Davis Polk acting for bondholders in Odebrecht restructuring
Davis Polk & Wardwell is advising an ad hoc group of bondholders of Odebrecht Engenharia e Construção (OEC) on the restructuring of approximately $3 billion of OEC’s notes
OEC filed an application on August 19 for confirmation of its extrajudicial reorganisation plan with the São Paulo Bankruptcy and Reorganization Court to have its restructuring transactions approved in Brazil.
The filing follows the successful completion of a consent solicitation through which holders of more than 73% of all outstanding notes consented to the restructuring.
The filing and agreed transactions are the result of extensive negotiations between the ad hoc group and OEC to develop and implement a reorganisation for OEC, Davis Polk said.
As consideration in the restructuring, noteholders will receive a combination of new senior notes as well as an equity-linked instrument to be issued by a new holding company that will sit directly above OEC.
The transaction will result in significant deleveraging of OEC’s balance sheet and provide cash-flow relief for the company in the form of extended note maturities and the ability to pay some or all interest in kind rather than in cash during the first five years after issuance.
OEC’s new notes will also provide noteholders with higher interest rates, additional guarantees, enhanced covenants, an excess cash flow sweep, and other improved debt terms relative to existing notes, as well as a share of OEC equity distributions until 2058.
As part of the restructuring, OEC will also modify its governance structure to provide for, among other things, enhanced independent representation and involvement on its board. The restructuring is expected to be fully implemented following, among other things, judicial approval of the restructuring plan in Brazil and recognition in the US.
OEC is one of the largest engineering and construction businesses in Latin America, historically operating in 16 countries. In addition to its financial restructuring, OEC and certain of its affiliates have entered into numerous agreements in recent years to resolve liabilities relating to the so-called ‘Operation Car Wash’ corruption scandal and re-establish the company’s market-leading position.
OEC pleaded guilty to corruption and bribery charges in a US court in 2016 relating to several companies and individuals in a number of Latin American countries.
“In representing the ad hoc group, Davis Polk has brought to bear its leading restructuring and capital markets and regulatory enforcement practices, as well as the firm’s substantial experience and strong relationships in the region,” the law firm said.
The Davis Polk restructuring team includes restructuring partner Timothy Graulich and associates David Schiff and Jarret Erickson, and partners Tatiana R. Martins, Antonio J. Perez-Marques and associate Trishna Velamoor, who are providing litigation advice, while the corporate team includes partner Manuel Garciadiaz, counsel Drew Glover and associates Rebecca L. Roman, Richard Corbett and Amanda Rae Schwarzenbart.
The team is based across the firm’s New York, Northern California and São Paulo offices.
