Brazil's Eike Batista, who was worth US$30 billion only a year and a half ago, is now worth a scant $200 million because of his industrial group's breakdown. Jonathan Alcorn / Bloomberg
Brazil's Eike Batista, who was worth US$30 billion only a year and a half ago, is now worth a scant $200 million because of his industrial group's breakdown. Jonathan Alcorn / Bloomberg

Another tear in Brazilian billionaire Eike Batista's pocketbook



OGX Petroleo e Gas Participacoes, one of the companies owned by Brazil's former richest man, Eike Batista, has been rated worthless, the latest chapter in the crumbling of the magnate's industrial empire.

Analysts at Deutsche Bank and Bank of America estimated the stock to be worth about 4 cents, while Marcos Elias, a partner at the Sao Paulo-based brokerage Gradual Investimentos, said on Friday the company's value was close to zero.

The decline of OGX, once Brazil's second-biggest oil company by market value, further dials down the clock on Mr Batista's race to offload parts of his oil and gas, mining and ports businesses before they run out of cash. Several potential investors, including Mubadala Development, the strategic investment company owned by the Abu Dhabi Government, are reportedly circling.

The speed of the unravelling of Mr Batista's fortunes has been as rapid as it is dramatic.

Sitting on an estimated fortune of more than US$30 billion as recently as 18 months ago, the world's seventh-richest man at the time was talking up his chances of supplanting Mexico's Carlos Slim from the number-one slot by 2015.

But in July his wealth had tumbled to just $200 million, according to Bloomberg. Shares in OGX have sunk as much as 90 per cent, and shed roughly two-fifths of their value in the final half-hour of trading on Friday.

Elsewhere, Mr Batista has been looking to divest from the mining, ports, ship building and energy units of EBX Group, the conglomerate whose companies were once worth as much as $60bn.

The reasons behind the reversal in fortunes are numerous. One of the first signs of trouble emerged when OGX said last year that it was producing only 17,000 barrels of oil and natural gas equivalent a day at its first field, much less than it had planned. The admission coincided with a downturn in metals mining, another cornerstone of Mr Batista's empire. Against the backdrop of a cooling Brazilian economy, rising debt throughout the business began to look unsustainable, investor confidence steadily ebbed and stock prices nosedived.

It was all a contrast from earlier years, when EBX emerged as the natural choice for investors wanting exposure to Brazil's sizzling expansion. Between 2004 and 2010, Mr Batista was able to borrow cheaply to create a group of companies spanning mining to logistics.

In the process, big investors including Pacific Investment Management and BlackRock bought in. Business was still running smoothly when Mubadala struck a $2bn investment deal with EBX in March last year.

In return, Mubadala was granted a 5.6 per cent stake in Mr Batista's offshore holding companies, including Centennial Asset Brazilian Equity Fund, which along with another fund, Centennial Asset Mining Fund, held 58.9 per cent of OGX as of July 10, according to Thomson Reuters data.

Brian Lott, a spokesman for Mubadala, said on Thursday: "Mubadala remains in close discussions with EBX and a number of interested parties as EBX continues to restructure its businesses. We believe many EBX assets have significant potential value for Mubadala and other investors."

He declined to comment on a Bloomberg report that Mubadala had joined the Amsterdam-based commodities trader Trafigura Beheer to bid for Mr Batista's iron ore unit, MMX Mineracao e Metalicos. The news wire cited three people with direct knowledge of the matter.

As Brazil's fourth-largest iron-ore operator, MMX holds two producing assets in Brazil and is building the Sudeste port in Rio de Janeiro, from where it hopes to ship steelmaking material to Asia.

In July, EBX renegotiated $2.3bn in debts to Mubadala, reportedly the Brazilian company's single biggest creditor.

"The agreement we signed in July with EBX gives Mubadala improved protection for the remaining portion of its investment against certain assets," Mr Lott said. When Mubadala announced its initial investment in EBX in March last year, Khaldoon Khalifa Al Mubarak, the chief executive and managing director, cited Brazil's strong economic fundamentals and attractive investment prospects over the medium to long term as reasons for the deal.

It would be heartened, therefore, by news that the country's economy grew by 3.3 per cent year-on-year in the second quarter, higher than originally forecast.

But the value Mubadala gleans may still ride on the restructuring of Mr Batista's tentacle of business units in the coming months.

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