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Bad karma

4 Dec 2015 By Antony Currie

What goes around, comes around. At least that’s what’s happening for BTG Pactual. The scandal-tainted Brazilian investment bank is in talks to sell its latest acquisition, BSI. The Swiss bank joins the list of assets on the block to shore up cash after the arrest last week of former BTG Pactual Chief Executive André Esteves.

Back in 2009, Esteves took advantage of just such a fire-sale situation, buying back Pactual from UBS which had acquired the Brazilian firm three years earlier. The Swiss bank and wealth manager was desperately raising money to cover billions of dollars of financial-crisis losses on subprime mortgages. Esteves’ $2.45 billion purchase price was 21 percent less than what UBS had paid for his firm. He had initially stayed at UBS as head of fixed income before leaving in 2008 to set up BTG, his investment company.

Until late last month, Esteves was on a roll. In 2010 he persuaded a group of global investors including Singapore’s GIC, China Investment, JC Flowers and the Ontario Teachers’ Pension Plan Board to invest $1.8 billion. He snapped up a retail bank in Brazil and a brokerage covering Chile, Peru and Colombia, and he beefed up the trading desk as higher capital requirements and other regulations forced larger international rivals to scale back.

BSI was billed as a game-changer for BTG Pactual – akin to how UBS expected its 2006 acquisition of Pactual to transform its Latin America business. The addition of the Swiss business meant that 60 percent of Esteves’ firm’s earnings would come from outside Brazil. He even managed to cut the price he paid: the cost of a BSI agreement to assuage the U.S. Department of Justice meant BTG Pactual paid 1.25 billion Swiss francs, a 17 percent discount to its original offer.

Now BSI is one of the biggest assets Esteves’ successors at BTG Pactual may be prepared to offload in order to ensure the bank doesn’t run short of cash. A sale for around 1 billion Swiss francs would rhyme neatly with Esteves’ 2009 UBS coup.


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