(Adds BNDES, paragraph 6)
By Guillermo Parra-Bernal and Leonardo Goy
SAO PAULO/BRASILIA, March 6 (Reuters) - Brazil’s three biggest private-sector banks want to participate in the structuring of an emergency loan to bolster the nation’s power distributors as long as borrowing costs reflect higher risks and a longer maturity, three sources with direct knowledge of the negotiations said on Friday.
Itaú Unibanco Holding SA, Banco Bradesco SA and Banco Santander Brasil SA are willing to take part in a syndicate of state and private-sector banks that would provide an additional 3.15 billion reais ($1 billion) in credit to the sector, said two of the sources, who requested anonymity because the negotiations are under way.
State-controlled Banco do Brasil SA and Caixa Econômica Federal have also shown their intentions to participate, a third source said. Representatives of the banks and the government declined to comment.
Besides the new loan, the government wants those and other lenders that participated in a similar deal a year ago to renegotiate terms by extending the repayment time through at least 2017, the sources added. The government wants maturities extended to six years from two years currently, but banks seem unreceptive to that idea, the second source added.
“Everything is possible as long as the issue of the return remains at the forefront of talks,” the first source said.
Last year, 13 banks, three of them state-owned, teamed up to lend about 18 billion reais in two portions to the ailing sector. Borrowing costs for both portions stood at 1.9 percent and 2.35 percent above the nation’s CDI interbank rate, respectively.
State development bank BNDES, which participated in last year’s loans, could join the deal to help the other banks manage their exposure to the sector, a fourth source said.
Utilities piled up large debts after a government-mandated reduction in power rates, and they had to buy electricity in the spot market to maintain supplies. Brazil is facing one of its toughest energy crises ever.
Customers will repay the utilities as tariffs rise to adjust to more-expensive power generation. The loans are intended to help the companies fund operations until the money from higher rates enter their coffers.
With reservoirs at very low levels following a three-year drought, Brazil had to resort to an expensive network of thermal power plants to secure electricity supplies lately. Energy rationing is still a possibility, although the situation has improved a bit after strong rains in February.
$1 = 3.059 Brazilian reais Additional reporting by Alonso Soto in Brasilia; editing by Alden Bentley, Lisa Von Ahn and Richard Chang