April 4, 2017 / 5:48 PM / a year ago

UPDATE 1-Brazil's BNDES to share guarantees on bank infrastructure loans

(Recasts with co-guarantor role, adds quotes, background)

By Bruno Federowski

SAO PAULO, April 4 (Reuters) - Brazil’s state development bank BNDES will assume a role in guaranteeing infrastructure loans by allowing other lenders access to collateral from borrowers, its chief executive said on Tuesday, in the bank’s latest move to boost private sector participation in such funding.

Talks with public and private banks are at an advanced stage and an announcement could come as soon as next week, BNDES CEO Maria Silvia Bastos Marques told an investment conference sponsored by Banco Bradesco BBI.

“We are trying to act in a way that is complementary to the private sector,” she said. “For instance, if the consortium of private banks agrees to extend guarantees covering at least 40 percent of the project, we’ll agree to cross-sharing.”

She added that the state development bank and the World Bank are discussing a mechanism to reinforce guarantees on local notes issued to finance infrastructure projects.

BNDES is also studying the possibility of acting as a direct guarantor, she said.

Since she took the helm of BNDES 10 months ago, Bastos has sought to transform the state lender, which for years has incurred sharp losses on cheap loans to handpicked local groups, into a leaner, more efficient lender.

Last week, the development bank said it would introduce a new benchmark lending rate pegged to yields on inflation-linked bonds. That would replace a previous rate set on a quarterly basis by Brazil’s top economic policy body.

Bastos said the bank intends to eliminate the spread between the new rate and so-called NTN-B bond yields after a five-year transition, effectively making it equivalent to the government’s funding costs.

During 13 years of left-wing Workers Party administrations that ended last year, BNDES handed out heavily subsidized credit at a steep cost to taxpayers, backed by repeated capital injections by Brazil’s National Treasury.

Bastos said there was “no possibility” that the Treasury Department would step in once again. BNDES is eyeing a potential return to the market this year, she added. (Reporting by Bruno Federowski; Editing by Daniel Flynn and Richard Chang)

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