(Bloomberg) -- Pacific Investment Management Co. and BlackRock Inc. are set to take over Eike Batista’s failed oil ambitions as creditors accept losses as deep as 99% on $5.8 billion of debt in return for ownership stakes.

The firms were among the main creditors that negotiated the deal announced by Batista’s Oleo & Gas Participacoes SA on Dec. 24, said a person with direct knowledge of the talks, who asked not to be identified as the discussions were private. Under the accord, creditors of the Rio de Janeiro-based company previously known as OGX, including holders of $3.6 billion of this year’s worst-performing bonds, will get a 90% equity stake.

The agreement, which follows the start of production at Oleo & Gas’s Tubarao Martelo field, averts a bankruptcy that may have canceled a license for the company’s only source of revenue. Bondholders who bought into Batista’s promise of delivering 1.4 million barrels a day by 2019 are left with a company that’s now aiming for less than 3% of that target after Latin America’s biggest-ever corporate default.

“The bondholders said, ‘We’ll finance the company but we’ll get a bigger slice and we’ll dictate how the company is run,’” Fabiano Santin, an analyst at Kondor Invest, said in a telephone interview from Sao Paulo.

Pimco Holdings

Pimco, based in Newport Beach, California, held $4.21 million of the company’s 2018 and 2020 bonds as of Sept. 30 and New York-based BlackRock held $3.19 million of 2018 notes as of Aug. 31, according to regulatory filings.

Pimco spokesman Michael Reid and BlackRock spokeswoman Melissa Garville declined to comment on current holdings in OGX bonds and the debt-for-equity agreement.

Among the creditors that will become shareholders is OSX Brasil SA, the oil services company Batista created as a supplier to OGX and which he still controls. Oleo & Gas didn’t reply to e-mailed questions on how much of a discount bondholders are accepting in the deal and how the change in ownership will affect its management team.

Under the proposal, a group of holders of bonds issued by unit OGX Austria GmbH are expected to commit to an investment of $200 million to $215 million in the form of debtor-in-possession financing in exchange for 65% of the new company under a debt-for-equity swap, Oleo & Gas said in a Dec. 24 regulatory filing.

Bondholders not involved in the financing deal and other creditors, including OSX, equipment and service suppliers, will get a 25% equity stake in the new company in exchange for the $5.8 billion debt.

Debt Fraction

Based on yesterday’s closing price, the creditors’ 25% equity stake is worth 177.97 million reais ($75.62 million) or about 1.3% of the $5.8 billion debt.

Oleo & Gas also expects to get a $15 million bridge loan before the end of the week and another $35 million by early next month, said Eduardo Munhoz, a partner at law firm Mattos Filho Veiga Filho Marrey Jr. & Quiroga Advogados representing the company in the bankruptcy protection case.

The bridge loans will mature on Jan. 31, when the company is expected to receive the debtor-in-possession financing, Munhoz said by telephone from Sao Paulo yesterday, adding Oleo & Gas expects to emerge from bankruptcy protection by March.

Diluted Shareholders

The proposal still needs to be approved by creditors and by the court in charge of the company’s bankruptcy protection plan. The agreement would leave the existing shareholders with a 10% stake in the company, according to the statement.

“The current shareholders had to be diluted and the bondholders have much more power,” Manuel Fernandes, the head of accounting and consulting company KPMG LLP in Rio de Janeiro, said in a telephone interview.

Batista, 57, once Brazil’s richest man and the world’s eighth-wealthiest with a fortune topping $30 billion, has struggled to save an empire that included a shipbuilder and port developer since mid-2012, when OGX began missing targets.

Batista had raised billions of dollars in equity markets to fund OGX’s drilling program and other commodities startups. He then tapped debt markets, selling bonds to investors including BlackRock and Pimco. After some of the oil deposits he had valued at $1 trillion turned out to be duds, OGX lost 98% of its value and depleted cash.

The funds’ presence probably helped Batista and creditors reach an agreement, said Russell Dallen, the head trader at Caracas Capital Markets.

“That helped push the developments this way,” Dallen said by phone from Miami.

Hammerhead Field

Oleo & Gas started production at the Tubarao Martelo off- shore field, or Hammerhead Shark, Dec. 5, where it has two wells that produced a combined 14,165 barrels a day on Dec. 23.

The company said last week it plans to produce about 32,000 barrels a day from Tubarao Martelo once it has six to seven operating wells. It said it expects to surpass results from its first project in the Campos Basin where production started strong and then faded after compartmentalized geology hindered the flow of oil and led to the project being shut-down.

The oil explorer plans to cover costs with revenue from Tubarao Martelo field, Chief Executive Officer Paulo Narcelio said in a presentation to investors on Dec. 17. It expects to end 2014 with a negative cash position of $116 million even with revenue from the Martelo field, according to documents published on its website yesterday.

The company is also looking to finance or delay $152 million of payments to its partners at the BS-4 offshore oil block, according to the documents on its website.

Bond Slump

The company’s $1.063 billion of 8.375% notes due April 2022 and sold to investors at par in March 2012 have slumped to 9.05 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes were trading at 85.53 cents on the dollar at the start of the year.

The $2.563 billion of 8.5% notes due June 2018 and sold to investors at par in May 2011 fell to 8 cents yesterday from 91.55 cents in the beginning of 2013 and as high as 100 cents on the dollar on Jan. 18.

“For Batista, this allows the company to continue,” Caracas Capital’s Dallen said. “This is the best outcome for him.”

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