CORRECTED-LATAM WRAP-BTG bonds tailspin on CEO's arrest

miércoles 25 de noviembre de 2015 15:07 GYT

(Corrects day to Wednesday in 1st, 5th, 10th paragraphs)

By Paul Kilby

NEW YORK, Nov 25 (IFR) - Bonds issued by BTG Pactual were leading the Brazilian bond complex lower on Wednesday following news of the arrest of the bank's CEO and a ruling party senator.

The bank's recently issued perp bond suffered a 20 point collapse to hit 70-74, while the senior 2020s fell a good 16 points to trade at 72.00-75.00.

BTG Pactual's CEO Andre Esteves was seen as one of the wunderkinds of Brazil's boom years, and his arrest as part of the corruption investigation at oil company Petrobras is seen having broad implications for what is now the country's largest investment bank.

"This is a bank that relies on wholesale funding and it is really dependent on perception," said a New York based investor. "Their cost of funding will increase substantially, and best case scenario their profits will go lower. Its magic touch has gone."

While the bank itself has not been accused of wrongdoing, Moody's said Wednesday that the prolonged absence of Esteves could be credit negative for the bank.

The rating agency, nevertheless, underscored BTG's access to liquidity and its track record in managing market risks.

"Notwithstanding its dependence on market funds, the bank can count on a large pool of liquid resources," said Alcir Freitas, senior bank analyst at Moody's, which has a negative outlook on the bank's Baa3 rating.   Continuación...