OGX penniless by 2014 triggers Batista cash hunt: Brazil credit

Rodrigo Orihuela, Boris Korby – Bloomberg, 02/25/2013

Bondholders are increasing pressure on Brazilian billionaire Eike Batista to raise outside money for his oil producer, pushing up borrowing costs to levels associated with companies on the verge of collapse.

After surging to more than 11.6 percent last week, yields on $2.56 billion of notes due 2018 issued by OGX Petroleo & Gas Participacoes SA ended Feb. 22 at 11.06 percent following a report by Sao Paulo-based newspaper Valor Economico that Batista is in talks to sell a stake in OGX to Malaysia’s state energy company. Company officials declined to comment on the report.

OGX’s cash hoard dropped 23 percent in the six months through September to 5.1 billion reais ($2.56 billion) as subpar production at its first two oil wells put output goals out of reach. Bonds of OGX, which will run out of cash in less than two years at its current burn rate, have suffered even after Batista said in October that he would pump $1 billion of his own money into the company that he founded in 2007.

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Brazil’s credit-driven consumer boom hits a limit

Howard Schneider – The Washington Post, 12/13/2012

By early November, the retailers along bustling Doze Outubro street were in full holiday mode. Balloons and streamers bedecked a newly opened branch of the Magazine Luiza department store, a deep-voiced salesman boomed offers of easy credit through a sidewalk sound system, and store banners summed up the mood of a consumption-crazy nation:

“Come, and be happy.”

For more than a decade, a credit-driven consumption boom has helped fuel economic growth here, expanding the country’s middle class and adding to the success Brazil had already enjoyed through its commodity and agricultural sales. Now, there are signs that that model is fraying, and with it the optimism that the world’s main emerging markets would become permanent props for global economic growth.

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Mantega’s `currency war’ backfires as real volatility jumps: Brazil credit

Ye Xie – Bloomberg, 10/07/2010

Brazilian Finance Minister Guido Mantega pledged Sept. 27 that he would take measures to curb the real’s volatility and limit its gains in response to a global “currency war.”

So far he’s done the opposite.

One-month implied volatility on options for the real versus the dollar, which reflects traders’ expectations of currency swings, jumped to a two-month high of 13.7 percent from 11.16 percent on Sept. 27. The increase was the biggest over such a period since May. The real advanced to a two-year high of 1.6632 per dollar this week as the swings picked up.

Mantega, 61, stepped up his attempts to stem the real’s rally on Oct. 4 when he doubled the tax on foreigners’ purchases of local fixed-income assets to 4 percent. Benchmark two-year bond yields of 11.48 percent, which compare to a record-low 0.35 rate on two-year U.S. Treasuries, helped lure a net $34.6 billion into Brazil’s bond and stock markets in the first eight months of the year, the most since the central bank began collecting the data in 1995.

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