Brazil’s OSX may seek bankruptcy protection.
SAO PAULO (AP) — A day after the OGX oil company of Brazil’s one-time richest man Eike Batista sought bankruptcy protection, there are fears his OSX shipbuilding company could be next.
OGX Petroleo e Gas Participacoes S.A. filed for bankruptcy protection on Wednesday after it failed to reach an agreement to delay payment to holders of $3.6 billion in bonds.
Cassia Pontes, an oil industry analyst with the Rio-based Lopes Filho e Associados consulting firm said that unless OSX successfully negotiates debt repayment extensions on nearly $2.3 billion worth of loans, “it will have to follow OGX’s example.”
OGX failed to deliver on promises to produce large amounts of offshore oil even though it reported many finds since 2010, when its market value reached $34 billion. In the first half of this year, the company averaged output of just 8,500 barrels a day and racked up more than $2.5 billion in losses.
Critics have said that Batista has lied to investors, citing a correction made earlier this month for a promising OGX offshore field. In 2012, OGX said the field held nearly 1 billion barrels, but a few weeks ago it lowered that projection to 285 million barrels, too late for those who plowed cash into buying the company’s stock.
Pontes aid that OSX’s situation is “very worrisome because its fate is closely linked to OGX that was created to supply oil tankers and platforms to Batista’s petroleum concern.”
“This was the company’s business plan and it started collapsing when it was learned that OGX’s oil production had fallen short of expectations,” she said, adding that OSX depended on Batista’s oil company for “most if not all of its revenue. They are like conjoined twins.”
Vanessa Guerra, an OSX press officer, said that Brazil’s National Development Bank has agreed to extend the payment deadline on a $246 million loan, and that it is still negotiating an extension for a $179 million dollar loan from the state-run bank Caixa Economica Federal.
She said the company had no further comment on its financial situation, nor on OGX.
But OSX has other debts with suppliers and other financial institutions that added to what it owes to the development bank and the Caixa Economica Federal come to $2.3 billion, said Ponte.
She said most of these loans would come due in about one year.
And since revenues have dwindled it has also lost non-OGX contracts,” Ponte added.