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MPX | Eike Sells Out


Source: Folha de S.Paulo

With the sale of energy provider MPX to Germany’s E.ON, BNDES has unburdened itself of most of the debt owed by the Eike Batista group . However, nearly R$ 2 billion in debt remains and part of this debt is being renegotiated.

Data obtained exclusively by the Folha de S. Paulo indicate that about R$ 4 billion migrated to the new controller of MPX, amounting to 66% of the group’s R$ 6 billion outstanding debt.

This is the value of credits extended by the state-owned bank, BNDES, to the EBX group— out of a total of R$ 10 billion in financial contracts.

Renegotiations are underway, however, with respect to a R$ 518 million bridge loan extended to LLX (logistics) for the construction  of the port at Açu (RJ).

BNDES will likely extend the the payment deadline, which comes due this month.

This is the same mechanism used on another bridge loan to OSX (shipyard), extended in August for two months.

Bridge loans are loans granted until such a time as a definitive contract can be signed under optimal conditions.

The goal of renegotiation is to give the company time to find buyers for these companies willing to assume their debt.  “It is better to give them more time than to allow the company to collapse,” says Eduardo Coutinho, a professor at Ibmec.

Of the total amount lent by BNDES to the EBX, R$ 500 million are directly at risk  for nonpayment — this is the so-called exposure of the bank to companies in the EBX group.

This sum corresponds to 0.6% of all the credits granted by the bank during the first quarter.  “It is not an inconsiderable amount, especially because a state-owned bank is involved, but in proportion to the size of BNDES, it [bankruptcy] would not be a huge problem,” says the Ibmec professor.

BNDES carries relatively little risk because 80% of the loans it makes put up security or are indirectly financed (passed along by other banks, which assume the risk).

That is to say, in the case of delinquent loans, the egg on the face is assumed by the bank that approved the BNDES loan.

In Coutinho’s viw, BNDES walled itself off because Eike’s businesses were still at the planning stage — a fact that frustrated hopes that the promised results would be achieved — and had no cash generation of its own.

Sought for comment BNDES said it would not comment on the numbers obtained by the Folha. LLX e OSX confirm that they are renegotiating debts. The EBX grojup had no comment.

Exit Strategy

Business magnate Eike Batista is negotiating the reduction of his equity share in MMX, the mining division of the EBX group, according to a Material Event addressed to the CVM.

In the document, signed by chief executive of MMX, Carlos Gonzalez, the company says that while negotiatiosn are underway, no documents have been signed in relation to a possible sale.

MMX has been the subject of interest by various groups, most of them especially interested in the Porto Sudeste port facility, the company’s largest project, under construction at Itaguaí (RJ). The company also owns two iron ore mines: Serra Azul, in Minas Gerais, and the other in Corumbá.

“Bigger than Manhattan,” the “superport” at Açu was designed by LLX as an industrial cluster that would house other EBX projects — MPX, OSX — as well as national and international industry — Anglo American, Wisco, Ternium, cement-makers Votorantim and the engineering concern Camargo Correa.

According to Jornal do Brasil, the state assembly of Rio is mounting a special commission on the Açu port facility.

The RIo state legislative assembly (Alerj) today — September 5 — approved the creation of a special commission to analyze the situation of the Logistical Complex of the Port of Açu, a works project situated in the city of São João da Barra, in the Norte Fluminense region. Author of the request that created the working group, Roberto Henriques (PSD) announced the intends to study the current situation of the massive project, allegedly plagued by a reduction in investments and labor disputes.

“Our work will be organized along three basic lines: We will inventory the port itself, the industrial complex, and the shipyard — the latter two of which are the focus of the crisis in which the project finds itself,” he said. The commission will have seven members and four months in which to complete its work.

Projects involving LLX, until recently commanded by Eike Batista, the Industrial Complex and the Port itself are at the center of a controversy involving a strike by workers over layoffs, which has hurt the local economy. According to LLX, however, this is a normal situation caused by the progress of the construction work, and the project remains on schedule for completion.

Operations are expected to begin this year.