In 2010 Eike Batista, the Brazilian entrepreneur, told Forbes that he would one day become the world’s richest man. In 2012 his wealth was estimated at $30 billion and it seemed as though he was on his way to achieving that goal, but just 18 months later and he has been struck off the Forbes billionaires list, worth just $900 million.
Batista’s energy empire has suffered various hits over the past year, but the latest blow has come from a drop in value of his four largest public holdings, reducing his fortune by $430 million over the past few weeks. The worst, his oil and gas company, OGX that lost 40% of its market value in one day, and 63% over the week, forcing Morgan Stanley to sell all of its 183 million shares in the company.
EIke Batista. (Glamurama)
OGX is the largest of several natural resource companies started by Batista that have gone public in recent years, but also the frailest, with a debt of $4.6 billion according to the latest report released in June. Adam Cohen, of Covenant Review, stated that OGX debt is actually much greater than reported, when taking into account the guarantees of its sister companies from EBX. The cash balance is also poor, having fallen by 72% to $326 million, due to a net loss of $2.03 billion.
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An analyst from Deutsche Bank explained that the shares in OGX are technically worthless due to the imbalance between assets and liabilities, the dwindling cash flow, and the poor financing options.
Most of Batista’s remaining $900 million is in the form of shares in his six publicly traded companies, all of which are still young, and have yet to turn a profit. The fact that he secured bank loans with his personal wealth leaves the possibility of his net worth falling even further.
In order to keep his creditors at bay, Batista wants to break up his EBX Group. He has already sold his MPX energy company to E.ON, his LLX logistics company to EIG Global Energy Partners LLC, and his MMX mining company is supposedly the next to be sold.
By reorganizing his empire in accordance with Brazil’s bankruptcy laws, Batista could avoid financial collapse, however, unlike many Brazilian businessmen before him, he has decided to honour his financial obligations. Writing; “I won’t leave a single penny unpaid for each one of my debts.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com