Construction Firm Accused in Operation Car Wash Requests Judicial Reorganization

03/26/2015 - 09h13

Galvão Engenharia, one of the companies being investigated in the Federal Police's Operation Car Wash, filed for judicial reorganization on Wednesday (25) with the courts of Rio de Janeiro. The company has debts of US$575 million.

Judicial reorganization is a kind of "truce" that the company requests of the courts, in order to be freed of its obligations to suppliers and creditors. The aim is to avoid bankruptcy.

In a statement, the company said that it is currently in a complicated financial situation, which has been aggravated by the "failure of some of the company's main clients to honor their debts, including Petrobras."

Galvão Engenharia has been accused of bribing ex-Petrobras employees in order to obtain contracts and approve kickbacks. The company's director, Erton Medeiros Fonseca, is currently in police custody. The company denies the accusations.

With net revenue of US$1.1 billion last year, the firm is part of the consortiums responsible for major construction works such as the Belo Monte hydroelectric plant, the extension of lines five (lilac) and two (green) of the São Paulo metro, and the East-West Railroad which connects the states of Bahia and Tocantins.

The financial situation of the companies under investigation is precarious. Their access to credit has been restricted and they are experiencing delays in payment for work completed for Petrobras and the Federal Government.

In recent weeks, Alumini has also requested judicial reorganization and other companies, such as OAS and Engevix, are likely to follow suit.

According to the request submitted to the courts, to which Folha had access, Galvão Engenharia has debts of US$128 million with suppliers, US$219 million with banks and US$9.4 million with ex-employees.

Translated by TOM GATEHOUSE

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