By Jeb Blount and Guillermo Parra-Bernal
RIO DE JANEIRO/SAO PAULO, Oct 16 (Reuters) - The ouster ofOGX's chief executive opens the door for embattled Braziliantycoon Eike Batista to exit the oil company and for OGX to seekbankruptcy protection, sources told Reuters.
Luiz Carneiro was replaced on Tuesday by Chief FinancialOfficer Paulo Simões Amaral as CEO of OGX Petróleo e GásParticipações SA. The move likely puts more power inthe hands of Brazil-based Angra Partners, the financial adviserhired by Batista to restructure the liabilities of OGX and itssister company shipbuilder OSX Brasil SA, said one ofthe sources who is familiar with Angra's thinking.
As the collapse of Batista's empire has accelerated over thepast three months, Angra and its senior partner, RicardoKnoepfelmacher, have sought to arrange for bankruptcy protectionto shrink OGX and OSX and save them as going concerns. Nearlyall OSX business involves building or leasing vessels for OGX,which is not producing enough oil and gas to pay for them.
Batista's fall from grace, which knocked him off his perchas one of the world's 10 richest men, has led to a strugglebetween shareholders, banks and bondholders over who will get tokeep the scraps. The dramatic unraveling of Batista's energy,mining, port operation and shipbuilding empire has also become asymbol of Brazil's own recent economic woes after a decade-longboom that made it one of the world's hottest emerging economies.
Carneiro did not always agree on strategy withKnoepfelmacher, the source said. Angra turned down repeatedrequests for interviews with Knoepfelmacher and other partners.
Knoepfelmacher, known in Brazil simply as "Ricardo K," isone of the country's most respected corporate handymen. A formerCEO of now extinct Brasil Telecom SA, he arranged the sale ofthe company to rival Oi SA for more than $2.5 billion in 2008.
Carneiro's departure gives Angra some breathing room as itseeks $150 million of emergency capital from bondholders for OGXand as it draws up legal documents to file for court protectionin Brazil, a second source with direct knowledge of thesituation said.
"Angra would negotiate something with bankers and Carneirowould negotiate something else with bondholders," said the firstsource, who asked for anonymity because the sensitivity oftalks. "It became very complicated for all parties."
OGX, once the flagship company of Batista's EBX Group,declined to comment. EBX and OSX also declined comment.
Bankruptcy protection in Brazil is roughly equivalent toChapter 11 bankruptcy protection in the United States and wouldgive the company a chance to reduce its liabilities and emergeas an going concern. Without it, the company may be forced intoliquidation, ending the chance of profit from future operations.
Batista's departure is essential to the bankruptcyprotection filing, the first source said. By exiting, he willshow the bankruptcy judge that Angra and creditors are incharge. By offering to swap his stock for bonds, he will alsoshow the court that he has made an effort to pay at least partof his debts.
"Batista's departure is part and parcel of any potential bankruptcy filing," the source said.
OGX bonds due in 2018 rallied on Wednesday,climbing to as high as 10.75 cents on the dollar from about 8cents the prior session, traders said.
OGX stock surged for a second day, rising 38 percent in SaoPaulo trading to 0.47 real, on track for its highest close inmore than five weeks. On Tuesday it rose nearly 50 percent. OSXrose 12 percent to 0.82 real, a seven-week high.
"The goal is to try and keep the companies alive in someform," said the first source. "A bankruptcy filing is seen asthe best way to do that for both OGX and OSX."
GETTING BATISTA OUT
Batista's departure from OGX would allow the formerbillionaire to free himself of an obligation under a put optionto invest up to $1 billion of new capital into the company.Former CEO Carneiro led a push to get Batista to pay $100million of that put option before year-end after board membersrepresenting minority shareholders, normally charged withcontrol over the option, quit.
That put option was seen as a source of potential leveragefor bondholders, who were dismayed by the firing of OGX'sprevious chief financial officer in the midst of negotiations,according to a third source familiar with the talks. It wasunclear how bondholders viewed Carneiro's departure.
In the past year, OGX shares have fallen more than 90percent, the result of lower than expected output from thecompany's first offshore field and dwindling cash to prepareother fields to start producing oil.
The plunge in OGX shares set off a chain reaction amongBatista's listed companies, pushing all of the stocks lower andforcing him to sell off what he could. The stock-price collapse,however, made it hard for Batista to use his shares ascollateral for loans to keep the companies afloat.
Batista had challenged the right of Carneiro to request thenew cash. Carneiro said at the time that the put's rules gavetop executives the right of exercise in the absence of theboard.
A bankruptcy filing would allow Batista to offer minorityshareholders a chance to salvage something from theirinvestments. It may also force a quicker end to talks withbondholders.
If they don't take Batista's offer of shares for theirbonds, they will likely receive nothing during a court-ledbankruptcy restructuring, the first source said.
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