Brazil’s Lupatech gets nod for second group restructuring09/12/2015
Brazil’s Lupatech gets nod for second group restructuring
Wednesday, 9 December 2015 (1 hour ago) by Toby Luckhurst
Creditors of Brazilian oil logistics company Lupatech Group have agreed to the terms of a new group restructuring plan, its second in as many years, which extends to 11 different companies.
The new plan was approved at a meeting held on 18 November, five months after the company filed for insolvency. It is now pending approval from the First Bankruptcy Court of the State of São Paulo, which is expected to come in the next few weeks. Holding company Lupatech SA and 10 of its subsidiaries, including one Cayman Islands company, are involved in the plan.
Under Brazilian law, the debtor has a 180-day stay period from the date of its insolvency filing to obtain its approval. Felsberg Advogados partner Paulo Fernando Campana Filho, who is representing Lupatech in the restructuring, says the plan was approved relatively quickly. “It’s common for a company to take even longer than the stay period to approve the plan,” he says. Filho also says Lupatech will file a Chapter 15 proceeding in the US after the Brazilian court confirms the plan. Brazil’s Mattos Rodeguer Neto Victória Advogados is acting as counsel to the judicial administrators, Alta Administração Judicial.
Lupatech’s main client is Petrobras, Brazil’s state-owned oil company, which is embroiled in a very public bribery and corruption scandal involving executives and politicians. Petrobras is the world’s most indebted company, with current obligations standing at US$128 billion.
Lupatech filed its second bankruptcy in May, citing the “drastic” drop in oil prices in a statement. “The decision to request court-supervised reorganisation aims to protect the value of the company’s assets…its social function and stimulation of economic activity and to meet the interests of the creditors and shareholders,” it read.
The creditor-approved plan includes a number of options for over 4,000 secured and unsecured creditors. Secured creditors can choose between quarterly repayment of debt over 18 years, after a five-year hiatus, with annually accrued 3 per cent interest; a debt-to-equity conversion; or early repayment of debt if the company sells assets – or even the chance to take the assets themselves. Labour claims will be paid within one year from court approval. Unsecured creditors, including bondholders, have the same options, but could also to take quarterly repayment over a twenty-year period at 3 per cent interest, which could accelerate if there is a “liquidity event” – such as the company being bought or merged. The plan also allows the sale of production units free of all debts.
This second restructuring comes just over a year after Lupatech completed a pre-pack reorganisation, culminating in a 1 billion reais share capital increase in 2014. That plan involved a debt-for-equity swap, issuing new notes to bondholders worth 15 per cent of the outstanding debt and new shares representing 85 per cent of the bonds’ value. The 2014 insolvency also entailed a Chapter 15 filing in the Southern District of New York Bankruptcy Court, in which Shearman & Sterling LLP represented Lupatech.
Counsel to Lupatech Group
In-house counsel – João Marcos Cavichioli Feiteiro
Partners Thomas Benes Felsberg and Paulo Fernando Campana Filho and associates Clara Moreira Azzoni, Pedro Henrique Torres Bianchi, Thiago Dias Costa, Eduardo Luiz Kawakami and Solano Magno Deboni Neiva in São Paulo.
Counsel to Alta Administração Judicial
Mattos, Rodeguer Neto, Victória Advogados
Partners Afonso Rodeguer Neto, José Carlos Mattos and José Eduardo Victória in São Paulo.