BTG Pactual faces rocky exit in some Esteves bets, hurting Brazil

jueves 10 de diciembre de 2015 13:23 GYT

* BTG Pactual shedding assets after founder's arrest

* Some investments may struggle as bank protects cash

* BTG Pactual is putting noncore assets up for sale

* Sete Brasil, Leader among troubling investments

By Tatiana Bautzer and Guillermo Parra-Bernal

SAO PAULO, Dec 10 (Reuters) - When Grupo BTG Pactual SA took control of apparel and home furnishing retailer Leader Participações SA about three years ago, it looked like a classic turnaround play: a threadbare chain that could be revamped to serve Brazil's burgeoning middle class.

That wager backfired when Leader's once free-spending clientele slammed their wallets shut as the South American country slid into its worst recession in 25 years. A troubled merger with rival Seller then helped sour a tense relationship with Leader's founding Gouvêa family.

The investment, one of the two dozen purchases that BTG Pactual founder André Esteves made with proprietary and client money during a half-decade of frenzied deal making, is now under threat following his alleged involvement in a corruption scandal. Esteves was arrested Nov. 25 on obstruction of justice charges related to a graft investigation surrounding state-controlled oil producer Petroleo Brasileiro SA.

BTG Pactual, which Esteves built into Latin America's No. 1 independent investment bank this decade, is quickly exiting assets and tapping emergency funding from Brazil's deposit guarantee fund as investors, fearful it will be dragged into the sweeping probe, run scared.   Continuación...