NEW YORK - Brazil and a steering committee of its commercial creditor banks have agreed to reduce the amount of collateral needed to underpin a huge debt accord signed last year.
A statement issued by the bank advisory committee, which is headed by Citicorp, said that the collateral requirements had been reduced to $2.8 billion from $3.2 billion and that all of Brazil's creditors had been advised of the change.
According to the statement, Brazilian Finance Minister Fernando Henrique Cardoso said the cut was being made because the stock of debt to be treated is less than originally estimated.
Banking sources said the restructuring, initially estimated to cover $40 billion of debt, actually covers $35 billion, according to Brazilian calculations.
Because of the change in the amount of collateral, creditor banks now have the right to reallocate by Sept. 9 the bond options they have chosen under the financing plan, the statement said.
However, they must still keep their choices within the government's guidelines of no more than 40% par bonds, and no less than 35% discount bonds.
Analysts of the Latin American debt market expected Brazil to seek a reduction in the amount of collateral.
Some speculated, however, that this was because Brazil appears to be having problems reaching a stand-by agreement with the International Monetary Fund.
Mr. Cardoso has said in Brazil that the government may be unable to clinch an IMF accord in time for the November closing of its agreement with private creditor banks and he asked for special consideration from the monetary fund.
A large part of the $2.8 billion in collateral is supposed to be funded by the IMF and other multilateral lending agencies.