Reuters: Global Markets: OGX shares soar on report that Batista to relinquish control

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OGX shares soar on report that Batista to relinquish control Oct 15th 2013, 20:58 Share this Email Print Reprints By Guillermo Parra-Bernal and Asher Levine SAO PAULO/BUENOS AIRES | Tue Oct 15, 2013 4:58pm EDT SAO PAULO/BUENOS AIRES (Reuters) - Shares of OGX Petróleo e Gas Participações SA surged by almost 50 percent on Tuesday as a report that company founder Eike Batista might cede control of the ailing Brazilian oil producer to bondholders sparked speculation that such a move could save the company from bankruptcy. Brazilian website InfoMoney reported that OGX creditors are considering a proposal that would convert their bonds into stock. The report, which cited an unnamed source close to OGX, said that as part of the deal Batista would relinquish control of the company he founded to great fanfare in 2007. Batista, a flashy former billionaire who has been scrambling to sell off pieces of his EBX conglomerate of industrial companies to pay debt, currently holds a 51 percent stake in OGX. A spokeswoman for the company declined to comment on the report or negotiations with creditors that are taking place in New York. OGX shares (OGXP3.SA) closed up 48 percent to 0.34 reais, posting their biggest gain in six weeks. The surge in the shares had triggered a mandatory trading halt earlier in the day that lasted for more than an hour. The stock, which is among the most volatile on Brazil's benchmark Bovespa index .BVSP, has shed about 93 percent of its value so far this year. Some market participants believe that if Batista were to walk away from OGX, it would ease tensions in talks with bondholders and potentially facilitate a resolution that could save the company from bankruptcy. "The market feels that with Batista out of the picture, OGX would be in a better position to renegotiate its debt," said Anderson Luz, managing partner at brokerage firm Intrader in Sao Paulo. "It's a question of credibility. When it's time to sit down with creditors and negotiate, you want a new controlling shareholder there at the table." OGX, which currently has $3.6 billion in outstanding bonds, was forced to the negotiating table after missing a $44.5 million interest payment on its debt on October 1. The company has 30 days from the missed payment to reach an agreement with bondholders or be declared in default, which would be the largest ever corporate default in Latin America, according to Thomson Reuters data. Faced with dwindling cash and a crushing debt load, OGX could also be forced to file for bankruptcy protection in Brazil, giving it more time to restructure. Calls to representatives of the group representing OGX creditors were not immediately answered. The speculation that Batista might surrender control of OGX comes a day after the company finalized a $996 million deal that handed over control of its iron ore port in Brazil to Dutch energy firm Trafigura Beheer BV TRAFG.UL and Abu Dhabi sovereign wealth fund Mubadala Development Co MUDEV.UL. Trafigura and Mubadala, Batista's single biggest creditor, will invest $400 million to complete the port and agreed to assume 1.3 billion reais ($596 million) of debt as part of the deal. Batista, who just a year ago was Brazil's richest man and the seventh wealthiest in the world with a fortune close to $35 billion, is dismantling his Grupo EBX conglomerate of mining, energy and logistics companies because of a dearth of cash, surging debt and a plunge in investor confidence. A collapse of OGX, once the flagship company of the EBX group, could also bring down Batista-controlled shipbuilder OSX Brasil SA (OSXB3.SA), which is owed payments for the oil tankers that it has built and leased to OGX. O Estado de S.Paulo newspaper, citing unnamed sources, said that state development bank BNDES agreed to refinance a 518 million reais loan to OSX for an additional 30 days. The company is also trying to persuade state-run Caixa Economica Federal to roll over a 400 million reais loan due on Saturday. Representatives from OSX, Caixa Economica and BNDES did not immediately respond to requests for comment on the report, which was published on Tuesday, when the loan from BNDES was due to be repaid. ($1 = 2.18 Brazilian reais) (Additional reporting by Priscila Jordão; Editing by Todd Benson and Leslie Adler) Link this Share this Digg this Email Reprints

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