* Exposure may be 'underestimated' due to poor disclosure
* BNDES appears most exposed bank in Brazil to Grupo EBX
By Guillermo Parra-Bernal
SAO PAULO, July 1 Brazilian state-run lenders
Caixa Econômica Federal and BNDES have the largest loan exposure
to debt-laden Grupo EBX, Bank of America Merrill Lynch said on
Monday, as markets assess risks stemming from years of hefty
borrowing by billionaire Eike Batista's mining and energy
Although available data on loan exposure to the Rio de
Janeiro-based group is limited, risk is concentrated at some of
the nation's major banks, analysts led by Alessandro Arlant said
in a note. Shares of EBX-controlled companies tanked on Monday
after oil producer OGX Petróleo e Gas Participações SA
declared several projects unfeasible.
The analysts concluded that exposure is concentrated in five
Brazilian banks, chiefly state development lender BNDES
and Caixa, the nation's largest mortgage
lender. Private-sector lenders Banco Bradesco SA,
Itaú Unibanco Holding SA and Grupo BTG Pactual SA
are next on the list, Arlant and his team said.
While Arlant estimates the five banks' loan exposure to EBX
at 9.42 billion reais ($4.2 billion), the number may be
"underestimated" amid poor disclosure and difficulty knowing how
much of that exposure is collateralized. In recent months,
investors have balked at the group's complex structure, its
appetite for debt and, in the case of banks, the existence of
guarantees and undrawn, committed credit lines.
A spokeswoman for Bradesco declined to comment on the
report. A spokeswoman for BNDES did not comment, saying that
some contracts with clients are subject to banking secrecy
rules. Calls made to Itaú, Caixa and BTG Pactual spokespeople
were not immediately answered or returned.
For years, Batista put shares of some of the companies he
controls through EBX as collateral in exchange for loans that he
used to build oil platforms, develop wells, build ports and mine
for iron ore. In recent months, Batista has reversed course and
is currently selling assets and repaying debt to reduce
requirements on some of that collateral.
At the end of last year, Batista's six publicly traded
companies had a combined net debt of about 15 billion reais,
according to Thomson Reuters data. That number, which almost
tripled since 2010, only rose as the companies posted losses
exceeding 1 billion reais last year.
According to the analysts, BNDES had by far the largest
exposure to EBX at the end of March - a total 4.9 billion reais
that represented 5.8 percent of the lender's regulatory capital.
BNDES is the main source of long-term corporate loans in Brazil.
Brasilia-based Caixa had total exposure of 1.4 billion
reais, or 3.4 percent of its regulatory capital, to EBX, mainly
to embattled shipbuilder OSX Brasil SA, the note
added. Bradesco had disbursed 1.25 billion reais, and Itaú a
total 1.24 billion reais as of the end of the first quarter.
This represents 1.3 percent and 1.4 percent of their regulatory
In the case of BTG Pactual, the investment-banking giant
controlled by billionaire André Esteves, exposure was estimated
at 649 million reais, mostly to electricity generator MPX
Energia SA, the note added. "However, given its
smaller size relative to larger commercial banks, BTG had
exposure of 4.3 percent of its total regulatory capital," Arlant
and his team wrote in the report.
All but one of EBX's six traded companies has lost more than
90 percent of their value compared with record highs, and the
bonds of OGX, EBX's flagship unit, are trading for about 20
cents on the dollar.
Batista, one of Brazil's most successful entrepreneurs
during a decade-long commodities boom, saw his $30 billion
fortune shrink to $10 billion this year.
($1 = 2.23 Brazilian reais)
(Reporting by Guillermo Parra-Bernal; Editing by Lisa Shumaker)