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BTG Pactual Is Seeking to Sell Stake in Hospital Chain

27 November 2015

(Bloomberg Business) Grupo BTG Pactual is trying to sell its remaining stake in Brazil’s biggest hospital chain as the bank seeks to shore up its cash holdings in the wake of Chairman Andre Esteves’s arrest, said two people with knowledge of the matter.

BTG Pactual has offered a stake of about 12 percent of closely held Rede D’Or Sao Luiz SA to Carlyle Group LP, to Singaporean sovereign-wealth fund GIC Pte, and to Jorge Moll, the billionaire who controls the hospital chain with his family, the people said, asking not to be identified because the discussions aren’t public. BTG is also trying to sell other private equity investments, one of the people said.

Concerns about BTG Pactual’s funding and liquidity prompted Moody’s Investors Service and Fitch Ratings to say that they were reviewing its credit rating for a possible downgrade. BTG funds about 23 percent of its 302.8 billion-real ($79 billion) balance sheet with equity or long-term debt, leaving the rest vulnerable to changes in borrowing costs or the confidence of the bank’s lenders, counterparties and depositors.

“BTG will have to become smaller,” said Carlos Thadeu de Freitas, a former director at Brazil’s central bank. “In these times, foreign banks could benefit in Brazil. There’s more trust in them. There may be a flight for safety.”

Officials from BTG and Carlyle declined to comment on the Rede d’Or stake. GIC also declined to comment. A spokeswoman for Rede d’Or said in an e-mailed statement that the Moll family isn’t negotiating to buy BTG’s stake.

BTG has stopped making loans and is taking other steps to preserve liquidity, Persio Arida, who was named as the firm’s acting chief executive officer on Nov. 25, said in an interview with the Financial Times on Friday. A BTG official confirmed the comments reported in the FT.

BTG bought 25.6 percent of Sao Paulo-based Rede D’Or in 2010 for about 600 million reais, a person familiar with the matter said earlier this year. In May, BTG Pactual sold half of its holding in Rede D’Or to GIC for 1.6 billion reais, according to the bank. In August, BTG Pactual was in talks to sell a small stake to Carlyle, the Washington-based private-equity firm, people familiar said at the time.

Esteves, who is also BTG Pactual’s founder and controlling shareholder, was arrested on Nov. 25 in connection with Brazil’s widening probe into corruption surrounding the state-run oil company, Petroleo Brasileiro SA. The Sao Paulo-based bank’s stock has fallen 26 percent since Esteves’s arrest and the yield on its benchmark bond has climbed to more than 11 percent.

Esteves, 47, was transferred from federal police headquarters in Rio de Janeiro to a regular jail known as Bangu 8 after his lawyer’s request to have him released was denied by Supreme Court Justice Teori Zavascki late Thursday. Antonio Carlos de Almeida Castro, one of the billionaire’s defense lawyers, said by phone that nothing more can be done until Nov. 29, when the temporary arrest order for Esteves expires.

“The bank is solid and has a robust financial position,” Arida wrote in a letter to clients Friday. A bank official confirmed the statement. “We are reviewing the facts linked to the accusations against Mr. Esteves to guarantee that all the issues will be clarified as soon as possible.”