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July 4, 2013 7:32 pm
Brazilian billionaire Eike Batista on Thursday kicked off what is expected to be a wholesale restructuring of his heavily indebted oil, mining and energy empire, mostly involving the sale or closure of his listed companies.
The proceeds of the complex operation will be used to repay bank debtors in full while bondholders at his flagship oil company, OGX , will be subject to a debt restructuring, said one person familiar with the matter.
In the first such deal, Mr Batista handed control of his power company, MPX, to his co-investor in the unit, Eon, Germany’s largest utility by sales, resigning as chairman of the company and from the board.
“Eon appreciates Eike’s great contribution to developing MPX to be one of the leading energy companies in Brazil since he founded it in 2001,” said Jørgen Kildahl, a member of Eon’s board of management who will replace Mr Batista and become interim chairman of MPX.
The restructuring of Mr Batista’s group, once the brash symbol of a booming Brazil, is expected to leave him with rump assets worth only about $1bn-$2bn, a person familiar with the matter said. This would represent a huge climbdown for Mr Batista, who last year was estimated by Forbes to have a fortune of $30bn, leading him to boast he would overtake Mexican telecoms magnate Carlos Slim as the world’s richest man.
But the asset sale plan could also represent a relatively clean exit for the tycoon after a crisis of confidence in the group sparked by OGX, which repeatedly missed forecasts culminating this week in an admission its only producing oil wells are a flop and would probably be wound down next year.
Under the deal with Eon, the German company will increase its 36 per cent stake in MPX by buying nearly half of a R$800m rights issue. Mr Batista will not participate in the offering, reducing his stake from 29 per cent to about 19 per cent.
Next for sale is the other crown jewel of his EBX Group, his mining company MMX, whose Porto Sudeste port near Rio de Janeiro, rather than its mines, is considered attractive by strategic bidders.
With the proceeds of the sales of MMX and his remaining holding in MPX, Mr Batista would then pay off creditors at his holding company, including leading Brazilian banks, Itaú and Bradesco.
His shipbuilding company, OSX, is to be closed and any unused oil platforms sold while his logistics company, LLX, will invite in strategic investors to complete its main project, the Açu “super port” in Rio de Janeiro state.
A $2bn investment by Abu Dhabi-based investment company, Mubadala, in Mr Batista’s holding company has been converted to long-term debt.
OGX will be left with a group of valuable oil exploration fields and a gasfield but will need to overhaul its capital structure through a restructuring and haircut on its $4bn in mostly fixed income debt. The company will be maintained as a going concern for as long as possible, possibly one to two years, by carefully controlling capital expenditure, the person said.
If Mr Batista’s financial situation improves, he may honour a $1bn put option he previously pledged for OGX. Mr Batista’s EBX Group did not respond to a call for comment.
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