Itaú Unibanco Holding SA, Brazil's largest bank by market value, will pay Grupo BTG Pactual SA approximately $305 million for a stake in a debt collection company and a pool of non-performing loans.
Itaú said that it would pay for the 82% stake that BTG Pactual owned in Recovery do Brasil SA once the deal wins regulatory approval. Itaú also clinched the purchase of 70% of a large portfolio of bad loans managed by BTG Pactual, according to a securities filing. Recovery is Latin America’s largest debt collector, according to Reuters.
BTG Pactual is rushing to sell assets to shore up cash holdings and restore client confidence in the wake of the arrest of founder André Esteves.
The Recovery purchase was announced after a sale process that lasted approximately three weeks. Itaú placed a bid once exclusive talks between distressed asset firm Lone Star Funds and BTG Pactual expired.
BTG Pactual said the Recovery stake and the loan portfolio represented roughly 0.2% of assets. The deal doesn’t imply the assumption of Recovery's debt or give the right to tap the company's cash stash, the filing added.
Several asset sales, including pools of loans and a stake in Brazil's largest hospital chain, as well as the obtainment of a emergency credit lifeline from Brazil's deposit guarantee fund have helped allay lingering concerns of a cash crunch at BTG Pactual.
More than 23 firms reportedly had shown preliminary interest in Recovery. Recovery, based in São Paulo, is a major buyer of bad credit from Brazil's biggest financial institutions.
With unemployment soaring and inflation eroding disposable income, Brazilian households are defaulting on loans at the fastest rate in six years. Bad debt also is increasing for companies, which are succumbing to sinking sales and rising borrowing costs.