9/18/2014
Former billionaire Eike Batista, the flamboyant Brazilian entrepreneur whose wealth peaked at $30 billion in 2012, now says he has a negative net worth of $1 billion.
Batista, whose troubled empire of energy-related businesses began to collapse about two years ago when his flagship oil company OGX (now OGPar) failed to meet production and financial targets, said during an interview with Brazilian newspaper Folha de S. Paulo that he still has hopes to emerge from his financial hell with some cash once the legal issues against him are concluded. That could take up to 10 years.
OGX filed for bankruptcy protection last year after defaulting on a $45 million bond payment in early October, the largest corporate default in Latin American history. Creditors include BlackRock and PIMCO. A month later, Batista’s shipbuilding company OSX also filed for bankruptcy protection. Both companies have total debts reported at as much as $7.1 billion. More recently, Batista’s mining unit MMX was also rumored to be considering filing for financial protection, although he denied such rumors during the interview with Folha and stated that the company still has a chance of being reorganized or reaching a debt settlement with its creditors before doing so. The ‘X’ on each of his companies’ names was meant to signify multiple returns.
Batista’s ups and downs have been closely chronicled by the financial media worldwide, including FORBES. Batista invited the scrutiny by living large. The former billionaire, whose first wife was a former Playboy cover girl, used to pose for pictures next to a Mercedes-Benz McLaren parked in his living room at his mansion in Rio de Janeiro. In 2009, he hosted a dinner there for Madonna and announced a donation of a total of $7 million to the singer’s welfare projects in Rio throughout the following years. She was reported to have been left in tears by the gesture, but Batista has only forked over about $500,000, according to reports.
Former billionaire Eike Batista (PHOTO: Mario Anzuoni/REUTERS)
Batista also used to make big statements. In 2010, he promised FORBES he would become the world’s richest man by 2015. A year later he confirmed that during an interview with CNBC, stating he had “created five companies that have in them embedded resources worth $2 trillion at a very low cost of producing,” calling them “idiot-proof assets.”
Now he seems more concerned about getting rid of all his debts and hopefully one day being recognized as someone who has left a legacy for his country. “I’ll leave the largest gas reserves onshore in Maranhao [northeast Brazil], more than 2000 MW generating power for the Brazilian energy system, the Sudeste port. Isn’t three [legacies] enough? Brazil has spectacular oil fields. I found 11 mining camps. Why couldn’t I have had the same luck with oil? And what if I had? Wow,” Batista told Folha.
Earlier this week, a federal judge in Rio ordered banks to freeze up to R$ 1.5 billion ($640 million) in financial assets belonging to Batista, who is accused by prosecutors of market manipulation and insider trading. In May, a court had already frozen R$ 122 million ($52 million) belonging to him. According to the Wall Street Journal, who interviewed the judge responsible for the court order, so far Brazil’s Central Bank has found only about R$ 117 million ($50 million) in Batista’s accounts, bringing the total amount frozen closer to R$ 240 million ($102 million).
Ever since he began to fall from his billionaire grace, Batista has ceased to grant interviews or interact with fans on his Twitter account, where he is followed by more than 1.3 million users. He broke his silence last year in July after publishing an article in the Brazilian newspaper O Globo, when he said he regretted taking his companies public and partly blamed advisers for what was happening to him.
This week, besides the Folha interview, Batista also spoke to Brazilian business daily Valor Economico, to which he confirmed the sale of his gold miner AUX to a group of investors from Qatar for $400 million, which will go straight to some of his biggest creditors, the Brazilian banks Itau and Bradesco, and Mubadala, Abu Dhabi-based investment and development company, which will also get 10.44% from his stake in Prumo Logistica (formerly known as LLX) and 10.52% of his stake in MMX. In 2012, Mubadala paid $2 billion for a 5.63% stake in Batista’s holding company, EBX. Batista’s declines since then forced him to renegotiate the deal with the fund.
“It’s time to talk,” Batista told Folha, the same newspaper that last November published an exclusive story indicating that he was aware of his companies’ troubles before they became public, and possibly used that information to reduce his losses, which he denied.
Following are some excerpts of his interviews to Folha de S. Paulo and Valor Economico:
From Folha, on being worth a negative $1 billion:
As someone who co-runs businesses, who knows that people want these assets to prosper, I believe them will create a lot of value and that we will see a settling of accounts in the future. These are not assets that disappeared, quite the contrary (…). My cash flow is all gone, but I still have the shares. I’m negative at about $1 billion, but the stocks will be worth more in the future. As I have debt negotiated with all my creditors within the next 10 years, I am working towards the creation of more value and, should God allow it, in five or ten years there will be something left for me. So I am now an assets manager working under a juggernaut.
From Folha, on perhaps being too optimistic about early reports indicating oil findings:
Before pumping out any oil, we can’t know for sure. Who would have thought that the most productive area of the country, in the Campos Basin, where are our fields, we wouldn’t have hit at least 60% in oil found?
From Folha, on selling shares before informing investors that there problems and being accused of insider trading:
The share weren’t mine. They belonged to creditors. They were in my name, but they had another owner. Sure, you had to pay a huge debt load, in order to avoid a side effect of debt across the group. If a bank comes to you with $8 million in interest, you face a default of serious proportions. So you need money to pay these debts.
From Folha, on his businesses still being ‘idiot proof,’ as he called them:
They are still standing, so I believe they are idiot proof. There are legacies. The problem is that people expected to many legacies from me. I’ll leave the largest gas reserves onshore in Maranhao [northeast Brazil], more than 2000 MW generating power for the Brazilian energy system, the Sudeste port. Isn’t three [legacies] enough?
