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Creditors May Have To Hire Pirates To Seize Oil Ship From "Deadbeat" Ex-Billionaire
Sometimes it’s not worth it for creditors to seize collateral when a deal goes bad.
Just ask Deutsche Bank, or any of the other investment banks which would have been forced to book billions in mark-to-market losses on Canadian asset-backed commercial paper deals gone bad in 2007 had they chosen to collect the available collateral and cancel their swaps rather than negotiate a restructuring.
Or you could ask OSX Brasil SA bondholders who are technically entitled to take possession of an oil ship the size of the Chrysler building which is currently sitting 130 miles off Brazil’s coast.
As Bloomberg explains, OSX effectively forfeited its claim on the ship when the company - part of former billionaire Eike Batista’s crumbled empire - defaulted in March, giving creditors the option to sail out and tow the vessel in.
The issue, of course, is that there are significant logistical problems associated with repossessing a giant oil ship and while creditors work on figuring those problems out, OGpar (another Batista venture) is still pumping 10,000 barrels of oil a day, because...well...because why not if no one is going to come and stop you.
To add insult to injury, OGpar is refusing to pay the nearly $300,000/day rental fee to use the vessel, money which, considering OSX is bankrupt, presumably also belongs to creditors. Here’s more from Bloomberg:
The clash is the latest chapter in the saga of Brazil’s once-richest man, an investor-darling-turned-pariah who sold shares in six companies in a span of six years and lost more than $30 billion even faster when his commodities and energy empire collapsed. It’s also a cautionary tale for Brazilian creditors, whose claims can get tied up for years and even decades in the nation’s maze-like legal system.
[Bondholders] could try to seize the ship, but only if a court and the government approves. And the tumble in crude prices means the vessel isn’t worth what they’re owed, anyway. They could leave the rig to OGpar while waiting for asset prices to rebound, but the oil producer is refusing to pay rental fees of as much as $265,000 a day.
OSX’s bondholders -- including Redwood Capital Management LLC, DW Partners LP and Rimrock Capital Management LLC -- are asking a Brazilian court to make OGpar pay $70 million in past-due fees.
Batista and OgPar and OSX’s management "are doing what they can to abuse the Brazilian legal system to prevent investors from being paid what they are owed," said Ruben Kliksberg, a partner at hedge fund Redwood Capital. Batista and the management teams, as well as courts, "are having a material impact on the reputation of Brazil as a foreign investment jurisdiction."
Maybe so, but as OGpar CEO Paulo Narcelio will patiently explain to you, the company (which is also bankrupt) is trying to squeeze out a living here, and if it is forced to pay the money it owes, then the offshore oil operation that it shouldn’t be allowed to run in the first place will cease to be economically viable.
OGpar Chief Executive Officer Paulo Narcelio said paying the $70 million could force the Rio de Janeiro-based company to shut down and liquidate. OGPar also has been operating under bankruptcy protection since 2013.
The oil company is producing only about 10,000 barrels a day -- about 10 percent of capacity -- from the vessel in Brazil’s offshore Tubarao Martelo field. Paying the full daily rate would make the operation unprofitable, Narcelio said.
"There will only be losers if they keep insisting,” Narcelio said in an interview in Rio de Janeiro. "It’s stupidity. They’re portfolio-management kids just out of college, and they think they’re powerful."
Yes, these newly graduated greenhorns were under the mistaken impression that the bond covenants represented legally-binding agreements between creditors and borrowers (thanks a lot undergrad finance professors). What these "kids" don’t understand is that in a world ruled by debt, "insisting" that people pay back what they borrowed produces nothing but "losers."
You know, it’s the old "if I owe you a dollar that’s my problem, but if I owe you a 1,000 foot oil ship, that’s your problem" argument - or something.
As Bloomberg goes on to note, "disconnecting and hauling away the 284,000-ton vessel would cost millions of dollars and require approval from Brazil’s oil regulator and maybe even the Navy," meaning there aren’t really any good options here for the bondholders.
Well, that’s not entirely true.
Leonardo Theon de Moraes, a bankruptcy expert in Sao Paulo who spoke to Bloomberg did say that there was one possibly cheaper alternative creditors could pursue:
"The costs of executing the collateral are very high unless creditors send pirates from Algeria to go and get the vessel."

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oops she sprung a leak... and the lesson of the day is:
never take out a secured loan on anything that cannot be turned into a pile of ashes or be sent to the bottom of the ocean. oh fuck, did i say that aloud?
This "not paying" thing is really starting to grow legs.
fuck them all! when will they pay?
Ask for Bilbo Baggins. Tell him Gandalf sent you.
Its a Trap!
"We're in the pipe 5 x 5."
