Brazil's flamboyant tycoon has reversal of fortune as company files for bankruptcy protection

Just a year ago he was labeled the "pride of Brazil" by no less than the nation's president, a wildcat entrepreneur playboy, the Brazilian Donald Trump who embodied his country's rise. Eike Batista rode atop a wave of endless optimism, driven by repeated reports that his oil company had struck black gold once again.

On Thursday, he was sifting through the ashes after becoming the head of the biggest Brazilian firm to seek bankruptcy protection, the share price of his OGX oil company worth less than a stick of gum. Some feared it could have a domino effect on his other concerns in the mining, infrastructure and real estate sectors.

The fall was fast and sharp for Batista, 56, who just a few years ago vowed to become the globe's richest man, but whose fortune is now reported to be less than 1 percent of the $34.5 billion he was worth at his apex last year, when he was at No. 7 on the Forbes billionaires list.

Batista was born to privilege. His father was the mines and energy minister and also led what was then the state-run Vale mining company, which has since been privatized. The younger Batista made his first fortune in his 20s, scouring the Amazon to buy up gold, which he resold in Brazil's big cities and Europe.

Those beginnings led to his current conglomerate of oil, mining, infrastructure and real estate companies, all suffering as his once high-flying OBX faces possible liquidation.

There are now concerns that Batista's OSX ship building company may also quickly fall into bankruptcy; it's carrying heavy debt and was meant to supply the oil firm with ships and platforms.

Married for more than a decade to Luma de Oliveira, a former model and one of Brazil's most beloved Carnival queens with whom he had two sons, Batista's life has been as much fodder for celebrity scandal sheets as the business pages, with his problems at times extending into his personal life. In June, his son Thor, 21, was convicted of involuntary manslaughter for running over a slum-dwelling cyclist while driving the same model of Mercedes-Benz his father keeps near a family couch.

Critics contend Batista misled investors about the size of the oil fields that OGX had found in recent years and say his troubles are a new sign that Brazil won't soon see an end to its economic slide. The economy grew 7.5 percent in 2010, but then eked out just a 0.9 percent gain last year amid a downturn in world commodity prices and Brazilian consumer spending.

OGX didn't respond to requests for comment. On its website, it posted a short statement Thursday saying it had no choice but to declare for bankruptcy protection given "its adverse financial situation and accumulated losses."

Just 18 months ago, President Dilma Rousseff attended a ceremony marking OGX's first offshore oil production and said resolutely that state-run oil company Petrobras would go into deep partnerships with Batista's firm.

"Eike is our standard, our expectation and, above all, the pride of Brazil when it comes to a businessman in the private sector," Rousseff told those in attendance.

Some say Batista's failure to deliver on producing offshore oil and the resulting inability to obtain more investor credit was a byproduct of a toughening economic environment as well as underlying weaknesses in his company.

Jefferson Finch, a Latin America analyst with the New York-based consulting firm Eurasia Group, said that "investor enthusiasm started turning on Brazil around 2011" after five years of high hopes that South America's biggest nation had finally turned a corner and would make good on its longtime promise to become a perennial power with repeated years of strong growth.

"But if you look at the overall context, Brazil was never as promising as people said it was in 2006, when a lot of commentators were effervescent on Brazil, ignoring the structural challenges it faced," he said. "Now, Brazil is not as bad as all the negative commentary."

OGX, created in 2007, didn't deliver on its promises to produce significant amounts of offshore oil even though it reported many finds since 2010, when its market value reached $34 billion. In the first half of this year, the company averaged output of just 8,500 barrels a day and racked up more than $2.5 billion in losses.

Critics say Batista has lied to investors, citing a correction made earlier this month for a promising OGX offshore field. In 2012, OGX said the field held nearly 1 billion barrels, but a few weeks ago it lowered that projection to 285 million barrels, too late for those who plowed cash into buying the company's stock.

Miriam Leitao, one of Brazil's top economic columnists, wrote on her blog for the O Globo newspaper Wednesday that Batista's "main error was to declare that he had what he didn't, to mislead the investor."

"He's always exaggerated the potential of his companies and thus increased his stock," she wrote. "He built a house of cards."


Associated Press writer Stan Lehman in Sao Paulo contributed to this report.


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