Brazilian tycoon Eike Batista's OGX oil firm on Wednesday filed for bankruptcy protection in Rio to avert default after debt-restructuring talks with creditors failed.
The headquarters of Brazilian oil firm OGX, seen with its windows broken by protestors, in downtown Rio de Janeiro on October 1, 2013
"The company filed its request for bankruptcy protection this afternoon," said a court spokeswoman.
The move had widely been anticipated by market analysts, after the Rio-based company announced Tuesday it had failed to reach agreement with its creditors.
Credit rating agency Moody's said that with OGX's debts of up to $5.4 billion, it would be the biggest bankruptcy protection process in Latin America since 1990.
Four weeks ago, OGX, once the jewel in the crown of Batista's flagging EBX empire, opted to forego a $44.5 million interest payment to its international creditors, precipitating the current crisis.
If bankruptcy protection is approved, all of OGX's legal actions and debts will be suspended for 180 days.
The company has 60 days to present a restructuring plan while creditors have 30 days to come forward and then hold an assembly to vote on whether to accept the plan. The process can last six months.
Thursday, a 30-day deadline was set to expire for OGX to take necessary measures before its $3.8 billion debt matures.
In December, the company is also supposed to pay interest on $110 million in notes due in 2018.
At the opening bell on the Sao Paulo bourse Wednesday, OGX shares tumbled 17.39 percent to a record low of $0.09 and later in the day plummeted 26 percent.
Bankruptcy protection means the immediate suspension of OGX shares trading on the Sao Paulo stock exchange.
According to its own data, OGX owes around $3.8 billion to its international creditors and banks.
But Brazilian press reports put the figure at $5.4 billion in view of other commitments with suppliers and clients.
At their peak in November 2010, the shares traded at more than $10.5 and the OGX's market capitalization reached $34 billion against less than $340 million currently.
OGX's current assets are valued at nearly $2.7 billion.
Batista's recent market woes had cut an estimated $30 billion of value from his empire, and the man who until earlier this year was purportedly the world's seventh richest man is now believed to be worth less than $900 million.
OGX's troubles began in the middle of last year when it announced that its oil production would be a quarter of what it had promised.
A year later it suspended development at three offshore oil fields not deemed commercially viable and said it may shut down its Tubarao Azul deep-water oil field off the Brazilian coast.
OGX has been the worst-hit in the Batista group, forcing him to seek new investment to keep its oil projects afloat.
Earlier this month, the company reeled from more bad news when the US, Dallas-based petroleum consulting firm Golyer and MacNaughton cut by a little over a third the estimated reserves in OGX's Tubarao Martelo field, which was Batista's best hopes of luring fresh investment.
OGX was in talks to sell a 40 percent stake in Tubarao Martelo to Malaysian energy giant Petronas, but according to press reports Petronas turned down the deal.
OGX said these talks would continue as part of its debt-restructuring plan.
Batista's EBX has interests in oil, energy, mining, logistics, coal mining and offshore industries, but the conglomerate has reeled as Brazil's once-sizzling economic growth has slowed.
In a related development, CCX, one of the companies in Batista's EBX empire said the embattled tycoon sold his coal mines in Colombia to Turkish firm Yildirim Holding for $450 million.
CCX announced late Tuesday that it had reached a deal to sell open-sky mining projects in Canaverales and Papayal to the Turkish company for $50 million.
Yildirim also agreed to buy the San Juan underground mining project, which includes logistics such as railway lines and ports, for $400 million.
All these projects are based in the northern Colombian province of Guajira.
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