Presentation to OAS Creditors - April 2015 - OAS SA
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Presentation to OAS Creditors
April 2015
1Disclaimer
This presentation and its content are proffered as a settlement proposal in furtherance of settlement discussions and is entitled
to protection from any use or disclosure to any party or person pursuant to Federal Rue of Evidence 408 and any other law,
regulation or rule of similar import, and the statements contained in this material shall not be treated as an admission regarding
the truth, accuracy, or completeness of any fact or the applicability or strength of any legal theory.
This presentation and its content are privileged and confidential and may not be reproduced or otherwise disseminated
in whole or in part without OAS’, as hereinafter defined, prior written consent.
This material does not constitute an offer, or invitation, or solicitation of an offer to subscribe or purchase shares or any other
financial instrument, nor does any information contained herein form the basis to any contract or commitment whatsoever.
The material that follows contains general business information about the OAS Group dated September 30th 2014, including
certain subsequent events. It is not intended to be relied upon as advice to potential investors. The information does not purport
to be complete and is in summary form. No representation or guarantee is made, explicitly or implicitly, concerning the accuracy
of the information presented herein.
This presentation contains statements that are forward-looking and are only predictions, not guarantees of future performance.
Creditors and investors are warned that these forward-looking statements are and will be subject to many risks, uncertainties,
and factors related to the operations and business environments of OAS, its subsidiaries and affiliates, such as competitive
pressures, the performance of the Brazilian and international economy and the industry, changes in market conditions, and
other known and unknown risks. Such risks may cause the OAS’ results to be materially different from any future results
expressed or implied in such forward-looking statements. Forward looking statements include, without limitation, any statements
that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like
“anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend” “estimate,” “potential,” or any other words or phrases of similar
meaning. OAS assumes no responsibility for updating projections, be they related to new information, future events or any other
situations present or inferred herein. OAS also cannot guarantee any events or future results present or inferred herein, which
may differ materially from the expectations of management.
2Table of Contents
1 Events Leading to the Current Situation
2 Recuperação Judicial Process Overview
3 Asset Monetization Overview
4 Capital Structure Overview
5 Engineering and Construction Business Plan
6 OAS Empreendimentos Situation Overview
7 DIP Financing
8 Restructuring Framework
9 Next Steps
Appendix
3SECTION 1 Events Leading to the Current Situation
Events Leading to the Current Situation
On 2 January 2015, due to the major challenges facing the Brazilian engineering and construction (“E&C”) industry, OAS
Group (“OAS” or the “Company”) announced its intent to achieve an organized financial restructuring to improve its balance
sheet and ensure long-term viability for the Company
Since this announcement, OAS temporarily suspended all debt-related payments to preserve liquidity to maintain normal
course operations and ensure continued viability of the Company(1)
Key factors that led to this decision were:
1. R$680 million of new financings that were in advanced discussions and were expected to be disbursed were
unilaterally cancelled by financing providers
2. International capital markets were closed to the Company starting in mid-November
3. Rating agencies indicated that ratings downgrades were being actively considered which would have led to:
• Acceleration of debt of approximately R$1.5 billion
• Termination of the undrawn standby facilities of R$400 million
– The standby facilities have a 30-day disbursement period and the Company would not have had
sufficient time to draw down these facilities given the required disbursement period
4. Debt payments to be made in January 2015 comprised ~R$300 million or ~30% of the Company’s total cash at year
end 2014. These payments, if made, would have severely compromised the viability of the Company given the cash
flow cyclicality of the business
• Payment default on the 9th debenture, on January 5th, of ~R$100 million triggered a cross default on OAS’ debt
and OASE’s debt
5. Temporary suspension of payments by BNDES of export financing of projects in foreign countries
1 Does not include equipment financing and lease payments
5Liquidity Impact of Recent Events
What changed in last 15 days of 2014?
2015 Refinancing Needs R$1,500 MM
(-) Debt Deals Cancelled R$680 MM
(-) Standby Facilties R$400 MM
(=) Refinancing Gap (Needs - Sources) – Original Scenario R$420 MM
(+) Accelerated Debt (Excluding Short Term Debt) R$800 MM
(+) Debt Cancelled R$1,080 MM
(=) Refinancing Gap – Current Scenario R$2,300 MM
(-) Expected Cash Position (2014YE)(1) R$1,000 MM
(=) Exposure R$1,300 MM
1 Includes restricted cash
6Macro Economic Climate
Deteriorating macro economic conditions in Brazil have lead to a depressed infrastructure spending
environment
GDP (% Growth) Service Inflation (% Growth)
9.0%
10.0%
7.5% 9.0% 8.7% 8.7%
9.0% 8.3%
7.0%
8.0% 7.6%
5.0% 7.0% 6.4%
6.0%
2.7% 2.5%
3.0%
5.0%
1.0% 0.1% 4.0%
1.0%
3.0%
(1.0%) (0.3%) 2.0%
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
Gross Capital Formation (% of GDP) SELIC
11.7%
22.0% 12.0%
10.7% 10.9%
20.0%
20.0% 9.9%
20.0% 10.0%
18.0% 18.0% 8.7%
18.0%
18.0% 8.0%
7.1%
16.0% 6.0%
14.0% 4.0%
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2014
Source: The World Bank, Banco Central Do Brasil and ipeadata
7Preparation for the Recuperação Judicial (“RJ”) Filing
Since December 2014, OAS and its advisors have been working actively on a number of workstreams
to prepare for the Company's financial restructuring
1. Organizational transformation
• Recent changes in OAS’ organizational structure will support the execution of the E&C business plan
• New senior management team with change in mindset from “growth” to “liquidity and profitability”
• Focus on cash management and use of capital
• Business plan indicates exit from certain international markets, with focus on Brazilian heavy
engineering markets
• SG&A is expected to be reduced by ~R$270 million with 95% achieved / identified to date
2. E&C business review
• Finalized a long-term business plan for the E&C business – all construction projects, geographies and
commercial policies were analyzed to preserve liquidity and maximize long-term value for stakeholders
• E&C business plan was validated by the Company’s advisors with respect to growth, margins,
profitability, etc.
