LatinFinance - September/October 2013 - 64

after oGX’s debt situation become clearer.
in early September, Batista agreed to pay
$100 million of a $1 billion put option, and
the rest as necessary. it was unclear if he
could provide the sum, given the collapse in
his own wealth.
Ratings have dropped and oGX’s dollar
bonds traded at 20% of face value in early
September. analysts were expecting a
restructuring offer, though it was unclear
what form this would take. Some of the

question is whether they will be able to
survive and get some of these assets up
and running. it’s going to be a very tight six
months.”
oGX needs the cash if it is to continue
developing the tubarão martelo field in the
hopes of ultimately extracting oil. analysts
expect a restructuring might include an
exchange of debt for equity; it will most
likely involve a big haircut.
Historically, Brazilian restructurings

holders of the $3.6 billion outstanding in
2018 and 2022 bonds had organized and
hired cleary Gottlieb, Pinheiro neto and
Rothschild. Blackstone has been advising
oGX on restructuring options. no official
offer from oGX had been made by midSeptember, and both sides declined to
comment.
“the issue is that oGX is just running
out of money,” says Daniel Kastholm,
managing director at fitch Ratings. “the

Brazil Stars Index

Taking stock

Quantifying the softer aspects of a business is never easy — but
when done right, it can be highly rewarding.
the performance of the m&e LatinFinance Brazil Stars index
bears this out: the index has consistently outperformed almost
all of Brazil’s other benchmarks over the past three years. only
the Novo Mercado index has matched it — both have returned
34% over the period, according to data from management &
excellence (m&e).
the performance of the Brazil Stars index puts it in another
category entirely from the country’s largest index, the iBovespa —
although it hardly seems fair to compare it with an index that has
seen its methodology change in reaction to its poor performance
over the past three years.
Still, the Brazil Stars index has outperformed the Dow
Jones Sustainability index, which has returned 13% over the
same period, as well as Bovespa’s itaG index (11%), corporate
Governance index iGc (8%) and iGct Governance index (3%),
according to m&e data.
the components of the Brazil Stars index are weighted
according to management value: well-managed companies count
more. the goal is to quantify management processes within a
firm — such as corporate governance and compliance with best
practice — that are difficult to measure, but which have clear
implications for a company’s revenue and profits.
the index takes into consideration four aspects of a company’s
operations to calculate management values, which are displayed
for the first time in the accompanying table.
compliance, good practice and governance make up one area.
the company’s strategy is another — that brings in elements
including product development plans and risk management.
Historical performance data and ratios are also incorporated. a
risk scoring takes into account the volatility of the indicators, and
is subtracted from the overall score. the end number, in effect,
represents the human management value of the company.
the management scores are multiplied by the market
capitalization of each company to determine their weightings.
Recalculated on a monthly basis only, the index is made up of
16 components. it has benefited particularly from the exclusion

64 l atinfina nce.com - September/October 2013

of Petrobras, a stock that has dragged down valuations in the rest
of Brazil. the inclusion of amBev has also had a positive effect on
the index’s performance.
mid-cap stocks, among the best-performing Brazilian shares in
recent years, could be included next in the index. the inclusion of
a broad number of mid-cap companies have helped the iGc novo
mercado’s performance. Some of the larger mid-cap companies
are already under consideration, with the idea of incorporating
some in the next six to 12 months. LF

Financials on top
Brazil Stars management value ranking
Management
value rank

Company

Management
value (BRL, m)

M&E rating

1

Itaú Unibanco

127,818

AA+

2

Bradesco

102,532

A+

3

Bicbanco

983

4

BM&F

17,202

BB

5

Natura

14,008

BB

6

Fibria

9,512

B

7

CPFL Energia

13,810

B

8

Cemig

14,017

B-

9

A

Pão de Açúcar

17,983

CCC+

10

Embraer

9,668

CCC+
CCC

11

BRF Brasil Foods

28,245

12

TIM Participações

13,268

CCC

13

Vale

103,959

CCC

14

Braskem

6,764

CC

15

AmBev

153,422

CC-

16

Ultrapar

16,901

Source: Management & Exellence

C
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LatinFinance - September/October 2013

Table of Contents for the Digital Edition of LatinFinance - September/October 2013
