Petrobras independent director to quit board

Petrobras independent director to quit board

http://www.ft.com/cms/s/0/4791990e-d7e4-11e4-80de-00144feab7de.html#ixzz3W3O0dFdF
March 31, 2015 11:02 pm

Joe Leahy and Samantha Pearson in São Paulo/FT

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©EPA/Sebastiao Moreira

Unrest: the Petrobras revelations have sparked protest

An independent director of Brazil’s Petrobras has voiced a vote of no-confidence in the government’s handling of problems at the corruption-ridden state-controlled oil company by refusing to stand for re-election next month.

Mauro Rodrigues da Cunha, who was elected to the board two years ago with the support of international institutional fund managers, announced his decision as one of Petrobras’ biggest contractors, OAS, filed for bankruptcy on Tuesday.

Mr Cunha indicated in a statement that the oil company’s failure to set a date to release audited results for 2014 — considered essential to avoid a technical default — was to blame for his decision.

“In view of my personal frustration with the incapacity of the controlling shareholder [the government] to show the necessary degree of urgency to reverse the innumerable problems that have left Petrobras in its current situation . . . I state that I do not intend to put my name forward for another term,” Mr Cunha said in a statement.

The announcement, a rare public expression of discontent from a serving director on the oil company’s board, will be worrying for investors in Brazil’s most important enterprise.

The sudden exit of independent directors has preceded negative events at other companies in Brazil — the independent directors of OGX, the oil flagship of former Brazilian billionaire Eike Batista, fled the board only months before the company went bankrupt in 2013.

Petrobras is under fire over allegations that former directors conspired with contractors and politicians mostly from the ruling Workers’ Party coalition of President Dilma Rousseff to receive kickbacks in return for business.

In view of my personal frustration with the incapacity of the controlling shareholder to show the necessary degree of urgency to reverse the innumerable problems that have left Petrobras in its current situation . . . I do not intend to put my name forward for another term

– Mauro Rodrigues da Cunha, Petrobras director

PwC, the company’s auditor, has refused to sign off on its accounts for last year, placing it in danger of a technical default with lenders unless it can release them by a final deadline of the end of May.

Petrobras is planning to hold an annual general meeting on April 29 at which it is expected to appoint a market-friendly candidate, Murilo Ferreira, the present head of iron ore miner Vale, as chairman.

But in a notice announcing the meeting, Petrobras dismayed the market by saying it would not be releasing the long-delayed third-quarter and annual financial results for 2014 and refusing to set a date for doing so.

Mr Cunha, a former fund manager at Franklin Templeton, was the first true representative of minority shareholders to be elected to Petrobras’ 10-member board.

He said in his statement he was confident that “the community of shareholders and staff” would defend Petrobras against further “abuses” committed against the company.

Brazilian builder OAS’s bankruptcy protection filing represents the biggest company so far to collapse as a result of the corruption scandal.

OAS, which is building Belo Monte in the Amazon — the world’s third-largest dam — said it also planned to sell off several assets, including its stake in Invepar, the company developing Brazil’s international airport in São Paulo.

Since OAS’s chief executive was arrested in November last year over his alleged involvement in the bribery and kickback scheme, the 40-year-old company has been cut off from capital markets and forced to miss debt payments.

OAS’s announcement comes less than a week after construction company Galvão Engenharia filed for bankruptcy.

Copyright The Financial Times Limited 2015.

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