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Insight

Oceanografía Sailing Back to the Mexico Oil Industry

Wed, 01/21/2015 - 14:26

In February 2014, Citigroup announced the discovery of fraud within its Mexican subsidiary, Banamex, which led it to cut US$235 million in net profits reported for 2013. The company revealed that Banamex had made about US$585 million in short-term loans granted to Oceanografía, an oil services company that had supported PEMEX for over 45 years. However, Oceanografia was disqualified from working with any government entity for 21 months after an investigation turned up major irregularities in its accounts. Furthermore, the loans from Banamex were provided based on false invoices that Oceanografía provided as evidence of its contracts with PEMEX. Despite the scandal, many international investors are interested in capitalizing the company to help it renew its operations. Starting in July 2015, Oceanografía is likely to make its return to the Mexican oil and gas industry. After finalizing a settlement agreement with creditors, two backers have signed up to refinance the Mexican company for up to US$78 million. The conditions of this investment were for Oceanografía to formally declare bankruptcy, for the government’s Service Management and Property Disposal Department (SAE) to release the company and for a new board of directors to be appointed. This process started in May 2015 once the deadline for Oceanografía’s creditors to sign an agreement to restructure its assets expired. After this period, SAE withdrew from Oceanography and the new shareholding

body and board of directors were formed. According to the agreement signed by the creditors, and who were paid a portion of their debt through corporate stocks, they will maintain a stake of 29% while 51% will belong to the investment firms that are providing the new capital. The remainder will be divided among the previous investors, including former CEO Amado Yanez, who will hold a stake smaller than 5% and will no longer sit on the board. Finally, a reserve of 12.5% will be held for shareholders whose existing debt has not been recognized so far and is pending the result of an appeal in June 2015. While Oceanografía’s total debt amounts to US$2.8 billion, it also holds significant assets, including a fleet of ships worth just around US$700 million. Its creditors include Ashmore, EIG Global, Investment Frantelli, Ice, and MLF Trust, among others. The company is also hoping that the final resolution will revive the unrecognized Banamex loans, with the matter currently up for appeal at Mexico’s First Unitary Court.

PEMEX has taken steps to rapidly distance itself from the scandal. It announced in April that the 39 contracts it had with Oceanografía before the crisis were reduced to just two and that the company ceasing operations had in no way impacted the NOC’s oil production. However, PEMEX did fire a number of employees that it blamed for errors made in overseeing the Oceanografía contracts.