Is There Any Value In OGX’s Shares?

Eike Batista’s spectacular fall from the billionaire’s list is not the only outcome from the fall of his energy and infrastructure Brazilian empire. The shares of his flagship oil company OGX Petroleo e Gas Participacoes (OGXPY), which have fallen more than 95% year-to-date, have made investors across the world lose billions.

The problem is simple: The company has an outstanding debt of more than $3.6 billion, which is substantially more than the value of all the company’s assets. As a matter of fact, Credit Suisse’s analysts estimate the value of OGX’s assets to be around $1.9 billion. That said, a successful restructuring of OGX’s debt could leave some value left for currently existing shareholders.

Exercising an Outstanding Put Option

If OGX does exercise the $1.0 billion put option it has against its biggest shareholder, the company could gain time to re-negotiate its debt in order to get better conditions for the rest of its current owners. Out of the $1 billion, $100 million would be injected immediately and the remaining $900 million as the company needs it.

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