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* OGX may swap debt for stock, Folha de S. Paulo reports
* Debt swap would dilute investors, end Batista control
* Batista leaves LLX board
By Jeb Blount and Guillermo Parra-Bernal
RIO DE JANEIRO, Aug 28 (Reuters) - Shares of Brazilian oil company OGX SA fell 17 percent on Wednesday after more signs emerged that its beleaguered controlling shareholder, Eike Batista, was not only losing control of the company but most of his empire.
The local Folha de S.Paulo newspaper said on Wednesday that Batista planned to swap $3.6 billion in OGX Petróleo e Gás Participações bonds for shares, while giving up his controlling stake.
Batista also on Wednesday resigned his seat on the board of port operator LLX Logística SA.
Shares of OGX had already plunged nearly 15 percent on Tuesday, when the company was forced to abandon nine oil exploration blocks and cracks in an $850 million deal to sell a stake in its Tubarão Martelo block to the Malaysian state oil company Petronas started to appear.
Batista had already left the board of MPX Energia SA , a power company, which is now controlled by German utility E.ON SE.
Batista, who was ranked No. 7 on Forbes magazine’s list of billionaires last year, has seen his fortune shrink by more than $25 billion over the past 18 months.
After falling as much as 22 percent in early trading on Wednesday, OGX trimmed losses to close down 17.4 percent at 57 centavos, a three-week low.
OGX released a statement late on Wednesday in an apparent effort to calm markets, saying that Petronas had “no right to delay closing” the deal until after the completion of the Brazilian company’s debt restructuring plan.
OGX needs the cash from the sale to keep drilling for oil and stay current on about $3.6 billion of bonds.
The bonds-for-shares swap, as reported by the Folha, would not only remove Batista from control but also reduce existing shareholders’ stakes in the oil company, once Brazil’s second-biggest by market value.
“An operation like this would dilute the existing shareholders base,” said Felipe Rocha, stock analyst at Omar Camargo Corretora, a Curitiba, Brazil brokerage.
Much of the market value of the companies in Batista’s empire, which were once worth as much as $60 billion, has evaporated over the past year after they suffered from project delays, mounting debt and dwindling confidence.
Prices on OGX’s 2018 and 2022 bonds have tumbled more than 80 percent this year alone, making them the worst-performing emerging-market bonds in the period, according to Thomson Reuters data. The bonds fell after OGX’s first oil field failed to meet output expectations, reducing the revenue needed for planned expansion and to pay debt.
Credit agencies consider OGX bonds at high risk of default.
Expectation of debt-for-stock swap comes after a dozen investment funds formed a creditors’ committee and picked investment bank Rothschild to advise on a potential debt restructuring.
OGX recently hired Blackstone Group LP to help the ailing oil producer review its capital structure.
Batista will be replaced as chairman of port operator LLX by Roberto D‘Araújo Senna, who was already in his second term as a board member, according to a securities filing.
Batista’s departure from LLX comes after Washington D.C.-based EIG Global Energy Partners agreed on Aug. 14 to invest 1.3 billion reais ($548 million) in it, providing enough cash to help finish the company’s Port of Açu north of Rio de Janeiro.
After rising as much as 3.66 percent in early trading in São Paulo on Wednesday, LLX stock reversed gains to fall 2.44 percent to 1.60 reais, its lowest close in a week. ($1 = 2.37 Brazilian reais) (Reporting by Guillermo Parra-Bernal and Roberto Villas Boas; Additional reporting by Algerto Alerigi Jr.; Writing by Jeb Blount and Reese Ewing; Editing by Matthew Lewis and Stephen Coates)