Eike Batista: The downfall of a $30 billion tycoon

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Batista vies for biggest loser as $34 billion vanishes
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It was May of 2011, and the setting was the Michael Milken conference in California.

Although investor skepticism was starting to rise even then, Eike Batista, worth roughly $30 billion at the time, was still his usual, confident self. He was going to be richer than Carlos Slim , Warren Buffet and Bill Gates , he told CNBC at the time, because "I have created five companies that have in them embedded resources worth $2 trillion at a very low cost of producing." He went on to call them "idiot-proof assets."

Fast-forward to today. Those assets are valued a lot closer to zero than $2 trillion. One of his five companies, oil and gas driller OGX-the cornerstone of his short-lived mining, energy and shipping empire-is expected to file for bankruptcy any day. And he's essentially held a yard sale for his other holdings, all in an effort to find cash.

Batista once compared his oil fields, located off the coast of Brazil in the Campos Basin, to those of Saudi Arabia. But today, OGX produces not a single barrel of oil. Four out of five fields are abandoned, after oil production there turned out to be dramatically below expectations.

(Read more: How a Brazilian tycoon lost $25 billion )

"Higher than anticipated geological complexity" is the reason for the production failure, according to a recent report from Moody's, which rates the company's debt as junk.

Those who lent Batista money or invested alongside him are some of the biggest names in corporate America and the investing world-General Electric (GE), BlackRock (BLK), Pimco , Loomis Sayles, Lord Abbot, the Ontario Teachers' Pension Fund.

GE invested $300 million with Batista in May of 2012 only to write down the investment a little more than a year later. Considering the number of oil-drilling products and services the company's sold to OGX over the years, often announced with splashy press releases, it's possible that GE could end up in the long line of creditors hoping to get paid back.

According to Morningstar data, Pimco, Blackrock and Lord Abbot are some of the largest holders of OGX bonds that are on the verge of default. Those three companies, along with Loomis Sayles, Ashmore, Spinaker and GSO, have hired legal firm Cleary Gotlieb and banking firm Rothschild to represent them in trying to negotiate a debt restructuring with OGX. Despite days of meetings this past week in Brazil, those negotiations so far have come to nothing. Blackstone & Lazard are representing OGX.

OGX bonds fell in value at a breath-taking pace. They were issued in the last two years and yet now are trading between 7-12 cents on the dollar. Many of the current holders, according to people familiar with the situation, bought at face value.

(Read more: Where now for Brazil after rates hiked for fifth month? )

None of the firms mentioned above replied to CNBC's requests for comment.

In May of 2011, OGX borrowed $2.56 billion with a coupon of 8.5 percent. The unsecured bonds were due to mature in 2018. Less than a year later, as OGX's offshore struggles mounted, the company went back to the capital markets for even more-borrowing $1.063 billion with a coupon payment of 8.375 percent, also unsecured, and set to mature in 2022.

OGX missed an interest payment on the latter on Oct 1, setting in motion the road to a potential bankruptcy filing. Batista's 30-day grace period expires at midnight on Halloween, Oct. 31.

One last hope for Batista & OGX could be a lone field called Martelo. Batista is racing to bring it online in hopes of having a commercially viable well there as early as next month. It's the key reason he may file for bankruptcy as soon as this weekend. According to sources familiar with the situation, suppliers and contractors have stopped providing services to OGX for fear they won't get paid.

If a company sells a service or piece of equipment before a bankruptcy filing, it falls into the list of "pre-petition creditors" and has to fight for the financial scraps along with everyone else. However, once the company has filed for bankruptcy, a judge can order that contractors be paid first in order for the company to keep functioning at its core mission-making it easier to pay back creditors.

-By CNBC's Michelle Caruso-Cabrera. Follow her @MCaruso_Cabrera .



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