An OGX Petroleo & Gas Participacoes SA (OGXP3) shareholder asked a Rio de Janeiro court to block asset sales and payments to companies affiliated with billionaire controller Eike Batista. The company’s bonds fell to records.
The case was submitted by Rio lawyer and professor Jorge Lobo on behalf of his son Marcio Lobo, who owns 84,000 shares in the oil company, according to the filing, a copy of which was obtained by Bloomberg News. The filing couldn’t immediately be verified in records at Rio’s Fifth Business Court.
“OGX’s situation is of dramatic pre-insolvency,” according to the document e-mailed by Jorge Lobo, citing Standard & Poor’s and Fitch Rating Ltd.’s CCC ratings as examples of the company’s financial situation. EBX Group Co., Batista’s holding company, is “in a deep financial crisis,” he wrote.
EBX, created by Batista as an umbrella group for his commodities and energy units, announced yesterday that it restructured a $2 billion investment by Mubadala Development Co. after the billionaire’s six publicly traded companies lost a combined $10 billion in market value this year. OGX’s dollar bonds due in 2018 fell as much as 20 percent to 17.99 cents on the dollar, a record. The stock has tumbled 86 percent this year after missing targets and abandoning fields.
The press departments of EBX and OGX in Rio declined to comment on the injunction request. Batista announced last month that OGX and EBX restructured debt and only has long-dated maturities. The restructuring “is clear evidence of EBX’s high level of commitment toward its obligations with stakeholders,” he said then, without providing further details.
Batista is seeking to bring in partners and inject fresh capital into OGX, a person with direct knowledge of the plan said last week. Grupo BTG Pactual, the investment bank adviser to Batista’s companies, is scouring for prospective oil field partners, according to the person, who asked not to be identified because negotiations are private.
Injunctions are necessary because there is “a high risk of default and sale of assets and rights,” said Jorge Lobo, who is a professor at Rio de Janeiro State University and has published a book called Shareholders Rights, according to his firm’s website.
The Lobos requested in the filing that OGX be barred from paying back any debt it owes EBX or any of Batista’s companies. On July 1, OGX said it won’t lease an oil platform from Batista’s shipbuilder OSX Brasil SA (OSXB3), as was planned, and may return another platform next year. OGX also paid OSX $449 million and will continue to pay platform fees until they are sold or relocated.
Batista sold OGX shares in June for the second time in as many months as the billionaire unloads assets including his Embraer Legacy 600 jet to raise cash. OGX’s controlling shareholder sold 75.4 million reais in shares from June 7 to June 13 for as much as 1.39 reais each, the company said in a filing yesterday.
On July 1 OGX shares dropped 30 percent after it canceled orders for new oil platforms and said it may halt output next year at its only producing oil field.
The sale was part of a restructuring EBX completed in June and Batista won’t sell additional OGX shares, EBX said in an e-mailed statement. OGX rose 3.4 percent to 61 centavos in Sao Paulo at 11:30 a.m.
The two remaining independent members of OGX’s board, Luiz do Amaral and Samir Zraick, have resigned, the company said yesterday in a separate filing. Three other board members, including former Finance Minister Pedro Malan, left last month, OGX said June 21. OGX will find replacements, it said.
“It is very much on people’s radar,” Russ Dallen, a fixed-income investor at Caracas Capital Markets, said in a telephone interview from Miami, referring to the case. “The 2018 bonds were down and the lawsuit just added to the trouble. It definitely is getting confusing.”
The case is 0236942-88.2013.8.19.0001, according to the Rio Judiciary’s website.
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