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UPDATE 2-Judge denies bankruptcy protection for OGX foreign units

Sabrina Lorenzi
Thursday, 21 Nov 2013 | 6:20 PM ET

(Adds judge ruling and context))

RIO DE JANEIRO, Nov 21 (Reuters) - A Brazilian judge on Thursday denied bankruptcy protection for the foreign subsidiaries of OGX in a decision that may complicate the recovery of the oil company, which is controlled by former billionaire Eike Batista.

Rio de Janeiro Judge Gilberto Matos did, however, accept bankruptcy protection for company's Brazil-based units OGX Petróleo e Gás SA and OGX Petróleo e Gas Participações SA.

OGX sought court protection from creditors on Oct. 30 after it failed to convince them to refinance more than $5.1 billion in obligations, in Latin America's largest-ever corporate bankruptcy filing.

Marcio Costa, a lawyer for OGX, told Reuters that the judge's decision would complicate the recovery process, adding that the company plans to appeal the ruling.

"This decision disrupts the judicial recovery process, allowing some lenders to seek debt payments in Brazil and Austria," Costa said. "Those funds were raised abroad to be used in Brazil. The judge didn't take that into consideration."

OGX has two foreign subsidiaries, OGX Internacional and OGX Austria. The judge denied the request for those units on the grounds that bankruptcy protection should be decided in the countries where they are based, according to a copy of the judge's decision.

For the Brazilian operations, the judge's decision gives OGX 60 days to come up with a restructuring plan. OGX creditors including California-based bond fund Pacific Investment Management Co (PIMCO) and New York-based investment fund BlackRock Inc will then have 30 days to endorse or reject the plan.

OGX's sister company shipbuilder OSX Brasil SA filed for bankruptcy protection on Nov 11. The company is expected to get court protection from creditors.

Batista, 56, a dealmaker who once boasted he would become the world's richest man, has seen his personal fortune plunge by more than $30 billion in the last 18 months as investors punished the share price of his listed companies.

The collapse of his empire stems from the failure of OGX to meet its ambitious oil production targets despite repeatedly reassuring investors that copious amounts of oil would soon flow.

The downward spiral forced Batista to start breaking up his Grupo EBX conglomerate, which also included port, mining and energy interests. (For a FACTBOX on the unraveling of EBX, see )

Next week OGX's board is expected to change the name of the company to remove the trademark letter X that stood for "multiplication of wealth" and branded all the companies in Batista's now-crumbling industrial empire.