(Adds Caixa comment on planned loan sales in paragraph 5)
By Guillermo Parra-Bernal
SAO PAULO, June 29 (Reuters) - State-controlled Caixa Econômica Federal, Brazil’s largest mortgage lender, is in the final stages of selling two pools of distressed credit to investors, three sources with direct knowledge of the plans said on Monday.
Up to 5.9 billion reais ($1.9 billion) worth of defaulted loans to consumers and small companies could be sold to investors who specialize in dealing with distressed assets, said the first source, who requested anonymity since the plans are private. The separate sales could conclude in the first two weeks of July, the source added.
Such deals allow banks to take defaulted debt off their books, giving them room to fund more loans and comply with regulators’ capital requirements.
Caixa consulted as many as five distressed debt firms, some of which have presented their offers, the first and second sources said. The firms include Paschoalotto Serviços Financeiros Ltda, Graça Participações, Grupo Recovery do Brasil SA and RCB Investimentos, they said. The firms had no comment.
“There are negotiations underway, whose value and terms have not been finalized yet with the companies interested in those assets,” Caixa said in a statement to Reuters. The bank targets the sale of 9 billion reais of bad loans this year.
Loan in arrears in Brazil rose in May to a nearly two-year high, the latest sign that companies and individuals are struggling to honor their debts as Latin America’s largest economy sags. The about 74 billion reais in defaulted debt represented 4.7 percent of outstanding loans, central bank data showed last week.
Investors in the segment expect banks to dispose of as much as 23 billion reais of soured loans this year, up from 18 billion reais in 2014. A growing number of corporate bankruptcies could help fuel growth in this market, investment bankers told Reuters.
Brasilia-based Caixa has spent the past year gaining additional know-how on how to clear defaulted loans from its balance sheet, a common practice among Brazilian lenders, the second source said. Carrying distressed assets can increase operational costs for a lender and cost it time and money.
Earlier this year, Caixa arranged the sale of about 1 billion reais in soured credit to the loan recovery unit of state-controlled lender Banco do Brasil SA. The bank began those offerings last year.
$1 = 3.1396 Brazilian reais Editing by Lisa Von Ahn