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UPDATE 3-Brazilian oil firm OGX presses Batista for cash; shares soar
September 6, 2013 / 1:56 PM / 4 years ago

UPDATE 3-Brazilian oil firm OGX presses Batista for cash; shares soar

4 Min Read

* OGX calls on Batista for immediate $100 mln

* OGX to exercise part of $1 bln put sold by Batista

* Unclear how Batista will generate the cash (Adds comments from source)

By Sabrina Lorenzi and Reese Ewing

RIO DE JANEIRO, Sept 6 (Reuters) - OGX, the debt-laden Brazilian oil company, said on Friday it has called in a promise from controlling stakeholder Eike Batista to start injecting $1 billion into his empire's flagship company while it renegotiates debt.

The company's stock surged on the news, closing up 27 percent at 0.52 real, and its bonds also reacted positively.

Once the crown jewel of Batista's multibillion-dollar energy, shipbuilding and mining empire, OGX Petróleo e Gás Participações SA said in a filing on Friday it would take $100 million immediately, issuing new shares to Batista.

Such a capital injection, if it comes through, would improve the company's short-term liquidity, but analysts said it would not address OGX's fundamental problems.

OGX is not producing oil at levels sufficient to cover massive debt obligations, which has eroded market confidence. The stock has tumbled by 97 percent since February 2012.

Whether Batista is able to come through on his full promise, which he made in 2012 when he still ranked as the world's seventh wealthiest man, remains to be seen. Forbes now estimates Batista's fortune at $900 million.

"This is the billion dollar question: Will Eike pay or not?" said a source with close understanding of Batista's companies.

In an attempt to shore up declining confidence in OGX last October, Batista pledged to put up $1 billion in the form of a financial guarantee called a put option to be exercised at the discretion of the board.

How he will generate the cash to make good on the entire OGX put option, as well as other promises to inject cash into his quickly disintegrating empire, is still unclear.

In addition to OGX, the board of Batista's shipbuilder, OSX Brasil SA, said on Wednesday it will exercise a put option with Batista at a value of up to $50 million.

Over the past week, in five separate sales of stock, Batista trimmed his controlling stake in OGX to about 52 percent to generate cash and avert bankruptcy.

Creditors have been pressuring Batista to fulfill his promise to inject cash into OGX through the option that allows the company to sell $1 billion of stock to Batista at 6.30 reais a share by April 30, 2014, if needed.

Exercising the option is seen as a last-ditch effort to keep OGX afloat after it burned through cash faster than many analysts expected and a potential investor, Malaysian oil company Petronas, got cold feet as doubts over OGX's solvency surfaced.

Batista is in talks with his main debt holders, including Pimco and BlackRock, to convert $3.6 billion in notes to equity and inject up to $500 million in fresh capital to avert the company from entering bankruptcy protection.

In another sign of instability in Batista's empire, steelmaker Ternium SA said on Friday it would halt plans to build a plant at the Açu Port project, owned by a logistics company formerly controlled by Batista, LLX SA. (Reporting by Reese Ewing; editing by Nick Zieminski, Matthew Lewis and Leslie Adler)

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