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Odebrecht Holding Files for Bankruptcy Protection in Brazil

Cristiane Lucchesi and Pablo Gonzalez

(Bloomberg) -- Odebrecht SA, the holding company of the Brazilian conglomerate that stretches from construction to oil and gas, has filed for bankruptcy protection in a Sao Paulo court.

The company asked the court for protection while it seeks to restructure more than 51 billion reais ($13.1 billion) of debt, according to a statement. Units Braskem SA, Odebrecht Engenharia e Construção SA, Ocyan SA, OR SA, Odebrecht Transport SA, Enseada Indústria Naval SA are not part of the restructuring, the statement said.

Apart from the 51 billion reais, the holding company has inter-company loans and other debts totaling 98.5 billion reais, or more than $25 billion, which will make Odebrecht’s bankruptcy filing the largest ever in Latin America, topping the Oi SA that stood at $19 billion.

The privately-held parent came under strain in early June after the group’s ethanol unit Atvos SA filed for bankruptcy protection and talks with LyondellBasell Industries NV over the sale of its petrochemical unit Braskem SA collapsed.

Read more: Oil, Sugar, Shipyards: A Rundown of Odebrecht’s $26 Billion Debt

The conglomerate has been struggling to recover from the fallout of Brazil’s Carwash corruption probe. The investigation, which started in 2014, brought the construction industry to a halt as access to government projects was cut off and executives were jailed. Odebrecht paid millions in fines in other Latin American countries and has seen its pipeline for new projects diminished, adding to the cash crunch.

RK Partners is financial adviser to the company and E. Munhoz Advogados is the legal councel.

Bonds guaranteed by Odebrecht construction unit have long traded at distressed levels, with perpetual notes now trading at about 6 cents on the dollar.

Brazilian lender Caixa Economica Federal executed the holding guarantees on soccer stadium Arena Corinthians, triggering a cross default. The move came on the heels of Odebrecht’s ethanol unit Atvos SA filing for court protection from creditors.

The holding guarantees about 11 billion reais that Atvos borrowed from local banks. In total, the conglomerate owes about 6 billion reais to Caixa as well as a fund the bank manages, and this debt has no collateral, three of the people said.

On June 4, talks ended for the sale of Odebrecht’s controlling stake in Braskem, seen as a crown jewel for the conglomerate. The deal would have brought a much needed cash injection for the group.

(Updates with details from filing, background on Odebrecht.)

To contact the reporters on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net;Pablo Gonzalez in Sao Paulo at pgonzalez49@bloomberg.net

To contact the editor responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net

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