Brazil's OGX ends talks with holders of $3.6 billion of bonds

Tue Oct 29, 2013 6:43am EDT
 
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By Jeb Blount and Guillermo Parra-Bernal

RIO DE JANEIRO/SAO PAULO (Reuters) - Indebted Brazilian oil producer OGX Petróleo e Gas Participações SA (OGXP3.SA: Quote) said on Tuesday that talks with holders of $3.6 billion in bonds have ended without agreement, following months of negotiations over a potential debt restructuring.

The Rio de Janeiro-based company, controlled by former billionaire Eike Batista, did not explain in a statement why talks collapsed.

Sources familiar with the situation said areas for disagreement between Batista, management and creditors during the talks ranged from the scope for a capital injection to the terms for Batista's departure from the company, which has total debts of over $5 billion.

OGX's failure to meet expected oil output targets, coupled with its voracious appetite for funds as it pushed forward with an aggressive exploration campaign, sped up the meltdown of Batista's Grupo EBX energy, mining and logistics conglomerate. Media and investor relations officials at OGX did not answer requests for comment made by phone and email.

Less than 18 months ago Batista, 56, was ranked as the world's seventh-richest person.

But talks with a creditors' committee formed by half a dozen investment funds kicked off in August, as OGX bonds due in 2018 and 2022 slumped in the wake of dwindling confidence in Batista's ability to shore up the company. Pacific Investment Management Co (Pimco), the world's largest bond fund manager, and BlackRock Inc (BLK.N: Quote) are on the committee whose members own more than half of OGX's outstanding bonds.

The announcement came just hours after Reuters reported, citing three sources with knowledge of the situation, that OGX was ready to file for bankruptcy protection as early as Tuesday.

The company, which for years was viewed as Brazil's most promising oil producer, could place the request for creditor protection in a Rio de Janeiro court, one of the sources said.   Continued...

 
Brazilian billionaire Eike Batista, CEO of EBX Group, talks during a ceremony in celebration of the start of oil production of OGX, his oil and gas company, at the Superport Industrial Complex of Acu in Sao Joao da Barra in Rio de Janeiro April 26, 2012. REUTERS/Ricardo Moraes