SAO PAULO â€" The flagship company of the Brazilian businessman Eike Batista took a big step toward exiting bankruptcy on Friday as it presented a court with its creditor-approved restructuring plan.
The petroleum company OGX, now known as OGpar, declared Latin America’s largest corporate default last October when it sought court protection after missing payments on $3.8 billion worth of bonds. The company also owes about $2 billion to suppliers.
The outline of the plan, which converts debt to equity and ends Mr. Batista’s control of the company, was disclosed on Dec. 24, but the company only concluded this week negotiations for $215 million in financing to continue operating the company.
Márcio Costa, a partner in the Rio de Janeiro law firm Sérgio Bermudes Advogados, which handled the bankruptcy filing for OGpar, said he was “very optimistic†the plan would be approved by the court in Rio de Janeiro because it already has the support of a majority of creditors.
A bankruptcy lawyer in São Paulo, who spoke on the condition of anonymity because he is representing one of OGpar’s creditors, said that approval should come quickly and that the various lawsuits swirling around the firm would not be an obstacle.
Under the plan, creditors will own 90 percent of the company and current shareholders will own 10 percent. Half of that 10 percent will go to Mr. Batista. Because he is also one of the company’s creditors through his stake in a sister company, OSX, his total ownership of OGpar will be about 9.4 percent.
The plan values the company, whose main assets are stakes in two offshore oil fields, at $1.5 billion. Should that estimate prove accurate, the company’s worth will be equivalent to about one quarter of the debt that it accumulated.
Adriano Pires, director of the Brazilian Infrastructure Center in Rio de Janeiro, said the company’s value was uncertain. “No one knows exactly how much their fields will produce; $1.5 billion could be too high an estimate, but it could also be too low.â€
If the court approves the plan, the company’s bondholders, led by foreign fixed-income funds, will become its owners.
Because these foreign funds never intended to own a controlling interest in a Brazilian petroleum company, they will probably try to sell the company quickly if it becomes profitable, Mr. Pires said.
These funds will likely end up with losses even under the most optimistic scenario for OGpar’s production. Pimco, which industry sources say is the company’s largest bondholder, may take a particularly big hit. Details of Pimco’s current stake are not publicly available, but documents on Pimco’s website show several mutual funds purchased OGX bonds in 2013 as they were falling. The Pimco Income Fund, for example, owned OGX bonds with a face value of $128 million and a market value of $100 million in March 2013. By September 2013, it had accumulated OGX bonds with a face value of $177 million, but the market value had collapsed to $29 million.
Minority shareholders are suing Mr. Batista and Brazil’s securities regulator, the C.V.M., is investigating him over allegations that include inadequate disclosure and insider trading.
But it is clear that Mr. Batista, once the world’s seventh-richest person with a net worth of more than $30 billion, lost than more than anyone from the implosion of his six publicly traded companies, meant to create an empire of synergies to develop, transport and export his country’s rich natural resources.
Media, government officials and foreign investors celebrated him at first, though many Brazilian business leaders, traditionally discreet and risk averse, kept their distance.
His companies failed to become profitable in time to service their debt loads, and all six have either entered bankruptcy, transferred control or sold key assets.
Mr. Batista’s stake in the companies he listed on the São Paulo stock exchange is now worth less than $1 billion. Although his privately owned firms have assets likely worth at least another $1 billion, his debts may be even greater.
If new management succeeds in turning around the companies he founded, in which he is still a large shareholder, Mr. Batista’s fortunes will improve.
Mr. Batista appears to be cutting costs. Last year he sent his company yacht to the junkyard, and earlier this year he sold his private jet.
