UPDATE 1-BTG Pactual scrambles to contain Esteves arrest fallout

miércoles 25 de noviembre de 2015 18:16 GYT

(Adds details on BTG's dealings with Petrobras)

By Guillermo Parra-Bernal, Tatiana Bautzer and Aluísio Alves

SAO PAULO Nov 25 (Reuters) - Brazil's Grupo BTG Pactual SA scrambled to contain fallout from the arrest of its billionaire boss on Wednesday, tapping cash reserves to cover client redemptions and announcing a stock buyback to prop up plunging shares.

The moves highlighted investors' concerns whether Latin America's largest independent investment bank can thrive without savvy founder André Esteves, Brazil's most influential dealmaker.

Clients withdrew funds equivalent to less than 1 percent of assets under management at BTG Pactual, according to a source with knowledge of the bank's strategy. The bank had to tap around 5 percent of its roughly 40 billion reais ($10.7 billion) in cash reserves to cover those redemptions, the source said.

The arrest of Esteves, who is chairman, chief executive and the controlling shareholder of BTG Pactual, sent shares plunging as much as 39 percent and prompted the central bank to issue a statement saying it was monitoring developments. BTG Pactual has robust liquidity indicators, the central bank said.

Ratings agency Moody's Investors Service warned the credit rating of BTG Pactual could be at risk if Esteves' absence from the helm is prolonged.

Bond prices slid sharply, raising BTG Pactual's cost of funding and underlining investors' view that the bank's fortunes are heavily dependent on Esteves' dealmaking skills, including his ability to sell investments and renegotiate loans to clients. The bank's shares ended the day down 21 percent.

"Esteves is a key manager at BTG and a prolonged absence could be credit negative for the bank," said Alcir Freitas, a senior bank analyst at Moody's Investors Service in São Paulo.   Continuación...