OGX files for bankruptcy protection in Rio

OGX Petroleo & Gas Participacoes SA, the oil company controlled by former billionaire Eike Batista, filed for bankruptcy protection in Rio de Janeiro Wednesday, Sergio Bermudes, Mr. Batista's lawyer, said by telephone.

The filing would put $3.6 billion of international dollar-denominated bonds into default in the largest corporate debt debacle on record in Latin America. An official at OGX's Rio press office, who isn't an authorized spokesperson, declined to comment.

The move marks the final chapter in Mr. Batista's demise as poster child for Brazilian entrepreneurialism. First the Rio businessman raised billions of dollars in equity markets to fund OGX's drilling program and other commodities startups. He then tapped debt markets, selling bonds to investors including BlackRock Inc. and Pacific Investment Management Co. When some of the deposits he'd valued at $1 trillion turned out to be duds, OGX lost 98% of its value and ran out of cash.

“He got excessive leverage, the cash flow and the value expectations of the assets didn't materialize and the market has been penalizing him with impatience,” Terence Ortslan, who has known Mr. Batista since the mid-1980s and now heads Montreal-based research firm TSO & Associates. “You have to deliver and he didn't.”

PIMCO own 12.78%, or about $600 million, of the company's bonds, according to Bloomberg data. BlackRock owns 2.72%, or about $130 million.