Eike Batista’s commodities group had the biggest selloff in two months as the former billionaire sells stock and a dispute with Petroliam Nasional Bhd. fuels speculation his oil company will run out of cash.
Oil explorer OGX Petroleo & Gas Participacoes SA slumped 12 percent to 50 centavos at the close of trading in Sao Paulo, extending a three-day slide to 38 percent, the steepest since early July when OGX shelved projects and warned it may cease output at its only producing oilfield. Shipbuilder OSX Brasil SA tumbled 18 percent to a record low 72 centavos, for a 42 percent three-day slide after Batista sold a 5.4 percent stake.
OGX said yesterday that Petronas has no right to delay buying stakes in two Brazilian blocks for $850 million after the Malaysian producer’s Chief Executive Officer Shamsul Azhar Abbas said Aug. 26 that the deal hinges on OGX undertaking a debt restructuring. Petronas may have to pay a fine if it walks away from the deal, Felipe Rocha, an analyst at brokerage Omar Camargo Investimentos, said by phone from Curitiba, Brazil.
“If Petronas wants to leave, perhaps the fines wouldn’t be a limiting factor,” Rocha said. “The market is concerned that the fines would obviously be less than the payments” OGX would receive from the sale, he said.
Rio de Janeiro-based OGX will run out of cash this quarter if it doesn’t receive the first installment of the Petronas payment, Deutsche Bank AG said in Aug. 27
“The company understands that Petronas doesn’t have any right to delay closing the deal with OGX as long as the conditions established in the contract are met, none of which mentions ‘debt restructuring’,” OGX said yesterday in a regulatory filing after markets closed.
OGX announced this month that it hired Blackstone Group LP to advise on a study of its capital structure as Batista raises cash and sells company stakes and assets after his fortune plummeted on missed production and profit targets. Batista sold 49.8 million OGX shares yesterday, or a 1.54 percent stake, and has shed a 5.67 percent holding since March, the company said in a regulatory filing today.
Batista sold 6.4 million OSX shares on Aug. 27 and 10.4 million yesterday, according to separate filing, which didn’t disclose how much he raised. The company said two days ago that it would exercise a portion of a put option pledged by the controlling shareholder for as much as $50 million.
“If he’s selling at these prices the guy is desperate, clearly,” Cornel Bruhin, who manages $250 million of emerging-market corporate debt at MainFirst Schweiz in Zurich, said by telephone. “Everything he sells in OSX or OGX is just a drop on a hot stone.”
The sale “doesn’t modify the controlling or administrative structure of the company,” OSX said in today’s statement. The put is part of a $1 billion option granted by Batista to OSX, $620 million of which has already been exercised.
OSX is seeking to sell assets, close projects and cut debt amid a restructuring overseen by Marcelo Gomes, who took over as chief executive officer Aug. 23. OGX said Aug. 27 it will return nine exploration licenses awarded in May as it tries to cut spending.
Under the terms of the May deal with Petronas, OGX offered an additional 40 percent in the BM-C-39 and BM-C-40 blocks and half of its 40 percent stake in the BS-4 block to Petronas as guarantees of the deal, without disclosing publicly under which circumstances Petronas can exercise those guarantees. Petronas also has an option until April 2015 to acquire a 5 percent stake in OGX at 6.3 reais per share.
While the deal with Petronas isn’t conditioned by a debt restructuring, OGX is “seeking a solution that preserves the interests of both companies,” it said in yesterday’s filing.
The Petronas deal still requires Brazilian regulatory approval. The country’s antitrust regulator, known as Cade, yesterday approved OGX’s December acquisition of a 40 percent stake in the BS-4 block, which must now be approved by the oil regulator.