By Jeb Blount and Guillermo Parra-Bernal
RIO DE JANEIRO/SAO PAULO Oct 31 Brazilian
tycoon Eike Batista's oil company OGX Petróleo e Gas
Participações SA agreed on Thursday to sell its 67 percent stake
in its natural gas unit for 344 million reais ($156 million),
the day after it filed for bankruptcy protection.
Under the deal, São Paulo-based buyout firm Cambuhy
Investimentos Ltda will end up with 73 percent of OGX gas-unit
OGX Maranhão Petróleo e Gas SA, statements from the companies
involved said. Half that stake will come from buying 200 million
reais of new stock in OGX Maranhão. The rest will come from a
200 million real payment to OGX for its remaining share of the
German utility E.ON SE will provide another 50
million reais of investment and hold 9 percent of OGX Maranhão
when the deal is complete. The multi-step transaction also
includes a 144 million real payment to OGX from OGX
Maranhão to repay the cost of joint expenses.
Without new money, OGX is expected to run out of cash by the
end of 2013. The proceeds from the sale of OGX Maranhao come as
OGX scrambles to raise at least $250 million that it said it
needed to keep operations running through at least April.
Investors, such as the world's largest asset manager
BlackRock and the world's biggest bond investor Pimco, have
shown increased concern that OGX may use cash to fund inviable
operations rather than repay $3.6 billion in debt.
The parties agreed to the deal hours before OGX sought court
protection from creditors, a source with direct knowledge of the
matter told Reuters. The company left OGX Maranhão out of the
bankruptcy protection filing because the gas unit was in talks
for a potential capital injection or a buyout.
Power company Eneva SA's stake in OGX Maranhão
will shrink to 18 percent from 33 percent as a result of the
deal. E.ON is Eneva's largest shareholder.
"This new deal allows for smooth operations of OGX Maranhão
amid OGX's insolvency and implies no equity disbursements by
Eneva, which had committed to inject 200 million reais in case
of a Maranhão credit default," wrote UBS Securities analyst
A renowned entrepreneur who once said he would become the
world's richest man, 56-year-old Batista has seen his personal
fortune tumble by more than $30 billion in the last 18 months as
share prices of his listed companies sank. This has forced him
to start breaking up his Grupo EBX conglomerate, which also
included a port operator, mining and energy interests, and an
OGX needs new capital to avoid losing its rights to its
exploration areas and existing fields, its principal assets.
While bankruptcy proceedings will not automatically result in
their loss, Brazil's oil regulator has warned OGX that it must
meet all its contractual agreements with the government,
including making investments, or risk losing its oil rights.
The bankruptcy filing came after OGX spent about 10 billion
reais exploring for offshore fields that failed to deliver on
output expectations, the company said in court documents. It is
scrambling, though, to hook up a second offshore field, Tubarão
Martelo, by the end of November.
OGX Maranhão, with its on-shore gas fields, is OGX's
best-performing asset and sells natural gas to Eneva's power
plants. OGX's share of OGX Maranhão gas sales is about 2.1
million cubic meters a day.
The offshore troubles led to a more than 98 percent drop in
the value of OGX stock in the last 16 months. Worth about $45
billion in October 2010, the shares fell 24 percent on Thursday
to close at 0.13 reais, giving the company a market valuation of
about $190 million.
Eneva, originally founded by Batista as MPX Energia SA, is
led by E.ON, which bought 38 percent of the company from Batista
earlier this year. Batista retains a 27 percent stake.
Some analysts said OGX's planned sale of OGX Maranhão and
other assets such as the Tubarão Martelo field might reduce the
amount of money that creditors could recover if the bankruptcy
restructuring fails and OGX is liquidated. OGX has about $5.1
billion in debt, $3.6 billion of which is in the hands of
bondholders such as Pacific Investment Management Co, BlackRock
Inc and Loomis Sayles & Co.
When OGX Maranhão is sold, OGX's main assets will be Tubarão
Martelo, which is expected to generate about $11 billion of
revenue over its lifetime, and a 40 percent stake in the BS-4
offshore block, which has the potential to generate $6.2
billion, OGX's bankruptcy filing said, citing reserve
PETRONAS DEAL IN DOUBT
Based on those values, Tubarão Martelo is worth $890 million
and OGX's share in BS-4 is worth $437 million, Deutsche Bank
analyst Marcus Sequeira wrote in a report to investors Thursday.
While he said creditors might get something from the bankruptcy,
he said shareholders were likely to get nothing.
In May, Malaysia's state oil company Petroliam Nasional
, also known as Petronas, agreed to buy 40 percent of
Tubarão Martelo and an adjacent area for $850 million. In
August, Petronas' chief executive officer Shamsul Azhar Abbas
said the company would not complete the deal without an
agreement with bondholders.
OGX on Thursday said the two companies may end up in
arbitration if Petronas doesn't honor its agreement.
The only new money so far available to OGX comes from the
OGX Maranhão sale: 200 million reais from Cambuhy and 144
million reais from OGX Maranhão in three payments through 2015
for OGX's part of shared costs in the gas unit.
The companies did not say whether proceeds from the deal
would go to help repay OGX Maranhão's 600 million reais of debt
with lenders Itaú Unibanco Holding SA, Morgan Stanley
and Banco Santander Brasil SA.
Eneva wants to ensure a supply of gas as demand for power in
Brazil is growing faster than the expansion of hydroelectric
generation. New dams with smaller, less ecologically damaging
reservoirs need to be supplemented with backup power from gas
and coal during dry seasons.
The investment in OGX Maranhão will help secure access to
gas for Eneva's power plants in Maranhão, E.ON said in a
statement. Eneva will have the right to buy part or all of
Cambuhy's shares in OGX Maranhão during the next two years.
Cambuhy was founded in 2011 by Brazilian banker Pedro
Moreira Salles and three partners to oversee assets of clients
and some of his family members. Moreira Salles is the chairman
of Itaú Unibanco, Brazil's largest bank by market value.