Batista’s OGX Said to Plan Bankruptcy Protection Filing

October 30, 2013 Leave a comment

Batista’s OGX Said to Plan Bankruptcy Protection Filing

OGX Petroleo (OGXP3) & Gas Participacoes SA, the oil company controlled by former billionaire Eike Batista, could file for bankruptcy protection as soon as tomorrow, said a person with direct knowledge of the plans. The filing for judicial recovery, as the proceedings are known in Brazil, will be done after the close of trading in Rio de Janeiro, where OGX is based, said the person, who asked not to be identified before documents are submitted. While Batista is yet to decide, his shipbuilder probably will also seek protection against creditors, the person said.The proceedings will put $3.6 billion of dollar bonds into default in the largest corporate debt debacle on record in Latin America and mark the final chapter in Batista’s demise as poster child for Brazilian entrepreneurism.

An official at OGX’s press office in Rio, who isn’t an authorized spokesperson, declined to comment on plans to file for legal protection from creditors when reached by phone today.

Discussions between OGX, which is running out of money to test its most promising field, and holders of bonds due in 2018 and 2022 concluded without any restructuring agreement, the Rio-based company said in a statement released earlier today. Shares fell as much as 24 percent in Sao Paulo.

Batista became Brazil’s richest man after raising billions of dollars in equity markets and loans from a state bank to fund OGX’s drilling program and sister commodities startups. He then tapped debt markets, selling bonds to investors including BlackRock Inc. (BLK) and Pacific Investment Management Co.

Wealth Erosion

Bankruptcy would culminate a 16-month decline that wiped out more than $30 billion of Batista’s fortune after offshore deposits he had valued at $1 trillion turned out to be duds.

Shares of OGX, which Batista founded in 2007, lost 95 percent in the past 12 months, the worst-performing stock among 73 members of the Brazilian benchmark Ibovespa Index. The stock dropped 21 percent to 23 centavos in Sao Paulo today.

Batista asked bondholders to convert debt into equity, diluting his role in the company, two people with direct knowledge of the matter said Sept. 9. OGX’s $2.56 billion in bonds due in 2018 trade at nine cents on the dollar.

To contact the reporter on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

Filed under Macro Trends

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