The meltdown of Eike Batista's commodities empire gave Mubadala Capital the local knowledge to become a private equity standout in Brazil. Now it's looking for more troubled assets in Latin America’s largest economy.
The investment arm of Abu Dhabi's sovereign wealth fund — with about $5 billion of equity in Brazil including a refinery and three metro lines in Rio de Janeiro — has about another $3 billion earmarked for deals it's working on, Oscar Fahlgren, the head of Mubadala Capital in the country, said in an interview.
It’s a remarkable turnaround from a $2 billion investment in Batista’s holding company that almost went up in smoke in 2013, when the bankrupt tycoon's oil wells proved to be duds, triggering a three-year fight to successfully recover several assets from Batista, such as a stake in the company that owns Burger King and an office tower in Rio's upscale Leblon area.
“We are a foreign investor that had a pretty rough experience getting in, and we’ve emerged as the best private equity manager in the country,” said Fahlgren, speaking from the tower in Leblon. “We saw an opportunity to build a business around a skillset that's quite unique.”
A key moment for Mubadala was when a massive pay-to-play scandal known as Carwash sent Brazil's business and political elite into an unprecedented crisis. Mubadala sprung into action to negotiate the purchase of a toll road in Sao Paulo state from an engineering conglomerate that was deeply embroiled in the corruption scheme, taking advantage of the expertise in Brazilian defaults and corporate restructurings it acquired during 11 debt-to-equity transactions with Batista.