--Managers hoping troubled bank can be sold by Sept. 12
--Without a buyer, Cruzeiro do Sul will be liquidated
--Cruzeiro do Sul bank under intervention since June
By Luciana Magalhaes
SAO PAULO--Representatives of several banks have accessed a
special data room for information about Cruzeiro do Sul (CZRS4.BR)
put together in hopes that one of them will buy the troubled
Brazilian bank, according to a person close to Brazil's Deposit
Insurance Fund, or FGC, currently responsible for the bank's
management.
The fund is hopeful it will be able to find a buyer for the
distressed bank by Sept. 12, but doesn't rule out the possibility
the attempt will fail, said the person, who wished not to be named.
In that case, Banco Cruzeiro do Sul will be liquidated.
Cruzeiro do Sul, a relatively big player in Brazil's
payroll-lending market, was seized by Brazilian authorities in
June, after they detected persistent irregularities. In an audit,
the FGC found Cruzeiro do Sul had a shortfall of BRL2.24 billion
($1.1 billion) in net assets.
Last week, the FGC sent letters to 20 different business groups
offering to sell Cruzeiro do Sul. Any interested group must show it
has minimum shareholder equity of BRL2.5 billion and authorization
to operate in Brazil. Groups must also show a willingness to
capitalize the bank by up to BRL800 million as well as assuming the
bank's debts.
According to the person with knowledge of the FGC's actions, the
list included prominent Brazilian banks such as Banco do Brasil
(BBAS3.BR), Itau-Unibanco (ITUB, ITUB4.BR), an Itau joint-venture
called Itau BMG Consignado, Bradesco (BBD, BBDC4.BR) and BTG
Pactual (BBTG11.BR) as well as international institutions such as
Santander (SAN). Some mid-sized Brazilian banks, such as BIC,
Panamericano (BPNM4.BR) and Banco Daycoval (DAYC4.BR), also
received letters.
All those banks declined to comment for this article or weren't
immediately available for comments.
The FGC is hopeful it will be able to capture the interest not
only of banks that already do business in the payroll-deductible
loan segment, looking to expand their portfolios, but also
newcomers. "Any of the banks which match the criteria and operate
in the retail banking segment in Brazil could be a potential
buyer," the person said. No offer has yet been made, the person
added.
The FGC, however, is hopeful offers will be forthcoming closer
to the Sept. 12 deadline. The FGC doesn't plan to reveal the names
of the potential candidates, in case the tender offer fails. "But
if the offer is successful, the FGC will likely be very
transparent," the person added.
Before the announcement of the tender offer, the fund held
discussions with Brazilian investment bank BTG Pactual, according
to local reports. "They [BTG Pactual] wanted several guarantees, as
Cruzeiro do Sul was still a black box," said the person familiar
with the FGC negotiations. At the end of May, BTG said in a note to
the market only that it was "constantly evaluating opportunities,"
in a response to a report by Brazil's newspaper Valor Economico
about its potential interest in Cruzeiro do Sul.
BTG Pactual declined to comment for this article.
Other large private-sector Brazilian banks are also seen as
possible candidates. Giant Itau Unibanco, for instance, reinforced
its presence in payroll lending last month in a joint venture with
smaller Banco BMG.
Low-risk loans linked to payroll deductions grew fast in Brazil
in the last decade or so. In the early days, it was mainly a
business for smaller banks but, due to tough competition and
funding limitations, larger financial institutions are now taking
the lead in the segment.
Cruzeiro do Sul had about a 5% market share in payroll lending
in Brazil. The bank still has close to 500 agreements with
municipalities and other public institutions which could be
attractive to an eventual buyer, according to the person familiar
with the situation.
But challenges to Cruzeiro do Sul's future aren't small
considering that many of the bank's bondholders are unhappy with
the terms of a recent tender offer, which might cut short FGC's
attempt to sell the troubled bank.
Write to Luciana Magalhaes at luciana.magalhaes@dowjones.com
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