Billionaire Eike Batista is considering issuing more bonds abroad to raise money for OSX Brasil SA after the success experienced with the debt issuance of OGX Petroleo e Gas Participacoes SA six months ago. The company’s CFO, Roberto Monteiro, said the money will be necessary to help finance the construction of an oil rig.

Citigroup’s Bevan Rosenbloom is skeptical, though. According to him, investors may shy away from high-risk assets like OSX because of the European debt crisis and the fact that the company’s largest client, OGX (also Eike’s company), does not produce oil yet. “For a company that basically has one single client, I’m not totally convinced that there is necessarily a market for this kind of thing,” Rosenbloom said in a telephone interview to Exame. “There is no external business supporting OGX, which makes this bond deal seem speculative to me.

OGX is five rating levels below S&P;’s investment grade and six levels below the sovereign grade sovereign. OSX has no rating. OSX’s goal is to provide the OGX with 48 oil rigs for use at sea for US$30 billion over the next decade.

Speculation that OGX is closer to fulfilling the plan of oil production contributed to the superior performance of the company’s securities relative to other similar risk rating. According to OGX’s CFO, Marcelo Torres, the company plans to start pumping oil before the end of this year and that annual sales could reach US$15 billion in 2015. The company said last year that it would begin producing oil by mid-2011.

The truth is that there is not much “risk on” money left for this type of speculative deal nowadays. Investors are being selective in this tough environment, and there are companies around the world offering lower yields, but with much better fundamentals.

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