Schahin Petroleo & Gas SA, a rig and platform supplier to Brazil’s state-run producer, is seeking a credit line to avoid filing for bankruptcy protection, said two people familiar with the matter. Bonds tumbled.
Schahin, which supplies Petroleo Brasileiro SA with offshore drilling rigs and production platforms, is halting operations at some units because creditors have put claims on its assets, one of the people said, who asked not to be named because the information is confidential. The company could file for bankruptcy protection, known as judicial recovery in Brazil, as early as this week, the person said.
The company’s Schahin II Finance Co. notes due in 2022 tumbled 9.50 cents to 51 cents on the dollar at 12:28 p.m. in New York. That’s the biggest drop and the lowest price since they were sold in March 2012. The $651.5 million in notes are backed by flows related to a long-term charter and services agreement signed with Petrobras for a drill ship called Sertao.
Newspaper Estado de Sao Paulo reported the potential bankruptcy filing earlier Monday.
The company has halted operations at five rigs leased to Petrobras, Veja reported Monday, without saying where it got the information. Schahin declined to comment on a potential bankruptcy filing and the status of is rig fleet in an e-mailed response. Petrobras didn’t provide comment when contacted by e-mail.
Last month, Fitch Ratings cut Schahin II Finance by two notches to BB-, three steps below investment grade, citing higher leverage and more difficult credit conditions.
The group’s engineering unit, Schahin Engenharia SA, is among more than 20 companies that have been temporarily banned from bidding on new Petrobras projects amid allegations that suppliers and builders paid bribes to inflate contract values. HSBC Holdings Plc is suing Schahin Engenharia for 173.6 million reais ($56 million) related to unpaid promissory notes.