Batista oil firm OGX files for bankruptcy

The BBC's Wyre Davies visits the site of Batista's unfinished super-port

Related Stories

OGX, the Brazilian oil and gas company controlled by the billionaire tycoon Eike Batista, has filed for bankruptcy protection in a Rio de Janeiro court.

The move came after talks with creditors to restructure some of its $5.1bn (£3.2bn) debt failed on Tuesday.

The company, run by Mr Batista, a colourful former speedboat racer, has struggled with large debt and a crisis in investor confidence.

It is believed to be Brazil's biggest corporate bankruptcy.

The BBC's Wyre Davies looks at Eike Batista, the man behind oil firm

The failure of OGX is seen as a significant chapter in the demise of the vast business empire controlled by Mr Batista, which also includes steel, mining, infrastructure and property companies.

Mr Batista, a well-known business figure in Brazil, was a key player in Brazil's successful bid to host the 2016 Rio Olympics, once boasted of ambitions to become the world's richest man.

His personal fortune was estimated by Forbes magazine at $30bn in 2012, but analysts suggest that troubles at OGX have all but wiped out his wealth.

Promise

Some critics say his business tracks that of Brazil itself, a country which has long been expected to deliver riches, but has consistently failed to move convincingly beyond the developing market stage.

Analysis

In recent years, Eike Batista became the international media's poster-boy for Brazilian economic growth. Interview after interview hailed his success in the mining, oil and gas sectors.

At his height in 2011, he was the richest man in Brazil and the eighth-richest in the world, with a net worth of $30bn. But his career has turned out to be a classic case of over-reach.

The turning point came when his flagship oil and gas company, OGX, suffered a rapid decline in its share price last year.

The firm had gone public in 2008 at the height of the oil boom and swiftly became overvalued. But it soon transpired that its production targets were hopelessly over-optimistic.

Mr Batista's downfall comes at a time when analysts are starting to question Brazil's overall economic direction, largely as a result of perceived policy mistakes by the current President, Dilma Rousseff.

One fault the two have in common, analysts say, is an excessive reliance on commodities, thus making them vulnerable to the current downward global price trends.

The country, one of the Brics group that defines those nations with the most promising opportunities for investors, recorded growth of 7.5% in 2010, but last year grew by just under 1%.

Cassia Pontes, an oil industry analyst with the Rio-based Lopes Filho consulting firm, said: "The entire thing [OGX] has had a really negative impact on Brazil's image and reinforces the need for stronger corporate governance in this country.

"Reality didn't live up to the exaggerated expectations created by Batista."

Confidence

OGX has 60 days to present a restructuring plan.

Its investors, who collectively hold $3.6bn in debt, will then have six months to accept or reject the plan - if they do not accept the company will be liquidated.

The company has suffered poor output from its oil fields in Brazil, which has led to a loss of confidence among investors and creditors.

There were signs of trouble earlier in October when OGX missed a $44.5m interest payment owed to bondholders.

Analysts say the business model was based on securing loans to be paid back with oil that had not yet been produced.

More on This Story

Related Stories

More Business stories

RSS

BBC Business Live

  1.  
    PETROBRAS PROBE 08:53:
    Petrobras HQ, Rio

    Brazilian police named 46 suspects including an executive at oil company Petrobras in an alleged $4.5bn money laundering and drug operation, according to AFP. Authorities are investigating a gang for illegal currency trading, diamond trafficking and bribing government officials along with money laundering and drug allegations. Two of the suspects are on the run, said AFP, citing local media.

     
  2.  
    MARKET UPDATE 08:42:

    Shares in London have drifted lower in early trading. The FTSE 100 is down 0.2%, with Diageo the biggest loser after it reported a fall in sales in the third quarter. Shares in RSA Insurance have jumped almost 3% after announcing the sale of businesses in the Baltic states. In Frankfurt the Dax is down 0.2% and the Cac 40, is little changed.

     
  3.  
    BEER 08:29: Radio 5 live

    Colin Valentine of Campaign for Real Ale is on 5 live telling us beer is just as good for us as wine. There is some science behind his claim, he says. Alas, it is only healthy in moderation, according to Mr Valentine. "When people talk about beer bellies it's not just the beer we are talking about," he said.

     
  4.  
    SPIRITS TUMBLE 08:21:
    Diageo Claive Vidiz Collection

    It's a rough morning for shares in the makers of some of the world's best-known spirits. Diageo, the owner of Johnnie Walker, is down 3.8% and Remy Cointreau is down 6.2%. Remy warned that annual operating profits could be down as much as 40%. Diageo reported that sales in the three months to the end of March fell 1.3%.

     
  5.  
    NEW CAR SALES 08:02:
    New cars, Sheerness Kent

    Demand for new cars in the European Union increased for the seventh month in a row in March, according to the European Automobile Manufacturers Association. It says car registrations rose 10.6% last month. The UK was the strongest of the major markets with a 17.7% rise, Italy was the weakest with a 5% increase.

     
  6.  
    HEADLINES
     
  7.  
    FRANCE DEFICIT 07:48:

    France will slightly slow the pace of its deficit reduction, according to the French Finance Minister, Michael Sapin. In an interview on RTL radio he said that the move had been discussed with European partners. Last week new French Prime Minister Manuel Valls vowed to cut both taxes and spending in a bid to make the French economy more competitive.

