BTG Pactual faces rocky exit in some Esteves bets, hurting Brazil

SAO PAULO, Dec 10 When Grupo BTG Pactual SA took control of apparel and home furnishing retailer Leader Participações SA about three years ago, it looked like a classic turnaround play: a threadbare chain that could be revamped to serve Brazil’s burgeoning middle class.

 

Of all BTG Pactual’s investments, the most painful is Sete Brasil.

Hailed by President Dilma Rousseff as the cornerstone of her industrial policies, Sete Brasil was Esteves’ boldest deal – a green field project to supply as many as 28 rigs for Petrobras once valued at $80 billion.

Sete Brasil’s collapse would be devastating not only for banks and pension funds that backed the project, but for dozens of shipbuilders and manufacturers supplying the company. More than 800,000 jobs could be destroyed, said a source involved in the company’s turnaround plan.

Executives at Petrobras oppose terms of the Sete Brasil contract, and have remained at loggerheads with BTG Pactual and lenders over the issue for months. Sete Brasil, however, cannot wait any longer.

Both Petrobras and state development bank BNDES abandoned the project as the corruption probe swelled, leaving Sete Brasil moribund. BNDES reneged on prior commitments to refinance $3.8 billion in debt, forcing BTG Pactual to write off the value of the investment, a source added. Petrobras declined to comment.

While conceding that Sete Brasil had flaws, Esteves told Reuters in April that, in proprietary investments, “you win and you lose all the time. We’ve done well many times, but we did stupid things too.”
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