BTG Funds Lose Half of Net Assets in Week After Esteves Arrest

  • Withdrawals have slowed to 210 million reais on Wednesday
  • Lender's bonds fell to a record of 52.6 cents on the dollar

The Chances of a Depression in Brazil

Some of Grupo BTG Pactual SA’s fixed-income funds have lost about half of their net assets in the week that followed the arrest of the firm’s billionaire founder, Andre Esteves.

Clients pulled a net 6.7 billion reais ($1.8 billion) in the week after Esteves was jailed as part of a corruption probe in Brazil, according to the latest available data compiled by Bloomberg. That represents more than half of the combined net assets of the 10 fixed-income funds listed on the bank’s website, which totaled 12.7 billion reais the day before the arrest.

Withdrawals have slowed, falling to 210 million reais on Wednesday from as much as 2.28 billion on Nov. 25, when the billionaire was detained in Rio de Janeiro. He is accused of trying to interfere with testimony from a former Petroleo Brasileiro SA executive in the so-called Carwash case, the largest-ever corruption probe in Brazil. Esteves, who has denied wrongdoing through his lawyer, stepped down from his posts at the bank on Sunday after his arrest was extended for an indefinite amount of time.

BTG’s press office declined to comment on fund withdrawals.

Partners including new co-Chief Executive Officers Marcelo Kalim and Roberto Sallouti used a share swap with Esteves to take control of the company, Sao Paulo-based BTG said in a regulatory filing Wednesday. The announcement came within hours of BTG saying it sold a stake in Rede D’Or Sao Luiz SA, Brazil’s biggest hospital chain, for 2.38 billion reais as it seeks to shore up cash.

The founder’s jailing has taken a broader toll on BTG. While the lender’s shares joined a rally in Brazilian markets on Thursday -- gaining 1 percent in the stock’s first advance since the arrest -- the company’s $1 billion of bonds due 2020 fell another 2.4 cents to a new low of 52.6 cents on the dollar.

Before it's here, it's on the Bloomberg Terminal.