8Preparation for Recuperação Judicial Filing (Cont’d)
Since December 2014, OAS and its advisors have been working actively on a number of workstreams
to prepare for the Company's financial restructuring
3. Secured financing
• The Company’s liquidity needs are highly seasonal with working capital consuming cash in the first
semester and generating cash in the second semester. To maintain sufficient liquidity in 2015, OAS
and its advisors solicited secured financing proposals from over 40 potential financing providers
• However, financing providers were reluctant to lend capital to the Company outside of a RJ proceeding
and required the protections offered by the RJ proceeding as a precondition to lending capital
• The R$800mm debtor-in-possession (“DIP”) facility currently being pursued represents the best
alternative to address to the Company’s liquidity needs
4. Asset monetization
• OAS has been working on sale processes for all of the Company’s infrastructure equity investments
• Extensive and competitive process ensures value maximization for the benefit of all stakeholders
• However, potential buyers were reluctant to transact with the Company outside of a RJ process and
required the protections and releases offered by the RJ proceeding as a precondition to any sale
5. Discussions with advisors of ad hoc bondholder group
• Since January, OAS and its advisors have been working closely with FTI, Morgan Lewis and Pinheiro
Neto as advisors to the ad hoc group of bondholders, to facilitate business and legal diligence of the
Company with the goal of effectuating a consensual debt restructuring
9Preparation for Recuperação Judicial Filing (Cont’d)
Corporate reorganization undertaken to simplify the corporate structure of the Company
and reduce administrative and operational costs
OAS Investimentos S.A. (“OASI”), a wholly owned
subsidiary of the Company, was merged into OAS
S.A. in December 2014 in order to:
– Simplify the Company’s corporate structure
– Reduce its administrative and operational
costs, a plan previously announced and under
execution by the Company
As part of this corporate reorganization, OASI’s stake
in INVEPAR was also transferred to OAS Timeline of events related to INVEPAR share transfer
Infraestrutura to facilitate the Company’s debt
restructuring by segregating the shares of INVEPAR Retention of
Merger /
INVEPAR
G5/Evercore
for a potential sale or to raise new financing Transfer
March 2010 June 2014 October 2014
2015
March 2014 December 2014
Creation of 2019 Note
OAS 2021 Note
Consent
Infraestrutura Issuance
Solicitation
10SECTION 2 Recuperação Judicial Process Overview
Recuperação Judicial Overview
On 31 March, OAS and certain of its subsidiaries filed for a recuperação judicial proceeding pursuant to
Brazilian Bankruptcy Law (No. 11,101/05) (“BBL”) in São Paulo
BBL is modeled largely after the U.S. Bankruptcy Code
As such, a recuperação judicial proceeding is similar to a chapter 11 proceeding in the U.S. and enables
viable companies to implement a financial restructuring in a court-supervised and organized process
Key elements of the RJ process include:
– Automatic stay
– Ability to obtain post-petition super-priority DIP financing
– Debtor exclusivity
– Asset sales with requisite releases
– Debt restructuring binding on all affected creditors
Pursuant to the BBL, a reorganization plan (the “Plan”) must be submitted to creditors within 60 days from
the date the Court decision to approve the RJ proceeding is published
Plan details will include terms of the debt restructuring and details on the sale of certain assets
Plan approval requires the consent of a majority of affected creditors in number and amount
12Illustrative Recuperação Judicial Process Timeline
Publication of the
Court approves RJ Publication of the Court decision General meeting of
judicial
filing Publication of the List of creditors to vote on Confirmation of the
administrator’s list
Creditors Plan plan by court
of creditors
(1 April 2015) (22 April 2105) (18 September 2015)
(22 June 2015)
Deadline for Deadline for
End of the
creditors to Reorganization Plan
in-court proceeding
file claims
(10 November 2015)
(7 May 2015) (22 June 2015)
RJ petition filed by
Creditor Information
Debtor
Meetings
(31 March 2015)
13OAS Recuperação Judicial Filing
Debtor Entities
On 31 March, OAS and certain of its subsidiaries filed for a recuperação judicial proceeding in São Paulo
Debtor entities
OAS S.A.
Construtora OAS 78.95% 100% 100% 37.5% 17.5% 100% 61% OAS Infraestrutura
SPE GESTÃO DE 24.44%
ARENAS S.A.
(1)
Internationa
Consortiums
l Branches ARENA PORTO ALEGRENSE S.A.
SPEs (100%)
Arena Fonte Nova (50%) (100%)
(100%)
Note: Debtor entities include OAS Investments GmbH, OAS Finance Limited, OAS Investments Limited and OAS Imoveis S.A.
14OAS Recuperação Judicial Filing (Cont’d)
Debtor Entities and Cross Guarantees Structure
(R$ in millions)
Offshore Entities
OAS Finance Ltd.
(3,025)
OAS Investments Bond Guarantors OAS S.A.
Ltd.
(1,252)
(131)
OAS Investments
GmbH
(2,911) Corporate Guarantees
OAS
OAS Imóveis Construtora OAS OAS Infraestrutura SPE Gestão
Empreendimentos
(0) (618) (236) (96)
(327)
Note: Debt figures shown exclude extraconcursal claims and secured debt at OAS Empreendimentos and do not include other potential liabilities (see “Claims as of Petition Date” page for further details).
Figures include supplier claims
15Chapter 15 Process Overview
On 15 April, OAS also filed for Chapter 15 in New York for itself and certain of its subsidiaries as ancillary
proceedings to the recuperação judicial proceedings in Brazil
This Chapter 15 filing will allow OAS to:
– Stay all existing enforcement actions in NY and enjoin creditors from initiating further enforcement
actions against the filing entities in the U.S.
– Maintain the status quo while obtaining confirmation of its reorganization plan in Brazil
– Request that the U.S. bankruptcy court give full force and effect to such plan, upon confirmation in
Brazil, within the U.S.
