Cerberus Eyes Brazil Deals as Slumping Economy Creates Bargains

Cerberus Capital Management LP, the investment firm with about $25 billion under management, is eying a first acquisition in Brazil at a time the slumping domestic economy creates buying opportunities.

New York-based Cerberus is signing an agreement with Brazilian distress advisers RK Partners to find assets to invest in Latin America’s largest economy, Cerberus spokesman Chip Smith said in a statement to Bloomberg. The firm is interested in possible investments across all industries, it said.

“There will be a window of opportunity in Brazil for a minimum of three years for investments in distressed assets,” Cerberus said in the statement. “The recession is driving those opportunities, and has created situations in which strong companies need financial and operational assistance.”

The Brazilian economy is heading to its biggest contraction since 1990 with the central bank boosting borrowing costs to reign in inflation and the government slashing spending to cut the fiscal deficit. A wide-ranging corruption scandal has shaken the construction and energy industries, with some builders filing for bankruptcy protection amid a credit squeeze and lower commodities prices.

Some of the potential investments “are able to move quickly” after Cerberus has been monitoring Brazil for several years, the firm said, without giving a specific timing.

“They are hiring us to originate and analyze deals for them here in Brazil,” Ricardo Knoepfelmacher, founding partner of Sao Paulo-based RK, said. “They know Brazil is not for beginners.”

Knoepfelmacher, 49, has helped reorganize more than $15 billion in debt from some of Eike Batista’s ventures after previously working on the restructuring of Brasil Telecom, he said in an interview. The company is currently advising Galvao Engenharia SA and Estaleiro Atlantico Sul SA, he said.

“Brazil is going through a very special moment; it’s a moment of economic retraction, a moment when companies are without credit,” Knoepfelmacher said. “Brazil is today a country with a lot of opportunities.”

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