RIO DE JANEIRO Brazilian billionaire Eike Batista needs partners to help fund the expansion of his EBX Group, a situation that could lead him to cut his stake in EBX companies by more than half, fellow billionaire Andre Esteves told the Estado de S. Paulo newspaper.
Batista's ownership of as much as 60 percent to 70 percent of EBX's oil, mining, power, port and shipbuilding companies is not normal, Esteves, the founder and president of Brazilian investment bank BTG Pactual Group (BBTG11.SA) said in an article published by Estado on Sunday.
Normal would see Batista cutting his holding to about 20 percent to 30 percent, said Esteves, who recently signed up as adviser and banker to Batista and EBX. [ID:nL1N0BZ4JA]
In the last year, Batista's companies have seen their share prices plunge, cutting 53 billion reais ($26.4 billion) off the companies' market values and bumping Batista from his spot as Brazil's richest man, the paper said. Investors are concerned Batista will be unable to raise funds needed to transform his companies from cash-burning start-ups to cash-generating operations. All are behind schedule and generate little or no revenue.
"There are various types of partner: financial, strategic, development-banks, the entrepreneur and the capital markets," Esteves told Estado. "I see the excess of ownership of the EBX Group in its projects to be an anomaly. It's natural to have smaller stakes in projects that will pay dividends and generate cash."
On Thursday, Batista said he was in talks to sell more of his MPX Energia SA MPXE3.SA power-generation company to Germany's E.ON (EONGn.DE).
The debt held by Batista's companies is not as big a problem as some believe, Esteves said. He added that nearly all his projects are not only viable, but provide essential transportation, real estate and energy infrastructure in a country where demand for ports and power plants, oil and iron ore outstrips supply.
Esteves plans to better organize the construction of LLX Logistia SA's LLXL3.SA, Port of Açu, north of Rio de Janeiro, the iron ore mine and transportation systems of MMX Mineração e Metalicos SA (MMXM3.SA), the shipyard of OSX Brasil SA (OSXB3.SA), the power plants of MPX Energia, the oil production of OSX Petróleo e Gas SA (OGXP3.SA) and the coal mining operations of CCX Carvao de Colombia SA (CCXC3.SA).
"The challenge is to better organize the execution," Esteves said. "All are great infrastructure projects linked to natural resources and are complex and capital intensive."
"We are going to help organize, rationalize and prioritize the execution," he added. "Many people question the indebtedness of the EBX group, but even with its shares very depreciated, there is a significant positive asset value. The debt is not that great. What exists is a demand for future investment that needs to be calculated project by project.
Eike he added, is in no immediate danger of going bankrupt.
"He remains one of the best capitalized entrepreneurs in the country," Esteves said. "He's young, entrepreneurial, believes in Brazil and is going to build a lot yet. His financial situation is easily manageable."
Esteves said he would like to see more Brazilian investment funds and insurance companies invest in the EBX Group companies. With Brazilian interest rates falling these companies need to move some of their investments out of government debt and into corporate debt and projects that will pay dividends.
EBX companies are likely to continue receiving funds from Brazil's state-led development bank BNDES and from state-controlled oil company Petroleo Brasileiro SA (PETR4.SA), Esteves told Estado. Petrobras, as the oil company is known, needs ports and storage facilities for its planned expansion of offshore output making it a potential partner for LLX's port and OSX's shipyard.
($1 = 2.0095 Brazilian reais)
(Reporting by Jeb Blount; Editing by Maureen Bavdek)