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How Brazil's Richest Man Lost $34.5 Billion

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http://www.businessweek.com/articles/2013-10-03/eike-batista-how-brazils-richest-man-lost-34-dot-5-billion#r=rss

Eike Batista stands at the center of a specially built air-conditioned stage on his 22,000-acre-plus Açu port project, a massive oil and iron-ore shipping complex about 200 miles north of Rio de Janeiro. He’s beaming, flashing victory signs. He has on an orange-and-gray racing jacket of the type he wore as a champion speedboat racer two decades before. It clashes badly with his bright pink tie and gray pinstripe suit, but he doesn’t appear to care—in fact, the loud ensemble only serves to highlight a faux oil-stained handprint across the jacket’s left pocket—a corny hint about why he’s asked everyone here.

It’s a cloudy April afternoon in 2012, but Batista is full of blue skies and endless vistas. To date he’s founded five publicly traded companies and is soon to launch a sixth. His personal wealth is estimated at $34.5 billion; most of his enterprises are managed under the umbrella of a holding company bearing his initials, the EBX Group. At 55, he’s Brazil’s richest man—and the eighth-wealthiest man on earth.

..

To say Batista overreached would be to seriously undersell what has happened in the 18 months since that self-regarding presstravaganza of hubris and magical thinking. In what is shaping up to be one of the largest personal and financial collapses in history—if not the largest—Batista may be nearing bankruptcy. On Oct. 1, OGX missed a $45 million interest payment on bond debt it had racked up during its rise. Batista has sold his planes and his helicopter, and creditors are arguing over the remains of his companies. He’s no longer on the Bloomberg Billionaires Index and has become the butt of jokes in Brazil. One suggests that Pope Francis plans to return to Brazil soon and will again be visiting the poor, including Batista.

..

OGX entered the business aggressively. In November 2007 the company bid at a government offshore oil lease sale, paying $1.3 billion for 21 blocks, seven in what is known as the Campos Basin, off Rio state. The bids for the leases in Campos, which holds 80 percent of Brazil’s output, startled his competitors. OGX offered double what Petrobras was offering for four Campos tracts and outbid Anadarko Petroleum (APC), an offshore specialist, fourfold on another.

“They went in and paid massively; they put multiple times what anyone else put on the blocks,” recalls Rebecca Fitz, an analyst with Washington-based PFC Energy. “They needed to have extraordinary success to recoup. The high bid kind of forced the hand to begin with. They were showing the world they could beat everybody.”

..

In April 2011, OGX released a report by independent auditors that startled investors. Reserves in the company’s fields looked less a sure thing than earlier reports indicated, with a good portion of them marked down as “prospective” instead of “contingent.” Essentially, recoverable reserves simply were not as certain as they once seemed to be. The stock fell 17 percent, the most in two and a half years, and OGX would never recover to the 20-reais level traded early that year. An historic unraveling had begun.

Unable to find drilling partners, Batista and OGX in May 2011 turned to the bond markets and—despite concerns about its reserves—the “smart money” poured in. The company raised $2.6 billion for its exploration campaign and began to tout a 100 percent success rate on its Campos test wells. A year later, after its own analyses showed most of the crude it had discovered was locked in complex subsea geologic formations that made it difficult to pump out, OGX revised its claims to say it thought 87 percent of its drill sites would be producing oil.

..

“It’s stunning. There’s a maxim: Never drill with debt,” says Michael Roche, an emerging-market strategist at broker-dealer Seaport Group. “I’m sure the bond managers who suffered the most losses say ‘I’m never again going to lend to an oil company that’s not producing oil.’ ”

An impressive amount of wealth to lose.

The wonders of leverage strike again. Still I'm sure next time the results will be different.

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Some entrepreneurs aren't able to stop gambling. You make a few billion, more than you will ever need, and you still have to stake the lot once more.

D'Arcy did just that at the turn of the last century. Having made billions (in modern money) getting into Australian gold he restaked the lot in Persian Oil. But after 7 years of drilling dry wells in Persia he had run out of funds and was on the verge of a ''multi-billion bankruptcy''. In 1908 as the business was about to be unwound he struck lucky and the Company eventually became BP.

http://en.wikipedia.org/wiki/D'Arcy_Concession

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What disturbed me the most about the article, were the power investment-names investing with him - and teaming up with him - although perhaps they were eyes full of money with promises of oil wealth.

Wouldn't be personally be drawn to such a mammoth over-reaching company into all aspects (ports) run by a 'personality' who has tendencies for playboy living lavish spending in the first place. Wouldn't want to pay premium fees to big-name investment money-managers to do so either.

11 November 2013

Eike Batista-owned OSX files for bankruptcy

A second company controlled by the Brazilian former billionaire Eike Batista has filed for bankruptcy protection.

Shipbuilding firm OSX Brasil made the filing in a Rio de Janeiro court less than two weeks after its sister oil company, OGX, also declared bankruptcy.

http://www.bbc.co.uk/news/business-24905669

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