The Atlântico Sul Shipyard (EAS), controlled by Camargo Corrêa and Queiroz Galvão, seeks alternatives to strengthen its capital structure and ensure its survival. Valor has learned that the Apollo fund, a partner in the Starboard business restructuring consultancy, is considering bidding for EAS and may even take control of the shipyard. The shipping company Satco is another candidate to invest in the shipyard and could bring with it a portfolio of ship orders.
New investor or controller in EAS will require at least 8 to 10 months to be approved. “It’s not a simple operation,” one source said. In any case, the offer of an investor for the yard will need support from the National Bank for Economic and Social Development (BNDES). BNDES is the main creditor, with R $ 1.2 billion in loans – 75% of the total EAS debt, of R $ 1.6 billion. BNDES, EAS and Starboard did not comment.
If discussions with investors do not come to fruition, there is a risk that the EAS will have to seek court protection against creditors in 2019. The shipyard is not producing and has granted collective vacation to the 3,600 employees until 11 June due to shortages of inputs as a result of the truckers’ strike.
With no new order book, EAS faces financial difficulties: it had a loss of R $ 466 million in 2017. And it should require a new contribution from the shareholders later this year.
Camargo Corrêa is not willing to participate with new contributions in EAS and Queiroz Galvão is in a delicate situation with debts in the order of R $ 10 billion, and problems in the Court of Audit of the Union (TCU) . In addition, the two shareholders still find restrictions to access credit from banks for new investments due to Lava-Jato.
It is in this complex context that the Apollo fund is considering in making an an offer for EAS. Apollo may become owner of the shipyardyard. Conversations with the fund, though preliminary, are one of the most advanced alternatives at the moment. There is still no binding offer from Apollo, but may occur in the short term.
The yard still has five ships for delivery to Transpetro, the Petrobras logistics subsidiary, by mid-2019. Of the original lot of 22, seven were canceled when Pedro Parente took over the state-owned oil company in 2016.
EAS would have needed to renew its order book earlier this year, which did not happen, making the company’s situation more and more delicate. One of the alternatives that EAS has been seeking for some time to continue operating involves the transaction with the shipping company Satco, interested in building five oil tankers to service Petrobras.
The deal has not advance as fast as thought, but Satco remains in the loop, and can also make an offer to enter the capital of EAS. Linked to English capital, it signaled that it would take up a good part of the shipyard’s debt with the BNDES, but the transaction with the EAS partners did not go further. Today, it is unclear whether BNDES would accept proposals from Apollo or Satco involving control of EAS. The bank is demanding the shareholders’ actual collateral in this type of transaction.
The new EAS partners, as well as the current shareholders, are interested in renegotiating the financing conditions contracted with BNDES in terms of costs and deadlines. What EAS seeks, therefore, are options for continuity. If you want to guarantee a new monies, you need guarantees from financial resources, which is not available today. Although it has generated positive cash, it can not afford to pay the full cost of debt service. In the case of BNDES, the debt of R $ 1.2 billion has a term of 20 years, with four grace periods and 16 years to pay. EAS considers it to be an expensive debt, which would need to be renegotiated.
The yard’s capitalization is “pressing issue” if EAS wants to keep operating. The entry of a partner in the yard becomes easier if it is someone with a “bigger” balance sheet because it facilitates to raise funds with banks. The shipyard’s debt to BNDES originates from on lending of the Merchant Marine Fund (FMM), but the risk of the operation is the financial agent, in this case the development bank. “Eventually, the new controller would have to discuss new credit with BNDES and pre-pay the FMM,” a source said.
In total, EAS received investment of R $ 3 billion and after many difficulties managed to qualify labor and gain productivity gains. Today, the shipyard has reached 70% to 75% of the learning curve, and operates with production of five ships per year. However, sources say a yard can not survive if it does not have local content support of at least 40% to 45%.