March 30, 2017 / 6:36 PM / 10 months ago

Exclusive - Brazil conglomerate Odebrecht mulls IPO after overhaul

SAO PAULO (Reuters) - Odebrecht SA, the family-controlled engineering conglomerate ensnared in Brazil’s worst corruption scandal ever, is considering going public once it finalises a thorough overhaul of corporate governance practices, a senior executive told Reuters on Thursday.

An initial public offering remains one of several options the group and the namesake family that controls it are analysing as part of a process to implement stricter ethical and operational procedures, said board member Sergio Foguel, who also presides over Odebrecht’s compliance council.

While declining to discuss alternatives aside from the IPO, Foguel said tougher compliance standards have prepared several of Odebrecht’s business divisions to weather a potential dearth of state contracts, which might translate into slower growth.

“This year we’ll be more focussed on re-examining and reinforcing our corporate values, which were not strong enough before,” Foguel said in an interview at Odebrecht’s São Paulo headquarters.

Odebrecht is the largest of Brazilian building groups accused of colluding to overcharge Petróleo Brasileiro SA (PETR4.SA) and other state-controlled firms for contracts, then using part of that to channel donations and bribes into Brazil’s former ruling Workers Party and domestic and international allies.

Rapidly resolving legal obligations related to the scandal, as well as paving the way for the partial exit of the Odebrecht family from the business will be key for Odebrecht to win new projects, raise cash and cut the group’s 76 billion reais (19.22 billion pounds) in net debt. The conglomerate is restructuring and reworking more than 40 billion reais in bank loans.

A 6.7 billion-real leniency deal that was signed off late last year stipulated that Odebrecht admitted guilt and offered information on bribes paid. Seventy-seven executives, including family patriarch and Chairman Emilio Odebrecht and his jailed son and the group’s former chief executive, Marcelo Odebrecht, agreed to make plea deals.

The group, which was founded in the mid-1940s by German-Brazilian engineer Norberto Odebrecht, is also negotiating graft-related fines with several Latin American countries.

    Such negotiations, which the group wants to conclude by June, would help Odebrecht prevent upcoming elections across the region from slowing planned asset sales, Reuters reported on Feb. 22.

    To weather fallout from the scandal and the impact of a three-year economic slowdown throughout Latin America, Odebrecht has also cut costs and refinanced obligations at some cash-strapped subsidiaries.

    Talks with creditors to restructure oil drilling firm Odebrecht Óleo & Gás SA’s obligations could be concluded as early as April, sources told Reuters this week.

    The group is also selling assets and projects including Perú’s Chaglla power dam, Colombia’s Ruta del Sol highway project, several subway and toll road licenses as well as a stake in Rio de Janeiro’s international Galeão airport.

    Editing by Guillermo Parra-Bernal and Richard Chang

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