When a Brazilian Billionaire Goes Silent

Raul Gallegos is a Bloomberg View contributor, who covers Latin American politics, business and finance. He was a columnist for Reuters and a correspondent for Dow Jones and the Wall Street Journal. He is a graduate of the University of California at Berkeley and Columbia University. He grew up in El Salvador and is based in Colombia.
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The severity of Brazilian billionaire Eike Batista's financial troubles is perhaps best gauged by his silence. The publicity-loving jetsetter has ignored his Twitter fans since the end of May, despite the fact that his companies have been making headlines -- and not good ones.

At the beginning of July, Batista's flagship oil company, OGX Petroleo & Gas Participacoes SA, announcedit may shut down its only oil-producing field next year. The jewel of Batista's EBX group is running out of money -- fast. Barclays Plc. reckons OGX will have about $150 million in cash by the end of September. The company is desperately selling assets, its top executives are leaving and its lenders are huddlingwith lawyers to figure out how to get their money back.

A shareholder istrying to block Batista from selling pieces of his diminishing company. Meanwhile, Brazil's O Globo newspaper has suggested "a market solution" that saves some of Batista's ambitious projects. Selling assets, the paper said, "is the right path to the group's recovery." For investors who hate uncertainty, this is hell.

The timeline of woes began a year ago when OGX first admittedthat its original plans to pump nearly 20,000 barrels of oil a day at its first two wells were wishful thinking. Then there was the revolving door of executives: OGX had two chief executive officers, two chief financial officers and two exploration directors in 2012. OGX shares have dropped about 90 percent this year, and its bonds due in 2018 have fallen to below 20 cents on the dollar. Credit Suisse reckons that, even under the best of scenarios, OGX bondholders won't recover more than 60 cents on the dollar.

This is hardly what Batista had in mind when he named all his companies with an "X," to signify how they would multiply money. An understated message from a Twitter user with the handle "@goonarchy" is apropos: "With OGX teetering on the brink, Batista's empire is staring at a spectacular implosion. Commodities Boom. Indeed. Time to rethink the 'X.'"

Batista's pocketbook has certainly suffered a blow. His $2.9 billion net worth on July 3, according to Bloomberg, was one tenth of the $29.8 billion fortune he commanded just 16 months ago. This is a bad knock for an entitled business leader who believes Brazilians owe him reverence and was intent on becoming the world's richest man.

Indeed, his salesmanship is partly to blame for his demise. He brought a brash self-assurance that many thought Brazil's business community was missing, so people believed his promises. Back when his empire still had good credit, the billionaire vowed that OGX would pump 400,000 barrels of crude a day by 2015, nearly 15 percent of Brazil's current output.

And so he became a glorified icon of Brazilian business and a figure young people sought to emulate. In January 2012, Brazil's Veja magazine put him on the cover under the headline "Eike Xiaoping" and credited him with promoting the idea that "growing rich is glorious." In April 2012, Dilma Rousseff, Brazil's president, in a celebration of OGX's first oil barrel pumped called him "a very special kind of entrepreneur, who defines his dream in an extremely ambitious way and seeks to reach it."

"Dream" was the operative word.

Batista's lifelines have quickly vanished. Banks may lose billions if Batista's EBX group companies fail, but probably not enough for the state to step in. With Brazilians protesting high prices, inefficient government and meager growth, Rousseff is no longer available for photo ops. As Ricardo Balthazar put it in Folha de S. Paulo, "To Eike's chagrin, his empire suffers at a time when he can no longer count on an important partner, the government. With economic troubles and a need to address street protests, the last thing Dilma is willing to do is help a shark in trouble."

But Batista still has plenty of moral support in some quarters. Ebladston Mendes, one of his many fans tweeted yesterday: "Many people may be happy that you've lost a few millions. But have faith in God. You will make it back on top."

Last November, long before he went silent, Batista told his Twitter followers: "Dream your dreams, but be disciplined in the execution." The billionaire would have done well to follow his own advice.

(Raul Gallegos is the Latin American correspondent for the World View blog.Follow him on Twitter.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Zara Kessler at zkessler@bloomberg.net