Brazil Distressed-Asset Firm Shifts Partnership, Boosts TargetBy and
BrD plans to buy up to $460 million in soured debt this year
Marcio Fujita, who joined in 2016, named managing partner
Brasil Distressed, the troubled-asset buyer also known as BrD, shuffled its partnership and said it plans to step up purchases this year.
BrD aims to invest in as much as 1.5 billion reais ($460 million) in soured debt from mid-size Brazilian companies, two-thirds more than it bought last year, Carlos Catraio, a managing partner, said in an interview. The firm has purchased about 3 billion reais in debt since it was created in 2010.
In addition, BrD named Marcio Fujita a managing partner to replace Jose Guilherme Lembi de Faria, who’s left the company, according to Catraio. Fujita and Catraio together own 68 percent of BrD. The remaining 32 percent was sold to Araba Comercio de Bens e Participacoes Ltda., controlled by Portugal’s Lapa family.
Small and medium-size companies are among the most damaged by Brazil’s two-year recession, with roughly 14 percent of their loans delinquent or already restructured, according to central bank data from December, the most recent available. That’s up from about 11 percent a year earlier. Data from Serasa Experian shows that 94 mid-size companies asked for court protection from creditors this year through April, down from an all-time high of 149 in the same period of 2016.
“The crisis generates potential raw material, but it also increases the difficulty of credit recovery because fewer companies are able to survive,” Catraio said. More firms have been repaying debts in the past few months as Brazil’s economy shows signs of recovery from the downturn, the worst in the nation’s history, he said.
That’s why BrD gave up on some sectors, including companies that provide heavy machinery to the construction industry, according to Catraio.
“In this environment, like the rest of the credit market we became more cautious," said Fujita, who was named a managing partner in February, according to his LinkedIn page.
BrD’s purchases are typically in the range of 1 million reais to 30 million reais, and the company doesn’t buy retail portfolios or legal claims, Catraio said. “We have also been buying offshore debt from Brazilian debtors,” he said.
Distressed asset investors have been flocking to Brazil. Lone Star Funds, founded by billionaire John Grayken, is buying Apoema Capital Partners, a Brazilian firm that manages about 4.5 billion reais in distressed assets, a person with knowledge of the matter said in April. Canvas Capital SA, backed by Credit Suisse Group AG, is raising a fund of as much as $600 million to invest in distressed corporate assets in Brazil, people said in March.
“We might consider joining forces with an international distressed player,” said Catraio, adding that no such talks are under way yet.