Banco Cruzeiro do Sul SA, the Brazilian lender downgraded by Moody’s Investors Service last month because of funding difficulties, agreed to acquire control of Banco Prosper SA for 55 million reais ($30 million).
Cruzeiro do Sul will acquire 88.7 percent of Prosper’s capital, according to a regulatory filing yesterday. The deal needs approval from Brazil’s central bank.
“We need to raise Prosper’s capital by at least 100 million reais to comply with Basel rules and to let Prosper operate,” Fausto Guimaraes, Cruzeiro’s superintendent of investor relations for the Sao Paulo-based company, said today in a conference call. “Cruzeiro do Sul will boost Prosper’s capital once the acquisition is approved by the central bank.”
Brazilian small- and mid-size banks such as Cruzeiro do Sul and Prosper are facing a funding squeeze because of Europe’s debt crisis and the bailout of Banco Panamericano SA in November 2010. Moody’s cut Cruzeiro do Sul’s credit rating to Ba3, three levels below investment grade, on Nov. 18, citing “increasing competition” and the lender’s reliance on “higher-cost guaranteed deposits and on expensive foreign funding.”
Brazil’s central bank changed liquidity rules Dec. 23 to entice big lenders to purchase loan portfolios from smaller banks. The monetary authority said it would allow banks to use part of their required reserves to purchase credit portfolios and bonds, known as letras financeiras, from lenders whose capital doesn’t exceed 2.2 billion reais.
Cruzeiro do Sul dollar-denominated bonds due in 2020 were unchanged at 10:51 a.m. New York time with yields at 19.39 percent.