Buyers Line up for Cruzeiro

At least 20 banks have been qualified to submit proposals for the purchase of Banco Cruzeiro do Sul’s assets, according to a person familiar with the sale, though any deal is contingent upon a minimum 90% acceptance of an exchange offer expiring September 12. Eligible buyers are Brazilian banks with at least BRL2.5bn ($1.24bn) in assets and able to inject some BRL800m in to Cruzeiro, which was revealed to have a BRL2.24bn shortfall due to fraud. The Fundo Garantidor de Credito (FGC) administering Cruziero launched last week a tender seeking to buy back $1.58bn in six series of the lender’s dollar bonds at about 49% of face value, hoping to lure subordinated and senior debt holders faced with the alternative of liquidation and a likely recovery rate of close to zero. The FCG is offering $560 cash per $1,000 principal for Cruzeiro’s 8.00% 2012 bonds. It is also offering $510 per $1,000 for its 7.00% 2013, 7.625% 2014 and 8.50% 2015 and 8.250% 2016 bonds. Holders of the 8.875% subordinated bonds receive $260 per $1,000. Those accepting before an August 28 early deadline receive an extra $50 per $1,000. Acceptance of the offer is far from assured. “The general tone is not very positive and it looks like bondholders are going to be treated unfairly,” says an investor following the situation. Bank of America Merrill Lynch and HSBC are managing the offer. The 2020 bonds traded at 22 in price Tuesday, according to a trader. BTG Pactual had previously been rumored to be in discussions to buy the bank. Brazil’s central bank seized Cruzeiro in June after finding “unsubstantiated asset items,” and the bank has been under the temporary administration of the FGC during the fraud investigation and process of seeking a sale.