16Impact of RJ Proceeding on OAS’ Equity Investments
Sale processes currently under way for INVEPAR, Soluções Ambientais, Arenas and other assets
OAS has a number of equity investments which are in the process of being monetized in value maximizing
transactions for the benefit of creditors including:
– INVEPAR
– OAS Soluções Ambientais
– OAS Arenas
OAS Empreendimentos (“OASE”)
– OASE is included as a debtor entity in OAS’ RJ proceeding and will be restructured as part of the
overall proceeding
Other assets
– Certain claims may arise from certain of OAS’ other assets
– If applicable, these claims will be addressed in the Company’s restructuring plan
17SECTION 3 Asset Monetization Overview
Process Update
Sale processes currently under way for INVEPAR, Soluções Ambientais, Arenas, Empreendimentos
and Óleo e Gás with an anticipated valuation range of ~R$1.7 – 2.5 billion
G5 Evercore is conducting a comprehensive sale process for OAS’ equity ownership in INVEPAR, Soluções
Ambientais, Arenas, Empreendimentos and Óleo e Gás
– Broad buyer outreach conducted with a large number of parties (both strategic and financial) solicited
for all assets
– Multiple indications of interest received
– Shortlisted parties are progressing towards final binding offers
Any sale transaction will occur vis-à-vis the judicial reorganization proceedings
– Due diligence and negotiations with potential investors will occur concurrently with the judicial reorganization
proceedings
– The judicial reorganization plan (“Plan”), of which the sale transactions are a component, will be subject to
creditors’ review and approval
– Execution of final transaction documentation must occur before the Plan is put to vote at the creditors’
meeting convened for such purpose
– Decision by the creditors is subject to Court analysis and confirmation
– Closing of any of the asset sale transactions will be subject to creditors’ approval of the Plan and its
ratification by the Court
19SECTION 4 Capital Structure Overview
Capital Structure at Year End 2014
(R$ in billions)
R$8.0
R$7.0 R$0.2 R$6.7
R$1.1
R$6.0
R$4.8
R$5.0
R$4.0
R$3.0
R$2.0
R$1.0
R$0.6
R$--
(1)
Secured Debt Bonds Local Debt Other Debt at 31/12/14
1 Other unsecured debt
Note: Based on unaudited financials. Excludes liabilities from OASE
21Claims as of Petition Date (31/3/2015)
(R$ in billions)
Includes the following:
• Potential liabilities from equity support agreements executed by OAS
R$11.0 • Potential liabilities from completion guarantees on projects that have been or may be terminated
• Potential contractual penalties on certain OASE real estate development projects
R$10.5 R$1.7 R$10.3
R$10.0
R$9.5
R$9.0
R$8.6
R$0.4
R$8.5
R$0.3
R$1.0
R$8.0
R$7.5
R$7.0 R$0.3
R$6.7
(R$0.1)
R$6.5
R$6.0
(1) (2) (3) (4)
31/12/2014 Amortization Accrued Interest FX Impact Suppliers Other Liabilites 31/3/2015 Other Potential 31/3/2015
Liabilities
1 Amortization of secured debt
2 Change in USD to BRL exchange rate from 31/12/2014 to 31/3/2015
3 Includes OASE claims (excluding extraconcursal claims) and other unsecured liabilities
4 Estimate of other potential liabilities
22Potential Additional Claims that May Arise in a Liquidation
R$ in billions
Sureties and Bank Guarantees by Type
Other
Legal 9%
3%
Financial
5%
Advancement Performance
25% 58%
Total: R$5.2
Estimated Severance Costs
Labor
12%
Estimated using approximately 110,000 employees,
Corporate
4% including indirect employees, at ~R$12,000 of
severance costs per employee
Indirect
Employees
(1)
84%
Note: As of December 31, 2014 Total: R$1.3
23SECTION 5 Engineering and Construction Business Plan
Business Plan
Major efforts undertaken already to align the organizational model – including
Organizational leadership, processes and governance – as well as the organization’s cost structure
Realignment to the scope, scale and priorities of the new strategy
Backlog streamlining combined with changes in construction planning and supplier
Backlog relations will result in a smaller portfolio, with an improved liquidity profile, higher
Streamlining certainty of a positive contribution margin and better alignment with the future
strategy
Under realistic scenarios of market demand and competitive dynamics in the prioritized
“Back to segments, the post-turnaround and post-RJ Company will be positioned to resume
Basics” growth and recover to historical levels of performance
25Business Plan
Major efforts undertaken already to align the organizational model – including
Organizational leadership, processes and governance – as well as the organization’s cost structure
Realignment to the scope, scale and priorities of the new strategy
Backlog streamlining combined with changes in construction planning and supplier
Backlog relations will result in a smaller portfolio, with an improved liquidity profile, higher
Streamlining certainty of a positive contribution margin and better alignment with the future
strategy
Under realistic scenarios of market demand and competitive dynamics in the prioritized
“Back to segments, the post-turnaround and post-RJ Company will be positioned to resume
Basics” growth and recover to historical levels of performance
26Organizational Realignment
Changes in Corporate Structure are part of OAS turnaround efforts and reflect new approach to
decision making
SH - Shareholder Remain Created Extinguished
2013-14 Corporate Structure New Corporate Structure
Shareholders Shareholders
Governance Forums SH Governance Forums SH
CFO CFO
OAS SA
Legal Director OAS SA Legal Director
Adm Director Adm Director
CRO
OAS E&C OAS Inv.
CEO SH CEO SH CEO
VP VP CFO
CFO CFO Legal Director
OAS E&C
Legal Director Legal Director Adm Director
Adm Director Adm Director Technical Director
Technical Director
(5) Eng. Directors
(7) Eng. Directors
Inst Relations Director
Inst. Relations Director
27Organizational Realignment
An organizational transformation will support the execution of the Company’s business plan
Changes implemented or in process Examples
Operational transition in senior management New senior management drawn from ranks
group with streamlined structure and alignment to the
Leadership new mindset
Mindset change from “growth and client-centric”
to “productivity and balance”
Strengthened financial controls in (still) Variable compensation changed to also consider
Managerial decentralized organizational model working capital forecast
processes Zero-based budgeting launched with
contribution to SG&A expected for 2015
Establishing multi-functional committees for ‘Sustainability committee’ for in-depth
priority issues analyses of economic performance and control
Governance Review of decision making authority at project at key projects
level vs. corporate functions Key supplier negotiations and payment
processing shifted to Corporate
28Organizational Realignment
E&C business has adjusted its organizational model to better fit its strategy
Key recent changes
CEO
Assumed administrative
tasks formerly Institutional Relations
conducted by OAS
Investimentos Administration
Assumed project
(Corporate Center)
budgeting role
Finance (centralization) formerly
executed at each E&C
Legal Departments
Technical
Northeast / Center East Region and
SP/South Regional International Region Private Clients
West Regional Energy
East region has absorbed Energy and Under consideration, as part of the
Regions reduced to 4 from 7, dedicated Company’s re-positioning
Oil & Gas, reflecting de-prioritization of
to the future priority segments per those segments
revised strategy
29Organizational Realignment
SG&A reductions in 2015 result in SG&A margins in line with that of 2009, when the Company was
operating mainly in Brazil
SG&A Expenses(1) – Historical and Projections OAS Investimentos
R$ Million 211
20 185
17 19 8
2014 OAS Dunas e Samar e Others SG&A
Adjusted Empreen- Gremio Sagua 2015
1,055 dimentos (OAS (OAS Projected
Arenas) Soluções
Ambientais)
211
855 -38.0%
824 32 109 771
208
207 79 Rationalization 2015
211
596 127 Total: R$ 267 Millions
487 178 100 478 Rationalization 2016
153 844 89
185 Total: R$ 73 Millions
306 647 34
617 44
74 560 31 220
9 34
418
334 293
231
2009 2010 2011 2012 2013 2014 OAS Investments Indirect Royalties paid 2014 Staff - Third-party Trips and Others SG&A Staff - Third-party Others SG&A
Soluções in Projects costs from Adjusted Payroll service representations 2015 Payroll service 2016
Ambientais and Studies accounted International Expenses expenses expenses Projected Expenses expenses Projected
% and OAS as SG&A subsidiaries
Arenas to OAS S.A.
