SAO PAULO, Brazil â€" The investment firm Jive Investments Holding Ltd., which acquired some of Lehman Brothers Brazilian assets in 2010, is raising a new $100 million distressed debt fund focused on nonperforming corporate loans, according to people briefed on the firm’s plans.
Jive, which is based in Sao Paulo, expects to close the offshore fund this year, possibly as early as the end of May, said these people, who spoke on the condition of anonymity because they were not authorized to discuss the plans. A Jive representative declined to comment.
The new fund is distinct from the distressed real estate funds that Jive already runs. Its structure is also expected to be more traditional, with Jive acting as the general partner and the largely foreign investors as limited partners. The firm is in advanced discussions with United States and British backers, one person said.
The move is likely to jump-start a still nascent market. Brazil has few sellers of distressed assets, especially nonperforming corporate loans. While foreign banks, in particular Citigroup and Banco Santander Brasil, have led the way, Brazil’s highly liquid banks have so far not felt pressure to follow suit.
Still, KPMG estimates sales of loan portfolios in Brazil are $10 billion to $20 billion a year. In addition to Jive, big players in the market here include Discovery, owned by BTG Pactual, and RCB Investimentos.
Jive was started in 2010 by Alexandre Cruz. who at the time was running NeoIntelligence, a Brazilian accounting and business process outsourcing firm with mostly United States clients. When some of them closed their Brazilian operations, he started buying their overdue account receivables.
The firm then acquired 816.1 million reais, or $480 million, in assets from Lehman Brothers in 2010 out of its bankruptcy proceedings. That portfolio included nonperforming corporate loans with an outstanding principal balance of 726 million reais, or $427 million, from 211 companies, according to court documents. Jive paid 27 million reais, or $15.9 million, for those assets, according to the documents.
Brazil’s economy was soaring then, so many here were more willing to settle debts, which helped Jive make out nicely, though the precise return has not been disclosed.
That performance won it admirers among foreign investors. One person praised the firm’s track record, saying “the Lehman assets really turned out well for them.â€
Jive subsequently continued to acquire nonperforming loans and now owns unpaid loans with a face value of 3.1 billion reais, about half of them corporate.
Current economic conditions could present Jive and other firms with a greater opportunity.
Although economic growth is lagging in Brazil, credit continues to expand. The size of the country’s credit portfolio reached 2.733 trillion reais in February, a 14.7 percent increase compared with figures in the month a year earlier, according to a central bank report in March. That, combined with an expected increase in consumer and corporate defaults, could make banks more concerned about their increasing capital requirements and press them to sell nonperforming loans.
Jive appears to be anticipating such a scenario.
Still, credit may tighten in the short term in Brazil. The central bank this week raised its benchmark rate once again, to 11 percent. But that is not expected to continue.
Tony Volpon, an analyst at Nomura Securities, wrote in a research note that the bank’s “post-meeting communiqué brought language changes that strongly signal that the current tightening cycle is near its end.â€
