OAS reaches reorganization plan agreement with noteholders, Brookfield

By Caroline Salls

Pittsburgh, Dec. 18 – OAS SA reached an agreement with some holders of, or managers of entities holding beneficial interests in, OAS Investments GmbH’s 8¼% senior notes due 2019, OAS Finance Ltd.’s 8% senior notes due 2021 and OAS Finance Ltd.’s 8 7/8% perpetual notes and Brookfield Asset Management Inc. regarding a plan of reorganization, according to a news release.

The plan was approved by creditors at a meeting held Thursday.

On Oct. 19, the company, the noteholders and Brookfield executed confidentiality agreements to facilitate discussions concerning OAS’ potential alternatives for a proposed restructuring and the terms under which it would implement a judicial sale process before the bankruptcy court in which Brookfield would offer to buy all of the shares of Investimentos e Participacoes em Infraestrutura SA (Invepar) owned by OAS.

On Oct. 22, the company’s representatives provided a fourth written restructuring term sheet. Noteholder representatives provided their own fourth written term sheet on Oct. 23.

Brookfield indicated at meetings held during the week of Oct. 19 that it would be willing to bid R$1.35 billion at the auction for the Invepar shares.

Amended financing

The parties also discussed proposed amended terms for debtor-in-possession financing that Brookfield would provide to OAS.

The amended DIP financing terms included a principal amount of R$225 million, an interest rate equal to the CDI rate plus 1,306 basis points, a maturity of 18 months, a commitment fee of no greater than 2% and a disbursement fee of no greater than 1% of the face amount of the DIP financing.

Asset sales

Company representatives also shared information with the noteholders regarding potential sales of assets held by OAS in its investment divisions other than the Invepar shares.

OAS said the only assets advancing with reasonable certainty toward a sale are its stakes in Samar – Solucoes Ambientais de Aracatuba SA, for which it executed a binding offer, as well as Arena Gremio and OAS Oleo e Gas SA, and that the total value expected to be derived from the sale of these assets would likely equal R$125 million to R$140 million.

The company said those sale proceeds would likely be sufficient to allow it to meet some of the plan obligations.

OAS also discussed the possibility of Invepar selling all or a portion of the assets of Lamsac or all or a portion of the equity interests in Lamsac held indirectly by Invepar in connection with the restructuring.

The parties agreed that the Lamsac sale could occur as long as it is made through the best offer within the scope of an all-cash sale bid process, with the net amount to be received by Invepar to at least be the greater of R$ 2 billion and an amount sufficient to repay in full some debentures for which Invepar is the obligor.

In addition, Brookfield must be allowed to tender in the bidding process, and Invepar must launch a mandatory early redemption process or a tender offer as called for in the indenture governing the Invepar debentures.

The proceeds from the Lamsac sale must be used within 30 days of receipt to pay the holders of the Invepar debentures in full in connection with the early redemption or tender offer.

Brookfield revisions

On Nov. 17, the parties discussed the revised terms that would be necessary for Brookfield to consider a transaction.

Those terms included Brookfield's right to terminate the offer if the results of due diligence are not considered satisfactory to Brookfield, its existing right to top in the DIP financing in conjunction with a termination of the stalking horse bid if the DIP financing matures on the date of the closing of the acquisition of the Invepar shares or six months after termination of the stalking horse bid, and in case the Invepar shares are sold to any third party during the six-month period during which there is no right to top, Brookfield would be owed a break-up fee equivalent to R$67.5 million.

Alternative structure

In light of the status of the discussions with Brookfield, OAS said it proposed that noteholders consider alternate reorganization plans.

In one such possible alternative, the company suggested that noteholders succeed to OAS’ position as a shareholder of Invepar and the noteholders become indirect shareholders of Invepar, possibly with a view to selling the Invepar shares at a later date.

In connection with the discussions related to the alternative reorganization plans, OAS provided a term sheet that would be implemented if the Invepar shares were not sold at the auction or otherwise.

During the week of Nov. 23, the noteholder representatives informed the company that, while the terms set in the alternative structure proposal were unacceptable, the noteholders were amenable to including provisions in the plan incorporating the alternative structure in modified form.

OAS said subsequent discussions yielded a revised and agreed-upon plan incorporating the alternative structure under which, if the Brookfield offer or an alternative offer is not selected as the winning offer at the Invepar auction, the Invepar shares will be transferred to a special purpose vehicle owned by specified creditors. That vehicle may seek to sell the shares at a later date.

OAS is a Sao Paulo-based construction company.

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