How much is that tanker worth in the current market?
And if a ship is at anchor (like this one apparently is) it deteriorates very rapidly. I might not even be seaworthy without time in a drydock.
I think this calls for a shanty.
https://www.youtube.com/watch?v=7YUiBBltOg4
#41
Hmm, does it have to be "Algerian" pirates? Listen up Puerto Ricans...
The system of debt is slowly coming apart. People just won't pay and then what?
A rebirth of civilization, or something like that... certain realizations have to be made. "Rule of Law" hasn't been applicable for some time now.
No sane person ever pays a BK, make them come and get it.
FORWARD SOVIET!
Or the collateral has wheels, buy buy US, hello South America.
Pirate wearing Hammer pants. Nice!
"Can't touch this."
they can hire the same guys to get the gold from comex
it only works if there is some collateral there to seize
Make Jeff Christian walk the plank anyway. rrrrr now here be a boatin' accident!
Theres a vessel full of gold/silver future contracts in the middle of the pacific.
Bloomberg, more from Bloomberg. Bloomberg. Bloomberg.
"It’s stupidity. They’re portfolio-management kids just out of college, and they think they’re powerful.
LOL! What, they are not?
Don't tell them that, they may throw a tantrum, lie on the floor and hold their breath, kick scream...stuff like that!
You say repo man, i say pirate
Privateer, perhaps?
We've turned into a lawless Party Planet.
Nobody controls anything.
Good. The few have enjoyed no laws or consequences for a good while now. Risk is going to reassert itself with a vengeance.
Increasingly bizarre newsflow...
I will call your bizarre news flow and raise you an increasingly bizarre reality.
This is when every Hollyweird movie you have ever seen start to coalesce as 1 and they all start to make sense.
The shit that's coming will make the 1920's look like good days. Billionaires and bank start eating each other... Great theater.
What was that again? If you don't hold it, you don't own it?
Guessing they will be using sonar to find their ship.
It's supposed to be easy. Send your lawyer to his favorite judge, get a "court order", have the sheriff go get it.
Kinda like evicting a tenant in California. Start the paperwork, then someday, you get your rental back (provided you pay the tenant to leave).
In Arizona it is a different ballgame. They told basically that I will pay the exorbitant rent on time but they prefer early, I will have Mexicans care for my yard (or do a damn good job myself) and I will have it pest sprayed quarterly. They provided me a number for "their" Mexicans (which I don't use) or I will be out on the street with a swiftness. There is no squatting here, it is a an owners state. Good place to own a rental if there is ever a future after the reset.
The place is over 1600 a month and is a shithole.
Multiply times 10 Million when the "Great Reset" comes a'knockin.
that's so old school. million lol. Multiply times 10 Trillion when the great reset comes knockin.
The ship is only worth what people are willing to pay for it. With supply outstripping demand, and the cost associated with handling, and maintenance, as well as, FUEL, storage costs, the ship ain't worth the time it takes to cross a line through that particular account. In brief, the creditors must be well versed at eating crow by now, methinks. Frankly, the REPO Man must be tired or the creditors would not be mentioning pirates. They should chalk it up to experience, and move on to the next account in arrears. Good God, these guys are green.
Before I went bankrupt I purchased an answering machine real cheap at WalMart. Creditor's Collection Agency got so frustrated they called my neighbour to prompt them to knock on my door to let me know the Collection Agency was trying to get ahold of me. No shit.
When you finally get through Bankruptcy you are officially a 'Discharged Bankrupt' in the eyes of the law.
Now I'm MASTER OF UNIVERSE and they are going bankrupt.
:|
I just finished mine last month. Damn near 3 mil in liabilities 'poof'. It feels fuckin fantastic...
And I can assure you I will never hold title to anything larger than a #2 pencil ever again.
I hear you, BlindMonkey. I will never make a purchase without cash ever again. And, yes, it sure feels good when that weight is lifted and you can think, and concentrate, once again without that DEBT Elephant on one's back.
It's a ship, you blockade it and tell the crew to disembark or be starved out. Then you put your own crew on and motor it out of there. This will be expensive so stop making bad investments...you...dumb....fuckers.
I just assumed that this was going to be an Onion article...
So when will "they" erect the debtor's guillotines to scare the sheeple full retard?
Ahhhhhh damn it - the old pirate trick!
So are Algerian pirates going to come and take most college diplomas, automobiles, mcmansions, and leveraged stock portfolios? If the pirates have to collect from deadbeat oil companies, why not everybody else?
Call the repo man! He will gladly turn in his tow truck for a tugboat for a 10% cut.
Repossession is a very tricky and at times dangerous matter.
https://www.youtube.com/watch?v=dRi9jRa448w