Reuters: Regulatory News: Cruzeiro bondholders left with "no choice" in buyback -report

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Cruzeiro bondholders left with "no choice" in buyback -report Aug 20th 2012, 20:53 Mon Aug 20, 2012 4:53pm EDT * Pimco's Posch says plan not fair to all holders * Valor says investors unhappy with bank proposal * Cruzeiro seeks approval from 90 pct of holders SAO PAULO, Aug 20 (Reuters) - Bondholders of Brazilian lender Banco Cruzeiro do Sul who stand to receive about half of their investment in a bond repurchase program are being treated in an unfair way, investors told Valor Economico newspaper on Monday. Cruzeiro do Sul was seized by Brazil's central bank on June 4 and put under the administration of privately held deposit guarantee fund FGC the same day. Under the global bond buyback plan, FGC will receive tenders until Sept. 12. The repurchase is the best solution for Cruzeiro do Sul, since it would help lower the bank's debt load and boost its allure among potential suitors, executives said last week. FGC, which offered to repurchase the bank's bonds at a 49.3 percent discount, has a mandate to find a buyer for the lender by year-end. According to Valor, law firm Bingham McCutchen held a conference call with a number of bondholders last week to draft a counterproposal to Brazil's privately held deposit guarantee fund FGC, which took over Cruzeiro in June. The buyback, which might impose $1 billion of losses among owners of the bank's global debt, is leaving bondholders with no options, Valor cited an investor as saying. Officials at FGC were not immediately available for comment on the Valor report. Brigitte Posch, a senior emerging bond manager for Pimco, the world's largest bond fund, told Valor that "the FGC left bondholders with no choice and, in some way, owners of debt notes are not being treated equally." Calls made to Posch's Frankfurt-based office seeking comment were not immediately answered. "It is important that a logic of capital restructuring is respected, that the controlling shareholders of the bank apply rules with which investors are accustomed with in international markets," Posch told the newspaper. "If the opposite happens, it will be damaging to the way Brazilian corporate debt is seen as a whole" by investors, she added. Despite the large discount, some bondholders said they might have to agree to the repurchase or else risk seeing the bank forced into liquidation - a decision that would wipe out any remaining value for their bonds. With the tender, the FGC is also seeking to rule out a government- or banking sector-led bailout of Cruzeiro, investors told Reuters last week. Link this Share this Digg this Email Reprints

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