BTG Looks To Restore Credibility By Selling Off Assets

Selling the assets could improve BTG’s net worth by 20 billion reais ($5 billion).

On November 25, Brazilian billionaire André Esteves, who co-founded Latin America’s largest independent investment bank, BTG Pactual, was arrested by police. Esteves, a darling of Brazilian financial markets, is alleged to have been part of an escape plan for Nestor Cerveró, a former Petrobras executive convicted of corruption and money laundering. He is also suspected of paying $2.6 million in bribes to former Brazilian president and now senator Fernando Collor de Mello for allegedly obstructing an investigation into corruption allegations at Brazilian oil giant Petrobras. Esteves has since resigned as CEO and chairman of the bank in order to limit the fallout his arrest was having on the bank’s operations.

He was recently released from jail by the Brazilian Supreme Court but remains under house arrest. In an effort to calm investors, BTG appointed respected economist and head of its asset management arm, Persio Arida, as interim CEO. Arida is looking to sell off assets in 11 firms and financial institutions in order to restore its financial position and regain credibility. Selling the assets could improve BTG’s net worth by 20 billion reais ($5 billion).

A 12% stake in Rede D’Or São Luiz, the largest private hospital operator in Brazil, has already been sold to Singapore’s sovereign wealth fund, CIG, for $406 million.

The bank included in its sale list of assets financial institutions like BSI, a private wealth manager in Switzerland; Spanish water treatment company Aigües de Barcelona; and Brazil’s Banco Pan and BR Properties. The arrest of Esteves has also deepened the financial crisis of BTG-owned retail companies BR Pharma and retailer Lojas Leader.

Beyond the asset sale negotiations, BTG received a $1.5 billion credit line from FGC, Brazil’s credit guarantee fund.

BTG’s board has started an independent investigation into the accusations against Esteves. Brazil’s central bank is seeking more information from the attorney general on the bank’s suspected activities in order to perform its own investigation. “We do not see any systemic impact,” Murilo Portugal, executive president of the Brazilian Federation of Banks (Febraban), declared in December. “BTG has acted quickly in terms of governance and liquidity.”

Esteves is watching his assets evaporate: The FI Multimercado Credito Privado Valbuena Investimento no Exterior fund, in which he is the main investor, recently lost $71.6 million in two weeks.