Batista Loses Quarter of Fortune on Pledge for Loans

Photographer: Patrick Fallon/Bloomberg

Eike Batista, founder and chairman of OGX Petroleo & Gas Participacoes SA. His fortune has plunged from a peak of $34.5 billion last year after he repeatedly failed to meet targets he had set for his startup companies. Close

Eike Batista, founder and chairman of OGX Petroleo & Gas Participacoes SA. His fortune... Read More

Close
Open
Photographer: Patrick Fallon/Bloomberg

Eike Batista, founder and chairman of OGX Petroleo & Gas Participacoes SA. His fortune has plunged from a peak of $34.5 billion last year after he repeatedly failed to meet targets he had set for his startup companies.

Brazilian billionaire Eike Batista lost more than a quarter of his net worth after the state development bank said he offered personal guarantees for 2.3 billion reais ($1 billion) in loans and a rout of his publicly traded companies deepened.

Batista is now worth $2.9 billion, down from $4.1 billion at the close of trading July 2, according to the Bloomberg Billionaires Index. The loans are part of the 10.4 billion reais that Batista’s companies contracted with the state-run lender, known as BNDES, since 2007. BNDES provided the tally of the loans and their respective guarantees in response to a request by Bloomberg under Brazil’s freedom of information law. The bank didn’t say how much is outstanding.

Batista’s fortune has plunged from a peak of $34.5 billion last year after he repeatedly failed to meet targets he had set for his startup companies. The latest disappointment came when his flagship OGX Petroleo & Gas Participacoes SA (OGXP3) said July 1 that it may shut down its only producing oil field, prompting a selloff that’s since erased $1 billion in market value from his six publicly traded units.

“They can go after his personal assets, the car he bought for his children and so on,” said Ray Zucaro, who helps oversee $350 million of emerging-market debt at SW Asset Management in Newport Beach, California. “The nice thing about a corporation is that if the corporation goes away, the assets they can get are contained within that. This is more problematic for him.”

Most Exposed

Investors are trying to gauge the potential fallout after OGX’s warning prompted Standard & Poor’s and Moody’s Investors Service to cut their ratings on the company’s debt on concern it won’t have cash to pay its creditors. OGX’s bonds fell to a record low 19 cents on the dollar before rebounding to 22 cents yesterday.

The information provided by BNDES follows a July 1 report from Bank of America Corp. that estimated that the Rio de Janeiro-based lender was the most exposed of Brazil’s banks to Batista’s companies, having lent 4.9 billion reais, or 5.8 percent of the bank’s regulatory capital. Analyst Alessandro Arlant, whose estimate is based on regulatory filings from Batista companies, wrote that such findings may understate risks to the banking system because information and disclosure is poor.

Loan Details

BNDES, in its written response to Bloomberg’s request, declined to say how much of the loans were disbursed and repaid, citing bank secrecy laws that prohibit the disclosure of such information. BNDES didn’t specify what personal assets Batista used to guarantee debts with the bank. A spokesman for BNDES in Rio de Janeiro declined to comment further.

A press official in Rio for EBX Group Co., Batista’s holding company, declined to comment on the loans or his wealth. EBX said on June 13 it had restructured an unspecified amount of debt, leaving it with only long-dated liabilities.

To contact the reporters on this story: Joshua Goodman in Rio de Janeiro at jgoodman19@bloomberg.net; Alex Cuadros in Sao Paulo at acuadros@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.