Net
6.5% 9.1% 10.9% 11.6% 8.5% 13.5% 5.5% 5.5%
Rev
Financial Statement OAS Consolidated => Includes Samar, Sagua, Dunas, Grêmio, OAS Empreendimentos
Engineering and Construction (Sum of parts)
1) Includes general and administrative expenses and payment of bonuses to key managers. Excludes depreciation, management fees and non recurring costs
30Organizational Realignment
The Company has implemented multiple structural and temporary measures to conserve cash
Main levers Initiatives launched Impact (March to May 2015)
Processes adjusted to reflect focus on liquidity and
Adjusted processes and marginal value
incentive plan 40% of the bonus associated with cash flow generation TBD
and volatility
Structural Suspension / Suspension of projects not profitable and burning cash
measures renegotiation of existing Broader review of clients relations and impact of measures
contracts launched 111
Adjustment of organizational structure to reflect decisions
Rationalization of
already taken (e.g., international and OASI)
administrative expenses
Broad cost cutting effort
52
Revised payment schedule with main suppliers
Review of working capital
Terms for managing working capital in projects and
terms
corporate
Revised processes and on-going project operations 267
Temporary Adjustments to project
Tight management of execution and receivables
measures planning and execution
Review of concluded Revision of payments related to concluded projects
project’s outstanding Adjusted to RJ impact 70
balances
Total 500
31Business Plan
Major efforts undertaken already to align the organizational model – including
Organizational leadership, processes and governance – as well as the organization’s cost structure
Realignment to the scope, scale and priorities of the new strategy
Backlog streamlining combined with changes in construction planning and supplier
Backlog relations will result in a smaller portfolio, with an improved liquidity profile, higher
Streamlining certainty of a positive contribution margin and better alignment with the future
strategy
Under realistic scenarios of market demand and competitive dynamics in the prioritized
“Back to segments, the post-turnaround and post-RJ Company will be positioned to resume
Basics” growth and recover to historical levels of performance
32Backlog Streamlining
Backlog streamlining and refocusing launched in 4Q 2014 are expected to reduce backlog from
R$21.8B to R$11.0B
R$ billion International National
Projects that are
21.8 -8.4 being streamlined
-3.0
6.2
-5.5
-1.6
-0.1 -2.3
-0.6
-1.5 11.8 1.5
-1.7 11.0
-3.1
2.5
Projects that have
been halted or
15.6
discontinued prior
to Dec/14
8.6 8.4
Backlog September 2014 Exiting Stopped Revised Backlog New 4Q Consumption Streamlined Backlog
33Backlog Streamlining
Streamlining the portfolio backlog contributes to improvement in its marginal value and liquidity
requirements
R$ million
Rationale Marginal value impact1 Liquidity² Comments
No longer viable -117 -13 Includes projects that have ceased to exist or projects
under development by affiliated companies that are no
longer viable
Early
x stage -31 5
Negative
x marginal value 276 135 “Easiest” decisions when exit costs are low
x
Inflow shortfall risks 221 -15 Large projects with an asymmetric risk profile where a
small change in margins can make a project unprofitable
Cost
x overrun risks -56 -1
Streamlining
x impact 293 111
Potential
x upside of sales 45
Total
x 338 111
1 Liquidity impact through end of project
2 Mar/15-May/15
34Backlog Streamlining
The combination of portfolio streamlining and short-term adjustments brought the Company
to a better position in the short-term without impacting long-term strategy and value
R$ millions possible upside
1 Construction 2 Concluded 3 Exiting projects from sales
methodology projects AP
and negotiations outstanding
balance 338 989
45 45
Marginal 293
Value 652
0 0
(From Jan/15
onwards) 944
Year end backlog Streamlined backlog
39
111
70
Liquidity
Require-
ments 267
(Mar-May/15)
-409
Dec/14 projection Mar/15 projection
Currently being implemented according to plan
35Business Plan
Major efforts undertaken already to align the organizational model – including
Organizational leadership, processes and governance – as well as the organization’s cost structure
Realignment to the scope, scale and priorities of the new strategy
Backlog streamlining combined with changes in construction planning and supplier
Backlog relations will result in a smaller portfolio, with an improved liquidity profile, higher
Streamlining certainty of a positive contribution margin and better alignment with the future
strategy
Under realistic scenarios of market demand and competitive dynamics in the prioritized
“Back to segments, the post-turnaround and post-RJ Company will be positioned to resume
Basics” growth and recover to historical levels of performance
36“Back to Basics”
Company’s future priority will be the Brazilian public sector clients with high credit ratings and
private sector projects where OAS has an excellent track record
Strategic Rationale
• Long history of service to the public clients with established relationships
• Federal Government and the states with sizeable investment budgets and creditworthiness
Public Sector
• Well-developed execution capabilities in the typical project segments involved
(base case)
Main focus
• Specific experience with high expertise private sector projects
“High
Expertise” • Long history of solid results in several segments
Private
Projects
• Unique new project development capabilities and track record of value creation
Additional
growth
Large private • Selected operators lacking own development capabilities who may be willing to partner
projects in given projects or defined-scope JV
37“Back to Basics”
Projected investment for 2015-2018 is in line with historical averages and below that of other
emerging and developed countries Transportation Power Water Telecom
Historical investment in infrastructure in Brazil and compared to other countries
Average in period, % GDP
8.5
5.1 4.7
2.3 2.2 2.2 2.2 3.8
Other
Brazil 2.2
Countries 1.8
1990-2000 2001-10 2011-12 Average Global Emerging Latin Am. Brazil India China
Projected infrastructure investment as % of GDP
R$ billion
635
508
381
153 165 175
113 123 132 140 142
85 92 99 105
Total Total Total
1.5% 2.0% 2.5%
2015-18 2015-18 2015-18
Infrastructure Investment as % GDP
1 Considering “Basic Scenario” of Tendências
SOURCE: Tendências Consultoria
38“Back to Basics”
OAS’ share of infrastructure investment between 2008 – 2013 averaged ~4.0%
Historical Investments in Infrastructure(1) X% OAS domestic revenues as % of
infrastructure investment
R$ Billions
1.9% 3.1% 3.6% 4.3% 3.2% 4.3% 4.6%
119
+13% p.a. 95
81
72 75
57 60
2007 2008 2009 2010 2011 2012 2013
1 Total Infrastructure (Infrastructure, Transport, O&G/ Energy, Social Infrastructure)
SOURCE: BNDES
39“Back to Basics”
OAS’ expected long-term growth of 10% is similar to that of the Market (9%)... As a result of the
growth differential, its market share starts increasing in 2018 but stays below its 2012-14 level
Tendências pessimistic Tendências baseline EIU
WMM IHS Tendências optimistic
Annual growth (%) OAS’ market share Historical Projections
Baseline scenario – Market growth of 9 percent
4.3 4.6 4.2
8.8 9.7 9.9 9.6 3.2 3.0 3.1 3.3
8.8 8.8 8.8 8.9 8.8 8.8 9.3 2.2
7.7
Formation
Gross Fixed of
Physical
Capital
Capital
Formation 12 13 14 15 17 20 25 2030
Scenario 2 – Market growth of 8.5 percent
2020-2025 2020-2030 2020-2034
4.3 4.6 4.2
3.2 3.0 3.2 3.4
2.2
12 13 14 15 17 20 25 2030
7.5 7.9 8.2 8.2 8.4 8.3 8.3 8.3 8.3 Gross Fixed Capital Formation (GFCF) growth is the natural proxy for
6.4 the construction/infrastructure market.
