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 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.”
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.
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.