Brazil’s securities regulator is investigating a $1 billion put option granted by billionaire Eike Batista to his flagship company OGX Petroleo & Gas Participacoes SA.
The regulator, known as CVM, requested a review of the option announced by the crude oil producer on Oct. 24 to fund its investments, according to a statement yesterday on the regulator’s website, without providing reasons for the probe.
OGX has until April 30 to request that its billionaire controller pay the put option as its cash position dwindles. The company yesterday said that it may shut its only producing oil field next year after a technical review and scrapped three other fields. Batista has lost as much as $30 billion of his personal wealth in the past 16 months after missed targets and production delays at his resources and logistics startups.
“We were surprised with the announcements that the put was not exercised as it has become more critical than ever,” Banco Santander SA analysts Christian Audi and Vicente Falanga Neto said in a note to clients today. “While we previously estimated the company would run out of cash by mid-2014 (without the put), this potential situation is now anticipated to the end of this year.”
Fitch Ratings last month cut OGX’s rating to CCC, or seven levels below investment grade, citing increased uncertainty about Batista’s ability to honor the option.