15-Sep-14 - 16:04
Banco BVA unsecured creditor repayment unlikely - liquidator
Proprietary
Story:
Creditors of Banco BVA, the mid-sized Brazilian bank under central bank liquidation, are
facing additional time to be repaid after the bank filed for bankruptcy on 11 September in a
Sao Paulo federal court, according to several lawyers. As there are insufficient assets
compared to the liabilities, there is very little possibility of repayment for unsecured
creditors, said Valder Viana de Carvalho, BVA’s liquidator, or central bank-appointed official
overseeing the liquidation process.
Due to the bank’s situation, the possibility of unsecured creditors being repaid is remote,
Carvalho said. “There are not enough assets to pay unsecured debts due to the fact that
the assets are insufficient to pay even the creditors with priority,” the petition said.
According to the petition filed in a Sao Paulo court last week, BVA’s total liabilities were
BRL 6.43bn (USD 2.75bn), of which BRL 3.64bn were classified as unsecured credits on 19
June, the bank’s last balance sheet. The total assets, however, totaled BRL 1.47bn on the
same date.
“The assets are not enough to repay even 30% of the liabilities,” Carvalho said, adding that
all the credits the bank has to receive from loans are classified as distressed. “The current
situation does not permit even an extrajudicial liquidation.”
According to the petition, “irregularities committed by former managers, always in
synchrony with controllers, led the BVA to irreversible insolvency.” The document, signed
by Carvalho and Joao Carlos Silveira, the lawyer who is representing Banco BVA, included
a creditors’ list in order to try to move the court process along more quickly.
“The real value of the assets is the big question because the bank has credits that are
difficult to be valued and, consequently, provisioned,” said Carvalho. “In a bank liquidation
case, it is common for a borrower classified as low risk to not pay on time.”
In Brazil, bank insolvency processes must be filed as an extrajudicial restructuring, and an
official from the central bank is nominated to manage the bank.
According to Brazilian law, the liquidator can request the bankruptcy when the “assets are
not enough to cover at least half the value of unsecured claims, or when there are
substantial indications of bankruptcy crimes.”
The problem is the judiciary has many cases to analyze, so the decision to file for
bankruptcy will slow the process, said Marcelo Godke, partner at Godke Silva & Rocha, a
law firm which is representing certain BVA creditors. “The Brazilian Central Bank was
already liquidating BVA and now the judge will have to analyze everything related to the
case.”
The bankruptcy request shows this is the last measure to be taken in the process, and it is
clear there are not enough assets to repay all the creditors, or even the ones with priority,
said Alexandre Gontijo, associate at Siqueira Castro Advogados, representing two creditors
in the case. “A bankruptcy process always takes more time and is more bureaucratic than a
liquidation process,” said Gontijo, explaining that in a liquidation case the liquidator has the
chance to negotiate with creditors, but the same does not happen in a bankruptcy.
Gontijo saw the bankruptcy request as a surprise. “It seemed the bank had enough assets,”
he said, noting that the Credit Guarantee Fund known as FGC had injected money into the
bank.
In Brazil, the FCG guarantees BRL 250,000 for each individual with savings deposits, real
estate letters, and other types of assets, in the case of intervention, extrajudicial liquidation
or bankruptcy of a financial institution. In the case of BVA, however, this was done under an
old rule which guaranteed only BRL 70,000.
Bankruptcy brings transparency
The Brazilian Central Bank intervened in Banco BVA in 19 October 2012, and the monetary
authority ordered the bank’s liquidation on 19 July 2013, after failing to reach an agreement
with Antonio Carlos Alberto de Oliveira, owner of car dealership chain CAOA, as reported.
On 21 March 2013, Oliveira made a tender offer to buy Banco BVA’s outstanding USD 45m
9.125% senior unsecured bonds due 2014 as part of an effort to acquire the bankrupt bank.
However, CAOA withdrew the offer after it failed to persuade enough investors and
creditors to accept the proposal, as reported.
“The creditors at the end of the creditor’s list, the ones with no guarantees, will not come
close to seeing the money,” said Danielle Cupello, lawyer at DCupello Advogados, a law
firm that represents the Brazilian Association of Banco BVA’s Creditors, which was
established in November 2013.
For Cupello, the good news is the fact that a bankruptcy process will likely have more
transparency because every step has to be communicated to creditors. “It will also be
possible to advance the purchase of the former managers as there is a strong evidence of
fraud,” the lawyer said.
According to Guilherme Ferreira, partner at Jive Investment, an investment advisory
company focused on the distressed credit market in Brazil and Latin America, every credit
with reasonable liquidity has already sold. “The remaining are distressed debts and real
estate assets,” he said. Last year, Jive bought BRL 160m in receivables from defaulted
credits that were granted to bank customers. The bankruptcy request does not change
anything from Jive’s perspective, Ferreira said.
The judge now must decide to accept or not the bankruptcy request. If accepted, the judge
will appoint a judicial manager, who may be the current liquidator, to the case.
by Lucy Monteiro
Source:
Debtwire Proprietary
Intel. Grade:
Confirmed
Intelligence ID:
1876659