Bondholders of Eike Batista’s OGX Petroleo & Gas Participacoes SA, the oil-production company that may run out of cash this month, hired Rothschild to advise on a debt restructuring, a person with direct knowledge of the matter said.
Rothschild, Jefferies Group LLC, Moelis & Co. and FTI Consulting Inc. (FCN:US) were competing to advise the bondholders’ committee, which is led by Pacific Investment Management Co. and other international funds, people familiar with the matter said this week. Rothschild won the assignment, one of the people said today, asking not to be identified because the selection process is private.
Officials at Rothschild and Pimco declined to comment on the hiring.
OGX’s bonds, the worst performing emerging-market debt this year, have tumbled on deepening losses and missed production targets. Cash reserves plunged 72 percent as writedowns generated a record second-quarter loss of 4.7 billion reais ($2 billion), the Rio de Janeiro-based company said in a statement last week. OGX will run out of cash by the end of this month, based on the pace of decline in the past year, according to data compiled by Bloomberg.
OGX, controlled by Batista, faces interest payments of about $45 million on its outstanding bonds in October and $110 million in December, and “we believe the company’s cash sources will not be sufficient to cover these commitments,” Renata Lotfi, an analyst at Standard & Poor’s rating company, said in a statement last week.
The company had cash of $326 million at the end of the second quarter, almost equal to its capital spending of $316 million in the period, OGX said last week. It hired Blackstone Group LP “for the ongoing evaluation of its capital structure,” according to an Aug. 14 regulatory filing.
The bondholders’ committee represents investors in more than 50 percent of the total $3.6 billion of bonds outstanding, the people said. Creditors will demand a new controlling shareholder to replace Batista if the company attempts to impose losses through a bond swap or buyback, one of the people said.
Batista is selling pieces of his energy, commodities and logistics companies after his estimated fortune plummeted from $34.5 billion in March of last year to less than $1 billion, according to data compiled by Bloomberg.
On May 8, Malaysia’s Petroliam Nasional Bhd. said it would pay $850 million for a 40 percent share in the Tubarao Martelo oil field owned by OGX.
Mubadala Development Co., the Abu Dhabi sovereign-wealth fund, is in talks to buy some of Batista’s assets for about $1 billion, two people with direct knowledge of the matter said this week.
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