Third Petrobras contractor files for bankruptcy

OREANDA-NEWS. April 01, 2015. A massive corruption scandal centered on Brazil's state-controlled Petrobras has pushed a third Brazilian contractor into bankruptcy, casting doubt on a wide spectrum of infrastructure projects across the region.

OAS filed for bankruptcy today in a Sao Paulo state court on behalf of nine of the group's companies. The filing foresees the restructuring of R7bn (\\$2.2bn) in total debt.

The company says it will sell off its stake in subsidiaries, including its oil and gas construction arm and a 24.4pc stake in Brazilian logistics giant Invepar, to meet creditors' claims.

OAS says the decision to shed assets will also allow the company to return to its core business of large-scale civil construction.

Creditors have already obtained a court order blocking a portion of OAS's 25pc stake in Invepar.

As with Alumini and Galvao Engenharia, two other Brazilian firms that filed for bankruptcy protection earlier this year, OAS says its access to much-needed credit dried up at the end of 2014.

"Since the start of the investigation at Petrobras, financial institutions have systematically restricted firms' access to the resources needed for the maintenance of works," OAS Investimentos chief executive Fabio Yonamine said today. "With almost 40 years in the market, OAS felt forced to kick-start a healthy process of debt restructuring that will allow it to preserve thousands of jobs."

In January, OAS defaulted on around \\$33mn in combined principal and interest due on bonds and long-term debt despite having around \\$313mn in cash.

OAS is among some two dozen firms banned from bidding on future Petrobras contracts on account of their alleged role in a massive kickback scheme that diverted funds from inflated work contracts to politicians' coffers.

The company denies any wrongdoing.

The financial troubles impacting the construction firms is sparking concerns that Brazil's biggest infrastructure projects could be paralyzed, jeopardizing \\$130bn in investment, according to a recent industry report.

OAS was a major contractor on many of Petrobras' downstream and midstream projects. The firm was also responsible for building two stadiums for Brazil's 2014 World Cup, both of which were excluded from today's bankruptcy filing.

Many of the contractors are also tied to projects for the 2016 Olympic Games to be held in Rio de Janeiro.

OAS has construction projects throughout Latin America, including Argentina, Bolivia, Chile, Colombia, Costa Rica, Ecuador, Peru, Trinidad and Tobago and Uruguay, and has operations in Angola, Equatorial Guinea, Guinea and Mozambique.

The company's main projects abroad include an LNG regasification project in Uruguay, the Lima Canta highway in Peru, and a new port in Mozambique to support Brazilian mining giant Vale's operations there.