Esteves’s Billions Tangled in Batista’s Fall: Corporate Brazil

Eike Batista’s $30 billion reversal of fortune is eroding the net worth of fellow Brazilian billionaire Andre Esteves.

Esteves’s wealth has slid $1.3 billion since Grupo BTG Pactual SA, the firm he founded, agreed in March to support Batista’s flagging empire, according to the Bloomberg Billionaire’s Index. Batista’s oil startup, OGX Petroleo & Gas Participacoes SA, said this week it’s considering halting output at its only producing field, triggering a selloff in BTG’s shares. Esteves’s $3.55 billion net worth comes mostly from his 22 percent stake in Sao Paulo-based BTG.

Companies run by Batista, 56, owe BTG about 650 million reais ($286 million), according to a person with direct knowledge of the matter. The bank canceled a credit line of $1 billion that was part of the March agreement with Batista, the person said, asking not to be identified because the matter hasn’t been made public. The person didn’t say when the decision to withdraw the line was made. Batista used shares of his publicly traded companies, all of which end in the letter “X,” as collateral for a portion of the loans, the people said. OGX shares sank 91 percent this year before today.

“The market is concerned with banks’ exposure to ‘X’ companies, but it’s necessary to determine what the exposures are given each bank’s size,” Eduardo Carlier, a fund manager at the Brazilian unit of London-based Schroders Plc, said in a telephone interview. “Because BTG has a smaller market value than the others, it tends to suffer more than other banks.”

Itau’s Exposure

Itau Unibanco Holding SA, Brazil’s biggest bank by market value, has about 1.24 billion reais at risk in companies linked to Batista, or 1.4 percent of regulatory capital, Alessandro Arlant, an analyst at Bank of America Corp., wrote in a report this week.

Before today, BTG shares posted a 26 percent drop since the March 6 deal with Batista’s EBX Group Co., OGX’s parent. That compares with a 17 percent decline in the same period for Itau and 18 percent for Banco Bradesco SA, Brazil’s second-biggest bank by market value.

BTG shares rose 4.9 percent to 26.87 reais as of 11:07 a.m., while OGX climbed 15 percent to 45 centavos in Sao Paulo trading.

Esteves’s fortune of $4.85 billion in March sank to $3.55 billion, data compiled by Bloomberg show. Batista’s wealth fell more than $30 billion since March 2012, and last month he dropped from the list of the world’s 200 richest people, according to the Bloomberg Billionaires Index.

BTG and EBX declined to comment.

Under the March accord, BTG helped Batista companies including OGX and power generator MPX Energia SA sell assets. The sales failed to avert a debt downgrade from Standard & Poor’s, which cut OGX’s credit rating to CCC this week, eight steps below investment grade.

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