Small creditors take legal action over OGX restructuring
A group of small creditors in the bankrupt former flagship company of Brazilian billionaire Eike Batista have initiated legal action against Deutsche Bank alleging the institution acted unfairly during restructuring of the oil producer’s debts.
The lawsuit, filed in the Supreme Court of the State of New York, alleges Deutsche Bank, the trustee of $3.6bn of defaulted notes issued by OGX Oleo e Gas Participações, favoured majority bondholders in a deal to restructure the company’s debts.
“OGX agreed to push through a plan of reorganisation by which Deutsche Bank and its affiliates would make distributions of up to 75 per cent . . . to the majority noteholders and only 13 per cent to minority noteholders,” said the suit, filed by a group of US, UK, Cayman Island and Irish registered funds. They said they collectively held about $82m in principal value of the notes while “majority noteholders” held 55 per cent.
Deutsche Bank was not immediately available for comment.
Mr Batista’s oil and gas, logistics and mining interests collapsed last year when OGX’s two main producing fields turned out to be duds.
The loss of OGX as the group’s planned cash cow led to the bankruptcy or sale of sister companies, including oil services firm OSX.
Many investors blame Mr Batista – once Brazil’s richest man – for the group’s downfall. The entrepreneur, who has since largely removed himself from public life, is being investigated by Brazil’s market regulators over insider trading claims.
Regulators at CVM, Brazil’s version of the US SEC, claim the tycoon hid problems at his oil company from investors for 10 months and used Twitter to manipulate the company’s share price. Mr Batista has denied the allegations.
The bondholders suing Deutsche Bank include funds identifying themselves as Capital Ventures International, Brennus Fund, Susquehanna Ireland, and VR Global Partners.
“As a result of Deutsche Bank’s breaches and disproportionate distributions, plaintiffs will suffer significant damages, recovering only approximately 10.5 per cent of the principal of their notes, while the majority noteholders recover no less than 36 per cent of their principal,” the lawsuit said.