Petrobras Supplier Schahin Said Seeking Loan to Avert Bankruptcy

Petrobras Supplier Schahin Said Seeking Loan to Avert Bankruptcy

By Peter Millard Francisco Marcelino Filipe Pacheco

11:46 AM BRT
April 6, 2015

Schahin Petroleo & Gas SA, an offshore rig and platform supplier to Petroleo Brasileiro SA, is seeking a credit line to avoid filing for bankruptcy protection after getting blocked from new contracts by the state-run producer, said two people familiar with the matter. Bonds tumbled.

Schahin, which supplies Rio de Janeiro-based Petrobras with drilling rigs and production platforms, is halting operations at some units because creditors have put claims on its assets, one of the people said, who asked not to be named because the information is confidential. The company could file for bankruptcy protection, known as judicial recovery in Brazil, as early as this week, the person said.

Schahin is among more than 20 companies that have been temporarily banned from bidding on new projects by Petrobras amid allegations that suppliers and builders paid bribes to inflate the value of contracts. HSBC Holdings Plc is suing affiliated company, Schahin Engenharia SA, for 173.6 million reais ($56 million) related to unpaid promissory notes.

Newspaper Estado de Sao Paulo reported the potential bankruptcy filing earlier Monday. Schahin and Petrobras didn’t provide comment when contacted by e-mail.

The company’s Schahin II Finance Co. notes due in 2022 tumbled 8.50 cents to 52 cents on the dollar at 10:10 a.m. in New York. That’s the biggest drop and the lowest price since they were sold in March 2012.

Last month, Fitch Ratings cut Schahin II Finance by two notches to BB-, three steps below investment grade, citing higher leverage and more difficult credit conditions.

The $651.5 million in notes are backed by flows related to a long-term charter and services agreement signed with Petrobras for a drill ship called Sertao. The company has halted operations at five rigs leased to Petrobras, Veja reported Monday, without saying where it got the information.

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