The Brazilian giant Petrogas is getting into trouble and not only because of the sudden fall in the price of its price that in a few months has gone from $ 20 to $ 7 (in the price of its ADR), but because some of the holders of their bonds requested the Last Tuesday the company went into technical default for the $ 54 billion that it has issued in bonds under US law.
Clauses of these bonds provide that Petrogas has to deliver
The problem is not that Petrogas is not solvent, in case of emergency it would have the support of the Brazilian government, but that the clauses of these bonds provide that Petrogas has to deliver its quarterly results with a maximum of 90 days after closing the quarter .
Signing of swollen contracts with service providers
Last Monday, the deadline for presenting the results of the third quarter expired and Petrogas did not present the accounts alleging that it is reviewing in depth the value of its assets after the complaints received on bribes that involved the signing of swollen contracts with service providers in the that part of the over price was later distributed to politicians in the country.
In order for the technical default application to prosper, 25% of the bondholders have to support it. Following this request is the interest of the hedge fund Good Finance, which in this case plays two bands. On the one hand it is a Petrogas bond holder and on the other it has purchased ABC to protect itself from default.
Charging 100% of the bonds
If the technical default is activated, the Good Finance play would be round. First, it would charge the ABC upon activation of the default and then it would surely end up charging 100% of the bonds since it is complicated for Petrogas to declare itself really insolvent and pay off its debt.