OSX Brasil S A will file for bankruptcy protection

The "boom" has gone "bust" in Brasil.   This from Reuters.

By Sabrina Lorenzi

Nov 8 (Reuters) - Brazilian shipbuilder OSX Brasil SA said on Friday it will file for bankruptcy protection, another step in the decline of former billionaire Eike Batista's empire.
The company said in a securities filing its shareholders approved the bankruptcy filing, which is expected to take place next week in a Rio de Janeiro court. The company also announced the ouster of Chief Executive Marcelo Gomes.
OSX has 5.34 billion reais ($2.29 billion) in debt and could seek to restructure part or all of that, becoming the second company of Batista's to file for bankruptcy. Batista's oil producer company, OGX Petróleo e Gas Participações SA , sought protection from creditors on Oct. 30.
The OGX petition, citing 11.2 billion reais in debt, was the largest corporate bankruptcy filing in Latin America.

The OSX bankruptcy decision follows more than a year during which Batista's EBX Group - a sprawling empire of energy, minerals and logistics companies, including OGX and OSX - collapsed under a mountain of debt after missing production targets.
EBX was once valued at more than $60 billion, and Batista was a swaggering symbol of Brazil's rise as an emerging-market powerhouse over the past decade.
Yet, as problems mounted, they fulfilled predictions made by skeptics of Batista's breakneck expansion in recent years. Critics warned that interdependence between EBX companies would make them vulnerable to each other's problems, the opposite of Batista's contention that the links would generate business helping the companies flourish.
Once OGX filed for court protection, an OSX filing became more likely and thus did not come as a surprise. The shipbuilder depends on its sister company, to which it leases oil production vessels, for all its revenue.
OSX depends on OGX, to which it leases oil production ships, for all its revenue. OSX is 10 percent owned by South Korea's Hyundai Heavy Industry.
Parent company OSX and two subsidiaries OSX Construção Naval S.A. and OSX Serviços Operacionais Ltda. will jointly file for protection from creditors, the filing said.
The company did not mention a third unit, OSX Leasing, which owns three platforms that are leased for oil exploration purposes. OSX's $500 million in secured dollar-denominated bonds have rallied in recent days on speculation that OSX Brasil would keep OSX Leasing off the filing so that the company can freely decide what to do with the leasing company's assets.

If the court approves the bankruptcy request OSX plans to file, the company will have 60 days to present a restructuring plan. OSX creditors will then have 30 days to endorse or reject the plan, though legal experts warn the proceedings could drag on for much longer than that.
Brazilian Development Bank BNDES said in a statement that it granted OSX a $228 million bridge loan, but added that the loan is backed by bank guarantees and presents no risk to the BNDES.

UNFINISHED SHIPYARD
OSX, whose assets include an unfinished shipyard on the northern coast of Rio de Janeiro state, is also one of OGX's biggest creditors. OGX owes OSX at least 2.45 billion reais, according to documents filed with the bankruptcy court.


Before the OGX and OSX filings, Batista had already agreed to sell stakes and assets of the other four publicly traded companies in the ailing EBX conglomerate.

Like other Batista companies, OSX's troubles stem from the failure of OGX to meet any of its ambitious oil production targets. After starting output at its first field in early 2012, OGX repeatedly missed goals despite reassuring investors that copious amounts of oil would soon flow.

Having once said OGX would produce 1.4 million barrels of oil and natural gas equivalent a day by 2018, or more than half Brazil's current output, the company never produced more than 1 percent of that.
According to Batista's plan, the oil was supposed to have provided tens of billions of dollars to build several dozen oil platforms and other vessels at the OSX shipyard. The facility was modeled on shipyards operated by Hyundai Heavy Industry and was designed to be the largest shipyard in the Southern Hemisphere.
Bankruptcy protection could help OSX salvage its shipyard unit, part of which is almost ready to begin operations at the port of Açu complex on the Rio de Janeiro coast.

 The port's operator LLX Logística SA, another company founded by Batista, has agreed to renegotiate its contracts with OSX for the use of the port, reducing OSX's investment obligations, Friday's filing said.