Posted August 28, 2019
Fighting for its very existence amid corruption probes, embattled Brazilian engineering giant Odebrecht S.A. hopes to fend off legal action against it in the United States by so-called vulture funds, banks and other creditors.
At least six large Brazilian banks are owed huge sums by Odebrecht, and several U.S.-based financial firms such as BlackRock Securities and Fidelity Investments regularly report to U.S. regulators that they own shares in the Brazilian giant.
The Brazilian firm with a high-profile Miami subsidiaryon Monday filed a seldom-used Chapter 15 bankruptcy protection request in New York. It’s an action similar to one taken in 2018 by Brazilian telecom company Oi. There were 86 such filings in 2017, the last full year of records from the American Bankruptcy Institute.
An investigation led by the International Consortium of Investigative Journalists reveals that Odebrecht’s cash-for-contracts operation was even bigger than the Brazilian company has acknowledged. Here's a look into the bribery scandal.
Odebrecht remains under investigation across the Americas for acknowledged corruption, something spotlighted in a recent investigative collaboration by reporters from the Miami Herald, McClatchy and journalists from various countries. By its own account, it owes creditors at least $25 billion.
The parent company entered into a record corruption settlement with the U.S. Justice Department in December 2016, and in mid-June filed for bankruptcy protection in Brazil.
The U.S.-based action Monday is an offshoot of that, designed to protect a flank when a company with global operations files for protection from creditors at home.
“A company will generally file for relief under Chapter 15 if it has assets that it wants to protect from creditors and it wants to enjoin them from taking action in the United States,” said Francisco Vazquez, a bankruptcy expert and senior counsel in New York for Norton Rose Fulbright.
A lawyer for former Peruvian President Alan García says the leader shot himself before being detained by police amid allegations he received illegal payment from Brazilian construction giant Odebrecht.
A Chapter 15 filing limits a creditor’s ability to game international courts, forcing coordination between the Brazilian bankruptcy action and the U.S. filing.
“Chapter 15 is designed to create more cooperation. It will facilitate cooperation between the courts,” Vazquez said.
Monday’s filing involved entities in Brazil — Odebrecht S.A., the petrochemical company of which it is a majority owner, Braskem, and its financial arm, Odebrecht Participações e Investimentos S.A.
The company acknowledged it has important subsidiaries outside of Brazil — namely Odebrecht Finance Ltd. and ODB International Corporation — but asked the U.S. Bankruptcy Court for the Southern District of New York to treat those companies as Brazilian-based.
It’s unclear why the filing happened in the Southern District of New York while its record settlement was with prosecutors in the nearby Eastern District, which has its own bankruptcy court.
The Justice Department did not comment in June on the bankruptcy filing in Brazil, which could threaten Odebrecht’s pledge to pay at least $3 billion in U.S. penalties.
The Chapter 15 filing does not appear to affect Odebrecht operations in Miami, where a subsidiary has built highways, airport terminals and even the waterfront American Airlines basketball arena.
The company continues to face resentment in some quarters of Miami for Odebrecht S.A’s hand in modernizing the Cuban port of Mariel.
Source: Miami Herald