UBS Brokers in Puerto Rico Create Headache for the Bank

Over the years, Puerto Rico has attracted the very wealthy, who come for the postcard-perfect beaches and the promise of a tax-free life.

Many of them shelter their millions in local municipal bond funds, which have been hit hard of late as the island struggles with a weak economy, rising interest rates and outsize debt loads. For the Swiss banking giant UBS, which boasts that it manages money for half of the island’s millionaires â€" roughly $10 billion â€" the downturn has created a particularly nasty headache.

The bank’s clients had piled into highly leveraged bond funds run by UBS and were encouraged by its brokers to borrow even more money to invest in those funds. In some cases, money was lent improperly, exacerbating current losses, according to UBS employees in the region close to the situation, who spoke on the condition that they not be named because of a company policy against speaking to the news media.

Now, a number of UBS clients have been forced to liquidate hundreds of millions of dollars in holdings in these funds to meet margin calls. And the bank says it has begun an internal investigation into the lending practices of some of its top-producing brokers in the commonwealth.

Last week, after inquiries from The New York Times, UBS put one broker on administrative leave after claims emerged that the adviser had encouraged his clients to buy securities on lines of credit, violating the bank’s policy. Typically, customers use margin loans to buy securities on borrowed funds. Margin loans are governed by regulators and limit the amount of risk a customer can take on.

A spokeswoman for UBS, Karina Byrne, said the bank’s investigation was continuing, and added that the general weakness in municipal markets across the United States and Puerto Rico and apprehension about the direction of interest rates had contributed to steep declines in Puerto Rico funds.

Robert Mulholland, the head of wealth management advisers in the Americas for UBS, and other senior bank executives have descended on the island as the situation has worsened. “I would characterize this as the perfect storm,” Mr. Mulholland told a group of investment advisers last month in San Juan, according to a recording of that meeting reviewed by The New York Times.

UBS has had its share of embarrassments in recent years. It agreed to pay $1.5 billion last year to settle claims that its traders and managers had manipulated global benchmark interest rates for years. Around the same time, a former UBS trader was sentenced to seven years in prison after he was found guilty of fraud that prompted a multibillion-dollar trading loss at the big bank.

Also last year, UBS paid $26.6 million, to settle accusations by the Securities and Exchange Commission that the bank and two of its executives in Puerto Rico had made misleading statements to investors, which the agency said had concealed a liquidity crisis in UBS funds.

Puerto Rico, a commonwealth of the United States where residents typically pay no federal income tax, is regulated by the S.E.C. While other big banks do business in Puerto Rico, UBS is one of the few to have a large team of brokers on the island. The bank has five branches in Puerto Rico, with 132 brokers who manage money for the island’s elite, including local real estate magnates and wealthy foreigners. UBS often puts this money in mutual funds the bank itself manages. It can be a lucrative business. The broker and the bank get a commission on each sale, and the bank itself gets a fee for managing the fund.

For years, the bank’s funds had strong returns and paid healthy dividends. The Tax Free Puerto Rico Fund II, with $357 million in assets, has a five-year return of 6.8 percent, according to UBS documents.

But as Puerto Rico’s economic woes have deepened, UBS customers have seen the value of their holdings fall. The fund’s shares don’t trade on an exchange, but UBS documents show it had a per-share value of $6.16 in early September, down from $7.75 a share at the end of June. The fund’s value has fallen even further in recent weeks, according to brokers in the region.

American mutual funds have sharply reduced exposure to the island in recent months, according to the mutual fund research firm Morningstar. In recent weeks, UBS and Wells Fargo were among the banks that warned their brokers to steer clear of recommending Puerto Rican debt to clients. UBS has told them they need to affirm to the bank that they have warned clients who want to buy Puerto Rican debt about its risks.

UBS’s problems on the island have been aggravated by the use of leverage, on behalf of the bank and its clients.

“The losses can be, and usually are, very swift, especially when there’s limited or no liquidity,” Mr. Mullholland reminded brokers last month.

The funds UBS manages are themselves highly leveraged. For instance, the Tax Free Puerto Rico Fund II has a leverage ratio of 53 percent, meaning for every dollar of customer assets it holds, it has roughly another dollar of assets bought with borrowed money. UBS’s other Puerto Rico funds are similarly leveraged, according to firm documents.

The average leverage ratio on funds similar to UBS’s in the United States is roughly 22 percent, according to Morningstar.

