Odebrecht Engenharia e Construção completes $3 billion debt restructuring

Davis Polk advised an ad hoc group of holders of notes guaranteed by Odebrecht Engenharia e Construção S.A. (“OEC”) and certain of its subsidiaries in connection with the consensual cross-border restructuring of approximately $3 billion of OEC’s notes, which closed on January 20, 2021. The restructuring, which was implemented through a Brazilian extrajudicial reorganization plan, was previously approved by the São Paulo Bankruptcy and Reorganization Court and subsequently recognized in the United States under chapter 15 of the U.S. Bankruptcy Code in a proceeding before the United States Bankruptcy Court for the Southern District of New York.

 

As consideration in the restructuring, noteholders received 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 has resulted in significant deleveraging of OEC’s balance sheet, as well as additional cash-flow relief for the company in the form of extended note maturities and flexibility to pay all or a portion of interest in kind during the first five years after issuance. The new notes issued in the restructuring also provide holders with, among other things, higher interest rates, additional guarantees, enhanced covenants, an excess cash flow sweep and other improved debt terms relative to existing notes. In addition, noteholders received a new instrument that will share in OEC’s equity distributions until 2058, and OEC has also modified its governance structure and enhanced the representation and involvement of independent members on its board. 

 

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 “Operation Car Wash” corruption scandal and re-establish the company’s market-leading position.

 

Davis Polk continues to play a major role in the largest and most complicated restructurings and capital markets transactions in Brazil and Latin America. 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 Davis Polk restructuring team includes partner Timothy Graulich and associates David Schiff, Jarret Erickson and David Kratzer. The corporate team includes partner Manuel Garciadiaz, counsel Drew Glover and associate Amber Leary. Partners Antonio J. Perez-Marques and Tatiana R. Martins are providing litigation advice. Partner William A. Curran and associate Joseph M. Gerstel are providing tax advice. Members of the Davis Polk team are based in the New York, Northern California and São Paulo offices.