Batista seeks OGX bankruptcy protection
Brazilian tycoon Eike Batista triggered Latin America’s biggest corporate default on Wednesday when he filed for bankruptcy protection for his oil exploration and production company OGX. The filing signals the demise of one of the greatest fortunes built during the emerging markets boom of the first decade of this century, and of a businessman whose brash ambition symbolised the rise of Brazil as a new economic power. The judicial reorganisation, which follows the collapse of voluntary talks with creditors over the company’s $5bn in debts, is also expected to increase the chances that Brazil’s oil regulator could confiscate OGX’s remaining oil exploration blocks. "The company could become bankrupt very quickly if it has no ability to sustain its own operations," said Sam Aguirre of FTI Consulting Brasil, a corporate debt restructuring group. With a fortune valued at $34.5bn at his peak, Mr Batista captured more than any other tycoon the enormous wealth and optimism generated in Brazil and other emerging markets until the onset of the eurozone crisis in 2011. He built an empire of start-up companies in oil, mining and logistics virtually from scratch in less than a decade and was a star on capital markets, raising $3.6bn in international bond financing for OGX before it had even entered production. The plan soured, however, when OGX repeatedly missed production targets before admitting in the middle of this year that its only producing wells had flopped and would be closed. Under Brazil’s bankruptcy law, OGX will have to provide a detailed recovery plan within 60 days of a judge accepting the filing. The company’s creditors will then have 30 days to declare their opinion about the plan after which the judge can call an assembly of lenders to vote on the proposal. If the plan is approved, the company will have to implement it within two years of the original filing date – or in OGX’s case, October 2015 – or face liquidation. If creditors rejected the plan, the company would be liquidated straight away, lawyers said. Complicating the bankruptcy procedure for Mr Batista, however, is that Brazil’s oil regulator, ANP, has the right to confiscate fields from bankrupt concession holders. OGX has said in restructuring documents it has enough cash to continue operations until the end of this year and on Wednesday appointed a new exploration director in an apparent attempt to convince regulators that it was still functioning. But the company’s hopes of survival will be severely limited by the expected reluctance of investors or lenders to risk any more money in the venture. New loans provided to a company that is undergoing what is known in the country as a judicial recovery process are generally required to be written off by Brazilian banks, and, as such, banks have little incentive to make such loans.