Gross 5.0 5.0
The median projection of long-term (2019 onward) GFCF growth is
Domestic ~9% (implicit ~5% inflation).
Product
OAS’ assumption of 10% long-term growth is aligned with a
projected market growth of 9%.
2020-2025 2020-2030 2020-2034 Between 2015 and 2017, OAS’ market share would fall and
Company projections reflect a recovery to its 2012-14 levels.
SOURCE: Tendencias Consultoria Integrada, WMM
40“Back to Basics”
Based on historical bid and hit rates, estimated new contracts in 2016 could reach R$2.0 – 3.5 Billion
Estimate of potential new contracts in 2016 based on pipeline under analyses and historical bid and hit rates
Potential new contracts in 2016
Number of bids 180 R$ billion
by the
14.0
Company 80
Contracts/ 10 4.0 14%1 Hit rate
year 70 Pessimistic
scenario 10.0 2.0
1.4 0.6
38
Total value
contract bids 14
R$ Billion 4.0 20%2 Hit rate
4 Normal
10
scenario 10.0 2.9
0.8
211 2.0
175
Average value
of projects
R$ Million 4.0 25%3 Hit rate
Optimistic
scenario 10.0 3.5
1.0
2009-14 Current Pipeline 2.5
Current Pipeline Potential new projects
Taking the current pipeline as reference, the Company would resume
bidding at a pace 35-45% that of the 2009/14
1 Considering the average of the two worst regions in pipeline in terms of hit rate (South and Center-west)
2 Considering the historical hit rates per region (15/16) Projects in priority segments (South/SP/East/International)
3 Considering the biggest hit rate within the regions serviced (Northeast) Projects in other areas (North/Northeast/Center-west)
41“Back to Basics”
OAS expects to add ~R$5.7 Billion / Year in contracts to its backlog between 2017 and 2019, with a
book to bill ratio below its recent performance, a convergence of a slower economic backdrop and
smaller total addressable market
New projects added to backlog in targeted
Expected increase in backlog with new projects
segments
R$ billion in current terms
R$ billion in nominal terms
2010 5.3
Average
Context 4.5
2010-14
Company’s Business Plan 2011 5.5
reflect ~R$12 to 14B on new
projects added to its backlog,
Monetary
over the 2016-19 period 1.5
2012 2.4 correction
• 2016: ~R$2.5 - 2.8B
• 2017 to 2019: average of
~R$5.7B per year
2013 4.8
“Corrected”
6.0
Average
In line with past
2014 4.5 performance
and a book to
New Projects bill of ~1.5x
Average 5.7
4.5 2017-19 avg. (average)
2010-14
42“Back to Basics”
Company expects to reach gross revenues of ~R$5.5 billion and a book to bill of 1.1x by 2019
Book to bill
Assumptions Gross Revenues, R$ billion
In line with 2013 actual domestic revenues, in a
• New contracts calculation based 6.0 market potentially 30-40% larger 5.5
on: 5.0 4.5 4.4
0.7
– Bidding on ~10% (2016) and 4.0 3.4
~20% (2017-19) of potential 3.0
3.8 4.3
infrastructure investments 2.0
1.0
1.0
– Historical hit rate of 20% 2.4
0.1
-
2016 2017 2018 2019
• Market share ~2% (2016) and 3.5
Gross Revenue (old contracts) Gross Revenue (new contracts)
- 4.0% (2017-19), in line with
historical rates New Contracts, R$ billion
7.0 6.3
• Lifetime of each contract of 6.0 5.5
5.3
~3 to 4 years 5.0
4.0
• Gross margin of ~15%, based on 2.8
3.0
Company’s track record on target
2.0
regions/sectors
1.0
0.0
2016 2017 2018 2019
0.6x 1.5x 1.2x 1.1x
Projected book to bill ratio below historical average of ~1.5x
Construction schedule of 25% (Y1), 40% (Y2), 30% (Y3) and 5% (Y4)
43“Back to Basics”
Portfolio streamlining also contributes to reduced execution risks by focusing exposure
where the Company’s track record is superior
Track record (concluded projects 2010-2014) Current backlog lifetime margin projection vs. Track record
Gross margin, %
Nº of 28 13 15 5 Track record –Avg gross margin Track record - Std.Dev.
Projects 60
110
97 40
Average 76
contract 54 20
size
R$ MM 0
-20
15 12
Average
5
gross -40
margin
% of inflows -60
Project concluded
-19
in Peru with 17% -80
gross margin SP/South East NE/CW International
Gross 26
margin 22
19
Std. Dev. 13
% of inflows The ‘fit’ between projected margins in the streamlined
portfolios and effectively realized margins in projects in the
same region suggests margin projections are plausible
SP- East NE/CW Interna-
South tional
44“Back to Basics”
OAS has historically generated 9-10% EBITDA margins and cash generation aligned to EBITDA,
albeit with lags % Revenues
R$ million
Between 2009-12, adjusted EBITDA totaled ~R$1.5 2013 EBITDA represents ~2.0x-2.5x previous years EBITDA mainly due to the start-up of
billion and operating cash flow ~R$1.7 billion operations in Africa and a particular better performance of E&C operations overall
“Back to basics”
842
360 363 332 483
Adjusted
EBITDA
-573
10% 10% 9% 9% 11% -9%
Operating cash flow would have been
Mainly impacted by
positive and aligned with that year’s
projects with Related
EBITDA, if advanced payments
815 Parties (CART and GRU)
excluded
475
Operating 332
123
Cashflow
-19
-1,026
2009 2010 2011 2012 2013 2014
3% 13% 21% 6% 0% -16%
Note: 2014 results based on unaudited financials
45“Back to Basics”
Net revenue is expected to reach ~R$5 billion by 2019, and adjusted EBITDA margin is expected to
converge towards historical performance
Net revenues
R$ million
+12%p.a.
7,586 -2%p.a.
