Flamboyant Brazilian
billionaire with an extremely ambitious personality who was admired by so many businessmen
around the world has made his first million from gold trading before he was 24
years old, and he is Eike Batista. Since then, he had become the founder up to
six companies until he made it to the top 20 of the world billionaire’s list.
Batista told everyone who would listen that he would soon be the richest man in
the world (Lopez, 2013). However, by the end of the year 2012, half of his
wealth was vanished. What Batista is doing is making yet another huge bet on
himself. Lopez (2013) added that, He wants bondholders to restructure his over
$US3 billion of debt, give him more cash, and allow him to continue developing
his empire. With his high esteem of confidence, he was actually creating his
own disastrous. He still believes of saving EBX, but the market does not seem
to trust with him anymore.
Batista has always been the legend
in his own league. One of the seven children, Eike Batista was born in 1956 in
Governador Valadares, Minas Gerais in Brazil. He spent his childhood in the
country of his birth, but grew up in Europe with his family throughout his
teens. In 1974, Batista began in majoring in Metallurgical Engineering at the
University of Aechen in Germany. However, Unable to finish his degree in
Metallurgical Engineering, he returned to Brazil when he was 18. After he
showed some interest in export granite and diamond, he eventually moved on to
trading gold, where he made his first millions.
In the early 1980s, Eike Batista
started gold trading firm, and founded TVX Gold, which is a gold mining
company. Since the price of the gold was doing well on that time, he took the
opportunity to own a gold mining company. By the year 1983, Batista founded
EBX, the umbrella under which he would found all his other companies (Lopez,
2013). In addition, between the year 2004 and 2012 Batista had add six public
companies under the EBX umbrella such as OGX (oil), MPX (energy), LLX
(logistics), MMX (mining), OSX (offshore industry) and CCX (coal mining). The
‘X’ was included in the name of all companies to indicate multiplication, where
Batista believe as in multiplication of wealth.
Yet, trouble will definitely come to
every person in this world. As for Batista, after living like a billionaire, he
decided to resign in 2001 from his gold mining company, the TVX. Because of
failure plans for gold mine in Greece and then bad timing of price gold that drops
down, TVX turn for the worse. Apparently, Batista is not a person who give up
easily, he had set his eye on Ventana Gold Corp, in July 2009 through EBX he
had his first snapped up a 9.5% in Ventana. Later, in one year he controlled
20% of the company stock and in 2011 he managed to buy Ventana after a full
sale agreement at a little more than C$1.5million. As time pass by, his dream
in becoming one of the richest men in the planet came true. In the spring of 2012,
he was the top 10th richest man in the world. He told Bloomberg that he wanted
to repair Brazil’s reputation. According to Batista, ‘’ 'Brazil lost two
generation of Brazilians to the crisis between '84 and '97,' he said. During
that time Brazil probably paid $US150 billion in extra risk spread. The ratings
agencies put Brazil in the same level as Nigeria, and today it's better than
Germany (Lopez, 2013).
On the same year, he made a deal
with a sovereign fund all the way in Abu Dhabi in order to get additional cash
in developing his companies. A Mubadala Development Company is a
government-owned fund, which invested total of $US2 billion in EBX Group Co.
Therefore, Batista was able to raise more money in developing his oil and
mining business and indirectly helps in increasing fund up to 5.63% economic
stake in the company. However, everything changed the summer of 2012, Batista
lost 99% of his wealth. His oil and gas company, the OGX was his main
contributor suffered a bad fall where the estimated production of 15,000
barrels of oil a day was not that good. By May 2012, the production decreases
to 10,000 barrel of oil per day. In June 2012, the expectations for some fields
fell even lower to 5,000 barrels in a day (Lopez, 2013). One year later, As 1
August 2013, all six companies under EBX’s umbrella suffered a great amount of
lost of $US9.7 billion.
According to Cuadros A, Spinetto JP
and Cristinae L 2013, Eike Batista is the man who lost $US25 billion in one
year. As mentioned earlier, one year ago, Eike Batista was Brazil’s richest
man, and his fantasy of climbing to No. 1 in the world seemed to be beyond his
reach. After founding six publicly traded natural-resources companies, he would
just traded a stake in his EBX Group Co that valued his assets at $US34.5
billion. Now, Batista’s empire was ruined. Investors and market concerned about
the continuity of borrowing money to safe the companies. Markets are losing
their faith towards Batista. Moreover, Batista made a new approach in helping
the companies by forming an agreement with Grupo BTG Pactual Chairman Andre
Esteves in running a strategic and financial management committee.
