Legal Magazine

Legal Issues Facing Eike Batista

Posted on the 04 November 2014 by Angelicolaw @AngelicoLaw

It was just a few years ago that Eike Batista was on his way to becoming the richest person on the globe. The tycoon made his billions through his logistics and energy business and various profitable oil findings. And according to his company, it had an oil reserve of ten billion barrels, an astonishing number by any stretch of the imagination.

Corporate Default

Unfortunately, Batista’s company OGX started to bleed money, leading it to file for bankruptcy protection. This is now being regarded as the biggest corporate default in the history of Latin America. OGX was required to pay $45 million in bonds last month, which it didn’t. The company was also in the process of negotiating with some of its creditors, which include big names such as PIMCO and BlackRock.

The Cookie Begins to Crumble

The mud hit the fan when Batista’s company, OGX, announced a majority of its oil fields had no yield and development was impossible. This, of course, contradicts the company’s earlier claims of having ten billion barrels in reserve.

Further, Eike Batista’s ship building company, OSX, depended primarily on contracts given to it by OGX. With outstanding contracts worth over $30 billion to be completed over the next decade and the fall of OGX, OSX was forced to file for bankruptcy as well.

It was in Rio de Janeiro that OGX filed for bankruptcy. The company also made its debt public, which amounted to $5.11 billion. And of the $5.11 billion debt, OGX owed about $3.6 billion to several bondholders (a majority being international companies).

According to a recent report by Veja, it appears that Batista has settled at least the OGX debt by handing control of the company over to its creditors.

Insider Trading

Things took a turn for the worse when the public prosecutor’s office in Rio de Janeiro accused Batista of insider trading. They say the former billionaire manipulated the share price of OGX before the company went bankrupt. If there is a case and a ruling, Batista could stand to lose everything and could also be incarcerated for up to 13 years.

The former tycoon’s fortune, once estimated at a massive $34 billion, is now estimated to be less than $0 as his debts keep piling on. All three of his private jets, including his helicopter, have been sold off. It is still unclear whether or not Batista has some plan of action to extricate himself from what appears to be a labyrinth of debt.

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