6,308
5,310 5,351 5,036
3,552 3,692 3,835 4,048 4,029
3,133
2009 10 11 12 13 14 15 16 17 18 19
Adjusted EBITDA margin (excl. Bad Debt provision and Non-recurring Costs)
Percentage
11 12 12 10
10 10 9 9 10
2
-9
2009 10 11 12 13 14 15 16 17 18 19
Adjusted EBITDA margin converging to 10%, in line with historical
performance
Note: 2014 results based on unaudited financials
46“Back to Basics”
OAS’ projected EBITDA margins are in line with that of the industry
EBITDA margin
Percentage
14%
12% 12%
10% 9% Average: 10%
10% 9%
9%
Brazil 8%
(2004-2013)(1) 6%
4%
2%
0%
Andrade Gutierrez Queiroz Galvão Camargo Corrêa Odebrecht Galvão Eng
14% 13% 13%
12% 11%
10%
10% 9% Average: 9%
8%
International 8% 7%
(average 6%
6%
6%
2005-2014)
4%
2%
0%
Vinci Eiffage ICA FCC McDermott SNC-Lavalin CB&I ACS Jacobs
Source: Factset, public filings Engineering
1 Based on publicly reported data in years available
47“Back to Basics”
Projections are consistent with historical performance
2009- 2015- 2017-
2009 2010 2011 2012 2013 2014
2014 2019 2019
-19
36% 46% 27%
5% 5% 15%
Gross Revenue Growth
(17%) (4%)
0
21% 17% 19%
15% 11% 14% 14% 15%
1%
Gross Margin
3
7% 9% 8% 5% 9% 1% 4% 8%
EBITDA Margin
(35%) 2
10% 10% 9% 9% 11% 7% 9% 11%
Adj. EBITDA Margin(1)
(9%)
-4
12% 14%
9% 11% 9% 10%
7% 6% 6%
SG&A / Net Revenue
-3
13% 21%
3% 6% 5% 2% 4%
0%
NOCF / Net Revenue
(16%)
1 Adjusted EBITDA defined as EBITDA with add backs for non-recurring items including restructuring related costs
48Summary of Financial Projections
(R$ in billions)
Net Revenue and Growth Adjusted EBITDA and Margin
R$16.0 50% R$1.60 14%
14.2 1.36
R$14.0 40% R$1.40 12%
12.9 1.24
11.7
R$12.0 30% R$1.20 1.12
10.7 1.02 10%
Historical
9.7
R$10.0 Avg. Growth 8.8 20% R$1.00 0.92
9% Historical 0.84 8%
17% 7.3 8.0 0.81
R$8.0 10% R$0.80 Avg. Margin 0.73
6.6 0.67
6.0 0.61 6%
5.4 5.6
R$6.0 5.0 0% R$0.60 0.57
0.48 0.52
4.0 4.0 0.40 4%
R$4.0 3.1 (10%) R$0.40 0.37
R$2.0 (20%) R$0.20 2%
0.09
R$-- (30%) R$-- 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Adjusted EBITDA less Capex, Cash Taxes, and ∆NWC Cash Flow Available for Debt Service(1)
R$1.00 R$1.00
R$0.80 0.65
R$0.80 0.58 0.61
0.58
R$0.60 0.39 0.52
0.63
0.58 0.37 0.37 0.35
R$0.60 0.53 R$0.40 0.30
0.49 0.25
0.45
0.41 R$0.20
0.36 0.33 0.06
R$0.40 0.31 0.30 0.30 0.31 (0.17) (0.16)
R$--
R$0.20 0.12 (R$0.20)
0.07 (0.19)
(0.02) (R$0.40)
R$--
(R$0.60)
(0.07)
(0.68)
(R$0.20) (R$0.80)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
1 Includes lease payments, non-recurring items and cash flows from investments
49SECTION 6 OAS Empreendimentos Situation Overview
OASE Situation Overview
Key Takeaways
Due to current circumstances, OASE is in the midst of an orderly wind-down of its portfolio
– OASE holds a mature portfolio of projects, where the large majority of them already finished construction
– FUNCEF has a pending obligation of R$200 million with OASE (related to the second tranche of the equity
acquisition)
In order to continue to keep the situation stable, R$40 million of capital is required to be invested in OASE over the
course of the coming months
Making this capital investment will:
– Result in R$80 million of incremental value creation
– Mitigate R$0.8 billion in potential liabilities associated with a disorderly wind-down
Additionally, resolving the Karagounis and related contractual issues is in the best interest of all stakeholders and
allows OAS to mitigate significant potential liabilities
51OASE Situation Overview
Recent events have seriously affected OASE’s ability to turnaround operations and resume growth
Event Impact
Deterioration of the Brazilian real estate market, especially in 2014
Higher interest rate, increasing the funding costs of projects and clients
Market Conditions
Macroeconomic stagnation which is reducing consumer confidence and leading to (i) fewer new launches
and investments to purchase land, and (ii) increased difficulty to capture returns from existing investments
The financial market (bank loans) is closed to OASE, and it has had to postpone the investments in its
Lava Jato Implications business, and hold off on purchasing additional land
After the default on the 9th debenture by OAS S.A., OASE's debts were accelerated
OAS S.A. Cross Default Some debt required prepayments, and others required payments to be maintained and additional
guarantees, given the uncertainty surrounding the FUNCEF funding
Failure by FUNCEF to invest the R$ 200 million scheduled for February 2015 led OASE to decide to (i) put
a stop to its business plan, (ii) suspend payments on its corporate debt, (iii) adjust its corporate structure
FUNCEF Default and (iv) file for RJ to restructure the company's debt and sell assets to maximize the value for its creditors
The ability to create value from Mega Projects (Azenha, Porto Maravilha, Laercio Corte, etc.) has been
compromised, with attendant liabilities due to the combination of not having access to bank funding, the
Mega Projects Deadlock default of FUNCEF and cross default following the default of OAS S.A.
52OASE Situation Overview
Summary
Delivering the projects in OASE's current portfolio will increase the
Current company's cash flow and mitigate ~R$ 0.8 billion in potential liabilities
Business at relatively low market risk. Most of the projects have already been
Portfolio delivered, or are more than 90% complete, and the company's stock of
new projects is small
Karagounis has economic incentives to mitigate the contractual
penalties related to the FI-FGTS agreement due to a delay in the
Karagounis
Azenha launch, so long as it involves a solution for the APA issue.
This could create value for the OAS Group
53OASE Situation Overview
Summary
Delivering the projects in OASE's current portfolio will increase the
Current company's cash flow and mitigate ~R$ 0.8 billion in potential liabilities
Business at relatively low market risk. Most of the projects have already been
Portfolio delivered, or are more than 90% complete, and the company's stock of
new projects is small
Karagounis has economic incentives to mitigate the contractual
penalties related to the FI-FGTS agreement due to a delay in the
Karagounis
Azenha launch, so long as it involves a solution for the APA issue.
