management" at the bank then headed by CEO Ricardo Salgado, the patriarch of the bank's founding Espirito Santo family. He denies any wrongdoing.

"In the period between Dec. 31, 2013 and June 30, 2014 there was an increase in the BES Group's exposure to ES Bank Panama and Espirito Santo Financiere worth 579.2 million euros," the report, dated March 3, said.

Both institutions, owned by the family-controlled Espirito Santo Financial Group, at the same time lent 699 million euros to ESI and another family holding, the report showed.

The audit was requested by the Bank of Portugal shortly before the rescue. In early August the authorities injected 4.9 billion euros, mostly in state funds, to save the country's second-largest lender after the business empire of the Espirito Santos collapsed under a mountain of debt.

The Bank of Portugal carved out a working bank - Novo Banco, and left the toxic exposure with the old BES, which is to be wound down. The state hopes to sell Novo Banco this year.

There were other "potentially wrongful" activities including financing of non-financial sector entities after June 4, 2014 in breach of a central bank ban, and other financing through money market operations.

The Prosecutor General's office said it had received the document and forwarded it to the Investigation and Legal Action Department, but would not comment further.

Former CEO Salgado said in a statement sent to Reuters that he hoped he "would one day be given the right to defend himself on minimally equal ground".

Deloitte also questioned the origin of some 440 million euros in a BES escrow account set up to repay retail clients who bought Espirito Santo Group's debt via BES, and warned that some 740 million euros from that account were used to reimburse debt holders who were not BES retail clients.

Loans from two Portuguese banks worth nearly 200 million euros were also repaid from the escrow account. (Writing by Andrei Khalip; Editing by Elaine Hardcastle)

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UPDATE 1-U.S. investor sues OAS, Brazil builder tied to Petrobras scandal

Thu Mar 5, 2015 8:18pm EST

(Adds comment from OAS in fourth paragraph)

SAO PAULO, March 5 (Reuters) - U.S. investment firm Huxley Capital Corp filed a lawsuit on Thursday in a New York court against Brazilian construction group OAS SA, alleging the debt-laden company is hiding assets from creditors at two valuable subsidiaries.

The defendants in the lawsuit, filed in Manhattan federal court, are OAS and subsidiaries Construtora OAS SA, OAS Investimentos SA, OAS Infraestrutura SA and OAS Engenharia e Construção SA, court documents showed.

Huxley alleged that OAS transferred assets from Construtora OAS and OAS Investimentos to protect them from bondholders. Huxley owns debt issued by two of the subsidiaries, which he said might prove unable to make good on their obligations because of the asset transfers.

The transfers occurred as OAS plunged into "disarray" after the company was named in a corruption probe in Brazil that subsequently cut access to financing, the lawsuit said.

OAS said it will release a statement once it reviews the lawsuit but remains committed to engaging in negotiations with creditors and is currently working on debt restructuring program.

The New York lawsuit comes as OAS struggles with the impact of a graft and money-laundering scandal afflicting key client Petrobas, formally known as Petróleo Brasileiro SA, which has cut OAS's revenue flow and access to financing.

Some of Brazil's largest civil construction companies are facing increased scrutiny and limited access to credit markets after federal prosecutors found that executives at Petrobras negotiated bribes in exchange for building, leasing and other contracts.

In January, a Brazilian judge in São Paulo ordered the seizure of some the shares that OAS holds in infrastructure company Investimentos e Participações em Infraestrutura SA, or Invepar. The ruling came at the behest of holders of 160 million reais ($53 million) in local notes.

Early this year, OAS failed to pay interest on $400 million of global bonds and on 100 million reais of debt, and bankers are speculating that a sale of the stake in Invepar could help OAS raise cash to honor some obligations. OAS controls a 25 percent stake in Invepar through unit OAS Infraestrutura. (Reporting by Guillermo Parra-Bernal; Editing by Steve Orlofsky and Lisa Shumaker)

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PRESS DIGEST- Canada- March 4

March 4 Wed Mar 4, 2015 6:33am EST

March 4 (Reuters) - The following are the top stories from selected Canadian newspapers. Reuters has not verified these stories and does not vouch for their accuracy.

