Eike Batista, ranked as the world’s eighth-richest person last year, ceased to be a billionaire after Mubadala Development Co. converted an investment in his companies into debt, further eroding the value of his assets.

Batista’s EBX Group Co. owes US$1.5-billion to Mubadala after the Abu Dhabi sovereign-wealth fund restructured a US$2-billion investment, said three people with knowledge of the deal. The fund no longer has equity in EBX, which paid back US$500-million after renegotiating earlier this month, said two of the people, asking not to be named because terms are private.

Batista had already amassed at least US$2-billion in personal liabilities, meaning the 56-year-old entrepreneur now has a net worth of about US$200-million, according to the Bloomberg Billionaires Index. After peaking at US$34.5-billion when the transaction with Mubadala was announced in March last year, Batista’s fortune has evaporated as missed production and reserve targets at his flagship oil company OGX Petroleo & Gas Participacoes SA spurred selling of his group’s securities.

“His loss of credibility is explained by not delivering on the results promised when he listed his companies,” Elad Revi, an investment analyst at Spinelli SA, said by telephone today from Sao Paulo. “There was a chain reaction: he lost credibility in one, then he lost it in all of them.”

Loss Protection

As recently as last year, Batista had vowed to become the world’s richest man, and said in an interview with Bloomberg News that he exemplified a new “Brazilian dream” of entrepreneurial success. His decline comes as Brazil’s economic growth falters, with gross domestic product expected to expand by less than 3% for a third straight year. With inflation running faster than 6%, Brazil’s benchmark Ibovespa index is the world’s second-worst performing major stock gauge in 2013, declining 27% in dollar terms.

Batista’s OGX is down 87% this year, leading declines on the Ibovespa. By converting its investment to debt, Mubadala will be shielded from equity losses. General Electric Co., which bought a US$300-million stake in EBX last year, said earlier this month that it had written down its investment.

OGX rose 5.4% to 59 centavos at 10:21 a.m. in Sao Paulo Friday. The company’s US$2.56-billion of bonds due in 2018 are trading at 22 cents on the dollar, tumbling from 98.1 cents in January in the world’s worst corporate bond performance.

As a creditor, Mubadala will have priority over shareholders in the reshaping of the group as the former billionaire seeks to sell assets, trim projects and reduce debt. Batista’s five publicly traded companies had combined total debt of 19 billion reais at the end of the first quarter, data compiled by Bloomberg show.

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