By Tom Corrigan
Servicos de Petroleo Constellation SA, a Brazilian oil-and-gas drilling company, filed for bankruptcy in the U.S. on Thursday to help it restructure nearly $1.5 billion in debt.
The company sought chapter 15 protection, the section of the bankruptcy code that deals with international insolvencies, in U.S. Bankruptcy Court in New York.
Much of Constellation's debt is governed by New York law, court papers show, and it has several bank accounts in New York. Foreign companies with ties to the U.S. often use chapter 15 to seek court recognition of their insolvencies. If approved by a U.S. judge, it acts much like chapter 11, halting lawsuits and preventing creditors from seizing U.S.-based assets.
Constellation also filed for bankruptcy in Brazil on Thursday, but said it is continuing to operate normally while it works to shore up its balance sheet.
In court papers, Andrew Childe, Constellation's legal representative in the U.S., said the business' troubles stem largely from the global decline in the oil-and-gas sector as well as a recession in Brazil. Long-term charters and service contracts for seven of its eight offshore drillships have either expired or are set to expire soon, he said.
Constellation joins many other energy-sector businesses that have filed for bankruptcy in recent years after oil prices collapsed in 2014, falling to below $30 a barrel in 2016.
The company restructured its debt last year, closing an exchange offer with more than 80% of its bondholders. The deal greatly improved the company's creditworthiness, but Mr. Childe says it still wasn't enough. The company continued negotiating, and in late November it completed a comprehensive debt-restructuring agreement that is widely supported by both lenders and shareholders.
An initial hearing on the chapter 15 case, which will be overseen by Judge Martin Glenn, is scheduled for Monday. The oil-and-gas driller is being advised by the law firm White & Case LLP, and the case number is 18-13952.
Constellation's fleet, which is one of the largest in Brazil, comprises eight offshore rigs -- including three ultra-deepwater rigs -- nine onshore rigs and five so-called floating production storage and offloading units.
Brazilian state-controlled oil company Petróleo Brasileiro SA is its largest customer, providing 99% of its total gross revenue in 2016 and 2017, according to court papers.
Constellation has several offices in Brazil, as well as London, Luxembourg, Paraguay and Panama. It employs more than 1,200 people, about 93% of whom are in Brazil.
Write to Tom Corrigan at email@example.com