Court ruling could cast shadow over Brazil offshore oil sector

miércoles 1 de junio de 2016 02:00 GYT

By Tatiana Bautzer and Guillermo Parra-Bernal

SAO PAULO, June 1 (Reuters) - An appeals court ruling on whether a Liberian mortgage is valid for a Brazilian-owned oil production ship, due on Wednesday, could cast doubt on the future of secured lending for such vessels in the world's largest deepwater market.

The court in São Paulo is due to decide on the appeal by Nordic Trustee ASA to overturn a February ruling that the $500 million mortgage registered in Liberia is invalid for the OSX3 floating production, storage and offloading vessel, or FPSO, owned by a subsidiary of OSX Brasil SA.

The court will hold hearings on the case early on Wednesday, according to sources in the case and court documents seen by Reuters.

OSX, the shipbuilding and ship leasing arm of former billionaire Eike Batista's mining, energy and logistics empire, has been under bankruptcy protection for three years. The OSX3 FPSO is owned by OSX3 Leasing BV, the OSX Brasil unit that is also under creditor protection in the Netherlands.

The lower court's ruling favors investment bank Grupo BTG Pactual SA in an effort to recover a $28 million loan from OSX3. BTG Pactual has a lien on the FPSO and wants immediate repayment of the loan.

International law would normally give precedence to the mortgage holders in bankruptcy proceedings. In this case, the mortgage was given as collateral to OSX bondholders, represented in this case by Nordic Trustee.

Liberia is not a member of a 1926 global treaty on ship mortgages. If the appeals court upholds the lower court's decision that the mortgage agreement is invalid in Brazil because it was registered in Liberia, it would put BTG Pactual ahead of bondholders in the queue for repayment.

BTG Pactual argues the mortgage contract is invalid because there are no links between the ship and Liberia, where it is flagged. Nordic Trustee alleges that none of the 142 Liberian-flagged ships that operate in Brazilian waters have locally registered mortgages.   Continuación...