Mubadala Development Co survived the collapse of Brazil’s most famous former billionaire, thanks in part to Burger King shares.
The Abu Dhabi sovereign wealth fund got a stake in Restaurant Brands International Inc from Eike Batista in 2013 for $300mn during the first phase of a multibillion-dollar restructuring that it only completed last week, said Oscar Fahlgren, the head of Mubadala’s office in Rio de Janeiro. The stake in Oakville, Ontario-based Restaurant Brands, the owner of Burger King, has more than doubled to $715mn since acquiring it from Batista, he said.
Mubadala invested in Batista’s holding company in early 2012 when the commodities boom spurred demand for his startups in oil, mining and logistics, making him Brazil’s richest man. Later that year disastrous results at Batista’s first oil wells prompted a run on his publicly-traded companies, and in early 2013 Mubadala started negotiating a way to recover its investment, Fahlgren said. Efforts to reach Batista through his lawyers were unsuccessful.
During the next three years Mubadala used the conditions attached to its “preferred equity” investment to recover assets from Batista at a time he was grappling with bankruptcies, investor lawsuits and probes from Brazil’s securities regulator.
In total, Mubadala estimates its legacy Batista assets, including the Restaurant Brands shares, at $2.3bn, more than they invested in Batista during his heyday, Fahlgren said. The figure includes $300mn in cash Mubadala got from Batista during the early phases of the restructuring.
“We’re comfortable where we’ve ended up, and do not regret having made our investment,” Fahlgren said from the fifth floor of the Leblon Executive Tower in Rio de Janeiro, one of the assets it acquired from Batista in exchange for debt. “If you had asked us in May or June of 2013, you would have gotten a different answer.”
Mubadala took over a gold mine in Colombia that it now values at $400mn, royalty bonds linked to an iron-ore port that is now a joint venture with Trafigura Beheer BV, and other assets including commercial real estate in Rio where Mubadala recently opened its first office outside of Abu Dhabi. The final property it took from Eike was the Hotel Gloria in downtown Rio that it values at $25mn.
Mubadala’s original investment was for preferred equity in EBX, Batista’s holding company, which had terms including leverage restrictions and personal guarantees from Batista.
That made it easier for the fund to negotiate than the bond and stockholders who were wiped out in the downfall of Batista’s commodities empire, Fahlgren said.
Mubadala is now open to investing in businesses related to the Sudeste port and other former Batista assets it has in Brazil, despite a crippling recession and political turmoil caused by a sprawling corruption probe and an impeachment process against President Dilma Rousseff.
“This downturn is very severe, but it’s not uncommon in emerging markets,” Fahlgren said. “We’re deploying capital into Brazil at a time when most foreign people are not. We’re creating jobs and growing the assets, and we will continue to do so.”