So, how does Brazil’s richest man
lost $US 34.5 billion? People assumed that his greed of becoming the No.1
richest man was the main factor that lead to his big lost. Back in a gloomy
April afternoon in 2012, but Batista felt is it a great afternoon with blue
skies and endless scenes. Total of $US34.5 billion is estimated to be Batista
personal wealth. As stated earlier, most of his enterprises are under EBX Group.
At the age 55, he not only becomes the richest man in Brazil but the 8th
wealthiest man on earth. Alongside of his good networking with Business elite
and Brazil’s political, or even the Co-chief executive officer of Hyundai Corp.
Batista had been gathered them and 400 guests to his proudly 22,000-acre plus port,
Acu that he predicts to be largest in America. “This is an historical moment,”
says Batista. He confidently share good news of his OGX Petroleum e Gas which
have begun its production and it was the first time for an independent
Brazilian company has produces oil. He would not even bother about his lacking
of experience in oil and gas development. Rather to concern about the knowledge,
Batista hired few experts to manage the operations of his oil business. OGX
went aggressively as a new oil company. Batista paid $US1.3 billion for 21
blocks to boast off to its competitor, the Petrobras. According to Spinetto JP,
Millard P and Wells K in their article,“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.”
As a newbie in the oil business,
Batista wanted Brazil to have decade-long economic expansion which why he set
the date with others potential investors at Acu. Furthermore, most of the
international investor were American and have showed interest in his oil
business. Based on the report by Bloomberg, BlackRock, the world’s largest
money manager, had bought millions of OGX shares. Pimco, manager of the world’s
largest bond fund, owned $576 million in OGX bonds.
Additionally, General Electric took 0.8 percent share in
EBX when they purchased it with the valued of $US300 million. I would say that
Batista had this excessive self-confidence and optimistic thinking to some
extent to be overreached. It may not be the largest, but he could be of the
largest personal and financial breakdown in the history. For what has been
reported, Batista nearing to announce bankruptcy. What had happened on Oct 1
2013, OGX missed large amount of interest payment of $US45 million during its
rise. Creditors are quarrelling over the remains assets in his companies. His
precious planes and helicopter all been sold out. In the blink of an eye, he’s
no longer on the Bloomberg Billionaires index and become a joke in Brazil. One
suggests that Pope Francis plans to return to Brazil soon and will again be
visiting the poor, including Batista (Spinetto JP, Millard P and Wells K,
2013).
Batista rejected all interviews for this issue, but not
only the journalists are hunting for him. The Brazil’s securities regulatory
conducted an investigation on Batista and OGX. The investors claimed that
before the company cancels the project and warned it may stop the pumping
production, Batista discarded $US126.7 million of OGX shares. In a July edition
of newspaper in Brazil, Batista said he would honor all of his obligations. He
would be responsible on what had happened to the company. However, on the same
article he twists a word by blaming the stakeholders of the company. Batista
put the blame on the auditing firm and executives for their unreasonable
management. Yet, the company is in denial about the statement and Batista once
again gone silent after the print was released. Whilst the silence and the
vague statements were given, people started to question his creditability and they
started to loss faith on him and the enterprises.
Also, after the stock fell down and OGX began snag hit
with the oil production, he headed again to bond markets, as he believe nothing
that more money could not solved. Elsewhere, he started to give hints about new
deals; groups from U.S and Asia were interested in stake of EBX. Batista was
considering bringing “industry partner’’ but next he said another sovereign
wealth fund wanted to invest in EBX. Consequently, his words of promises and
high confidence were all over the place. Eventually Brazil growth slowed down
in 2012, which Batista’s fortune followed.
Batista been relinquished control of his most promising units where he
been spending the last few month shrinking his ‘’territory”. Meeting with creditors,
banks and not to exclude the Mubadala Development Company to negotiate his bad
debts. Total debt of 11 times larger than its market value, his problematic
company, OGX would be seeking to avoid bankruptcy. He had to cut his stake,
pass over his proudly Acu port and even announce an agreement to sell an
iron-ore port to a joint venture between Mubadala and commodities trader
Trafigura.
Last but not least, interviewed by
Wall Street Journal, Batista says ‘’I’ll make a comeback’’. This was published
on Sept 15. Adapting the experience by the founder of PayPal and Tesla Motors,
Batista will rise again. He wanted to create wealth not only for him but for
others too. By living in a country that has massive natural resources of oil
discoveries, why he should not have been blessed with it? After ruining his billionaire
title, will Eike Batista come back in business world, or were those the
statements that portray his high-esteem confidence and greed of becoming rich
again.
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