This could create value for the OAS Group
54Current Business Portfolio
Components of value of the current business portfolio
Projects Portfolio Corporate
Type A – Concluded
Projects
Land Bank Administrative
Type B – Projects to be
Expenses, Net of
Concluded During 2015
Management Fees
Type C – Projects at Initial
Stage of Construction or
Not Started
55Current Business Portfolio
Projects list by type
TYPE A type A TYPE B TYPE C
Projects Projects type B Projects type C
FOREST VILLE VIVA GUARAPIRANGA PARK 2 EXCLUSIVE VISIONAIRE
GARDEN VILLE JARDINS CAJAZEIRAS CONCEPT BOUTIQUE R. ATMOSPHERE
ART VILLE ILLUMINATO EVOLUTION BUSINESS PANORAMIC
PALM VILLE JARDINS CAMPO GRANDE BLUE DIADEMA LIBERTY
CITTA IMBUI PARQUE BUTANTA HORTO SÃO RAFAEL VILA MARIANA
VILLAGGIO HORTO PANAMBY SMART RESIDENCE SERVICE
CITTA LAURO DE FREITAS SOLARIS
MANHATTAN SQUARE COMERCIAL L´ORANGE
MANHATTAN SQUARE RESIDENCIAL STUPENDO PIATA
CITTA ITAPUA MAX & MALL
CITY PARK ACUPE ABSOLUTO
CITY PARK BROTAS MANSAO LEDUC
COSTA ESPAÑA ILHAS DE ITÁLIA
JARDINS DOS GIRASSÓIS VILLA VERDE RESIDENCIAL
JARDINS LAURO DE FREITAS NOUVEAU GRAJAÚ
VISTA PATAMARES
ALTOS DO BUTANTÃ
VIVA GUARAPIRANGA PARK
56Current Business Portfolio
An immediate liquidation would trigger ~R$780 million in liabilities and prevent the OASE from
generating ~R$110 million in cash flow
R$ Million Debt Client related liabilities
Cash flow Cash flow Marginal cash flow
Definition # of projects Total liabilities Apr-Aug 15 Sep 15-Dec 18 to equity
Concluded
projects
Type A 33 416 416 16 57 73
Projects with
expected
Type B conclusion in
5 46 151 -29 61 32
2015 105
Projects with
expected
Type C conclusion after 60 211 0 4
5 4
2015
151
Total 43 672 106 778 -13 123 110
Client liabilities are senior to unsecured claims
Note: OASE debt figures are as of 31/1/2015
57Current Business Portfolio
OASE is taking measures to increase liquidity without putting its portfolio of projects at risk
A R$ Million
Cash flow to equity Cash flow to equity Marginal cash flow to
# of projects Liabilities Apr-Aug 15 Sep 15-Dec 18 equity - Apr 15-Dec 18
12 8 8 18 26
No Debt
Financed by HoldCo 10 131 -3 9 6
Debentures
Outstanding 5 8 37 45
101
Plano empresário(¹)
Outstanding
1 17 -1 -3 -4
Plano empresário(¹)
and 3rd party debt
Outstanding 5 0
158 4 -4
3rd Party Debt
Total Type A 33 416 16 16 57 57 73
416
Note: OASE debt figures are as of 31/1/2015
1 Plano Empresário financing. Financing provided to assist in the construction of residential and commercial release projects
58Current Business Portfolio
Execution of type B projects will generate R$30 million, net of R$150 million liabilities
B
Debt Client related liabilities Cash generation (Marginal value)
Characterization of Portfolio
R$ Million
% units Liabilities Marginal Cash
Project already sold R$ Million % Construction Apr-Aug15 Sep15-Dec18 flow to equity
13
4 19
16 6
Exclusive 53 95
13
1
9
8 9
Concept 56 27 100
17
6
15 5 11
Evolution 73 30 100
15
6
5 33 4 10
Blue Diadema 76 91
28
7
Horto São 13 12
98 32 45 94 6
Rafael
32
Total 72 105 46 151 96 61
29
Note: OASE debt figures are as of 31/1/2015
59Current Business Portfolio
Executing the proposed plan for type C projects can mitigate potential liabilities
Debt Client related liabilities
C R$ Million Marginal cash
# of projects Liabilities flow to equity Current plan
Execute Atmosphere
10 according to the plan,
1 following the approved
Execution 28 4
19 Plano Empresário
schedule
Sell projects to 3rd parties,
30 to ensure project
Sell Project 2 57 0 continuity and minimize
26 potential liabilities for
OASE
Exit the projects
Exiting Projects 2 98 29 126 0
Total Type C 5 143 68 211 4
Note: OASE debt figures are as of 31/1/2015 Current plan execution allows to avoid potential liabilities
60Current Business Portfolio
Current business plan projects R$30 million from sale of the land bank assets between April 2015 and
December 2018
Apr – Aug 2015 Sep 2015 – Dec 2018 Total, Apr 2015 – Dec 2018 Current Status
• Already sold (in March 2015)
Brasilândia
• R$6 million (6 installments
São Rafael 5 5
starting in April 2015)
• Proposals by the end of 2014,
Espanhol II 2 2 points to ~R$3-4 million
• On going negotiations with MRV,
CIA 2 5 5
~R$6.1 million, August 2014
Cabula 4 4
Nova Esperança 1 1
Lima Borges 3 3
Vida Nova 3 3
Viva Lauro 2 2
(1)
Dias Dávila 5 5
Total 5 25 29
Limited risk on liquidity impact on short term
61Current Business Portfolio
The current plan, if executed successfully, will require R$40 million and generate ~R$130 million in
cash inflows to equity
R$ Million Acc.Apr-Dec Acc.Apr 2015 -
Apr-Aug 2015 Sep-Dec 2015 2015 2016 2017-18 Dec 2018
Initial cash balance 5 5 5 24 114 5
Type A 16 31 46 30 -3 73
Type B -29 -14 -43 73 2 32
Additional
R$80mm
Type C 0 0 0 -9 14 4 of value
created
Landbank 5 14 19 10 29
Corporate -33 -13 -45 -14 0 -59
Equity injection 41 0 41 41
Final cash balance 5 24 24 114 126 126
62Current Business Portfolio
Of the outstanding R$1.2 billion of OASE liabilities, approximately R$0.8 billion are directly related to
the current project portfolio
Liabilities
R$ Million SPE Related Liabilities
Corporate Debt 318 160 478
SPE Debt 88 306 395
Other Liabilities 70 159 229
Clients’ Reimbursement 114
Contingencies 38 53
15
Total 491 778 1,269
Note: OASE debt figures are as of 31/1/2015
63Current Business Portfolio
Detailed liabilities analysis
R$ Million
Corporate Debt SPE Debt Other Liabilites Clients’ Reimbursement
Debenture 124 Type A
181 Visionaire 95
debt Type A 0
Blue Diadema/ Type B
82
debt Acupe/ 62
S. Rafael 20
debt Brotas
Type B 46
Type C
43
debt
Stupendo
17 Suppliers 3
debt
Landbank
9
debt Type C 68
Not related Not related
to project 318 to project 70
portfolio Karagounis 80 portfolio
related debt
Total
Total Total clients’ 114
Corporate 478 Total 229 reimbursment
395 other claims
debt SPE debt
Note: OASE debt figures are as of 31/1/2015
64OASE Situation Overview
Summary
Delivering the projects in OASE's current portfolio will increase the
Current company's cash flow and mitigate ~R$ 0.8 billion in potential liabilities
Business at relatively low market risk. Most of the projects have already been
Portfolio delivered, or are more than 90% complete, and the company's stock of
new projects is small
Karagounis has economic incentives to mitigate the contractual
penalties related to the FI-FGTS agreement due to a delay in the
Karagounis
Azenha launch, so long as it involves a solution for the APA issue.
