The Complete Story Of How Brazilian Tycoon Eike Batista Lost 99% Of His $US34.5 Billion Fortune

Flamboyant Brazilian billionaire Eike Batista made his first million from gold trading before he was 24 years old.

And from there it was a life worthy of the silver screen — he married a Playboy model, entered speedboat contests, and amassed a fortune of $US34.5 billion.

Batista told everyone who would listen that he would soon be the richest man in the world.

That was the spring of 2012. Since then Batista has lost 99% of his wealth.

His commodities empire, EBX, is on the verge of utter collapse. Creditors are calling, and this week Batista did not pay a $US47 million interest payment on his oil and gas company’s (OGX) bonds.

If he doesn’t pay by October 30, OGX will be the biggest corporate default in Latin American history.

What Batista is doing is making yet another massive bet on himself. He wants bondholders to restructure his over $US3 billion of debt, give him more cash, and allow him to continue developing his empire.

He still believes he can make EBX great, but the market is losing patience.

Batista was born in Brazil in 1956 and moved to Germany when he was a teen.

Governador Valadares Square, in São Vicente de Minas downtown, Minas Gerais, Brazil

One of seven children, Eike was born in 1956 in Governador Valadares, Minas Gerais, Brazil, to a Brazilian father and German mother, he spent his childhood in the country of his birth, but moved to Germany when he was a teenager.

In 1974, he began to study metallurgical engineering at the University of Aachen in Germany.

He used to sell insurance door-to-door when he was in college

His family returned to Brazil when he was 18, and he started selling insurance to make ends meet. All his friends, on the other hand, were rich.

From the Australian Financial Review:

'So I got highly motivated to make some extra money and I sold insurance policies from door to door. It's a great learning experience because some doors open and some don't. I had a lot of teas with old ladies.'

But by 1979, he'd dropped out of college before he could finish his degree in metallurgical engineering and returned to Brazil.

Source: Robert the matador joins Eike the bull, Australian Financial Review, Oct. 30, 1999 Saturday, Late Edition.

After school, he tried to export granite, marble and diamonds.

He told the Australian Financial Review:

'I discovered it was controlled by the Italian Mafia, so I quit that and began organising pick and shovel miners to produce diamonds.'

The garimpeiros (shovel miners) would come to his Rio office with diamonds in little bags. Batista introduced them to Jewish dealers from Portugal and Antwerp and collected commissions on each sale.

Source: Robert the matador joins Eike the bull, Australian Financial Review, Oct. 30, 1999 Saturday, Late Edition.

He eventually founded TVX Gold, a gold mining company.

Since the whole gold trading things was working out so well, Batista decided to found his own gold mining company, TVX Gold, in 1980.

The 'X' in the name is supposed to signify 'multiplication,' as in multiplication of wealth.

It was rough going. Once, his bodyguard killed and buried a man in the Amazon

From Australian Financial Review:

Batista was a gold trader at the time, travelling around the pick and shovel miners (garimpeiros) in the Amazon jungle to buy their gold. He also financed some of them and one digger had made no attempt to repay him for six months.

'On one of my tours I went to see him and said: 'Where is my money?' He went screaming mad. He was a drunk. I made the mistake of calling him a son of a b--ch (filho da puta). I turned around and walked a few metres away and bang! He shot me in the back.'

'He was drunk. I was lying on the floor and the other guys' (his bodyguards) instinctive reaction was to shoot him because they didn't know whether he would shoot them next.'

They buried the garimpeiro in an unmarked grave at the end of the airstrip.

Source: Robert the matador joins Eike the bull, Australian Financial Review, Oct. 30, 1999 Saturday, Late Edition.

And some say Batista wasn't always on the straight and narrow in his dealings.

From the Age:

'Eike would go into the jungle and show these village chiefs a 10-day-old newspaper and say, 'Look, here's the price of gold,'' McLucas, told The Age.

'Meanwhile, the price had gone up, and would go up even more by the time he got back to Rio. He'd pay the chiefs in local currency, which was dropping, and sell the gold in hard currency. You couldn't lose.'

