Six Lessons From Blowing $30 Billion in Brazil

Brazil's OGX Petroleo & Gas Participacoes SA, the flawed jewel of ex-billionaire Eike Batista's EBX conglomerate, is one step closer to bankruptcy after missing a $45 million dollar debt payment that was due yesterday. If OGX goes under, its largest U.S. creditors, Pacific Investment Management Co. and BlackRock Inc., stand to lose millions in Latin America's largest corporate default. Batista's salesmanship and Brazil's growth boom drew investors to his over-hyped companies. The warning signs they missed offer precious investing lessons.

1. Avoid companies no one understands. Batista's EBX is a head-scratching maze of 13 interconnected startup companies, and only six of them are publicly listed. For instance, OGX was the main client of shipbuilding unit OSX Brasil SA. OSX in turn leased space from Batista's port operator LLX Logistica, another sister company. As one company ran into trouble the others did as well. Even Batista's employees couldn't figure out the corporate puzzle. A company spokesman once confessed to having trouble keeping up with the new companies Batista created.