OSX Brasil SA (OSXB3), the shipbuilder controlled by billionaire Eike Batista, shelved plans to sell debt abroad as a rout in its stock and bonds deepens, according to a memo from underwriters obtained by Bloomberg News.
“Extraordinary volatility” in bonds from OSX and Batista’s oil producer OGX Petroleo e Gas Participacoes SA (OGXP3) caused the cancellation, Pareto Securities said in the message. OSX originally planned to sell $265 million of one-year secured notes in a transaction managed by Pareto, a person familiar with the offering who asked not to be identified said March 15. An official at the Rio de Janeiro-based shipbuilder declined to comment today.
Shares and bonds issued by Batista-controlled companies have been sinking on concern that the businesses are losing access to financing needed to carry out investment plans. His six publicly traded companies posted a combined net loss of 1.68 billion reais ($835 million) in the first nine months of last year amid missed project targets and rising costs.
“Eike’s situation is getting more complicated,” Marco Aurelio de Sa, the head of fixed-income trading at Credit Agricole’s Miami brokerage, said in a telephone interview. “The market is questioning” OGX’s ability to repay debt given the fourth-quarter results the company announced yesterday.
The producer lost 296 million reais in the fourth quarter.
Staale Hellesjo, a Pareto official based in Rio de Janeiro, didn’t return calls and e-mails seeking comment.
Yields on OSX’s $500 million of 9.25 percent secured bonds due March 2015 rose 18 basis points, or 0.18 percentage point, to a record 11.11 percent today and have jumped 1.93 percentage points in the past week, according to data compiled by Bloomberg. OSX shares have plunged 75 percent in the past year.
Batista’s shipbuilding unit was raising money for the construction of an offshore production and storage vessel for OGX, his biggest holding. The oil producer’s $2.56 billion of notes due 2018 have lost 16 percent this year.
OGX will cut volume estimates for its only producing field after missing output targets, the company said in an earnings report yesterday. The first two wells at the Tubarao Azul field are producing a little less than 10,000 barrels a day. The company originally planned to pump as much as 20,000 barrels a day at each well.
Batista’s personal wealth has fallen almost $26 billion in the past year as the market value of his companies sank. The billionaire said in March 23 posts on his Twitter account that “rumors and gossip are the tools of short sellers” who will be “caught with their pants down.”
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