This could create value for the OAS Group
65Karagounis
Arena Porto Alegrense and Azenha Exchange
Original Concept Financing of APA Current situation
OAS Arena agreed to build a new stadium for OAS financed the purchase of a piece of land in APA was inaugurated in December 2012
Grêmio, Arena Porto Alegrense ("APA") in Humaitá Humaitá and the construction of the APA (stadium)
Grêmio refused to swap the APA for Azenha due
as follows:
Together with the construction of APA, OAS would to the loans for the construction and pledge of
develop residential and commercial properties in – ~R$300 million from the FI-FGTS system for Arena
Humaitá and Azena. an 80% stake in Karagounis
Grêmio offered to purchase APA in installments
As compensation for building APA, OAS would – Thus Karagounis owns:
The FI-FGTS agreement, via Karagounis,
receive: • 47.3% of the land on which APA is built, included deadlines for launching residential
– A 20 year concession for OAS Arenas to to be swapped for all of the residential developments in Azenha. Failure to meet the
operate the APA area in Azenha, and contractual deadlines for the first launch imposed
– Azenha, the land where the "old" Grêmio • 100% of the residential area of Humaitá contractual penalties on OASE.
stadium was located – APA borrowed ~R$180 million APA's current EBITDA of R$10 million in not
In exchange for the APA/Azenha swap OAS would: sufficient to cover the R$40 million it needs to
• Loans are backed by a different types of
– Build residential properties in Azenha, service the APA and SPE Gestão debt
collateral, including an equity support
through Karagounis agreement signed by OAS S.A., and the
– Build commercial properties (office towers) in pledge of APA
Azenha, through OASE SPE Gestão, the entity that controls APA, also has
mezzanine loans totaling some R$100 million
Humaitá Azenha
85 mil m2
Commercial
Residential 1 Residential
2
Arena
Residential
Porto Comm 1
Alegrense
Residential
(APA)
Comm 2 3
66Karagounis
Arena Porto Alegrense and Azenha Exchange
Potential Solution
Grêmio has offered ~R$400 million to purchase APA, to be paid over 20 years, backed by television rights and other assets
These payments would be used to settle the construction loan, allowing OAS to restructure
Under the original terms, Azenha (the old stadium), would be transferred to OAS/Karagounis
The residential properties in Azenha would be used to offset the FI-FGTS contractual penalties owed because of the delays in launching the first lot of Azenha
residences.
Asset sales would require the consent of SPE Gestão and APA creditors
Potential Benefits to OAS
Potential tax benefits from the sale of APA
Mitigate potential contractual penalties related to Karagounis
Restructure OAS capital support agreements within the scope of the loans to build APA
67SECTION 7 DIP Financing
Summary of DIP Financing Process
Inability to raise DIP financing would jeopardize the viability of the E&C business
and materially impair recoveries for existing creditors
The Company’s liquidity needs are highly seasonal with working capital consuming cash in the first semester
and generating cash in the second semester
Buyers of the assets being monetized by the Company are reluctant to transact outside of a RJ process and
required the protections and releases offered by the RJ proceeding as a precondition to any sale. As such,
any sale(s) would need to be approved by creditors pursuant to a restructuring plan
As the E&C business requires significant liquidity during the RJ process (and prior to the consummation of
any asset monetization), the Company and its advisors solicited interest in a secured financing backed by the
Company’s stake in INVEPAR from over 40 potential financing sources including:
– Existing creditors;
– Local banks;
– International banks; and
– Alternative capital providers
After evaluating proposals received, OAS is currently pursuing a R$800 million DIP facility.
69Short-Term Liquidity Need Overview
The Company’s financing requirements are driven by liquidity needed to sustain a minimum cash
balance and a working capital reserve
Considerations Implications
▪ Currently the Company does not count
on access to capital markets that ▪ In addition to the cash requirements from the normal course of
would normally fund volatility in its operations AND requirements associated to the restructuring process,
cash conversion cycles. These needs two additional elements need be considered to determine the
must therefore be covered by the Company’s cash requirements
DIP financing
▪ The reserves are based on volatility Cash balance required to:
Minimum
verified in the normal course of 1 Cover intra-month funding needs
Cash Balance
business under conditions less Ensure minimum reserve of liquidity
critical, both externally and at the
Company. These estimates may not Cash balance required to fund working
reflect the potential impact of RJ on Working
2 Capital capital under volatility intrinsic to the
Company’s operations and business
commercial terms Reserve
701 Minimum cash balance need estimated at R$250 million to cover
intra-month funding needs and minimum liquidity reserve
1a Projected intra-month funding gap(1)
R$ Million
The minimum cash balance accounts for both
R$148 R$160 1 liquidity effects to allow the company to sustain
41 ongoing operations
107 R$ Million R$250
Jan/14 – Dec/14 Worst 3 months
R$100
R$150
Minimum liquidity needed to cover 1-2 weeks of
1b
projected payments(2)
R$ Million
R$144 Intra-month Minimum Minimum
42 funding gap liquidity cash
R$64 Ø R$104 balance
11 102
53
Average Standard deviation
One week Rolling two
weeks
1 Average daily negative cash variance to month end cash balance
2 Based on projections payments in February through April 2015
712 The working capital reserve ensures funding will be available for
working capital needs considering volatility intrinsic to the
business
Methodology
Based on volatility of projected monthly inflows as compared to:
– Projections made in the budgeting process which capture uncertainty in
estimating inflows that are 6-12 months in the future
2a One Month Impact
– Projections made in the prior month
Based on cumulative variance from projected inflows
– The difference in projected vs. actual inflows for FY2013
2b Accumulated Impact
and FY2014
– The difference over 6-month rolling periods
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