(Adds plans for debtor-in-possession loan, debt, details on asset sales throughout)
By Guillermo Parra-Bernal
SAO PAULO, March 31 (Reuters) - Brazilian engineering conglomerate Grupo OAS requested court protection from creditors for nine of its units on Tuesday as it grapples with fallout from a corruption scandal at state-controlled Petróleo Brasileiro SA, a major customer.
The move was endorsed by the group’s biggest creditors and was seen as a prerequisite to restructure part of the 8 billion reais ($2.48 billion) that OAS owes to banks, suppliers and bondholders, executives told Reuters. Plans to obtain a debtor-in-possession loan from creditors and talks to sell three key assets to repay debt are “in an advanced stage,” they added.
The filing came after Grupo OAS struggled for months with the impact of a corruption investigation at Petrobras, as the state oil company is known, which undercut the builder’s access to financing. An economic downturn, government austerity and a slumping currency also took a toll on OAS in recent months.
OAS follows rivals Alumini Engenharia SA and Galvão Engenharia SA, which filed for bankruptcy protection in recent months as the scandal escalated. Prosecutors say the three firms were part of a cartel of about two dozen firms that paid bribes to Petrobras executives and politicians in exchange for contracts.
A massive disposal of assets and the recapitalization of the group’s construction unit will become the cornerstone of a recovery plan that Grupo OAS will present to creditors within 60 days. Grupo OAS was founded in 1976 by contractor Cesar Mata Pires and his partners in the northeastern city of Salvador.
“Once this process is over, we will have a healthier, sharply focused and smaller firm,” Fabio Yonamine, president of investment holding company OAS Investimentos, said in an interview.
Under terms of the petition, which OAS filed in a São Paulo state court on Tuesday, the company sought creditor protection for Construtora OAS SA, OAS SA, OAS Imóveis SA, SPE Gestão e Exploração de Arenas Multiuso, OAS Empreendimentos SA, OAS Infraestrutura SA, OAS Investments Ltd, OAS Investments GmbH e OAS Finance Ltd.
Among the assets that the group has put up for sale are stakes in infrastructure operator Investimentos e Participações em Infraestrutura SA, known as Invepar, as well as shipbuilder Estaleiro Enseada, OAS Empreendimentos, waste management firm OAS Soluções Ambientais, OAS Óleo e Gás and all of its defense unit OAS Defesa.
Those assets, as well as stakes in two soccer stadiums, were excluded from the petition, the statement said.
Talks with bidders for the stakes in Invepar, Soluções Ambientais and OAS Óleo e Gás are “very advanced,” Yonamine said, without unveiling any terms.
The so-called DIP loan, a credit facility that creditors extend to distressed companies during their recovery process, is being discussed with bank and non-bank creditors, the executives added, without detailing what assets could be used as guarantee for the facility.
Two sources with direct knowledge of the situation told Reuters on Tuesday that talks with potential bidders for the 24.4 percent stake in Invepar are in their later stages.
Brazilian police raided OAS headquarters in São Paulo late last year and arrested several executives, including the head of its main construction division, as part of a far-reaching investigation known in Brazil as “Operation Car Wash.”
The Petrobras scandal made it harder for the company to refinance debt and borrow fresh cash, precipitating a liquidity squeeze that led to its bankruptcy filing. Early this year, OAS failed to pay interest on $400 million of global bonds and on 100 million reais of debt.
OAS Investments GmbH’s bond due in October 2019 rose about a cent to 15 cents on the dollar on Tuesday. The bond was trading at 98 cents in early November, before the company missed debt payments, lost contracts and failed to roll over maturing debt.
Diego Barreto, head of corporate development at OAS Investimentos, said in the interview that the company currently has enough cash to honor operational expenses. The 30 percent decline in the Brazilian real over the past year lifted the value of Grupo OAS’s debt by 1 billion reais, he added.
$1 = 3.215 Brazilian reais Editing by Christian Plumb and Chris Reese