Thursday, 21 April 2016

Shareholders of Sete Brasil, top client of Keppel and SembMarine, approve plan to file for bankruptcy

SAO PAULO (BLOOMBERG) - Shareholders of oil-rig supplier Sete Brasil Participacoes agreed to a plan to file for bankruptcy protection after its single client, Brazil state oil giant Petrobras, failed to present a viable book order.

A Sete Brasil official confirmed on Wednesday (April 20) that investors are backing the plan and declined to elaborate. Shareholders had set that day as a deadline for Petroleo Brasileiro or Petrobras to propose a book order that could pay back the capital they had injected into the company, according to sources. Petrobras, which is a shareholder and Sete's only client, didn't vote, they said.

The company may list about 18 billion reais (S$6.86 billion) in liabilities, one of the people said. Law firm Sergio Bermudes Advogados in Rio de Janeiro will work on the bankruptcy plans, according to the people.

Keppel Corp, the world's largest builder of oil rigs, this week posted a 41 per cent fall in quarterly profit, its fourth straight decline, after the deferment of some projects and suspension of contracts related to its biggest single client Sete Brasil.

Sete stopped paying Keppel last year on some US$4.9 billion worth of rig orders. Keppel announced a S$230 million charge in January on the delinquent projects.

Sembcorp Marine meanwhile has seven drillships worth US$7 billion in total on its order books from Sete and has set aside S$329 million.

A spokesman for the law firm declined to comment, and a representative of Petrobras didn't immediately respond to a message seeking comment.

The oil-rig operator was created in 2011 to build the world's biggest deep-water drilling fleet for Petrobras, which later cut the number of rigs it planned to lease from Sete to 10 from 28 amid plunging oil prices and the nation's biggest-ever corruption probe. The probe saw several of Petrobras's former executives jailed.

The smaller order wouldn't be enough to repay 8.25 billion reais that shareholders invested in Sete Brasil, forcing them to inject more money into the business, the people said.

The shareholders, which include Grupo BTG Pactual and Banco Santander, among others, have been discussing the bankruptcy filing for at least three months, according to people involved in the talks. Creditors, which loaned about US$3.6 billion and include Banco Bradesco SA and Itau Unibanco Holding SA, had repeatedly renewed a standstill loan as Brazil's BNDES development bank froze a 10 billion-real loan to Sete Brasil last year. The current standstill will mature next month.

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  1. More provisioning at next quarter will drag down earning to losses?

    1. Offshore is almost dead. I think the only spot still glowing is LNG and FPSO.

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