http://www.zerohedge.com/news/2013-10-29/eike-batistas-ogx-said-file-bankruptcy-tomorrow
Submitted by Tyler Durden on 10/29/2013 17:58 -0400
Submitted by Tyler Durden on 10/29/2013 16:41 -0400
Eike Batista's OGX Said To File For Bankruptcy Tomorrow
Earlier this afternoon, it was Steve Cohen's final fall from grace. Now, Bloomberg reports that Brazil's one time super billionaire, and now negativeworthaire, Eike Batista, whose sprawling petroleum empire was once valued in the tens of billions, is set to file for bankruptcy tomorrow.
- BRAZIL'S OGX SAID TO PLAN BANKRUPTCY PROTECTION FILING TOMORROW
We are confident that just like in Europe, there is no bank with any exposure to either OGX, Brazil, or whatever potential intercreditor avalanche will tear down many more Brazilian companies once this first insolvent domino finally tips over.
Those who missed the preface to this story, we repost it below.
When on October 1, fallen billionaire Eike Batista's OGX Petroleo & Gas, missed a $45 million bond coupon payment, some were surprised but most had seen the writing on the wall. After all, Brazil's second largest oil company after Petrobras, and the crowning jewel of Batista's EBX Group, had been under the microscope of investors and certainly creditors (and if it wasn't it certainly should have been) after oil deposits that Batista had valued at $1 trillion turned out to be commercial failures. And so the countdown to the inevitable bankruptcy filing began. Overnight, Bloomberg reports that the wait should not be long (in fact it may coincide with the default of that other insolvent mega-creditor: the United States), and will mostly certainly take place before the end of the month, following the retention of bankruptcy specialist law firm Quinn Emanuel.
From Bloomberg:
Quinn Emanuel was hired to work on restructuring and potential litigation matters in the U.S. for Batista, said the people, who asked not to be named because they weren’t authorized to speak publicly.OGX Petroleo & Gas Participacoes SA (OGXP3) is considering filing for bankruptcy protection by the end of this month, two people with direct knowledge of the matter said last week. The filing would be done in Rio de Janeiro where OGX is based, said the people, asking not to be identified as discussions are private. While Batista is negotiating with creditors to avoid the same process for shipbuilder OSX Brasil SA (OSXB3), the most likely outcome is that both companies will seek legal protection, they said.
Prior stakeholder representations by Quinn Emmanuel have been the bankruptcies of energy trader Enron Corp., futures trader Refco Inc. and oil-trader SemGroup LP, according to the firm’s website, so they are quite proficient at representing what is about to be Latin America's largest energy-related bankruptcy in a long time.
And while it is unclear if the company will file concurrently in the US under Chapter 15, Batista's creditors, awoken from their "all is well" slumber and scrambling, have decided to pull an Elliott management, and take possession of at least two ships used as collateral by another Batista company, shipbuilder OSX and sister company to OGX, whose assets may also be impaired as unknown cross-default provisions are triggered and a vicious intercreditor fight ensues.
Bloomberg reports that OSX Brasil bank creditors considering taking possession of 2 vessels used as collateral on loans to Batista’s shipbuilder, say 6 people with knowledge. The banks are talking to advisers and company officials to see if they should execute guarantees if OSX’s oil sister co. goes into default, which would trigger cross-default clauses on OSX. Bloomberg adds that OSX already hired Credit Suisse to help sell OSX-1, OSX-2 platforms that guarantee loans.
One question is what the waterfall effects on local banks would be in the case of a bankruptcy filing, due to massive exposure to the company by both local and foreign financial firms - case in point OSX borrowed $1.27 billion from banks including Santander, DVB and others. Naturally officials at neither DVB nor Santander commented.
Either way, the seemingly endless period of financial stability in Latin America, and particularly Brazil (where record consumer debt is a far greater issue), long seen as a derivative of China, is ending. Luckily, the next steps in the global over-levered soap opera are about to be unveiled. So sit back, grab the popcorn and watch as the world receives yet another Donald Trump, i.e., fallen billionaire angel, this time in Latin America, and all the associated entertainment, even if it is not quite as entertaining for the thousands of Brazilians who are about to lose their jobs as the debt tsunami finally rolls over.
http://online.wsj.com/news/articles/SB10001424052702303918804579109160335793016
RIO DE JANEIRO—Brazilian commodity magnate Eike Batista's oil firm OGX missed a crucial bond payment Tuesday, setting up one of the biggest defaults in the history of Latin America.
The $44.5 million missed payment triggered a downgrade to "D" by the credit-ratings firm Standard & Poor's, although some creditors and analysts expect that OGX will still have a multiday grace period to make the payment before formally defaulting.
OGX has more than $3.6 billion in bonds outstanding, and a full default by the company would be the largest ever by a Latin American firm. Above, a worker on an OGX floating oil unit in Brazil. Reuters
Once considered among the world's wealthiest men, Mr. Batista, 56 years old, is scrambling to salvage parts of his commodity empire. Investors have sold off his shares and bonds, worrying his various companies may not reach profitability
Restructuring OGX's debts has additional importance because it is a linchpin in a matrix of Batista companies with interlinked businesses. Another of Mr. Batista's companies, shipbuilder OSX, was set up to build oil platforms for OGX and also faces solvency questions.
