Sete Brasil Lenders Said to Tap $1 Billion State-Backed Fund

  • Banks received 2.68 billion reais from naval fund last week
  • Creditors said to get remaining 1.58 billion reais soon

Sete Brasil Participacoes SA’s creditors, including Banco do Brasil SA and Itau Unibanco Holding SA, received 2.68 billion reais ($670 million) from a government-backed fund and will likely tap about 1.58 billion reais more, according to a person familiar with the matter.

Creditors withdrew the money from the fund created with government assets in 2008 after Sete Brasil couldn’t repay $3.8 billion in outstanding debt, said the person, who asked not to be identified because the matter is private. Data from Brazil’s securities regulator show the fund reported a 2.11 billion-real withdrawal on Feb. 10 and an additional 566.5 million reais on Feb. 12.

The group of six creditors will soon take out the remaining balance to cover part of Sete’s debt, the person said. The fund, which was created to guarantee lending for ship and oil-rig construction in Brazil, had assets of about 1.58 billion reais on Feb. 12, regulatory data show. By tapping the money, the banks are essentially transferring the onus of collecting the debt to the naval fund, which is operated by state-controlled lender Caixa Economica Federal, the person said.

Banco Bradesco SA, Banco Santander Brasil SA, Caixa and Brazilian workers fund FI-FGTS are among other creditors benefiting from the move. Sete Brasil had planned to build the world’s biggest deep-water drilling fleet for Petroleo Brasileiro SA before the oil giant and the rig builder were engulfed in Brazil’s biggest-ever corruption scandal.

Representatives for Itau, Bradesco, Banco do Brasil, Santander, Sete Brasil and FI-FGTS declined to comment. Caixa declined to comment saying the transaction is protected by bank secrecy.

Last month, Sete Brasil’s shareholders, including Grupo BTG Pactual and Santander, discussed a plan for the rig builder to file for bankruptcy protection, the person said. Instead, creditors agreed to renew a standstill loan for four months in exchange for being able to get access to the naval fund, according to the person.

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