Banco Cruzeiro do Sul SA, the Brazilian bank seized by regulators, failed to win the required 90 percent investor approval by today’s first deadline for a $1.6 billion bond-buyback plan, a person with direct knowledge of the matter said.
The bank is confident it will gain the approval needed by Sept. 12, the final day that investors can tender their bonds, the person said, asking not to be identified because the announcement isn’t yet public. Investors who tendered through today will be paid a premium of 5 percentage points if the buyback happens, and the bank must now seek approval from more bondholders without the incentive of a premium.
Brazil’s deposit-insurance fund, known as the FGC, has overseen the Sao Paulo-based payroll lender since the central bank uncovered accounting violations in June. It offered on Aug. 15 to buy back the bonds at discounted prices as part of a recapitalization plan. At least 90 percent of bondholders must accept the offer for it to proceed. Cruzeiro will be liquidated if the offer fails, Antonio Carlos Bueno, head of the FGC, said at an Aug. 14 press conference.
The average discount that Cruzeiro’s local and international creditors are being asked to accept is 49 percent, according to the FGC. Bank of America Corp. and HSBC Holdings Plc are arranging the bond-repurchase offer. Cruzeiro declined to comment, according to an official who asked not to be named.