Shares of OGX Petroleo (OGXPY.PK -14.2%) are plummeting on reports that OGX's beleaguered controlling shareholder, Eike Batista, will swap $3.6B in bonds for equity and give up his controlling position in the company.
OGX's $850M deal to sell a stake in its Tubarao Martelo field to Malaysian Petronas has started to crack. As the field fails to live up to expectations, Petronas is attempting to back out of the deal, a move OGX insists it "no right" to before OGX completes its restructuring.
Although the debt conversion would dilute shareholders, it may be the only option to ease OGX's cash crunch. Analysts speculate the company may run out of cash before year end because of interest payments and drilling costs.
Shares are down 32.3% this week.