Wednesday, July 3, 2013

Brazilian billionaire fights to save empire as economy stalls

Pressure: Eike Batista - with Brazil's President, Dilma Rousseff, last year.

Pressure: Eike Batista - with Brazil's President, Dilma Rousseff, last year. Photo: Reuters

With his playboy lifestyle of private jets, yachts and expensive cars, oil and gas billionaire Eike Batista makes for an unlikely protagonist in the story of Brazil's growing economic crisis.

But just as his country is feeling the impact of a dwindling commodities boom, Mr Batista is fighting to save a business empire which he once boasted would make him the richest man in the world. After borrowing billions in the good times to fund the expansion of his businesses, which range from mining to the redevelopment of Rio's Maracana football stadium, there are doubts that he can repay his creditors.

The scale of the decline reached a new low on Tuesday after his oil company OGX revised expectations on oil production, slashed spending and suspended drilling at three offshore projects, raising the likelihood of restructuring.

Rio's Maracana Stadium.

Rio's Maracana Stadium. Photo: AFP

Shares in the oil and gas arm of Mr Batista's EBX Group dropped by a record 30 per cent, wiping almost £200 million ($334 million) off its market value.


''OGX is on the ropes and could face imminent financial restructuring,'' Michael Wang, an analyst at IHS Herold, told Bloomberg. ''The company may go bankrupt and not be able to pay its debt.'' The company denied speculation it was considering filing for bankruptcy protection.

Last month, Fitch downgraded OGX to a lowly CCC rating, citing ''increased uncertainty about the willingness and ability of Eike Batista to honour the company's $US1 billion put option''.

This fuelled speculation about his finances, especially after he sold 70.5 million shares in OGX, reducing his stake from 61 per cent to 57 per cent.

The slide in the market value of companies owned by EBX has resulted in his own fortune being slashed by £13 billion. From seventh place on last year's Forbes list of billionaires, Mr Batista was most recently estimated to have a net worth of £7 billion, placing him at 100th on the list in March.

His rapid fall from grace mirrors the economic fortunes of Brazil, which was growing at 7.5 per cent in the boom.

Growth was just 0.9 per cent last year and, with inflation rising towards 6.5 per cent, the country is now being described as under ''speculative attack''.

Mr Batista is among the victims and has seen his publicly traded companies wither. But the businessman is also involved in the controversial ''white elephant'' projects linked to the 2014 World Cup and 2016 Olympics.

Heavy investment in stadiums and infrastructure for the two sporting events was among the grievances of the widespread protests that have swept Brazil in the past fortnight. Mr Batista was part of a consortium that will manage the £286 million Maracana Stadium, which will host the World Cup final next year.

Telegraph, London
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