OGX CEO ouster may open door for bankruptcy protection filing
RIO DE JANEIRO/SAO PAULO, Oct 16 (Reuters) - The ouster of OGX's chief executive opens the door for embattled Brazilian tycoon Eike Batista to give up control of the oil company and for OGX to file for bankruptcy protection, sources told Reuters.
Luiz Carneiro was replaced on Tuesday by Chief Financial Officer Paulo Simões Amaral as CEO of OGX Petróleo e Gás Participações SA. The move likely puts more power in the hands of Angra Partners, the financial adviser hired by Batista to restructure the liabilities of OGX and its sister company shipbuilder OSX Brasil SA, said one of the sources who is familiar with Angra's thinking.
As the collapse of Batista's empire has accelerated over the past three months, Angra and its senior partner, Ricardo Knoepfelmacher, have sought to arrange for bankruptcy protection to shrink OGX and OSX and save them as going concerns. Nearly all OSX business involves building or leasing ships for OGX.
Batista's fall from grace, which knocked him off his perch as one of the world's 10 richest men, has led to a struggle between shareholders, banks and bondholders over who will get to keep the scraps.
Carneiro did not always agree on strategy with Knoepfelmacher, the source said. Angra turned down repeated requests for interviews with Knoepfelmacher and other partners.
Carneiro's departure now gives Angra some breathing room as it seeks $150 million of emergency capital from bondholders for OGX and as it draws up legal documents to file for court protection in Brazil, a second source with direct knowledge of the situation said.
"Angra would negotiate something with bankers and Carneiro would negotiate something else with bondholders," said the first source, who asked for anonymity because the sensitivity of talks. "It became very complicated for all parties."
The move to bankruptcy may additionally give OGX leverage in talks with bondholders, the first source said. The company is trying to get bondholders to pardon all or part of OGX's $3.6 billion in outstanding bond debt in exchange for Batista's 50.2 percent share of OGX stock and his departure from the company.
Batista's EBX Group declined to comment. OGX and OSX also declined comment.
Bankruptcy protection in Brazil is roughly equivalent to Chapter 11 bankruptcy protection in the United States and would give the company a chance to reduce its liabilities and emerge as an going concern. Without it, the company may be forced into liquidation, ending the chance of profit from future operations.
OGX bonds due in 2018 rallied on Wednesday, climbing to as high as 10.75 cents on the dollar from about 8 cents the prior session, traders said.
OGX stock surged for a second day, rising 56 percent in Sao Paulo trading on Wednesday to 0.53 real, on track for its highest close in seven weeks. On Tuesday it rose nearly 50 percent. OSX rose 26 percent to 0.92 real.
"The goal is to try and keep the companies alive in some form," said the first source. "A bankruptcy filing is seen as the best way to do that for both OGX and OSX."
GETTING BATISTA OUT
Batista's departure from OGX would allow the former billionaire to free himself of an obligation under a put option to invest up to $1 billion of new capital into the company. Former CEO Carneiro led a push to get Batista to pay $100 million of that put option before year-end after board members representing minority shareholders, normally charged with control over the option, quit.
In the past year, OGX shares have fallen more than 90 percent, the result of lower than expected output from the company's first offshore fields and dwindling cash to prepare other fields to start producing oil.
The plunge in OGX shares and other companies in Batista's EBX oil, energy, mining, shipbuilding and port group left him without assets to raise new capital to keep the companies afloat.
Batista had challenged the right of Carneiro to request the new cash. Carneiro said at the time that the put's rules gave top executives the right of exercise in the absence of the board.
A bankruptcy filing would also allow Batista to offer minority shareholders a chance to salvage something from their investments. It may also force a quicker end to talks with bondholders.
If they don't take Batista's offer of shares for their bonds, they will likely receive nothing during a court-led bankruptcy restructuring, the first source said.
(Reporting by Jeb Blount; Editing by Leslie Gevirtz)