OAS SA, a Brazilian construction giant that is embroiled in a corruption scandal involving state-operated oil producer Petrobras Brasileiro SA, has missed an interest payment on $400 million in debt, sending its bond values tumbling. São Paulo-based OAS said on Jan. 2 that its OAS Finance Ltd. unit skipped a $16 million interest payment on its $400 million in 8% senior unsecured notes due July 2, 2021, which was due that day. For now, OAS has a 30-day cure period. Fitch Ratings Inc., however, suggested in a Jan. 2 report that OAS is also likely to forgo principal and interest payments that were due today on its BRL100 million ($36.72 million) in senior unsecured floating rate bonds due April 11, 2016. An OAS spokesman didn't respond to requests for comment Monday. OAS' debt issues come as Brazilian officials are investigating the company, several other Brazilian construction companies and oil producer Petrobras, alleging that the construction firms used bribery to obtain contracts from the oil producer. Petrobras has postponed filing financial reports based on the investigation, and hedge fund Aurelius Capital Management LP is attempting to garner support from other bondholders to reach the 25% threshold necessary to declare a default based on the delay. Some of Petrobras' bonds have sunk on the news. For example, Petrobras's $1.75 billion issuance of 5.625% senior unsecured bonds due May 20, 2043, was trading around 79.5 to 81.5 on Monday, down from 82 to 84 on Dec. 26. The oil producer has about $53.6 billion in bond debt outstanding, by Aurelius' estimate. For its part, OAS is likely trying to conserve capital to continue operating as it negotiates a debt restructuring with its creditors, Fitch wrote. The 8% bonds on which OAS Finance missed a payment are also guaranteed by the parent company and its Construtora OAS SA and OAS Investimentos SA subsidiaries. The 8% notes traded around 32 cents on the dollar early Monday but later traded at 12.13, according to data from Bloomberg Finance. Similarly, OAS Finance's $500 million in 8.875% senior unsecured perpetual notes, which have no maturity date, were trading around 11 to 12 on Jan. 5, down more than 62% from 31.75 on Dec. 30. OAS' president, José Aldemário Pinheiro Filho, was among the executives from various companies who were arrested as part of the investigation, according to a Nov. 14 report in Brazilian newspaper O Globo. Before the arrest, OAS' bonds were trading higher. For example, on Nov. 13, the OAS Investimentos subsidiary's $875 million in senior unsecured notes due Oct. 19, 2019, were trading around 97, according to data from Bloomberg Finance. The construction company's problems extend beyond the Petrobras scandal. "OAS Group is facing difficulties in accessing credit lines and, in the case of Construtora OAS SA, in dealing with its clients in terms of receiving payments and recognition of claims from important projects," Fitch said. The ratings agency warned that it believes it is "unlikely" that all of the company's creditors will agree to renegotiate their debts, and said potential difficulties with creditor negotiations could lead to a bankruptcy filing. Fitch also noted that OAS is evaluating asset sales to boost its liquidity. The analysts downgraded OAS SA's default rating to C from B+ based on the missed interest payment and the likelihood of imminent default on that and other payments. A formal default could accelerate the maturity of other debts issued by the parent company and its Construtora OAS SA and OAS Investimentos SA units, Fitch said. OAS SA has issued BRL170 million ($62.69 million) in senior unsecured floating rate bonds due April 10, 2015; BRL100 million in senior unsecured floating rate bonds due April 11, 2016; and BRL347.35 million in secured 9.47% notes due July 21, 2024. Construtora OAS SA has a $150 million unsecured letter of credit bearing interest at a rate of Libor plus 250 and maturing Feb. 19, 2017. Read more from:
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