Brazil Halts Muni Market as Banks Collect $140 Mln Fees

A year after it began, Brazil’s municipal bond market has been brought to a standstill by the federal government after Credit Suisse Group AG and Bank of America Corp. provoked a backlash by collecting $140 million in fees from the first two borrowings.

The second-largest Swiss bank provided a $1.27 billion, federally guaranteed loan to the state of Minas Gerais in February and then packaged and sold the debt as securities to investors a month later at a markup of 9.2 percent, or about $116 million. Bank of America earned $24 million, or 3.6 percent, by selling $662 million of notes backed by a loan to Maranhao state last month. The profits compare with the 0.25 percent fee Brazil paid to underwriters on a $1.35 billion bond sale less than a year ago, or about $3.4 million.