From Folha, on his world quest to find new partners:
I’ve been to Korea, to the Middle East. I am talking to potential partners for our shipbuilding company. I am looking for partners that can aggregate value. We’re still in talks.
From Folha, on possibly having assets outside of Brazil:
I don’t have assets abroad. I don’t think there is someone more transparent than me. Everything now belongs to the banks, to Mubadala…
From Folha, on his relationship with the candidates running in the Brazilian presidential election:
I haven’t spoken to any of them, nor has anyone talked to me. I am a Brazilian who builds things for Brazil. They should thank me for the fantastic infrastructure that I gave to the country.
From Folha, on dealing with minority shareholders’ losses:
A lot of people also made a lot of money. I have not benefited from anything. I have my shares only. The biggest loser on this story was me.
From Folha, on his life after losing all his money:
I was a middle class young man, and my life, you know, to have to go back to that… It’s difficult for me, you know, obviously it is a huge setback for my family, and it’s all in the press everyday. So that’s why I’m talking now, I spent a year looking into all of that.
From Valor, on his regrets:
I regret having entered the oil business. It took all my equity and all these fantastic projects I planned to build. It was the anchor that led me down.
Anderson Antunes, Contributor
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9/2/2013 @ 7:00PM|26,009 views
Brazil's Eike Batista, onetime The World's 7th Richest, Is No Longer A Billionaire
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Eike Batista, the flamboyant Brazilian entrepreneur whose wealth peaked at $30 billion just 18 months ago on FORBES' 2012 list of the World's Billionaires, has officially lost his billionaire status. Batista, who told FORBES in 2010 he would become the world's richest man, is now worth less than $900 million, according to Forbes' calculations. That figure accounts for $2.7 billion in loans that Batista reportedly owes to Brazil's BNDES development bank and to the Mubadala sovereign fund of the UAE. The latest hit to the former billionaire's troubled empire of energy-related businesses came on Friday, after the drop in the value of his four largest public holdings. Over the past weeks, the decline in those holdings wiped out about $430 million of his wealth. Just Batista's oil and gas flagship, , lost 40% of its market value in one day's trading Friday and 63% over the week, falling from $0.21 (R$ 0.51) to $0.12 (R$ 0.30) a share, after being removed from the MSCI Brazil Index. sold all of the 183 million shares it held in the company. Batista also sold 1.54% of his OGX stock on Wednesday and he plans to sell more, reportedly to pay debts. A Brazilian brokerage firm has suggested that OGX's market value is being inflated by its presence in Brazil's benchmark index, while a analyst wrote that the company's shares are technically worthless due to the growing imbalance between assets and liabilities, dwindling cash and limited fundraising options. OGX is the largest of several interlinking natural-resource startups created by Batista that have gone public in recent years. It's also the most beleaguered of Batista's companies, with a total debt of $4.6 billion (R$ 10.586 billion) as of its latest report in June, with about $975 million (R$ 2.237 billion) in short term obligations. Adam Cohen, founder of Covenant Review, concluded in a report from May that OGX debt "is much greater than what's being reported," when the guarantees of its “sister-companies” from EBX are considered. The company's cash, however, fell 72% in the second quarter to $326 million (R$ 753 million), after a net loss of $2.03 billion (R$4.7 billion), pointing to a possible imminent default that would be the largest in Latin American history to date. To make things even worse, in a plan to reduce risks in exploration and production and to protect cash, OGX agreed to return nine blocks for which it bid in a recent government oil-license auction. The company will pay a fine of $1.5 million (R$3.42 million) for not acquiring the areas, according to a securities filing. In addition, Malaysia’s Petronas tied a payment of $850 million for a 40% stake in two blocks of the OGX-controlled Tubarão Martelo field to the completion of a debt restructuring plan by the Rio de Janeiro-based company. OGX needs the cash from the sale to keep drilling for oil and stay current on about $3.6 billion of bonds. Petronas' CEO Datuk Shamsul Azhar Abbas told reporters in Kuala Lumpur last week that OGX’s “debt restructuring has to happen first” for the deal to be finalized, according to Reuters. Batista, OGX’s controlling shareholder, faces bond interest payments of about $40 million in October and $100 million in December. Much of Batista's estimated $900 million remaining fortune lies in shares of his six public traded companies, all of which are still in pre-operational stages and have yet to turn on a profit. That means he could eventually see his net worth drop even more, since he has reportedly pledged his personal wealth to back loans from Brazilian banks. Batista is in a desperate mode to speed up the dismantling of his EBX Group in order to pay creditors. He already gave up control of his energy company, MPX, to Germany's , and he recently quit as chairman of his logistics company, LLX, which was sold to EIG Global Energy Partners LLC. His mining company, MMX, is reportedly the next in line to be negotiated (the company recently agreed to sell its Chilean unit to Inversiones Cooper Mining). He’s also reportedly offering debt-for-stock exchange to bondholders, according to Brazil’s Folha de S. Paulo newspaper. To be fair, Batista could avoid the collapse of his empire by reorganizing it under Brazil's bankruptcy law, a move that would result in years of judicial review through the legal processes and ease the way for negotiations with equity investors and creditors, ultimately giving him plenty of time to relocate his assets, as many Brazilian businessmen have unashamedly done before him. But instead Batista has chosen to honor all of his obligations, as he stated in an op-ed published by a Brazilian newspaper in July. “I won’t leave a single penny unpaid for each one of my debts,” he wrote at the time. That certainly does not turn him into a hero. He is unlikely to deliver on his huge promises and a lot of people lost money while believing in him, not to mention the amount of taxpayers' money trusted to his charge by Brazil's public banks, some of which he may not be able to pay back. But it does prove that Batista is a genuine risk-taker, and risk-takers usually have the biggest returns. Hopefully for Batista that rule will apply to his situation also.
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