UPDATE 3-Batista speeds up dismantling of EBX as cash burn grows

Thu Aug 15, 2013 5:59pm EDT

* MMX expected to have new controlling shareholder

* Cash burn at OGX, MMX, LLX worries investors

* Batista ceded control of two of six EBX units; MMX next (Adds details of companies EBX divested, those likely to be sold, updates prices)

By Jeb Blount and Guillermo Parra-Bernal

RIO DE JANEIRO/SAO PAULO, Aug 15 (Reuters) - Debt-ridden Brazilian tycoon Eike Batista is accelerating the breakup of his tottering energy, port and mining empire, ceding control to new investors as some of the companies he founded scramble for fresh capital.

With cash holdings plunging and Batista's own fortune largely earmarked to guarantee Grupo EBX's estimated $11 billion in debt, the companies in his group face the choice of trimming capital spending or reducing their size to stay afloat.

On Thursday, the day after Batista agreed to cede control of port operator LLX Logística SA to Washington-based EIG Global Energy Partners, officials at MMX Mineração e Metálicos SA , the backbone of the EBX conglomerate, said the iron ore producer will soon have a new controlling shareholder.

With the previous sale of controlling stakes in power producer MPX Energia SA to German utility E.ON SE and LLX's sale to EIG Global Energy Partners, two of six traded companies in the EBX group are no longer under Batista's control.

MMX, the third, is likely to be next and he is expected to have little more than minority stakes in the pieces of his former empire when restructuring is complete.

"We are reviewing all our options and focusing on the port operations so that the new shareholder can make the decisions necessary to ensure the company's growth and expansion," Chief Executive Officer Carlos Gonzalez told investors on a conference call.

In the last quarter, MMX, LLX and oil producer OGX Petróleo e Gas Participações SA reported worse-than-expected losses as they spent capital faster than their nascent operations could generate revenue. As capital spending grew debt rose.

In the case of MMX, cash holdings of about 450 million reais ($192 million) may not be enough to cover both 1.2 billion reais of maturing obligations over the next 12 months and planned investments of some 700 million reais.

Estimated investments at the LLX Minas-Rio iron ore terminal that LLX is building with Anglo American Plc inside LLX's Port of Açu jumped to 1.7 billion reais from 974 million reais, the company said.

MMX fell 6.7 percent to 1.98 reais on Thursday in Sao Paulo after Wednesday's announcement of a 441.5 million real second-quarter loss. It was the stock's first drop in six sessions.

OGX tumbled 7.4 percent to 0.63 real after the company's net loss rose 12-fold, cash holdings dropped and debt soared. LLX stock was up 11 percent to 1.67 reais, its highest close in 2-1/2 months.

"While the operational results are unlikely to catch investors' attention, we believe that the low cash position, in face of OGX's liabilities and capex requirements, will weigh on the stock's performance," Paula Kovarsky, a senior analyst with Itau BBA in Sao Paulo, said in a client note.

OUT OF THE PUBLIC EYE

A former billionaire whose conglomerate of mining, energy and logistics companies once symbolized Brazil's rise to global prominence, Batista is now a reflection of the nation's recent woes.

He had long courted publicity, but has stayed out of the public eye amid a drop of more than $25 billion in his fortune that knocked him from the top of Brazil's wealth list this year.

The moves at LLX and MMX are the latest steps in Batista's efforts to shore up EBX, which was once valued at $60 billion but suffered from a series of project delays and dwindling confidence that its largely startup companies could deliver revenue and profit before being overwhelmed by debt.

The value of EBX assets, which had soared on hopes that Brazil's China-driven commodities boom would continue, is now less than $5 billion, according to Thomson Reuters estimates.

When EBX restructuring ends, Batista will be left with between $1 billion and $2 billion in assets and $1.7 billion of long-term debt, sources with direct knowledge of the situation told Reuters. That is a sliver of his former fortune, which last year reached about $35 billion, according to Forbes magazine.

About the only asset that is not on the block is his shipbuilder and ship-leaser OSX Brasil SA. A sale of OSX is not being considered at this time because it could trigger clauses in bond contracts that would force the company to buy back its debt if Batista and his family's holding company are replaced as controlling shareholder, OSX said.

Batista is already looking for buyers for Colombian coal mining rights owned by his coal mining company CCX Carvão da Colombia SA. OGX, after declaring several oil field prospects non-commercial is looking for partners to pick up some of the large costs of ramping up output at several offshore fields.

OGX sold a 40 percent stake in two of its most promising blocks to Malaysian state oil company Petroliam Nasional, or Petronas for $850 million in May.

MMX ON THE BLOCK

Talks with potential bidders for MMX, which owns several iron ore projects in Latin America, including the giant Serra Azul project in Brazil's southeastern highland state of Minas Gerais and a nearly complete iron ore port near Rio de Janeiro, are advanced and MMX has put nearly all activity outside of port construction on hold in deference to potential buyers.

The MMX port, west of Rio, is not related to LLX's Port of Açu, north of Rio.

Batista will leave the board of LLX, but retain a "relevant" stake and the right to choose a representative on the board. He may also keep a stake in MMX, which already has investment from South Korea's SK Holdings Co and China's Wuhan Iron and Steel Co.

MMX's Gonzalez also said the company has put its Corumbá mine up for sale along with other assets in hopes of finding investors that will shore up its dwindling cash position.

He also said it is unlikely that MMX will sell its port separately as the buyer risks not having enough iron ore to move through the terminal without ore from MMX's Serra Azul project, which is linked to the port by rail.

As part of the sale to a new controlling shareholder, MMX is likely to offer more stock to the general public and existing shareholders to raise additional capital, Gonzalez said.

($1 = 2.34 Brazilian reais) (Editing by Kieran Murray, Leslie Gevirtz and Matthew Lewis)

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