RIO DE JANEIRO/SAO PAULO, Oct 28 (Reuters) - OGX Petróleo e Gas Participações SA, the Brazilian oil company controlled by former billionaire Eike Batista, will file for bankruptcy protection as early as Tuesday, three sources with direct knowledge of the situation told Reuters on Monday.
Officials at the Rio de Janeiro-based company are currently preparing paperwork for the filing, said one of the sources, who declined to be identified because the decision is private. The same source said that OGX plans to exclude its OGX Maranhão gas unit, which is currently in talks to sell a stake to Eneva SA , from the bankruptcy protection filing.
OGX, which is saddled with over $5 billion in debt, declined to comment.
If confirmed, it would be the largest-ever corporate bankruptcy filing in Latin America, according to Thomson Reuters data. The decision comes as a 30-day grace period OGX had to pay $44.5 million in interest to investors was about to expire.
Not only would a filing be a sign of how far Batista's star has fallen, but it would also provide a stiff test of whether Brazil's eight-year-old bankruptcy law provides adequate protection to creditors. Batista, 56, less than 18 months ago owned the world's seventh-largest fortune.
Batista's dramatic decline has become a symbol of Brazil's own economic woes after the end of a decade-long boom that made it one of the world's hottest emerging economies. If foreign investors do not feel they have been treated fairly in the restructuring process, they may be less willing to invest in other Brazilian companies.
Shares of OGX were flat on Monday at 0.29 reais, reversing early losses of about 30 percent earlier in the day.
The other two sources told Reuters that OSX Brasil SA , OGX's sister company and a shipbuilder also controlled by Batista, is likely to avert filing for protection in courts. OSX depends on OGX for all its revenue.
In an email response to questions from Reuters, OSX said that "even as a bankruptcy protection filing is a legal tool available to any company, management has no intention to use it at this moment."
OSX is nearing the refinancing of a 400 million real loan with Caixa Econômica Federal for an additional 12 months, after Banco Santander Brasil SA agreed to extend a firm guarantee on the loan, one of the sources said. Santander Brasil is demanding more collateral to finalize the deal, said the source, who declined to speak on the record because the matter is subject to local banking secrecy rules.
The loan had originally been extended for 18 months.
OSX fell 5.6 percent to 0.67 reais on Monday. The stock is down 93 percent this year.