OGX Petróleo e Gás (OGXP3:BZ), the oil company controlled by Eike Batista, is preparing to file for bankruptcy protection, putting $4 billion in bonds and loans into default. The filing could come as early as today, according to Bloomberg News, and would be the largest corporate debt debacle in all of Latin America.
It would also mark the latest chapter in the ignominious comedown of Batista, once the eighth-richest man in the world and the poster boy of Brazilian entrepreneurialism. During his glory days, he seemed to find rich gold mines with blithe ease, courted supermodels, and charmed and cajoled hard-bitten New York money men to throw in their lot with him.
As we wrote in a cover story for Bloomberg Businessweek, his fortune began to unravel almost 16 months ago, when Batista and OGX had to admit that their much-hyped “new frontier” of oil off the Brazilian coast was actually a collection of mediocre-to-dud oil wells. Production would come nowhere close to paying off the billions he had borrowed in the bond market to finance exploration and production.
The market response was swift and ruthless. OGX lost 90 percent of its value and ran out of cash. The collapse of that and other Batista-created entities cleaved an astonishing $30-plus billion from Batista’s personal wealth.
“He tried to do too much, too fast, and he tried to do that with borrowed money,” says Arthur Byrnes, who oversees almost $1 billion of assets as senior managing director at Deltec Asset Management in New York. His company had invested in OGX but sold its OGX notes before the collapse. “He’s like a caged animal now. I feel sorry for him, but if you want to be a big shot, you have to deliver.”
The bankruptcy filing has not been unexpected; in the beginning of October, people with direct knowledge of the situation suggested it would come within a month. If a judge accepts the filing, OGX will have 60 days to present plans for restructuring.