SAO PAULO, Dec 8 (Reuters) - Bonds in Grupo BTG Pactual SA resumed the fall on Tuesday after Brazilian prosecutors presented formal charges against financier André Esteves for his alleged involvement in a corruption probe, casting pall over the future of Latin America’s largest independent investment bank.
Esteves, the founder and former chief executive of BTG Pactual, was arrested on Nov. 25 on suspicion of obstructing the largest graft probe in Brazil’s history. When presenting the charges late on Monday, prosecutors in the case did not say whether BTG Pactual may be investigated.
While executives at the bank and Esteves’ lawyer remain confident that the São Paulo-based lender will be spared from the sweeping investigation known in Brazil as “Operation Car Wash,” the case has rattled BTG Pactual.
A group of co-founders known as the “top seven partners” wrested control away from Esteves, after he stepped down as BTG Pactual’s chairman and chief executive last week. They are rapidly getting rid of non-essential assets other than banking, curbing new loans and dismantling massive derivatives positions to help BTG Pactual preserve cash and lure clients back.
The price on BTG Pactual’s $1 billion worth of 4 percent bonds maturing in January 2020, its most widely traded dollar note, dropped almost 2 cents on the dollar to 58.5 cents on Tuesday. At that price, the yield climbed to 19 percent from 17.5 percent the prior day.
The bond has dropped every single day but one since Esteves’ arrest.
BTG Pactual’s 8.75 percent perpetual bond was barely unchanged on Tuesday, trading at 48 cents on the dollar. At that price, yield on the bond hit 18.25 percent.
BTG Pactual is expected to announce a law firm that will conduct an internal investigation into the events that led to Esteves’ arrest, at the behest of the bank’s independent board members. Management vowed to impose “no limits” to that probe, according to a statement last Friday. (Reporting by Guillermo Parra-Bernal, editing by Louise Heavens)