SAO PAULO, Aug 31 (Reuters) - A Brazilian bankruptcy court freed up the disbursement of a debtor-in-possession loan on Monday to engineering firm OAS SA, which is under bankruptcy protection, under certain conditions, a source with direct knowledge of the ruling said.
A court of appellate justices from Rio de Janeiro state overturned an earlier injunction that blocked OAS from obtaining the loan, said the source, who is not allowed to speak publicly on the matter. Appellate Court officials were not immediately available to comment.
OAS declined to comment.
In June, Judge Daniel Carnio Costa of a São Paulo bankruptcy court freed up the loan of 800 million reais ($219 million) after court-appointed administrator Alvarez & Marsal Holdings LLC gave the go-ahead for the financing facility. At the end of July, a group of bondholders sued to reverse Carnio Costa's ruling.
In addition to quashing the July injunction, the appellate justices ordered that 200 million reais from the DIP loan be disbursed immediately and another 300 million reais be released at Carnio Costa's discretion, the source said. The remaining 300 million reais will only be made available to OAS if creditors agree on the facility at a meeting, the source added.
A DIP loan is a lending facility that creditors extend to distressed companies during the judicial recovery process. Brookfield Asset Management Inc is extending the loan to OAS, which will set aside a 24.4 percent stake it owns in infrastructure company Invepar SA as collateral.
The appellate court ruling paves the way for OAS to fund operations through year-end as talks with creditors gain steam. OAS is among a group of Brazilian engineering firms that sought protection from creditors after allegations that they bribed state-controlled Petróleo Brasileiro SA for contracts blocked access to financing and cut revenue.
Tentative dates for the general assembly of creditors, at which the company, creditors and the administrator will discuss OAS' plans to leave bankruptcy protection, as well as the release of the third portion of the DIP loan, are Sept. 22 and Sept. 29, according to documents from the São Paulo bankruptcy court.
$1 = 3.6397 Brazilian reais Reporting by Guillermo Parra-Bernal