May 17 2014, 12:34pm CDT | by Forbes
Brazil’s fallen billionaire Eike Batista finally presented to the court his plan to revive at least on of his failed companies, this one a merchant marine builder known as OSX. Bond holders shouldn’t expect being paid anytime soon. According to Brazil’s largest daily, Folha de São Paulo, Batista said it will take 25 years to pay investors back. By then, most of the holders of OSX debt will be dead and buried.
Batista fell from grace last year, when his family of mostly commodity and logistics firms lost nearly all of their share value and filed for bankruptcy. Batista, who was absent from the FORBES billionaire list this year, became one of the most beloved businessmen in Brazil. He rose to stardom in 2008 when his OGX Petroleo & Gas, the nation’s first privately held oil exploration and production company, listed on the BM&F Bovespa exchange and became one of the largest IPOs in the world. Investors believed the Batista hype, that his OGX was swimming in oil far off the coast of Rio de Janeiro.
The courts have been asking Batista to provide plans to revive the companies in the Batista family, and OSX became the first to do so on Friday. OGX, for its part, has managed to strike a deal with its main lenders before presenting its survival scheme to the courts.
Like OGX, OSX was a good idea at the time. Brazilian exporters have been complaining for years that the country did not have its own ship building capacity, and Batista was seen as a possible hero to their cause. Moreover, OSX was seen as a builder of floating oil drillers at a time when deep sea oil production was on the rise in Brazil. It had a captured market. But mismanagement and a weaker economy pulled the rug out from under the company.
The plan does not include any immediate haircuts on bond prices, but over the years will result in at least a 50% reduction from the original value. OSX’s plan includes a three year grace period before it begins paying back around R$4.5 billion ($2.2 billion) to its biggest lenders, including privately held Banco Votorantim (R$555 million) and state owned lender Caixa Economica Federal (R$463 million). However, over the next 12 months, OSX said it will pay a “minimum” to smaller creditors in an attempt to pay off those loans first.
The plan has yet to be approved by OSX lenders. If lenders fail to approve the recuperation plan set forth by Batista, then OSX will be forced to liquidate. The company hopes to strike a deal with Caixa and Votorantim next week to keep the company intact.
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