(Bloomberg) — Brazilian billionaire Eike Batista is being asked by advisers to consider shutting down OSX Brasil SA’s shipbuilding business and sell production platforms to raise cash, said a person with direct knowledge of the proposal.
Selling assets would allow the company to close the shipyard, which is still under construction, pay creditors and possibly leave some cash for shareholders, according to the person, who asked not to be named because the discussion is private and a final decision hasn’t been made.
The plan would help Batista reduce debt after his flagship company, oil producer OGX Petroleo & Gas Participacoes SA, said this week it may halt its only oil-producing field, the person said. Batista’s wealth slumped by $1.1 billion yesterday to $2.9 billion, from $12.4 billion at the beginning of the year as the value of his shareholdings plunged, according to the Bloomberg Billionaires Index.
Batista’s holding company, EBX Group Co., referred questions to OSX’s press office. OSX said in an e-mail it has no plans to close the shipyard. OSX is analyzing business alternatives in Brazil and elsewhere for the OSX-2 platform and OSX-1 will be used at the Tubarao Azul field until sister company and client OGX decides on a new allocation for it.
OSX started building the shipyard at Acu port in southeastern Brazil in July 2011, saying last month that it was slowing work there after losing a contract to build 11 ships. Under the original plan, Rio de Janeiro-based OSX expected to have it ready in the second quarter of 2014. The vessels the company owns are being made in shipyards in Singapore.
The shipbuilding company’s shares tumbled 88 percent this year as OGX failed to meet targets. This week, OGX scrapped offshore projects and canceled tentative orders for the OSX-4 and OSX-5 platforms and for three so-called wellhead platforms, which are used to extract oil from offshore oil fields.
OSX was created by Batista primarily to supply platforms and vessels to OGX.
Following this week’s announcements, the oil producer will pay $449 million compensation to OSX, which also stands to benefit from OGX’s commitment to continue paying rental fees on its equipment despite the production failures.
OSX dollar bonds due 2015, which are backed by the OSX-3 platform, were little changed at 85 cents at 10:05 a.m. in Sao Paulo.
– Francisco Marcelino and Rodrigo Orihuela, Copyright 2013 Bloomberg.