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Montevideo, May 28th 2023 - 16:56 UTC



Collapse of a 35bn dollars empire; Brazil’s Eike Batista defaulted on 45 million interest payment

Thursday, October 3rd 2013 - 19:29 UTC
Full article 2 comments
In the spring of 2012 Eike was the 7th richest man in the world (worth 35 billion dollars) (Pic  E. Martino/Redux/Eyevine) In the spring of 2012 Eike was the 7th richest man in the world (worth 35 billion dollars) (Pic E. Martino/Redux/Eyevine)

Two days ago, former Brazilian billionaire Eike Batista crossed a line. He started to default on a 45 million dollars interest payments on his oil and gas company, OGX's, bonds. The default will be official on October 30th, according to Bloomberg. That leaves bondholders, like PIMCO, the largest bond fund in the world helmed by legendary investor Bill Gross, taking a massive hit. And what's worse is that there could be more to come, according to the Wall Street Journal.

OGX has a little more than 3.6 billion in bonds outstanding, including 1.06 billion of bonds maturing in 2022 and 2.6 billion of bonds due in 2018. Tuesday's payment would have been on the 2022 bonds. Standard & Poor's said it expects OGX to fail to make its next payment on the 2018 bond as well.

If Batista defaults, it would be the largest corporate default in the history of a Latin American company, which is fitting for a man whose fall from grace has become larger than life.

In the spring of 2012 he was the 7th richest man in the world (worth 35 billion dollars) with a six company commodities empire in one of the fastest growing countries in the world. Now he's lost 99% of his wealth and his empire is falling apart. Brazil, almost shadowing Batista, is facing serious questions about its economic malaise as well.

No part of this story is as dire or reflective of the broken promise of Batista as OGX's collapse. Its problems are not hard to understand. The company forecasted product that it could not deliver. The fields Batista gave names like 'Hammer Head' did not produce the riches he expected.

Batista's hope is to restructure his empire, get more cash from investors, and go on developing his oil fields, that's why he's withholding cash.

OGX's investors, led by PIMCO have hired Rothschild to advice on the deal that's coming. According to Bloomberg, Batista will them ask for 250 million in addition to the restructuring 3.6 billion worth of OGX debt.

It's not completely unreasonable for Batista to think this is possible. Last month he managed to restructure the 2 billion dollars loan he got from Mubadala Development Corp., Abu Dhabi's sovereign wealth fund. The terms of the deal are unknown.

Moreover, given Brazil's track record for settling defaults, it may be in the best interest of bondholders to restructure. According to the World Bank, Brazil is ranked 143rd out of 185 economies when it comes to insolvencies.

Top Comments

Disclaimer & comment rules
  • Brasileiro

    Collapse? Everything he built is still standing serving our country. Speculators? Can take the property and continue the work. Can not? So why bought shares?

    Oct 03rd, 2013 - 08:27 pm 0
  • Conqueror

    27 days and counting. Tick, tock.......

    Oct 03rd, 2013 - 09:01 pm 0
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