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Odebrecht | Risks and Riches

Maracanã undergoes reconstruction

Maracanã undergoes reconstruction

2013 has so far been a time of trials for the Brazillionaire, a caste that has benefited significantly in recent years from the Lula government’s ambition to breed and incubate Brazilian multinationals with acquisitive power — think of JBS-Friboi’s takeover of the venerable Swift & Co.

The most visible sign of decline has been the performance of companies in the Eike Batista group, whose OGX petroleum subsidiary leads losses recently in the BM&FBovespa and is reportedly seeking outside and foreign investment.

Via Brasil 24/7.

With close ties to PT, Odebrecht carries $R 62 billion in debt

The Odebrecht group, which operates in the petrochemical and biofuels markets, produces nuclear submarines, participates in the management of the Maracanã football stadium and is one of the companies benefiting most from the amended Port Law, has run up debts equivalent to 3.5 times its net assets of R$ 17 billion.

Commanded by Marcelo Odebrecht, who publicly defended private sponsorship of air travel by former president Lula, minimizes the crisis: “The risk is well calculated.”

Odebrecht has a finger in every pie. Its brand is most visible in he petrochemical and biofuels markets, the building of nuclear submarines, and the management of the Maracanã football stadium alongside Eike Batista. It has also been one of the major beneficiaries of the law reforming the port and shipping sector, a battle won by a wide margin last week in a vote in the congress on the Dilma government’s bill. Operating on multiple fronts simultaneously, however, has drained the company of cash. Odebrecht has seen its debt rise to R$ 62 billion – nearly double its debt in 2010.

The company’s debt grew 36% in 2012 alone, according to the consolidated balance sheet published Abril 25 in the Official Diary of Bahia State, where Odebrecht’s board of directors is situated.

In all, Odebrecht’s companies reported operational income of R$ 4.6 billion. This performance was, however, consumed by financial costs stemming from debt, and so was recorded as a loss —  R$ 1.58 billion in 2012.

The group paid R$ 3.3 billion in interest and its balance sheet still suffers from a negative impact of R$ 3.5 billion, due to the strengthening of dollar. Its total debt is more than 3.5 larger than its liquid assets of R$ 17 billion.

VP Finance Felipe Jens, acknowledges that the dimensions of these debt would naturally concern observers, but says the company is accustomed to working using loans as leverage and that inside the company the view is that the risk is properly calculated and that debt is under control.

Behind the optimism is the support of Brazil’s most important political figure, ex-president Lula. During the Lula years, Odebrecht foi was the fastest growing contractor in Brazil and took on strategic projects, such as the nuclear submarine base in Rio, a hydroelectric plant on the Madeira River, and the construction of oil platforms for Petrobrás.

Because of the close relationship between the company and the Workers Party (PT), Odebrecht was recently accused of using Lula as a lobbbyist in its negotiations in Africa and Cuba.

In an article by Odebrecht president Marcelo Odebrecht, the company defends its relation with the ex-president and that it concerns the national interest and nothing else.