Jive Investments Holding Ltd., the firm that acquired a portfolio of Lehman Brothers Holdings Inc. (LEHMQ)’s Brazil assets, plans to buy an additional 1.1 billion reais ($600 million) of distressed loans.
The new investments will include non-performing consumer debt, Alexandre Cruz, the 33-year-old founder of Sao Paulo-based Jive, said in an interview.
Personal loans with payments more than 90 days overdue in Brazil increased to 7.6 percent of the total in the year ended in February, from 5.8 percent a year earlier, according to central bank data. Delinquent corporate loans jumped to 4.1 percent from 3.6 percent. At the same time, new regulations are encouraging some banks to sell distressed assets to meet tougher capital standards.
“We are looking for more partners to increase our activity in the growing distressed credit markets in Brazil,” Cruz said.
Jive, founded in 2010, bought a portfolio of 816 million reais of Lehman assets that year in a transaction approved by the court handling the New York-based firm’s bankruptcy. The holdings include corporate non-performing loans with an outstanding principal balance of about 726 million reais and distressed assets totaling roughly 85.4 million reais originated by Lehman’s fixed-income desk.
“When we saw the Lehman portfolio we realized what a great opportunity we have,” Cruz said.
Brazil’s central bank is forcing banks to hold fewer assets outside their balance sheets, a policy that’s encouraged some lenders to sell distressed-debt holdings. In addition, a 2005 bankruptcy law has made recovering assets from debtors easier, according to Guilherme Ferreira, a partner at Jive.
“The delinquency rates have increased, but the recuperation of credit is getting quicker,” Ferreira said. “The real estate price boom in Brazil increases the value of properties, including the ones from firms under bankruptcy protection.”
Ferreira, 34, said Jive’s focus is still non-performing loans from companies with total revenue of at least 50 million reais.
“We love the old bankruptcies because their real estate properties have strong value today,” Cruz said. Jive doesn’t buy equity, but sometimes accepts shares in exchange for debt, he said.
Cruz and Ferreira first met at the Sao Paulo university known as USP, where they both studied economics and law. Ferreira had worked for four years at Lehman, where he was on the Latin America fixed-income desk in New York and then became the de facto liquidator of the firm’s Brazil operations after the firm’s bankruptcy in 2008. Cruz owns NeoIntelligence, an accounting, reporting and compliance servicer that was hired by Lehman to do back-office work when the firm tried to start its business in Brazil.
“We are both co-CEOs of Jive, although I am more a COO and Alexandre is more a chairman,” Ferreira said.
Jive’s portfolio also includes assets from Independencia SA, a Brazilian meatpacker that stopped servicing $165 million of debt in September 2010. Independencia had already missed payments on $525 million of bonds a year earlier after the global financial crisis eroded demand for beef.
Jive also bought assets from Busscar Onibus SA, a Brazilian bus maker that filed for bankruptcy protection last year and has more than 700 million reais in debt.
Graça Joint Venture
In 2011, Jive created a joint venture with Graça Participações, a Brazilian company founded in 2005 that acquires government-backed claims related to real estate called FCVS. Graça has a portfolio of almost 500 million in face value of FCVS.
Jive manages a portfolio of 1.1 billion reais in non- performing credits and plans to end June with 2.2 billion reais, Ferreira said.
Cruz said he doesn’t mind when Jive gets called a “vulture company.”
“The vulture has an important role in nature: to eat and recycle organic matter,” he said. “That is what we do with credit. We recycle the credit system, helping credit flow.”
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