June 7, 2017 / 3:00 PM / 2 months ago

Triunfo sues Brazil watchdog over toll road delay -sources

SAO PAULO, June 7 (Reuters) - TPI Triunfo Participações & Investimentos SA has sued a Brazilian regulator over delays in a toll road project that forced the debt-laden infrastructure firm to embark on a painful restructuring, two people familiar with the matter said.

Last week, Triunfo filed a lawsuit at the 5th Civil Court of Brasilia against transportation industry watchdog ANTT, claiming it breached terms of a licensing contract to build and operate a tranche of the BR-040 highway, the people said.

According to the people, the agency must have automatically lengthened Triunfo's road concession after the government missed payments on the project. Both the company and government agencies discussed contractual terms of the BR-040 project, which includes construction of Brazil's longest highway tunnel in Rio de Janeiro state, for three years.

In the lawsuit, Triunfo seeks a reimbursement of a minimum 262 million reais ($80 million) and court permission to stop work on the project until contractual terms are fine-tuned, the people said.

The situation reflects mounting legal and operational risks facing infrastructure companies in Brazil, where the government has for decades proved to be an onerous and sometimes mercurial partner, the people said.

One of them said delays and contractual problems in the BR-040 project are responsible for heavy cash burn at toll road unit Concer and, ultimately, a Triunfo default on an 800 million-real loan from state development bank BNDES last year. BNDES said last week that it had started foreclosure procedures on the loan.

São Paulo-based Triunfo declined to comment. The media office of Brasilia-based ANTT did not have an immediate comment. The sources could not be identified because of the sensitivity of the issue.

Over the past couple of months, Triunfo and creditors have discussed ways to allow the company to keep cash from potential asset sales while downsizing further, sources told Reuters on May 11. An accord would prevent BNDES and other Triunfo creditors from tapping proceeds from Triunfo's divestitures to get their loans repaid immediately.

Without an agreement with creditors, Triunfo could see potential asset sales at jeopardy.

Reuters reported on March 27 that MSC Mediterranean Shipping was likely to exercise a right of first refusal to buy Triunfo's stake in the PortoNave port terminal for an equivalent of 12 times expected operational earnings. Apart from PortoNave, Triunfo is looking to sell stakes in Brazil's Viracopos international airport and a hydropower dam.

Triunfo borrowed heavily in recent years to participate on a massive infrastructure investment plan that collapsed as Brazil's worst recession ever eroded public finances.

$1 = 3.2773 reais Editing by Daniel Flynn, Bernard Orr

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