OGX, the petroleum exploration and production firm founded by the Brazilian entrepreneur Eike Batista, was pushed closer to bankruptcy after it announced Tuesday that it would default on a $44.5 million interest payment. OGX now has a 30-day grace period to negotiate with creditors.
Luana Helsinger, a petroleum analyst with Grupo Bursátil Mexicano in Rio de Janeiro, said “the logical next step is for OGX to request a court-supervised reorganization.â€
Should a bankruptcy occur, it would be the largest corporate default in Latin America’s history.
Foreign investors hold most of OGX’s bonds, with the world’s largest bond investor, Pimco, a major owner.
Under Brazilian law, if OGX prepares a plan to avoid liquidation and a court approves it, the company will have 180 days to continue negotiations without having to make any further debt payments.
That extra delay would be crucial for OGX, which has to make another $110 million payment in December.
Negotiations have been going on for months, with OGX reportedly trying to persuade its creditors to swap debt for equity and to invest additional funds in the company, whose offshore fields may hold billions of barrels of petroleum.
Ms. Helsinger said creditors were likely interested in making a deal with OGX. If the oil concern is forced into liquidation, a fire sale of its assets will likely provide only a fraction of the $3.6 billion that it owes bondholders.
Another option is bringing in a new investor, such as the Malaysian petroleum company Petronas, which is known to be interested in one of OGX’s offshore petroleum fields.
Without new money to develop OGX’s petroleum reserves, even a court-supervised restructuring might end in liquidation, a bankruptcy lawyer in Rio de Janeiro said. The lawyer requested anonymity since he has clients involved with OGX.
OGX was the crown jewel of Mr. Batista’s six publicly traded companies, which together were supposed to develop Brazil’s rich petroleum and mining resources, generate electricity, and build ships and ports to facilitate exports.
When OGX went public in 2008, it raised $4.1 billion and become Brazil’s largest private-sector petroleum company. By the end of 2010, its share price had more than tripled from the I.P.O. price, as the firm announced petroleum discoveries and foreign investors sought a piece of Brazil.
But in 2012 OGX revealed difficulties and delays in developing its petroleum finds. Several wells that it had triumphantly announced proved economically unviable.
Its share price began a collapse that only accelerated this year. An investor who bought OGX shares at the initial offering price would now have lost over 97 percent of the original investment.
Similar problems have hurt shares of his other five companies on the São Paulo stock exchange. Mr. Batista has already sold off controlling stakes in two, and the sale of a third company is expected soon. A fourth is selling off assets, and the fifth, the naval construction company OSX, is also expected to seek court-supervised reorganization soon.
Brazil’s securities and exchange commission, the CVM, has opened inquiries into whether OGX’s management, including Mr. Batista, may have violated disclosure rules about the company’s operations and about their personal ownership stakes. A group representing retail investors has also announced a lawsuit.
But Mr. Batista’s net worth, once over $30 billion, is now estimated at less than a billion, and even that may be dwindling.
In October 2012, Mr. Batista signed a contract that permitted OGX to require him to personally inject $1 billion into the company.
At the time, Mr. Batista said the contract indicated his confidence in the company.
OGX tried to exercise this option on Sept. 6, but Mr. Batista has gone to court to attempt to avoid the $1 billion payment, which he may not have the funds to fulfill.
Just as Mr. Batista for a time was a symbol of Brazil’s economic mightâ€"Time magazine chose him in 2012 as one of the 100 most influential people in the worldâ€"he has now come to represent his country’s growing pangs.
Brazil’s finance minister, Guido Mantega, said Monday that “OGX’s situation has already caused problems for the country’s image†and “I hope they stop this bloodletting soon.â€
Despite rich natural resources, Brazil has not yet managed to realize its full potential.
Last year the economy grew only 0.9 percent, and on Monday Brazil’s central bank lowered its growth forecast for this year to 2.5 percent.
In 2007, Brazil discovered offshore petroleum reserves which could make the country as rich in oil as Russia or Kuwait. But progress in developing these reserves has been slow. After several years of energy independence, Brazil recently became a net importer of petroleum products.
Brazil is now hoping to attract foreign investment in its energy sector. The first big test for Brazil will come Oct. 21, when it will auction rights to invest in an offshore petroleum exploration block, named Libra, which may have as much as 12 billion barrels in reserves and will require over $200 billion to develop.
