Now, Batista’s Shipbuilding Firm to File for Bankruptcy

Now, Batista’s Shipbuilding Firm to File for Bankruptcy

SÃO PAULO, Brazil – The empire of the Brazilian businessman Eike Batista took another hit on Friday, as his shipbuilding firm OSX said it would file for bankruptcy.

OSX’s board of directors released a statement Friday evening that it had decided to apply for court-supervised restructuring. It also said that Ivo Dworschak Filho would replace Marcelo Gomes as chief executive, and that the firm was hiring the consultancy Angra Partners to advise it on its restructuring.

The move comes as Mr. Batista’s firms, once symbols of Brazil’s might, have suffered under the weight of huge debt. All six of his firms have now declared bankruptcy, transferred ownership or sold off key assets.

OSX’s debts were $ 2.4 billion at the end of the second quarter according to the company’s balance sheet, but the current number may be greater.

Suppliers are claiming OSX owes them far more than the 650 million reals ($ 280 million) that the company acknowledges. Several, including the Italian engineering firm Techint, are already suing OSX.

Mr. Batista’s flagship company, the petroleum firm OGX, declared bankruptcy on Oct. 30. Analysts have speculated that OSX was always likely to follow because its biggest client was OGX, which may owe it as much as $ 2.6 billion from unpaid bills and fines over broken contracts.

Roberto Altenhofen, an analyst with Empiricus Research in São Paulo, said “my base scenario is that OSX ends up in liquidation. It is not operationally viable.”

He said the company was losing money even before making payments on its debt, which it cannot hope to service unless creditors agree to a major haircut.

But creditors may not do that, Mr. Altenhofen said, when they can force OSX to sell its valuable offshore platforms and get all or nearly all of their money back.

Lilyanna Yang, LatAm Oil & Gas analyst for UBS, wrote in a research note on Wednesday that the market value of OSX’s assets exceeded its debt by $ 356 million. But she added that “liquidation value can be eroded quite fast while liabilities can mount.”

OSX was the last of Mr. Batista’s six companies to list shares on the São Paulo stock exchange, and in March 2010 it raised $ 1.58 billion in what was then the seventh largest I.P.O. in Brazil’s history.

The six companies, whose names all ended in “X,” were supposed to create synergies to develop Brazil’s natural resources and make Mr. Batista the world’s richest man.

The plan was for OGX to find petroleum and gas using equipment OSX supplied, while MMX mined and transported iron, CCX mined coal, MPX generated electricity, and LLX built a giant port to export all the petroleum, iron and coal.

All six companies went public with little or no revenue, just a largely successful plea for investors to trust Mr. Batista, who had already made himself (though not his shareholders) a fortune in the 1980s and ’90s with a gold mining company listed in Toronto and New York, TVX. But none of the companies managed to become profitable in time to service their huge debts.

Mr. Batista’s companies also benefited from the Brazilian government’s since-abandoned ambition to create, with the help of subsidized financing from state-owned banks, private sector “national champions” meant to compete with multinational companies.

Walter de Vitto, petroleum analyst at the São Paulo consultancy Tendências, said OGX and OSX’s problems were specific to these companies and did not reflect Brazil’s energy sector as a whole.

“They made highly risky and highly leveraged bets which they sold to investors as sure things, when they weren’t sure at all.”



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