Part of erstwhile Brazilian billionaire Eike Batista’s many problems is that he’s not only hemorrhaging money from his crumbling commodities and logistics empire, but that he also owes some serious people some serious money as everything is falling apart.
Batista once said he would be the richest man in the world, and indeed at this time last year he was at least in the top 20. He has six companies under the umbrella of his holding company, EBX — they are OGX (oil), MPX (energy), LLX (logistics), MMX (mining), OSX (offshore industry), and CCX (coal mining).
Now, however, since his empire started crumbling, Bloomberg estimates that he’s only worth around $US200 million.
To give you an idea of how hard that means he’s getting hit, the stock price of Batista’s once-proud oil and gas company, OGX, is down over 90% this year.
So it may well be that right now Batista regrets the $US2 billion March 2012 loan he took from Abu Dhabi’s sovereign wealth fund, the Mubadala Development Corporation. At the time, Batista’s EBX empire of six companies was valued at $US35.5 billion, and he gave Mubadala a 5.63 per cent preferred equity interest.
The details of his deal with the fund aren’t public, but what we do know is that Batista still owes Mubadala $US1.5 billion after converting the fund’s share of EBX into debt.
According to Bloomberg, that $US1.5 billion is secured by Batista’s assets — some of which his investors are suing to ensure he does not sell. EBX also agreed to “redeem” a portion of Mubadala’s original investment last month and still expects Batista to “fulfil his obligations,” says a spokesperson.
Either way, it looks like Mubadala is stuck with a major stake in Brazil, whether EBX lives or dies.
Batista also owes billionaire Brazilian banker Andres Esteves a pretty penny. Esteves canceled a billion-dollar line of credit that his bank, BTG, extended to Batista’s companies back in march. Now BTG is owed about $US282 million, according to Bloomberg, though Esteves said on a recent conference call that an impending EBX collapse shouldn’t hurt his bank.
Brazilian bank Itau’s CEO, Roberto Setubal, said the same thing in an interview with LatinFinance, though he conceded that Batista’s failures were bad for Brazil, and its image as a high-growth country at large.
What an EBX explosion could hurt — and what EBX’s malaise has already begun to cripple — is BM&FBovespa, the operator of Brazil’s stock exchange, Sao Paolo’s Ibovespa. Trading volumes are down 13% from this time last year and NYSE Euronext has filed paperwork to start its own exchange in the country. That means new competition.
In the meantime, Ibovespa is considering changing the weighting of Batista’s stocks on the index. OGX alone is supposed to more than double its weight on the index next month, so the exchange wants to amend its rules as the selloff of all Batista’s companies is “wreaking havoc” and causing major volatility in the market.
Sounds stressful for all parties involved, especially Eike.