• Company caught up in probe into alleged fraud at pension funds
  • Police raided its offices in July in separate investigation

Bond investors in Eldorado Brasil Celulose SA can’t catch a break.

On Monday, Brazilian police raided the pulp and paper producer’s offices as part of a probe into alleged pension-fund fraud. The news sent Eldorado’s $350 million of notes to the lowest level since they were sold June 9. Police searched the company’s offices less than two months ago as part of a separate investigation into kickbacks at Brazil’s state-controlled oil producer.

Eldorado’s legal troubles have now saddled investors who bought its bonds in June with a loss of 19 percent. Brazilian police are investigating the country’s largest pension funds, saying there’s evidence of organized criminal activity among business leaders, pension-fund managers, companies that rated assets and private-equity fund managers.

“There are a lot of unknowns at this point and when in doubt, investors sell,” said Carlos Gribel, the head of fixed income at Andbanc Brokerage in Miami.

The company is part of the J&F Investimentos SA conglomerate run by the billionaire Batista family that also includes meat-producing giant JBS SA. In a statement, J&F said two of Brazil’s largest pension funds invested 550 million reais in Eldorado in 2009 and owned a stake valued at 3 billion reais ($920 million) as of December 2015.

Wesley Batista, JBS’s chief executive officer, went with police to give testimony in the investigation after the search at Eldorado’s offices, a press official said. His brother Joesley Batista, who is J&F’s CEO and JBS’s chairman, is out of the country, the official added.

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