Kroton Slumps Most in Two Months as Brazil Limits Student Loans

Kroton Educacional SA, Brazil’s biggest for-profit college operator by market value, dropped the most in two months after the government limited the number of student loans available for the rest of the year.

The shares declined 5.6 percent to 12.21 reais at 12:28 p.m. in Sao Paulo, set for their biggest slide since April 27. Rival Estacio Participacoes SA fell 4.7 percent to 17.95 reais. The stocks were the worst performers on the benchmark Ibovespa after Education Minister Renato Ribeiro said that only 61,500 students will be able to get government financing in the second half of 2015, compared with 252,500 in the first six months.

The decision is part of the government’s measures to cut costs and avoid a credit rating downgrade at a time when Latin America’s largest economy is set for the worst recession in 25 years. Education companies have plunged since late December when Brazil’s Education Ministry published new rules limiting access to student loans and altering payment schedules.

“There are so many changes in those rules, and that creates a lot of uncertainty over how the regulation for universities will look like in the end,” Paulo Henrique Amantea, an analyst at brokerage firm H.H. Picchioni, said by phone from Belo Horizonte, Brazil. “Investors are moving away from those stocks, even though the companies are seen as very well-managed and education is a big need in Brazil.”

The new rules for students to apply for the subsidized student loan program, known as Fies, will be published from July 3, according to Ribeiro.