Sete Brasil plans bankruptcy in week if no Petrobras lease proposal -sources (updated)

Banco Bradesco

20/02/2016 01:03

(Adds details on meeting, company background, details on 
dispute within Petrobras) 
    By Guillermo Parra-Bernal 
    SAO PAULO, Feb 19 (Reuters) - Sete Brasil Participações SA 
plans to file for bankruptcy protection if state-controlled oil 
producer Petróleo Brasileiro SA  PETR4.SA , the rig builder's 
sole client, fails to present a final lease contract proposal in 
a week's time, three sources with direct knowledge of the matter 
said on Friday. 
    Both Sete Brasil and Petrobras declined to comment. 
    Petrobras, as the oil company is known, asked for seven days 
to deliver the proposal, shareholders of Rio de Janeiro-based 
Sete Brasil were told at a meeting earlier on Friday, said the 
sources, who requested anonymity to speak freely about the 
matter. 
    Luiz Carneiro, Sete Brasil's chief executive officer, 
delivered the message on behalf of Petrobras, the sources said. 
The fate of Sete Brasil, which was created in 2008 by Petrobras, 
pension funds, banks and other partners to build the world's 
biggest deep-water drilling fleet order, hinges on Petrobras' 
willingness to sign a long-term rent contract for the rigs. 
    Shareholders, who have their combined 95 percent stake in an 
investment vehicle known as FIP Sondas, will request a judge to 
accept their bankruptcy protection request should Petrobras fail 
to deliver the proposal, as promised, one of the sources said.  
The shareholders include pension funds Previ, Funcef and Petros, 
banks Grupo BTG Pactual SA  BBTG11.SA  and Banco Bradesco SA 
 BBDC4.SA , and investment firms. 
    "If no proposal is extended within the agreed deadline, Sete 
Brasil will ask for creditor protection," the same source said. 
    A bankruptcy filing by Sete Brasil would be devastating not 
only for the banks, funds and investors that backed the project, 
but also for dozens of shipbuilders and manufacturers supplying 
the company. More than 800,000 local shipbuilding jobs could be 
lost, sparking about 40 billion reais ($10 billion) in losses 
for the economy, the same source added. 
    Sete Brasil owes about 18 billion reais to banks, a national 
workers' severance fund and suppliers, according to company 
data.  
    Other Sete Brasil shareholders include Caixa's workers 
pension fund Funcef, EIG Global Energy Partners and Fundação 
Valia, the workers' pension fund of mining company Vale SA 
 VALE5.SA . None of them had an immediate comment.  
         
    AT LOGGERHEADS 
    The $80 billion, government-backed project began to sour in 
2014 when Petrobras and Sete Brasil became engulfed in a massive 
corruption scandal in Brazil. Fallout from the so-called 
Operation Car Wash scandal deprived Sete Brasil from obtaining 
long-term financing, forcing Brazil's top lenders to roll over 
about 14 billion reais ($3.48 billion) in loans for the past 
1-1/2 years. 
    Petrobras Chief Executive Officer Aldemir Bendine and 
officials at the company's exploration and production division 
are at loggerheads over the Sete Brasil contract, Reuters has 
reported, citing sources. The tussle has forced BTG Pactual and 
creditors, which include Itaú Unibanco Holding SA and Bradesco, 
to write off part of the value of their investments and loans to 
Sete Brasil.  urn:newsml:reuters.com:*:nL1N12Q16G  urn:newsml:reuters.com:*:nL1N10Z19P  urn:newsml:reuters.com:*:nL1N0YX1L9 
    This month, Itaú  ITUB4.SA , Bradesco, Banco Santander 
Brasil SA  SANB11.SA  and state lenders Caixa Econômica Federal 
 CEF.UL  and Banco do Brasil SA  BBAS3.SA  agreed to renew 
almost 15 billion reais' worth of standstill loans until May in 
exchange for access to 4.3 billion reais in collateral at 
government-backed naval fund CDFMM, two of the sources said. 
    According to the sources, about 2.8 billion reais were 
already withdrawn from the fund, with the remaining likely to be 
available within days.  
    Petrobras, which owns 5 percent of Sete Brasil, also 
requested Sete Brasil to replace restructuring adviser Alvarez & 
Marsal Holdings LLC with Rothschild & Co, two of the sources 
said.  
 ($1 = 4.0199 Brazilian reais) 
 
 (Reporting by Guillermo Parra-Bernal; Editing by Andrew Hay and 
Matthew Lewis) 
 ((guillermo.parra@thomsonreuters.com; +55-11-5644-7714; 
+55-119-8346-7153; Reuters Messaging: 
guillermo.parra.thomsonreuters.com@reuters.net)) 
 
Keywords: BRAZIL CORRUPTION/PETROBRAS SETE BRASIL