BTG sweeps in for PanAmericano stake, working with CEF on funding, platform

Tuesday, February 1, 2011

Brazilian investment bank BTG Pactual looks set to enter the retail banking game via a 450mn-real (US$270mn) investment to buy out the 51% of voting shares, or 37.6% of overall ownership, in troubled lender Banco PanAmericano that the Silvio Santos group held.

Federal savings bank Caixa Econômica Federal (CEF) bought a 49% voting and 36.6% overall stake in PanAmericano in December 2009 for 739mn reais, showing the decline in value of the bank since the revelation in November 2010 of faulty accounting on billions of reais worth of loan book sales.

BTG will partner with CEF on operational aspects of the new management arrangement, a statement from the investment bank said, pointing to an agreement that keeps CEF holding its ownership stake in the bank, buying loans from PanAmericano and working together on distribution platforms.

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Once BTG's deal with the Silvio Santos group clears, it will go after a tender offer to minority shareholders of 4.89 reais per share, lower than the 5.22 reais seen at the close of business on Tuesday, up 23% from the previous close and much below the 8.27 reais per share paid by CEF in December 2009.


While many analysts were impressed by the deal, Mariana Taddeo of Link Investimentos also noted that risks remain for PanAmericano operationally, given that local press reports have put possible losses at the bank from its allegedly fraudulent accounting at nearly 4bn reais.

Moreover, official 3Q10 financial statements are still not out - they were promised by end-January - and 4Q10 earnings are still to be released, the analyst noted.

Moody's, for its part, issued a statement keeping PanAmericano on review for possible downgrade.

"Moody's noted that the sale of control reduces uncertainties about the future of the bank and its ownership structure and appears to address PanAmericano's immediate capital deficiencies," the statement read. "However, the conclusion of the review is dependent on the assessment of its capitalization and earnings performance, both of which are critical elements to assessing PanAmericano's financial strength and which are still uncertain at this point."