SAO PAULO (Reuters) - Brazilian engineering conglomerate Odebrecht SA has not yet secured new bank loans that it has requested to honor bond payments due next week, four sources with knowledge of the matter said, raising the possibility of a default triggering some $3 billion in early repayments.
Talks with Brazil’s biggest lenders, including Banco Bradesco SA (BBDC4.SA), Itaú Unibanco Holding SA (ITUB4.SA), Banco Santander Brasil SA (SANB11.SA) and state-controlled Banco do Brasil SA (BBAS3.SA) are still ongoing, but it has been difficult to accommodate the different interests among lenders, the sources said this week.
If Odebrecht [ODBES.UL] fails to line up fresh loans, it is not clear the group will have enough cash to honor a 500 million reais ($150 million) 2018 bond repayment due on April 25, three of the sources said. Other bond-related payments over the next 10 days from Thursday amount to $11 million.
In a statement to Reuters on Thursday, Odebrecht said it was engaged in talks with its creditors. It did not respond to questions about its plans for bond payments due next week. The banks declined to comment.
Odebrecht was forced to deleverage rapidly after it was ensnared in Brazil’s largest-ever corruption probe. It has admitted to paying bribes from Peru to Panama and has paid $3.5 billion in settlements in the United States, Brazil and Switzerland.
The last financial statement available to creditors showed a $700 million cash position in September, one of the sources said, but its current cash position is unclear.
A final decision among Odebrecht’s creditors is expected early next week, the sources added.
Cross default clauses on the bonds mean that a default on next week’s payments would trigger early repayment of almost $3 billion of dollar-denominated bonds issued by the Brazilian company, said Sarah Leshner Carvalho, director for Latin America corporate credit research at Barclays.
In recent weeks, Odebrecht has urged banks to extend new loans amounting to 3.2 billion reais ($945 million), arguing that its stake in petrochemical company Braskem SA (BRKM5.SA), has grown in value as the shares climbed 56 percent in the last 12 months.
Odebrecht’s 38 percent stake in Braskem is already pledged as collateral to the banks and its dividends are also directed to creditors to serve part of Odebrecht’s total 70 billion reais ($21 billion) in debt.
In previous debt refinancing, Odebrecht had agreed to accelerate the sale of assets to repay debt.
So far, it has committed to selling 12 billion reais in assets, but has only received around 7 billion reais, one of the sources said. The main problem is in Peru, where the conglomerate has not received proceeds of the sale of its Chaglla hydropower plant and Olmos irrigation unit.
That has left Odebrecht pressing banks for a lifeline, with limited success so far.
Some private-sector banks have agreed to provide new loans to Odebrecht if they get preferential rights as creditors, a condition which displeased other lenders, two sources said.
Other banks have refused to provide more cash, but at least one waived debt limits previously imposed, according to another source.
In the talks with creditors, Odebrecht has agreed to sell its Braskem stake within two years to repay the debt, according to one of the sources.
Odebrecht has discussed hiring the Brazilian unit of investment bank Moelis & Co as advisor, two of the sources said, but the bank would only have a mandate in the event of a debt restructuring.
Reporting by Carolina Mandl and Tatiana Bautzer, Additional reporting by Paul Kilby and Jessica di Napoli in New York, Aluisio Alves in Sao Paulo, Editing by Rosalba O'Brien