THE GLOBE AND MAIL

** Prime Minister Stephen Harper is expected to announce changes on Wednesday to Canada's life penalty for convicted killers that would make life truly mean life behind bars or as close as possible to pass constitutional muster. (bit.ly/18NQkBL)

** Canadian pension fund manager Caisse de depot et placement du Quebec is buying the British government's stake in high-speed train service Eurostar International Ltd as part of a push to accelerate its infrastructure investments around the world. (bit.ly/1DTuuXF)

** Target Canada is now owed C$1.9 billion ($1.52 billion) by a property company it created, making the insolvent chain its own biggest creditor and threatening to significantly dilute the recovery of others. (bit.ly/1BGD0dk)

NATIONAL POST

** Canadian investment banks are getting nervous as they are struggling to find buyers for Silver Wheaton Corp's massive $800 million bought deal offering. (bit.ly/18NPbtZ)

** The budget is still weeks away, but public-sector workers are already contemplating wildcat strikes as Alberta Premier Jim Prentice begins to seed the ground for spending cuts. (bit.ly/1AHh4cM)

** Ontario's top court has quashed a second, $2-million lawsuit filed by the family of a brain-damaged Toronto man, accusing doctors of intimidation, threats and assault as the two sides fought over whether to remove Hassan Rasouli from life support. The first case reached the Supreme Court, which ruled in 2013 that the hospital must get the family's consent before ending life-sustaining treatment. (bit.ly/1F8H314)

($1 = C$1.2518) (Compiled by Luke Koshi in Bengaluru)

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Bankruptcy judge okays disputed bonus plan for RadioShack execs

By Jim Christie

March 4 Wed Mar 4, 2015 5:13pm EST

March 4 (Reuters) - The judge overseeing RadioShack Corp's Chapter 11 bankruptcy case on Wednesday approved a revised $1.5 million bonus plan for eight top executives at the electronics retailer, over the objection of the U.S. Trustee in the case.

U.S. Bankruptcy Judge Brendan Shannon said that while he shared some of the trustee's concerns over the key executive incentive plan, or KEIP, he was convinced the executives would be "up to their elbows" with the sale of 2,000 RadioShack stores.

Shannon also said he was impressed the plan's payout had been reduced through negotiations.

Acting Trustee Andrew Vara on Saturday filed an objection to the plan, initially set at $2 million.

Vara said it would reward the executives for staying put at RadioShack after reaching the stalking horse bid for the 2,000 stores. A stalking horse bid is an attempt by a debtor to test the market in advance of an auction.

The bid was reached before RadioShack filed for bankruptcy in February. RadioShack said its executives worked to increase the value of the bid by $30 million during negotiations.

The objection said the plan was effectively a retention plan and criticized paying the executives an incentive bonus of $500,000 for working on the stalking horse agreement.

The Standard General hedge fund has agreed to make a $200 million stalking horse bid that would keep about half of the retailer's stores open and operate them under an agreement with Sprint Corp.

If there are competing bids, an auction will take place March 23.

Changes to the U.S. bankruptcy code in 2005 essentially swept away retention plans that unions criticized for rewarding insiders who slashed payrolls.

KEIPs then emerged as a way to reward insiders. Unions and investors have often complained they are little more than dressed-up retention payments.

The case is In re RadioShack Corp, U.S. Bankruptcy Court, District of Delaware, No. 15-10197. (Reporting by Jim Christie; Editing by David Gregorio)

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Judge tells Atlantic City's Revel Casino to seek higher bid

By Tom Hals

March 4 Wed Mar 4, 2015 6:57pm EST

March 4 (Reuters) - Advisors to the shuttered Revel Casino Hotel in Atlantic City, New Jersey, failed to get approval on Wednesday for an agreement to sell the hotel for $82 million and were told by a U.S. Bankruptcy Judge to look for a better price.

The decision by Judge Gloria Burns could open the door for a Los Angeles developer, Izek Shomof, whose attorney told Wednesday's court hearing he could offer more money.

The ocean-front Revel has already lost two deals in the last six months, with the price dropping from $110 million to the current price. The massive hotel cost $2.4 billion to open in 2012.

"I think in order for me to be comfortable with this you need to satisfy me that every stone has been overturned to find the best deal," Burns said at hearing in Camden, New Jersey.

Revel had asked Burns to approve the sale agreement with Florida developer Glenn Straub, who had failed to close a prior sale agreement. The current agreement required Straub to close the deal by March 31.

Shomof's lawyer urged Burns to delay approving the Straub sale and also complained the current sale process was unfair. He said his client was barred from performing due diligence and said Straub had been threatened to sue him for interfering with the Revel sale.

Although Burns only postponed a ruling for a week, Revel's advisors and lawyers for other parties urged her to take the certainty of a sale to Straub, given how difficult it has been to find a buyer for Revel. The casino filed for bankruptcy in June and closed three months later as it struggled to find a buyer.

The bankruptcy is being funded by a loan from Wells Fargo, and the bank's lawyer warned Wells might withdraw its support if Burns delayed approving a sale agreement with Straub.

"Then maybe a conversion to a Chapter 7 is the right way to go," Burns said in response. While Chapter 11 allows for a reorganization, Chapter 7 bankruptcy is a piece-meal liquidation overseen by an independent trustee.

Atlantic City's gambling market has declined dramatically in recent years as neighboring states have embraced casinos.

