Brasil Distressed, the two-year-old financial firm also known as BrD, plans to raise as much as $100 million from investors to boost purchases of distressed assets from mid-sized companies.
Carlos Catraio, partner and managing director of the Sao Paulo-based company, is on a promotional tour outside Brazil to talk about BrD+10, which was set up to raise the new funds. The company will start investing when it obtains $10 million, Catraio, 53, said in an interview.
“International players are more used to dealing with distressed assets,” said Catraio, who previously worked as a managing director at Bank of America Corp. and Uniao de Bancos Brasileiros SA. “This is an activity for qualified investors who can understand this kind of risk.”
Total credit outstanding for Brazilian companies grew about 19 percent in the year ended January, to 548 billion reais ($310 billion) from 462 billion reais, according to Brazil’s central bank. Loans with payments more than 90 days overdue increased to 20.3 billion reais from 16.6 billion reais.
“We don’t want to grow too much because we want to take a closer look at each investment we make and try to negotiate with each company,” he said. Until now, BrD has only invested capital from the company’s partners.
The goal is to obtain a yield equivalent to 200 percent to 300 percent of the Brazilian interbank rate, or about 20 percent to 30 percent a year, said BrD partner and managing director José Guilherme Lembi de Faria, 66, who previously worked as a managing director at Banco Bradesco SA before retiring. The maturity of the investment is 10 years.
BrD only buys credit at a discount of more than 50 percent of face value and after negotiations with creditors are already complete, he said. The seller usually is a bank or the company’s supplier.
“We don’t invest in distressed equity, only credit,” Lembi de Faria said.