Davis Polk is advising 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. On August 19, 2020, OEC filed an application for confirmation of its extrajudicial reorganization (“EJ”) plan with the São Paulo Bankruptcy and Reorganization Court to have its restructuring transactions approved in Brazil. The filing follows the successful completion of a consent solicitation through which holders of more than 73% of all outstanding notes consented to the restructuring.

The EJ filing and agreed transactions are the result of extensive negotiations between the ad hoc group and OEC to develop and implement a reorganization for OEC. As consideration in the restructuring, noteholders will receive 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 will result in significant deleveraging of OEC’s balance sheet and provide cash-flow relief for the company in the form of extended note maturities and the ability to pay some or all interest in kind rather than in cash during the first five years after issuance. OEC’s new notes will also provide noteholders with higher interest rates, additional guarantees, enhanced covenants, an excess cash flow sweep and other improved debt terms relative to existing notes, as well a share of OEC equity distributions until 2058. As part of the restructuring, OEC will also modify its governance structure to provide for, among other things, enhanced independent representation and involvement on its board. The restructuring is expected to be fully implemented following, among other things, judicial approval of the EJ plan in Brazil and recognition in the United States.

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 and Jarret Erickson. The corporate team includes partner Manuel Garciadiaz, counsel Drew Glover and associates Rebecca L. Roman, Richard Corbett and Amanda Rae Schwarzenbart. Partners Antonio J. Perez-Marques and Tatiana R. Martins and associate Trishna Velamoor are providing litigation advice. Members of the Davis Polk team are based in the New York, Northern California and São Paulo offices.