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Brazil’s iron ore giant MMX seeks bankruptcy protection

Brazil’s iron ore giant MMX seeks bankruptcy protection

Better close your eyes, Eike…  (Image by Danilo Verpa | Folhapress)

A subsidiary of Brazil’s iron ore firm MMX Mineração e Metalicos (BVMF:MMXM3), the mining unit of former billionaire Eike Batista, became the third of his companies to file for bankruptcy protection in a year, local newspaper Globo reported (in Portuguese).

MMX said late Wednesday its subsidiary MMX Sudeste Mineracao SA, which controls the Serra Azul and Bom Sucesso ventures and is the firm’s main source of revenue, decided to request protection from creditors in a Belo Horizonte court.

“Despite the management’s efforts to negotiate with creditors and seek potential investors, the bankruptcy protection request appeared as the most adequate alternative given the company’s economic and financial situation,” MMX said in a statement, according to the Brazilian newspaper.

The petition is likely to determine whether parent MMX, the first of six start-ups that Batista listed in Sao Paulo from 2006 to 2012, can continue as a viable company.

In August Veja magazine published that MMX would seek bankruptcy protection. The next day, the company announced it was temporarily halting operations beginning Sep. 1 at its Serra Azul unit in Minas Gerais, the company’s only producing mine.

The Brazilian miner also said it is giving its 400 workers at Serra Azul a month-long paid-“collective vacation,” while it reviews its business plan to bolster cash as iron ore prices decline.

Legal issues

Batista has spent the last 18 months watching his EBX empire slowly crumble to pieces and his fortune, once the world’s eighth largest, virtually disappear. Last year his oil and gas company OGX Petróleo e Gas Participações SA (BVMF:OGXP3) filed for bankruptcy, and logistics business LLX (BMVF:LLXL3) was taken over by U.S. equity fund EIG.

The ex-magnate is also dealing with legal issues. He is due to face trial next month for alleged insider trading and market manipulation.

Aurélio Valporto, who has lead actions against Batista on behalf of the company’s minority investors, told earlier this year evidence against the country’s most famous entrepreneur was solid.

He added that regulators seemed to have ignored the “several irregularities” committed by the company’s leaders. For instance, the fact that Batista sold 56 million shares of OGX a few days before the company announced it was suspending development of its only three producing oil wells.