The missed payment adds pressure to the talks between OGX and its creditors, which include U.S.-based investment firms Pacific Investment Management Co., or Pimco, and BlackRock Inc.
Mr. Batista told The Wall Street Journal in a recent interview that the outlines of the restructuring would be a debt-for-equity swap in which creditors would likely take control of the company.
One sticking point in the talks has been a demand by Mr. Batista that creditors inject more capital into the firm to keep it operating. Under a new version of that plan, Mr. Batista's financial advisers are also seeking to bring in an outside investor that would take control of the company in exchange for financing it, people familiar with the plan said.
With fresh capital, the firm could have a go at developing what it says is its most promising Brazilian field, Tubarao Martelo, or Hammer Head.
Skeptics of the proposal say investors are unlikely to put fresh capital into a company that has so far failed to live up to its forecasts for finding and developing other fields since its high-profile initial public offering.
Related
OGX went public in 2008 for $4.1 billion amid investor excitement about a publicly traded Brazilian oil firm operating in the vicinity of big new Brazilian oil finds.
Earlier this year, OGX announced that most of the fields it has explored aren't economically viable. Executives hope Tubarao Martelo will halt that trend.
Meantime, without new capital, the company could run out of money by the end of October, people familiar with the situation said.
Adding to the uncertain nature of the debt-restructuring talks, OGX has replaced its chief financial officer and added a new adviser, investment bank Lazard Ltd.
The addition of new players on the OGX side sparked optimism among some creditors about a new restructuring proposal, people familiar with the matter said. But no new deal has been offered.
Creditors want to avoid a collapse of the talks, which could lead to a lengthy bankruptcy trial in Brazil's notoriously slow and cumbersome courts. Even so, some creditors have said they want to sue Mr. Batista for failing to make good on personal promises to buy OGX shares if financing options ran thin.
Mr. Batista's advisers will meet with bondholders again next week to present a new debt-restructuring plan, said two people close to the talks.
OGX's creditors have signed nondisclosure agreements, allowing them to review nonpublic company information, another person said.
OGX has a little more than $3.6 billion in bonds outstanding, including $1.06 billion of bonds maturing in 2022 and $2.6 billion of bonds due in 2018. Tuesday's payment would have been on the 2022 bonds. Standard & Poor's said it expects OGX to fail to make its next payment on the 2018 bond as well.
A default would be the largest by a Latin American firm in nominal terms.
That record is currently held by Argentina's Banco de Galicia y Buenos Aires S.A.GALI.BA -8.11% , which defaulted on $1.9 billion in debt in 2002, the height of Argentina's national debt crisis, according to a report by credit agency Moody´s Investors Service that looked at defaults starting in the 1990s.
In an interview with The Wall Street Journal in September, Mr. Batista expressed optimism that a restructuring deal would be reached. "What happens and what is common in the U.S. is that you do a restructuring in which bondholders possibly will become large shareholders of this new OGX, a new equity play, with real assets."
http://www.zerohedge.com/news/2013-10-29/steve-cohen-era-over-sac-plead-guilty-securities-fraud-stop-managing-outside-money
The Steve Cohen Era Is Over: S.A.C. To Plead Guilty To Securities Fraud, Stop Managing Outside Money
Nearly three years ago, before anyone had heard of expert networks, before the SEC had brought any major enforcement action against any hedge fund and long before anyone had to gall to accuse SAC of insider trading, Zero Hedge started a series of posts commencing with "Is The SEC's Insider Trading Case Implicating FrontPoint A Sting Operation Aimed At S.A.C. Capital?" exposing the fraudulent transactions of Steve Cohne's hedge fund despite fears of violent legal reprisals. We are delighted to inform our readers that this particular chapter is now over: the WSJ has just reported that SAC will plead guilty to securities fraud, pay a final $1.2 billion penalty (still a tiny sum compared to all the ill-gotten gains by Steve Cohen over the years), and most importantly, end the fund's management of outside money.
SAC Capital Advisors LP will plead guilty to securities fraud as part of a landmark criminal insider-trading settlement with federal prosecutors set to be announced by next week, people familiar with the discussions said.The exact timing of the pact isn't set, and if final details are ironed out quickly, it could still be unveiled by the end of this week, these people said.SAC, run by Wall Street titan Steven A. Cohen, also will agree to stop managing outside money and pay the government criminal penalties of about $1.2 billion, according to these people—which would be the largest-ever insider-trading penalty....A spokeswoman for the Manhattan U.S. attorney's office, Jennifer Queliz, declined to comment, as did SAC spokesman Jonathan Gasthalter, Federal Bureau of Investigation spokesman J. Peter Donald and SEC spokeswoman Judy Burns.After any settlement is approved, Mr. Cohen would remain under criminal investigation, though no charges are expected against him barring unexpected developments in the probe, the people said.
And since in the hedge fund world the bulk of "retained earnings" comes not from capital appreciation, manipulated, centrally-planned markets or not, but from charging outside investors the exorbitant privilege of 2 and 20 or, in SAC's case 3 and 50, the Steve Cohen era is now effectively over.
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