Source: The boy from Oz goes to Rio for the force, The Age (Melbourne, Australia), June 15, 1999 Tuesday, Late Edition.

In 1983 he founded EBX, the umbrella under which he would found all his other companies.

Between 2004 and 2012 he would add six public companies under the EBX umbrella:

  • OGX (oil), MPX (energy),
  • LLX (logistics),
  • MMX (mining),
  • OSX (offshore industry),
  • and CCX (coal mining).

He became a superstar in 1991 when he eloped with model, actress, and carnival dancer Luma de Oliveira In 1991.

Luma de Oliveira

The couple met in 1990 and at the height of their romance they were the darlings of gossip rags and the mainstream media.

The thing was, Batista was seeing a Brazilian socialite at the time they were married unbeknownst to Oliveira.

From People:

'I just knew he had a girlfriend, but not ... who it was.'

In the four years before they got divorced, they had two children -- Thor and Olin.

Meanwhile, Batista started really living like a billionaire -- he won several power boating championship titles.

In the 1990s Batista was the Brazilian, U.S., and world champion in the Super Offshore Powerboat class.

In 2006, he covered the 220 nautical miles between Santos and Rio de Janeiro in just a sliver over three hours and beat the record for the course in his boat, the Spirit of Brazil, according to a Dow Jones profile of the CEO.

Source: Dow Jones

He bought lots of really expensive things, like this yacht ...

Pink Fleet Yacht

Source: Bloomberg, EBX

... and this yacht, The Spirit of Brazil VIII ...

Spirit of Brazil VIII yacht

Source: Bloomberg, EBX

... and this private jet ...

Embraer Legacy 600 jet

Source: Bloomberg, EBX

... also, this private jet ...

Embraer Phenom 300 jet

Source: Bloomberg, EBX

... and this one.

Gulfstream 550 jet

So far the tally is: two yachts and three private jets.

Source: Bloomberg, EBX

Then there's this really expensive car.

He bought a $US1.2 million Mercedes-Benz SLR McLaren. Then he used it to decorate the lounge of the Jardim Botanico mansion in Rio.

And he sure could afford it. At the start of 2012, he was worth more than $US30 billion.


In 2001, he had to resign from TVX, his gold mining company

After plans for a gold mine in Greece went bust because of political opposition, once high-flier TVX took a decided turn for the worse. And then the price of gold started to fall, reaching a paltry $US300 an ounce.

Batista resigned in 2001, after the cash-strapped producer was forced to put itself up for sale.

Source: The Globe and Mail

Environmental groups started agitating about what his businesses were doing to the environment.

You don't want to mess with Greenpeace or anyone else who is concerned with the health of Amazon River dolphins near Batista's mining operations.

But 10 years later, Batista bought back into the gold business.

In 2011, Batista bought out Ventana Gold Corp., a company he'd had his eye on for a while by then. He first snapped up a 9.5% stake in Ventana in July 2009 through EBX, and by 2010, he controlled 20% of the company's stock.

They finally came to a full sale agreement in 2011, when Batista sweetened the deal, which valued Ventana at a little more than C$1.5 million.

Source: Bloomberg

And one of his companies bought the rights to the Ultimate Fighting Championship in Brazil.

Ultimate Fighting Championship (UFC) fighter Keith Jardine demonstrates grappling moves during an exhibition in the hangar bay.

IMX, Batista's sports and entertainment company, bought the rights to the Ultimate Fighting Championship (UFC) in Brazil in late 2011. UFC Brazil is a mixed-martial arts fighting competition hosted in Sao Paulo that's aired on pay-per-view television.

Source: Fighters Only Magazine

In the spring of 2012 he was the 10th richest man in the world.

Eike Batista

And he told Bloomberg he absolutely had to become number 1 because of the competitive spirit that he acquired in his childhood:

'I suffered very heavy asthma, so my mother threw me in the cold swimming pool,' he said. 'So I cured my asthma through discipline, and I saw that you could achieve things by performing, and it's part of my DNA … I'm very competitive.'

