OGX shares have tumbled 88 percent this year, the worst performance on Brazil’s benchmark Ibovespa index (which is itself in deep poopoo the red).

Prices on OGX’s $2.56 billion of 2018 bonds have sunk to a record low 16 cents on the dollar from 77.6 cents at the end of March and 89.7 cents in September, making them the worst-performing dollar debt in emerging markets.

Credit Suisse estimates that OGX, which forms part of a Batista empire whose combined market capitalization has fallen $38 billion in the past two years, will have about $13 million in cash by year-end.

“Without revenue, the shareholders don’t have much to lean on, and I’m not sure at the end of the day the bondholders do either,” said Arthur Byrnes, who oversees about $1 billion of assets as senior managing director at Deltec Asset Management LLC. Deltec has sold all its OGX notes, he said. “The ability to buy the bonds at a discount — it’s not clear that it’s good value. The big lesson here is you can’t buy overpromises.”

If OGX halts payments on its debt, it would be almost double Banco de Galicia y Buenos Aires SA’s $1.9 billion default in 2002, the largest in Latin America to date, according to data compiled by Moody’s.

“A restructuring seems imminent,” Jack Deino, who oversees about $1.8 billion in emerging-market debt at Invesco Ltd., said in a telephone interview from Atlanta. “The bottom line is you just have way too much debt and way too few assets. This is going to be a great test of the Brazilian bankruptcy regime and the legal backdrop in the country.”

Batista is seeking to sell assets and renegotiate debt amassed by his six publicly traded companies. He’s also looking to bring in partners and inject fresh capital into OGX, a person with direct knowledge of the plans said earlier this month. Grupo BTG Pactual, the investment bank adviser for Batista’s companies, is looking for prospective oil field partners, according to the person, who asked not to be identified because the negotiations are private.

Source: Bloomberg

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