Fitch Rates BTG Pactual Holding 'BBB-' and BTG Investments 'BB+'

  Fitch Rates BTG Pactual Holding 'BBB-' and BTG Investments 'BB+'

Business Wire

SAO PAULO & RIO DE JANEIRO -- April 3, 2013

Fitch Ratings has assigned the following ratings:

BTG Pactual Holding S.A. (BTGH):

--Long-term Foreign and Local Currency Issuer Default Ratings (IDRs) 'BBB-';
Outlook Stable;

--Short-term Foreign and Local Currency IDRs 'F3';

--Support Rating '5';

--Long-term National Rating 'AA(bra)'; Outlook Stable;

--Short-term National Rating 'F1+(bra)'.

BTG Investments LP (BTGI)

--Long-term Foreign and Local Currency IDRs 'BB+'; Outlook Stable;

--Support Rating '2';

--Senior Guaranteed Notes 'BBB-(EXP)'.

KEY RATINGS DRIVERS: BTGH

BTGH's long- and short-term IDR's and National Scale Ratings are equalized to
those of its sole operating subsidiary, Banco BTG Pactual S.A.'s (BTG Pactual,
IDR 'BBB-'/Outlook Stable). BTGH is a pure holding company and directly
controls 71.9% of BTG Pactual. The equalization of the ratings is based on the
high correlation between the probability of default for BTGH and the bank.
Both are incorporated in the same jurisdiction, being overseen by Brazilian
authorities. Double leverage (equity investments in subsidiaries and BHC
intangibles / equity) is low at 101% in December 2012, and liquidity risk
management is centralized at the bank. BTGH's Support rating and Support
rating floors are being assigned at '5' and 'NF', in view of BTGH's nature as
a holding company, indicating that, although possible, external support cannot
be relied upon.

KEY RATING DRIVERS: BTGI

BTGI's long-term IDR rating reflects its role as an integral BTG Pactual group
and the implicit support BTGI receives from BTGH. According to Fitch's
criteria BTGI is deemed as a core part of BTG Pactual Group. Despite its
evident links with the group (franchise, common management, relevance of its
revenue stream and completely aligned business model); BTGI is not a direct
subsidiary of BTGH; hence, its rating its notched once from the rating of
BTGH, the primary source of support to the entity. The current Support Rating
of '2' is based on Fitch's assumption of support from BTGH it should be
required, which is based on the previously stated considerations about its
integration with the BTG Group and BTGH.

In spite of being a separate entity from its sister company, Banco BTG Pactual
S.A. (Foreign currency IDR of 'BBB-'; Outlook Stable), BTGI shows the same
ownership structure after the group's 2012 IPO where the floating portion of
the shares of the bank and BTGI were sold as staples shares and are listed
accordingly. The bank's asset management division is the investment manager
for BTGI's proprietary trading and private equity investments, which result in
the use of the same rigorous risk management measures and methodologies
adopted by the bank.

BTGI concentrates the bulk of the Principal Investment business and the group
plans to concentrate all of this business under BTGI. The company's plan is to
raise debt from several different sources in order to gradually transfer all
of the group's proprietary trading activity to BTGI. Despite the planned debt
issuances and third party funding, financial debt leverage should remain
inferior to 1.0x; almost zero as of today. At end 2012, BTGI's equity base is
relatively ample and unencumbered (14.5% of its total assets while total
liabilities to equity stand at 5.9x). According to the forecast of the company
total liabilities to equity may increase to 8.0x after the completion of the
aforementioned issuances and fund raising.

BTGI's financial profile benefits from the performance of its proprietary
investments, which are largely composed of liquid financial instruments, low
debt service charges and a very nimble operating structure outsourced to its
sister bank. In the next two years the size of the balance sheet will increase
due to the transfer of some of the proprietary trading portfolio in the bank
to BTGI, which will be funded with medium-term debt. BTGI's policies call for
the use of financial debt to finance proprietary trading activities and not
long-term investments. The lack of recurrent and predictable fee income and
the volatility of its proprietary trading and long-term (private equity like)
investments, require a heavy utilization of the balance sheet while future
earnings projections are deemed volatile in nature.