     
  8.  
    GOOGLE 07:37: BBC Radio 4
    Google logo

    Google's core business is getting a little "dodgy" according Larry Magid, technology analyst for the website C-Net on Today. They are not getting the revenue on phones that they are on the web, he says. "Some of the crazy ideas have got to get a little less crazy and more profitable," he says, referring to new businesses like robotics and drones.

     
  9.  
    DIAGEO 07:26:
    whisky

    The maker of Johnnie Walker whisky Diageo said sales in the three months to the end of March dipped 1.3%, led by a 19% drop in Asia because of political instability in Thailand and weaker China demand. India, where the firm is trying to buy United Spirits, delivered sales growth of at least 10% it said.

     
  10.  
    REMY COINTREAU 07:18:
    glass of scotch

    A cut in ostentatious spending by Chinese officials will hit profit for Remy Cointreau, the French distiller said. Full-year operating profit will fall as much as 40%, as sales in cognac fell 32% in the fourth quarter. The maker of Remy Martin cognac, Cointreau liqueur and Mount Gay Rum said sales for the three months to the end of March fell 16% to 186 million euros (£153m)

     
  11.  
    MULBERRY 07:14:
    Mulberry bags

    Handbag maker, Mulberry is introducing a "more affordable product" as it attempts to reinvigorate sales. It has also warned that pre-tax profit for the year to 31 March will be "marginally" below current expectations. The firm is looking for a new chief executive after the departure of Bruno Guillon last month.

     
  12.  
    CURRY 07:07:
    lamb curry

    A third of lamb curries tested by the Foods Standards Agency were found to contain cheaper meat. While no horsemeat was found in the watchdog's 145 samples, 25 were found to be just beef with no lamb.

     
  13.  
    CHINA WOMEN 07:02: BBC Radio 4

    In China there is an official phrase "left over women". It refers to single, urban women over the age of 27. On Today Leta Hong Fincher from Tsinghua University, says that Chinese state media has been insulting these women with the phrase and pressuring them into finding a husband and settling down.

     
  14.  
    HORSE RACING 06:48: BBC Radio 4
    Future Champion Novices" Steeple Chase

    40% of the population will watch some kind of horse racing during the year, claims Simon Bazalgette, chief executive of the Jockey Club on the Today Programme. That's why sponsors from the Middle East and big companies are keen to get involved in the sport, he says.

     
  15.  
    CO-OP GROUP 06:35: BBC Radio 4

    "Turkeys" and "angry birds" is how Michael Mol, professor of strategic management at Warwick Business School refers to senior managers at Co-operative Group on Today. He is "very worried" about their ability to take the right decisions. He thinks Co-op Group will have to find money to invest in the struggling Co-op Bank, despite only now owning 30% of the lender.

     
  16.  
    EASTER EGGS 06:25: Radio 5 live

    Are the walls of chocolate Easter eggs getting thinner? Yes, says Lee McCoy, editor of Chocolate Reviews, on 5 live. More shocking, there may be a shortage of the Easter treats. It seems Tesco have run out of a number of lines, especially eggs made by Cadbury and Nestle, as well as some Lindt and Mars eggs, the Daily Telegraph reports.

     
  17.  
    FOOTBALL 06:13: Radio 5 live
    Danny Mills, Robbie Savage, 2004

    More from Danny Mills. He's invested in a pasty company through private equity, but would he invest in football? Five-year contracts for staff (footballers) and the highest sporting wages in the world mean it's a game for "billionaires" he said. "You can't blame the footballers," he said, as anyone would take the money offered. Picture above shows Danny in his playing days, exchanging views with fellow BBC pundit Robbie Savage.

     
  18.  
    PASTIES 06:06: Radio 5 live
    Pasties

    Former England and Leeds footballer Danny Mills is part of an investment group that has bought West Cornwall Pasty Company from administrators. He tells 5 live: "There's a gap where banks just aren't lending," he said. The original company's strategy was "too aggressive" and expanded too quickly, which led to its demise. He blamed the pasty tax for the rising price of pasties.

     
  19.  
    CO-OP GROUP 06:01: Radio 5 live

    Michael Mol, professor of strategic management at Warwick Business School is on 5 live talking about Co-operative Group, which releases earnings today. "You have two different issues: the bank issue with huge losses," he said and "the group facing losses from the Somerfield acquisition". More losses could be on the way if they don't reform their governance structure, he said. They also have too many lay members who "don't know how to run a business," he said.

     
  20.  
    GOOGLE 06:00:
    Google building

    Google is likely to be under scrutiny today after it released results late on Wednesday that some considered disappointing. Google still made $3.45bn (£2.05bn) in its first quarter. But some are expressing concern about a surge in costs. That reflects Google's move into new businesses, including robotics and drones.

     
  21.  
    06:00: Howard Mustoe, Business Reporter

    Hello from me. Keep in touch via @BBCBusiness and bizlivepage@bbc.co.uk.

     
  22.  
    06:00: Ben Morris Business Reporter

    Good morning! Watch out for results from Co-operative Group due at 09:00. You can expect Google to be in focus today as well, releasing results which some investors consider disappointing.

     

Features

From BBC Capital

Programmes

  • JellyClick Watch

    Can Twitter’s co-founder Biz Stone break the mould with his social Q&A Jelly app?

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.