Brazil's most famous billionaire Eike Batista has begun restructuring his business empire, EBX Group, after his fortune dropped by as much as 91 percent in little over a year due to falling share prices.
Comprising oil, mining, energy and logistics companies, Batista's conglomerate was once valued at over US$60 billion, but is now in debt and shares in the EBX Group of nearly twenty companies – all of which are branded with an "X" to denote a "multiplication of wealth" – are now reported to be virtually worthless.
The entrepreneur's wealth is predicted to have collapsed from $34.5 billion in March 2012, when he was crowned eighth richest man in the world and richest in Brazil (down from seventh in 2011), to perhaps as low as $2.9 billion today – based on a variety of estimates.
Once the break-up is complete, Batista should be left with assets of between $1-2 billion and around $1.7 billion of debt.
Funds raised from the company's reorganization will go to repay creditors – ten banks, including the government's National Bank of Economic Social Development. The government – currently battling its own crisis – has said it will not be running to EBX Group's aid.
On Thursday it was announced that Batista would be stepping down from both the presidency and the board of directors of energy firm MPX Energia SA – considered EBX Group's most promising asset.
This company will be rebranded later this year and separated from the main group to insulate it from any negativity associated with the group.
MPX will also receive a private capital boost of $354 million, $163 million of it from German company E.On, which will increased its current sizeable stake in the company. The company's presidency will be assumed by Jorgen Kildahl, a member of E.On's administration advisory board.
Batista’s stakes in MPX and MMX, the group's iron ore mining company, will provide the bulk of the capital needed for the group's restructuring. Sources inside the conglomerate say the proceeds with more than cover the $1 billion debt owed to Brazilian bank Itaú and Bradesco.
- A wake-up call for Brazil's economy
Desperate times have, as the saying goes, called for desperate measures: Batista has in effect been forced to put a tourniquet on his empire to stop it hemorrhaging any more cash.
To avoid bankruptcy, Batista will have to sell off the majority of his remaining stakes in EBX Group companies. Reports say the Port of Açu is likely to be the only major asset to remain in his portfolio.
The demise of Batista’s fortune – and his "X" group – has been likened to that of Brazil as a whole: the country's sluggish economy and weakening currency and the lack of a light at the end of the tunnel have seen investor confidence slump.
Some analysts have said Batista overstated Brazil's potential to investors and has fallen on his sword as a result. Buoyed for years by China's unquenchable thirst for commodities exported by Brazil, particularly iron ore, and middle-class spending boom, Latin America's biggest economy has now cooled considerably.
An increase in gross domestic product (GDP) of 7.5 percent in 2010 was replaced by growth of under one percent in 2012. Although growth of between two and three percent is expected in 2013 and 2014, economists say that Eike Batista's demise should sound the alarm for the Brazilian government that its strategies for stimulating the economy are not working.
An avid user of Twitter himself, social media networks have been quick to take advantage Brazil's richest man's fall from grace: doctored images depicting Batista as a vagrant living on Brazil's streets have been quick to circulate.
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