BTG Pactual Shares Lose Half Their Value Since Esteves's Arrest

  • Bank's benchmark overseas bonds plunge to fresh record low
  • BTG's efforts to boost liquidity haven't soothed investors

Grupo BTG Pactual SA extended its slide since billionaire founder Andre Esteves was jailed to 52 percent as the bank’s push to bolster liquidity failed to ease investor concern that it won’t be able to withstand the crisis.

Data released late Monday showed investors picked up the pace of withdrawals from some of BTG’s fixed-income funds in recent days. Meanwhile, a U.S. affiliate of the bank was dropped as subadviser to a pair of alternative mutual funds run by Blackstone Group LP.

The rout in BTG shares and bonds shows the company is failing to assure investors that it can survive Esteves’s arrest even after he stepped down from the company’s management and the bank moved to bolster liquidity by selling assets and securing a credit line from Brazil’s deposit-guarantee fund. Esteves, who has denied wrongdoing, is accused of trying to interfere with testimony from a former Petroleo Brasileiro SA executive in a sweeping corruption probe that has upended the country’s politics and businesses.

"The bank has made big, big efforts to shore up liquidity and assure its clients that it is solid enough to withstand the current crisis," Rafael Elias, the head of emerging-market strategy at Cantor Fitzgerald in New York, said by e-mail. "It really doesn’t get any more prudent and proactive than that, which unfortunately signals the fact that the issue may lie beyond the new management’s latitude to handle the situation."

Shares lost 15 percent Tuesday to a new low of 14.95 reais as of 3:57 p.m. in Sao Paulo. The bank’s $1 billion of bonds due 2020 slumped 9 cents on the dollar to a record 50.9 cents, down from about 90 cents the day before Esteves was jailed Nov. 25. The billionaire stepped down from his posts at the bank Nov. 29 after his arrest was extended for an indefinite amount of time.

Brasil Pharma SA, the pharmacy operator it controls, sank 19 percent Tuesday has lost 58 percent of stock-market value in the span. Commercial bank Banco Pan SA dropped 11 percent since the arrest, while real-estate developer BR Properties fell 30 percent.

Investors pulled 882 million reais ($216 million) Thursday and Friday from the 10 fixed-income funds listed on BTG’s website, according to the latest available data compiled by Bloomberg. Clients have taken out a net 7.6 billion reais from the funds since the arrest, about 60 percent of net assets.

Caetano de Vasconcellos, the legal director of Brazil’s deposit-guarantee fund known as FGC, said that BTG’s shares are falling because the bank will shrink in size. The fund announced last week that it approved a credit line to BTG of as much as 6 billion reais, which "guarantees liquidity,” Vasconcellos told reporters in Sao Paulo.

BTG Pactual Asset Management US LLC “will no longer serve as a subadviser” to the Blackstone Alternative Multi-Manager and Multi-Strategy Funds effective Dec. 15, according to a notice Blackstone filed Monday with the U.S. Securities and Exchange Commission. The U.S. unit provided strategies based on global macroeconomic themes, according to regulatory filings. Its assets will be reallocated to the funds’ other subadvisers.

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