Eike Batista famously lost more than $30 billion, and is now facing a legal battle with bondholders.

Bondholders lent one of Batista’s companies $500 million, and the company defaulted on its payments. OSX Brasil SA lost the rights to the ship after defaulting in March, but Batista’s oil company OGpar is still using it to pump oil without paying rental fees, writes Juan Pablo Spinetto for Bloomberg.

Paging Mr. Singer: Brazil's Ex-Billionaire Batista Dares Bondholders To Seize Ship

Ship seizure not viable in current climate

Batista, formerly Brazil’s richest man, has told bondholders that if they want the rig back, they will have to come and get it. The legal wrangling should serve as a warning to Brazilian creditors, whose claims can be delayed for decades due to the country’s labyrinthine legal system.

“Unless creditors send pirates from Algeria to go and get the vessel, the costs of executing the collateral are very high. OGpar is trying to gain time,” said Leonardo Theon de Moraes, a bankruptcy expert at Sao Paulo-based law firm Theon de Moraes & Demasi Sociedade de Advogados, which isn’t involved in the case.

An attempt to seize the ship would have to be approved by the courts and the Brazilian government, and the current low oil prices mean the ship is not worth the value of the bonds. Although it may seem wise to wait until asset prices rise to seize the ship, that means they are missing out on rental fees of up to $265,000 per day.

Other restructuring agreements threatened by wrangling over Batista rig

A group of bondholders including Redwood Capital Management LLC, DW Partners LP and Rimrock Capital Management LLC, are pressing for $70 million in past-due fees, said Thomas Felsberg, a lawyer for the Nordic Trustee AS, which represents creditors.

OGpar CEO Paulo Narcelio claims that the payment would force the company into liquidation. OGpar has been under bankruptcy protection since 2013. The ship is operating at just 10% of capacity, which makes paying the full day rate unprofitable, according to Narcelio.

The impracticality of seizing the ship makes it an unlikely option right now. OGpar has instead proposed that bondholders allow the company to use the ship as collateral in a partnership.

Any legal battle with the bondholders could also threaten a restructuring agreement that has already been reached with other spurned creditors. A number of bondholders led by Pacific Investment Management Co. had agreed to convert debt into a controlling stake in the company, but conflict over the ship means that this agreement cannot be implemented.

Maybe Paul Singer would like to get involved?

[alio]