UPDATE 2-Batista's OGX sells stake in gas unit to Brazil fund, E.ON
RIO DE JANEIRO/SAO PAULO, Oct 31 (Reuters) - Brazilian tycoon Eike Batista's oil company OGX Petróleo e Gas Participações SA agreed on Thursday to sell its 67 percent stake in its natural gas unit for 344 million reais ($156 million), the day after it filed for bankruptcy protection.
Under the deal, São Paulo-based buyout firm Cambuhy Investimentos Ltda will end up with 73 percent of OGX gas-unit OGX Maranhão Petróleo e Gas SA, statements from the companies involved said. Half that stake will come from buying 200 million reais of new stock in OGX Maranhão. The rest will come from a 200 million real payment to OGX for its remaining share of the gas producer.
German utility E.ON SE will provide another 50 million reais of investment and hold 9 percent of OGX Maranhão when the deal is complete. The multi-step transaction also includes a 144 million real payment to OGX from OGX Maranhão to repay the cost of joint expenses.
The companies did not say whether proceeds from the deal would go to help repay OGX Maranhão's 600 million reais of debt with lenders Itaú Unibanco Holding SA, Morgan Stanley and Banco Santander Brasil SA.
The parties agreed to the deal hours before OGX sought court protection from creditors, a source with direct knowledge of the matter told Reuters. The company left OGX Maranhão out of the bankruptcy protection filing because the gas unit was in talks for a potential capital injection or a buyout.
Power company Eneva SA's stake in OGX Maranhão will shrink to 18 percent from 33 percent as a result of the deal. E.ON is Eneva's largest shareholder.
"This new deal allows for smooth operations of OGX Maranhão amid OGX's insolvency, and implies no equity disbursements by Eneva, which had committed to inject 200 million reais in case of a Maranhão credit default," wrote UBS Securities analyst Lilyanna Yang.
A renowned entrepreneur who once said he would become the world's richest man, 56-year-old Batista has seen his personal fortune tumble by more than $30 billion in the last 18 months as share prices of his listed companies sank. This has forced him to start breaking up his Grupo EBX conglomerate, which also included a port operator, mining and energy interests, and an entertainment company.
OGX needs new capital to avoid losing its rights to its exploration areas and existing fields, its principal assets. While bankruptcy proceedings will not automatically result in their loss, Brazil's oil regulator has warned OGX that it must meet all its contractual agreements with the government, including making investments, or risk losing its oil rights.
The bankruptcy filing came after OGX spent about 10 billion reais exploring for offshore fields that failed to deliver on output expectations, the company said in court documents. It is scrambling, though, to hook up a second offshore field, Tubarão Martelo, by the end of November.
OGX Maranhão, with its on-shore gas fields, is OGX's best-performing asset and sells natural gas to Eneva's power plants. OGX's share of OGX Maranhão gas sales is about 2.1 million cubic meters a day.
The offshore troubles led to a more than 98 percent drop in the value of OGX stock in the last 16 months. Worth about $45 billion in October 2010, the shares fell 24 percent on Thursday to 0.13 reais, giving the company a market valuation of about $190 million.
Eneva, originally founded by Batista as MPX Energia SA, is led by E.ON, which bought 38 percent of the company from Batista earlier this year. Batista retains a 27 percent stake.
Besides the 200-million-real direct payment from Cambuhy for its OGX Maranhão stake, OGX will receive 144 million reais from OGX Maranhão in three payments through 2015 for its part of shared costs in the gas unit.
Eneva wants to ensure a supply of gas as demand for power in Brazil is growing faster than the expansion of hydroelectric generation. New dams with smaller, less ecologically damaging reservoirs need to be supplemented with backup power from gas and coal during dry seasons.
The investment in OGX Maranhão will help secure access to gas for Eneva's power plants in Maranhão, E.ON said in a statement.
Some analysts said OGX's planned sale of OGX Maranhão and other assets such as the Tubarão Martelo field might reduce the amount of money that creditors could recover if the bankruptcy restructuring fails and OGX is liquidated. OGX has about $5.1 billion in debt, $3.6 billion of which is in the hands of bondholders such as Pacific Investment Management Co, BlackRock Inc and Loomis Sayles & Co.
Cambuhy has agreed to buy 200 million reais of new shares in OGX Maranhão, while E.ON will subscribe another 50 million reais in stock, the OGX statement said. Eneva will have the right to buy part or all of Cambuhy's shares in OGX Maranhão during the next two years.
Cambuhy was founded in 2011 by Brazilian banker Pedro Moreira Salles and three partners to oversee assets of clients and some of his family members. Moreira Salles is the chairman of Itaú Unibanco, Brazil's largest bank by market value.