Brasil Pharma Posts Record Decline on Loss, Covenant Breach

Brasil Pharma SA, the drug chain controlled by billionaire Andre Esteves’s Banco BTG Pactual SA, sank the most on record after reporting an unexpected quarterly loss and saying it breached covenants on local bonds.

The stock tumbled 11 percent to 3.89 reais at the close of trading in Sao Paulo, the biggest one-day drop since the company went public in 2011. It was the worst performer on the BM&FBovespa Small Cap index, which climbed 2 percent.

Brasil Pharma posted an adjusted net loss of 368 million reais ($163 million) while analysts surveyed by Bloomberg had predicted the company would report adjusted net income of 19.5 million reais. The company said in its earnings statement that it breached covenants on 549.8 million reais in local bonds.

“Brasil Pharma may require additional equity to improve its capital structure,” Ricardo Boiati and Pedro Bueno, analysts at Banco Bradesco SA’s brokerage unit, wrote in a research note to clients. Earnings were “very disappointing,” the analysts said.

Brasil Pharma’s net debt was 3.3 times earnings before interest, taxes, depreciation and amortization, or Ebitda, in the fourth quarter, above the 3 percent limit agreed upon with holders of local bonds, according to the statement. The company said a breach in covenants for two consecutive quarters would trigger an acceleration of debt payments.

To contact the reporter on this story: Ney Hayashi in Sao Paulo at

To contact the editors responsible for this story: Brendan Walsh at Dennis Fitzgerald

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