Brazil's Schahin hit by Petrobras scandal

Brazil's Schahin industrial group has filed for bankruptcy protection, becoming the third Petrobras contractor in as many weeks to crumble under pressure from the corruption scandal at the state-controlled oil company.

Schahin, which has built some of the country's largest hospitals alongside its work in the offshore oil industry, said on Friday it had requested creditor protection for 28 of its companies and planned to abandon all of its engineering and construction activities.

The Sao-Paulo based group blamed the "closure of national and international credit markets" for its failure to refinance R$6.5bn ($2.1bn) in debt.

"In recent months, all efforts to avoid bankruptcy protection were made - the attempt to launch bonds in the capital market, the renegotiation of liabilities and even the transfer of public works contracts - unfortunately without success," Schahin said in a statement.

Schahin's engineering unit is among more than 20 companies that have been banned from doing business with Petrobras after allegations they formed part of a cartel that creamed billions of dollars off the oil company's contracts to pay bribes and fund political campaigns.

Schahin's announcement comes after two of Brazil's other largest builders, OAS and Galvao Engenharia, filed for bankruptcy protection at the end of March, also citing the paralysis of credit markets following the scandal.

OAS's chief executive and other construction bosses have been in police custody for the past six months over their alleged involvement in the scheme. However, Schahin's engineering unit was only added to Petrobras's 'black list' in March after Pedro Barusco, a former Petrobras executive turned informant, cited the company as one of the cartel's members. Schahin declined to comment on the accusations.

Brazil's oil and gas industry, where Petrobras holds a near monopoly, has ground to a halt as prosecutors and the police have intensified their investigations into the corruption scandal that emerged in March last year. The plummeting global oil price has also put pressure on the industry and is expected to force Petrobras to scale back its ambitious plans to turn Brazil into one of the world's top oil producers.

Last month, Petrobras said it planned to sell an estimated $13.7bn of assets by the end of next year but denied speculation this could include some of the company's prized pre-salt oilfields.

While Petrobras has promised to file its long-awaited audited results for the third and fourth quarter on Wednesday, relieving some of the company's immediate financial concerns, the sharp slowdown in the industry could still lead to further bankruptcies, analysts said.

"Several shipbuilders in Brazil will struggle to stay in business," IHS analyst Carlos Caicedo wrote in a report this week. He added that Japanese investors were particularly exposed in the sector as many had partnered with Brazilian construction companies to develop new shipyards.

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