Earlier this year New Jersey's governor, Chris Christie, appointed an emergency manager to oversee the strained finances of Atlantic City, where four of the resort's 12 casinos closed last year. (Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)

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UPDATE 1-Caesars' operating unit files bankruptcy exit plan

Tue Mar 3, 2015 5:47pm EST

(Adds new lawsuit filed against parent company in paragraphs 10-11)

By Tom Hals

March 3 (Reuters) - The operating unit of casino company Caesars Entertainment Corp unveiled its plan to cut $10 billion of debt and to exit Chapter 11 in a late Monday filing with a U.S. Bankruptcy Court.

The plan formalized a proposal negotiated with senior creditors prior to the casino operator's January bankruptcy filing. It must be approved by U.S. Bankruptcy Judge Benjamin Goldgar in Chicago and creditors, a process that can easily take a year.

Under the proposed plan, the bankrupt unit would be split into an operating company that runs 38 casinos in 14 states and a property company.

"The debtors believe this structure materially improves stakeholder recoveries versus a more traditional 'standalone' restructuring," the company said in a court filing.

The plan was filed on Monday when the parent company Caesars Entertainment reported its fourth-quarter net loss narrowed to $1 billion from $1.76 billion a year earlier. Shares of the parent company closed down 4 percent at $10.58 on Nasdaq.

The property company would be controlled by a real estate investment trust, which benefits from more favorable tax treatment, creating value for the creditors.

In exchange for their $6.3 billion of debt, the first-lien noteholders would own the operating company when it exits bankruptcy. The noteholders would also own about 70 percent of the property company, with junior creditors getting the rest in exchange for their $5.2 billion in debt.

The bankruptcy put on hold lawsuits launched by other creditors who alleged the parent company looted the operating unit of its best casinos and properties and left it without enough assets to pay its debts.

The parent company has said the property transfers were fair.

On Tuesday, a trustee for $750 million of junior notes sued the parent company in Manhattan federal court, seeking to enforce the parent's guarantee of the notes and seeking full repayment plus damages. In January, the court declined to dismiss at an early stage a similar lawsuit.

A Caesars spokesman did not immediately respond to a request for comment. The parent company has said it has strong defenses to claims that it improperly eliminated the guarantees and has said it did not expect the allegations to impact the operating unit's reorganization.

The parent company is controlled by Apollo Global Management and TPG Capital, private equity firms that led the $30.7 billion leveraged buyout of Harrah's Entertainment in 2008. (Reporting by Tom Hals in Wilmington, Delaware; Editing by James Dalgleish)

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Oil and gas contractor Cal Dive files for bankruptcy

March 3 Tue Mar 3, 2015 6:28pm EST

March 3 (Reuters) - Offshore oil and gas contractor Cal Dive International Inc said the company and its U.S. subsidiaries filed for voluntary bankruptcy protection.

Cal Dive's foreign units have not sought bankruptcy protection and will continue to operate outside of any reorganization proceedings, the company said on Tuesday.

Cal Dive has been hurt by the slump in crude prices as oil and gas producers slash their capital spending budgets.

U.S. crude prices have more than halved since June.

"With our current capital structure, we are no longer able to financially withstand the industry downturn," Chief Executive Quinn Hebert said.

Cal Dive said it would sell non-core assets and reorganize or sell as a going concern its core subsea contracting business.

The Houston-based company said it received a commitment for up to $120 million in debtor-in-possession financing from its current first-lien lenders led by Bank of America. (Reporting by Anannya Pramanick in Bengaluru; Editing by Kirti Pandey)

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BRIEF-Scana Industrier unit, Scana Steel Stavanger, files for bankruptcy

March 4 Wed Mar 4, 2015 1:09am EST

* Has decided to cease further funding of its subsidiary Scana Steel Stavanger AS

* Says consequently there is no basis for a solvent winding-up of company and board of Scana Steel Stavanger resolved to file for bankruptcy March 3, 2015 Source text for Eikon: Further company coverage: (Gdynia Newsroom)

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No signs of balance sheet cheating at Austria's Hypo-FMA

VIENNA, March 3 Tue Mar 3, 2015 4:03am EST

VIENNA, March 3 (Reuters) - Austrian bank supervisors have no indication that defunct lender Hypo Alpe Adria improperly valued assets on its balance sheet, the co-head of the Financial Market Authority (FMA) said.

"We have no indications at the moment that the balance sheet was falsified. If we did we would investigate this accordingly," FMA co-head Klaus Kumpfmueller told reporters after an outside audit of the Heta Asset Resolution "bad bank" winding down Hypo assets discovered its balance sheet was overvalued by as much as 8.7 billion euros ($9.73 billion).

Kumpfmueller said the FMA was surprised at the extent of the adjustments but attributed it to the accounting switch triggered by reclassification of the business as no longer a going concern, a significantly worse outlook for economies in the Balkans, and the surge in the Swiss franc that delivered a hit worth hundreds of millions of euros. ($1 = 0.8943 euros) (Reporting by Michael Shields and Angelika Gruber, Editing by Shadia Nasralla)

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