Batista also said he wanted to repair Brazil's reputation:

'Brazil lost two generation of Brazilians to the crisis between '84 and '97,' he said. 'Brazil probably paid $US150 billion in extra risk spread (during that time). The ratings agencies put Brazil in the same level as Nigeria, and today it's better than Germany.'

And Batista struck a deal with a sovereign fund in Abu Dhabi to get his hands on some extra cash to develop his companies.

In 2012, he got Abu Dhabi's Mubadala Development Company, a government-owned fund, to invest $US2 billion in EBX Group Co., which gave the fund a 5.63% economic stake in the company.

He was raising money to develop his oil and mining businesses.

Source: Bloomberg

Then everything changed in the summer of 2012. Batista started losing $US1.6 billion a month, $US2 million a day. Now 99% of his fortune is gone.

By July 2013, Batista was no longer a billionaire.

The main contributor to Batista's downfall was and is OGX, his oil and gas company. His fields simply did not produce as promised. In January 2012 OGX estimated production of 15,000 barrels of oil a day (not that great), then in May 2012, one of its fields dropped to 10,000 a day.

Then expectations for some fields fell even further, to 5,000 barrels a day, in June 2012.

And as went Eike, so went Brazil.

As of August 1, 2013, the six companies under EBX's umbrella -- OGX, MPX, LLX, MMX, OSX and CCX -- lost a combined $US9.7 billion in 2013. All 300 publicly traded companies in Brazil lost $US203 billion in the same period.
Three of Batista's companies -- OGX, LLX, and MMX -- are among the 10 biggest losers in the Ibovespa Sao Paolo Stock Exchange Index.

One of Brazil's former Central Bank Presidents stood up for Batista, saying he helped make Brazil what it is now. Still, there are jokes floating around the country that the new Pope will visit to speak with the poor -- including Batista.

In July he wrote a letter to Brazil that seemed to wonder (rather than explain) what went wrong. He maintained, however, that he would carry on.

He wrote:

More than anyone, I wonder where I went wrong. What should I have done differently? A first question might be linked to the funding model I chose for the companies. Today, if I could go back in time, I would not have resorted to the stock market. I would have a structured private-equity firm that would allow me to create from scratch and develop over at least 10 years each company. And they would all remain private until I was sure that it was time to go public. In the projects that I conceived, time proved a vital stress factor for the reversal of expectations on companies bearing broadly satisfactory results and valuable assets.

But empires are not built on letters. On October 1st, Batista failed to pay a $US47 million interest payment on OGX bonds. By October 30th, he'll be in default.

If this happens, OGX will become this biggest corporate default in Latin America, according to The WSJ.

Batista wants bondholders, like PIMCO, the largest bond fund in the world, to restructure his debt, and bondholders have retained lawyers and hired Rothschilds to review the deal.

Last month, Batista got Mubadala to restructure his debt -- why not his bondholders?

According to Bloomberg, he'll also try to negotiate $250 million in cash to continue developing OGX's fields and hold his empire together.

But time is running out. Batista is now on his 5th restructuring adviser, and there are rumours swirling that OGX and another company have applied for bankruptcy protection.

Brazilian Eike Batista, chairman and CEO of EBX Group, gestures as he is introduced as one of the world's wealthiest men, prior to the 'Global Overview: Shifting Fortunes' lunch panel discussion at the Milken Institute Global Conference in Beverly Hills, California April 30, 2012.

Batista has denied filing for bankruptcy protection, though it was reported in Sao Paulo newspaper, 'Veja'.

Sources tell Bloomberg that Batista is considering selling the 'The Spirit of Brazil VIII' for scrap.

On the other hand ... last month, a 'bleary eyed' Batista told The WSJ that he is still hopeful:

'If you look at my astrological map, this period wasn't favourable for me,' Mr. Batista said during the interview, pausing and staring into space for a moment. 'The good period? It has already started, literally this month,' he added.

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