$5.8 B debt accord sees Batista's OGX shares jump 21%

By Rizza Sta. Ana

Dec 26, 2013 12:27 PM EST

The creditors of Oleo & Gas Participacoes SA had agreed to convert $5.8 billion of the company debt into a 90% equity stake, said former Brazilian billionaire Eike Batista. Oleo & Gas, which was initially known as OGX Petroleo & Gas Participacoes SA, saw its shares jumped 21% to 23 centavos per share at around 1PM in Brazil today. Benchmark index Ibovespa also climbed 0.1% from its previous trading per share on December 23.

The report on Reuters explained that part of the debt restructuring included dollar bonds, and could help the Brazilian company rise from bankruptcy experienced two months earlier after failing to pay its repayments. Oleo & Gas' default was said to be the biggest-ever corporate debt debacle in all of Latin America, said the report. Batista, who was initially known as the richest man in Brazil and the eighth-wealthiest in the world at $30 billion in fortune, saw himself struggling to save his empire, which included a port developer and a shipbuilder since the middle of 2012 when Oleo & Gas began to miss its targets.

In a phone interview from Florianopolis, Leme Investimentos Ltda's Joao Pedro Brugger said, "This was the most viable solution because, given the size of the debt, the company wouldn't be able to meet its obligations. At least the company gets out of bankruptcy protection and there will probably be significant changes in control and management." Brugger helped oversaw BRL400 million or $170 million in assets under management.

In a December 24 regulatory filing, Oleo & Gas said holders of $3.8 billion of bonds that were issued by its unit OGX Austria GmbH will be committing $200 million to $215 million into Oleo & Gas via debtor-in-possession financing. The filing also disclosed that such procedure will enable the bondholders to acquie 65% of Oleo & Gas.

Moreover, the plan also included the conversion of $1.5 billion of debt with Batista's oil service unit, OSX Brazil SA, into equity to compensate for the order cancellations and $500 million in non-payments to other suppliers.

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