OGX, the Brazilian oil and gas company controlled by the billionaire tycoon Eike Batista, has filed for bankruptcy protection in a Rio de Janeiro court.
The move came after talks with creditors to restructure some of its $5.1bn (£3.2bn) debt failed on Tuesday.
Robert Plummer Business reporter, BBC News
In recent years, Eike Batista became the international media’s poster-boy for Brazilian economic growth. Interview after interview hailed his success in the mining, oil and gas sectors.
At his height in 2011, he was the richest man in Brazil and the eighth-richest in the world, with a net worth of $30bn. But his career has turned out to be a classic case of over-reach.
The turning point came when his flagship oil and gas company, OGX, suffered a rapid decline in its share price last year.
The firm had gone public in 2008 at the height of the oil boom and swiftly became overvalued. But it soon transpired that its production targets were hopelessly over-optimistic.
The company, run by Mr Batista, a colorful former speedboat racer, has struggled with large debt and a crisis in investor confidence.
It is believed to be Brazil’s biggest corporate bankruptcy.
The failure of OGX is seen as a significant chapter in the demise of the vast business empire controlled by Mr Batista, which also includes steel, mining, infrastructure and property companies.
Mr Batista, a well-known business figure in Brazil, was a key player in Brazil’s successful bid to host the 2016 Rio Olympics, once boasted of ambitions to become the world’s richest man.
His personal fortune was estimated by Forbes magazine at $30bn in 2012, but analysts suggest that troubles at OGX have all but wiped out his wealth.
Some critics say his business tracks that of Brazil itself, a country which has long been expected to deliver riches, but has consistently failed to move convincingly beyond the developing market stage.
Mr Batista’s downfall comes at a time when analysts are starting to question Brazil’s overall economic direction, largely as a result of perceived policy mistakes by the current President, Dilma Rousseff.
One fault the two have in common, analysts say, is an excessive reliance on commodities, thus making them vulnerable to the current downward global price trends.
The country, one of the Brics group that defines those nations with the most promising opportunities for investors, recorded growth of 7.5% in 2010, but last year grew by just under 1%.
Cassia Pontes, an oil industry analyst with the Rio-based Lopes Filho consulting firm, said: “The entire thing [OGX] has had a really negative impact on Brazil’s image and reinforces the need for stronger corporate governance in this country.
“Reality didn’t live up to the exaggerated expectations created by Batista.”
OGX has 60 days to present a restructuring plan.
Its investors, who collectively hold $3.6bn in debt, will then have six months to accept or reject the plan – if they do not accept the company will be liquidated.
The company has suffered poor output from its oil fields in Brazil, which has led to a loss of confidence among investors and creditors.
There were signs of trouble earlier in October when OGX missed a $44.5m interest payment owed to bondholders.
Analysts say the business model was based on securing loans to be paid back with oil that had not yet been produced.