BTGI's merchant banking investments are carried out through private equity
funds and joint-ventures. In December 2012, total commitment undrawn was
approximately R$1,759 million, which should be disbursed mostly over the next
24 months (up to eight years) through investments in private equity funds and
the joint-ventures. The investment portfolio consists on a diversified group
of portfolio companies primarily located in Brazil with a view to divestment
within four to 10 years.

During 2012, BTGI's performance benefited from its proprietary trading funds
gains, which increased 133.1%, due to higher gains from fixed income products
in Brazil, which benefited from the easing cycle of Brazilian interest rates
and gains from investment in equities in 2012, primarily driven from the
increase of BM&FBovespa index during this period. Also, the sale of an
indirect interest in a company in the oil and gas industry resulted in a
non-recurrent gain that benefited the company's net income. As expected,
operating revenues may be volatile and concentrated in nature as is similar to
other companies focused on this business niche.

Fitch has also assigned BTGI upcoming issuance of senior guaranteed notes an
expected rating of 'BBB-(EXP)'. The notes will be fully and irrevocable
guaranteed by BTGH and hence, the rating of the notes is equalized to the
rating of the guarantor. The assignment of the final rating is subject to
final documentation conforming to that already received by Fitch.

The issuance will have a maturity of five years, and the amount of the notes
and the interest rate will be set at the time of the issuance. Interest
payments will be made semi-annually until maturity. The principal and interest
amounts will be settled in U.S. dollars (USD).

RATING SENSITIVITIES: BTGH

Changes on the rating of BTG Pactual may lead to changes on BTGH's ratings.
Also, an increase of its double leverage ratio above 120% or a deterioration
of its debt service metrics may result in a downgrade of BTGH's ratings.

BTGH, incorporated in June 2009, is the holding which controls BTG Pactual
with 71.9% of the total capital (82.51% of the voting capital). The balance is
held by foreign investors (13.3%, such as JC Flowers and sovereign funds from
China, Singapore and Abu Dhabi, among others), further to floating shares
(14.8%). BTGH is controlled (28.84% of the total capital and 57.12% of the
voting capital) by Andre Esteves, with the remainder divided among 165 BTG
Pactual executives.

RATING SENSITIVITIES: BTGI

Changes on the rating of BTG Pactual or BTGH may lead to changes on BTGI's
ratings. A material deterioration of BTGI's financial profile where sustained
losses and/or a significant increase of its leverage may hinder the overall
financial profile of BTG Group, may trigger a rating downgrade.

BTGH and BTGI Profile

BTGH, incorporated in June 2009, is the holding which controls BTG Pactual
with 71.9% of the total capital (82.51% of the voting capital). The balance is
held by foreign investors (13.3%, such as JC Flowers and sovereign funds from
China, Singapore and Abu Dhabi, among others), further to floating shares
(14.8%). BTGH is controlled (28.84% of the total capital and 57.12% of the
voting capital) by Andre Esteves, with the remainder divided among 165 BTG
Pactual executives.

BTGI is an investment vehicle and a sister company to Banco BTG Pactual and an
integral part of BTG Pactual group. BTGI carries part of the group's
proprietary trading investments and its merchant banking investments, which
include both private equity funds and co-investment through joint ventures.
Since 2011, it has no operating activities or employees, its investments are
managed by the bank's asset management unit,

BTG Pactual Group is one of the largest merchant banking groups in Brazil and
Latin America, focused on treasury activities (proprietary and for clients),
third party asset management, corporate finance (mergers and acquisitions,
finance consulting, etc), private banking and capital markets (fixed and
variable income issuances).

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Investment Manager and Alternative Funds Criteria' (Dec. 23, 2011);

--'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696673

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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Contact:

Fitch Ratings
Primary Analyst for BTG Pactual Holding S.A. and Secondary Analyst for BTGI
Pedro Gomes
Director
+55-11 4504-2604
Fitch Ratings Brasil Ltda.
Alameda Santos, 700 - 7th floor - Sao Paulo - SP - CEP: 01418-100
or
Primary Analyst for BTGI and Secondary Analyst for BTG Pactual Holding S.A.
Eduardo Ribas
Senior Analyst
+55-11-4504-2213
or
Committee Chairperson
Franklin Santarelli
Managing Director
+1-212-908-0739
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com