By Juan Pablo Spinetto Oct 16, 2014
Eike Batista’s main mining unit became the third of his companies to file for bankruptcy protection in a year after the Brazilian entrepreneur lost his fortune, once the world’s eighth largest.
MMX Mineracao & Metalicos SA (MMXM3), the iron-ore producer that Batista, 57, listed in Brazil in 2006, said in a statement yesterday its subsidiary MMX Sudeste Mineracao SA decided to request protection from creditors in a Belo Horizonte court.
MMX Sudeste is a wholly owned MMX subsidiary that controls the Serra Azul and Bom Sucesso ventures and is the company’s main source of revenue. Neither MMX nor Batista immediately replied to e-mails seeking comments.
The request marks another chapter in the demise of Batista, a former gold trader who surfed a wave of investor appetite for commodities’ ventures in emerging markets last decade to become Brazil’s richest person by raising billions of dollars in equity markets.
His empire of commodities and logistics startups collapsed last year, forcing his flagship oil unit along with his shipbuilding unit into bankruptcy protection amid mounting debt, a shortfall in revenue and a crisis of confidence among investors.
MMX, which was the first of six startups that Batista listed in Sao Paulo from 2006 to 2012, has been selling assets, halting producing units and shrinking operations to cut costs and bolster cash as iron-ore prices slide to a five-year low.
“Despite the management’s efforts to negotiate with creditors and seek potential investors, the bankruptcy protection request appeared as the most adequate alternative given the company’s economic and financial situation,” MMX said in the statement.
Face Trial
The company’s chief executive officer and two board members resigned in August, with MMX naming interim Chief Financial Officer Ricardo Werneck Guimaraes as replacement.
Batista is due to face trial next month for alleged insider trading and market manipulation. His lawyer, Sergio Bermudes, has previously said the allegations against his client were groundless.
MMX had record losses last year after putting on hold an expansion of its flagship Serra Azul project and writing down the value of assets. In February, the company sold a controlling stake in a key iron-ore port project in Rio state and in July agreed to lease its Corumba mine to Vetria Mineracao SA.
Shares of MMX fell to a record low 48 centavos on Oct. 10. The company has halted operations at Serra Azul, its only producing unit, and is reviewing its business plan to bolster cash. Angra Partners, which is advising Batista on the reorganization of his EBX Group Co. holding company, was hired by MMX on June 23 to work on restructuring the company’s debt.
Controlling Stake
Veja magazine columnist Lauro Jardim wrote Aug. 18 that the company would seek bankruptcy protection by the end of August. While MMX had no immediate plans to seek court protection from creditors, it remained an option, a person familiar with the strategy told Bloomberg News at the time.
The company was seeking to sell or lease its remaining assets, the person said at the time. It still has 35 percent of a key iron-ore port project in Rio state after selling in February a controlling stake to commodities trader Trafigura Beheer BV and Mubadala Development Co. for $400 million.
MMX was unchanged at 48 centavos in Sao Paulo yesterday. The stock lost 92 percent in the past 12 months, reducing its market value to 77.9 million reais ($31.7 million). At its 2008 peak, the company was worth 18.3 billion reais.
MMX, as opposed to Batista’s oil producing and shipbuilding units, doesn’t have outstanding international bonds. The company counts China’s Wuhan Iron & Steel Co., and SK Networks Co., the trading arm of South Korea’s third-largest industrial group, among shareholders.
Batista, who at his peak was worth more than $30 billion according to the Bloomberg Billionaires Index, told newspaper Folha de Sao Paulo last month that he has a negative net worth of $1 billion.
To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net