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Brazil: BTG enters retail lending market

Takes controlling stake in troubled lender PanAmericano; Investment expected to be treated as private equity

In February, BTG Pactual, the Brazilian independent investment bank, acquired a controlling stake in Banco PanAmericano, the country’s largest provider of used-car loans, which is at the centre of one of the biggest scandals to hit Brazil’s asset management industry.

BTG, which is controlled by Andre Esteves, Brazil’s youngest self-made billionaire, is not paying any cash for the 38% stake – which includes 51% of voting rights – but will assume R$3.8 billion ($2.3 billion) of debt to cover the bank’s losses, according to the federal deposit insurance fund.

By taking over the 17.5-year debt with the deposit fund, BTG is paying the equivalent of R$450 million as measured in net present value terms. Caixa Econômica Federal, the state-owned federal savings bank, which has been running the lender since the central bank bailed it out in November, will have a 36.6% stake. Final approval of the deal is expected shortly from the central bank.

BTG acquired its stake from Grupo Silvio Santos, the holding company of Silvio Santos, an 80-year-old better known in Brazil for hosting a Sunday TV chat show.

Fourth business line

Until now, BTG has specialized in investment banking, asset management and wealth management but, following the deal, will add a fourth business line of distributing retail banking products and credit.

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