In addition, many clients took out margin loans to buy into the funds. Other investors, according to local brokers and a lawyer representing some UBS clients who are considering suing the bank, were encouraged by their brokers to borrow on credit lines, which customers typically use to buy items like second homes or even to expand their businesses.

Most banks require investors who are given a credit line to sign a document saying they will not use it to buy securities. Instead, investors use margin loans, which are specifically governed by regulators and allow banks to more closely monitor what sort of risks their clients are taking on.

“When you add leverage on top of leverage, and then add more leverage, it usually doesn’t end well,” said Thomas R. Ajamie, a lawyer who frequently represents investors in financial cases.

UBS brokers who encouraged the use of credit lines had an incentive to do so. They receive commissions for securities bought on the credit line and make additional money if the customer uses the credit line.

“This is a scheme that is very questionable,” said Harold D. Vicente, a lawyer in San Juan who says he is representing 15 to 20 clients who he estimates have lost more than $50 million on UBS-managed investments. He said that UBS brokers encouraged some of his clients to take out credit lines to invest in funds, and that these clients did not sign documents saying they should not turn around and invest the money in securities.

Mr. Vicente said some of his clients drew checks from the credit lines originating in UBS’s bank in Utah. Those funds were then reinvested in UBS-managed funds in Puerto Rico.

Ms. Byrne, the UBS spokeswoman, declined to comment on that, but she said any client who used credit lines to buy securities signed documents saying they would not do so.

Mr. Mullholland told brokers at the San Juan meeting that the margin calls in Puerto Rico were “piling up” and that many of the funds were hard to trade because the market was fairly illiquid. In the event of margin calls, he encouraged brokers to search out clients’ most liquid assets “whether they are in the account or outside of the account.”

UBS Brokers in Puerto Rico Create Headache for the Bank

Over the years, Puerto Rico has attracted the very wealthy, who come for the postcard-perfect beaches and the promise of a tax-free life.

Many of them shelter their millions in local municipal bond funds, which have been hit hard of late as the island struggles with a weak economy, rising interest rates and outsize debt loads. For the Swiss banking giant UBS, which boasts that it manages money for half of the island’s millionaires â€" roughly $10 billion â€" the downturn has created a particularly nasty headache.

The bank’s clients had piled into highly leveraged bond funds run by UBS and were encouraged by its brokers to borrow even more money to invest in those funds. In some cases, money was lent improperly, exacerbating current losses, according to UBS employees in the region close to the situation, who spoke on the condition that they not be named because of a company policy against speaking to the news media.

Now, a number of UBS clients have been forced to liquidate hundreds of millions of dollars in holdings in these funds to meet margin calls. And the bank says it has begun an internal investigation into the lending practices of some of its top-producing brokers in the commonwealth.

Last week, after inquiries from The New York Times, UBS put one broker on administrative leave after claims emerged that the adviser had encouraged his clients to buy securities on lines of credit, violating the bank’s policy. Typically, customers use margin loans to buy securities on borrowed funds. Margin loans are governed by regulators and limit the amount of risk a customer can take on.

A spokeswoman for UBS, Karina Byrne, said the bank’s investigation was continuing, and added that the general weakness in municipal markets across the United States and Puerto Rico and apprehension about the direction of interest rates had contributed to steep declines in Puerto Rico funds.

Robert Mulholland, the head of wealth management advisers in the Americas for UBS, and other senior bank executives have descended on the island as the situation has worsened. “I would characterize this as the perfect storm,” Mr. Mulholland told a group of investment advisers last month in San Juan, according to a recording of that meeting reviewed by The New York Times.

UBS has had its share of embarrassments in recent years. It agreed to pay $1.5 billion last year to settle claims that its traders and managers had manipulated global benchmark interest rates for years. Around the same time, a former UBS trader was sentenced to seven years in prison after he was found guilty of fraud that prompted a multibillion-dollar trading loss at the big bank.

Also last year, UBS paid $26.6 million, to settle accusations by the Securities and Exchange Commission that the bank and two of its executives in Puerto Rico had made misleading statements to investors, which the agency said had concealed a liquidity crisis in UBS funds.

Puerto Rico, a commonwealth of the United States where residents typically pay no federal income tax, is regulated by the S.E.C. While other big banks do business in Puerto Rico, UBS is one of the few to have a large team of brokers on the island. The bank has five branches in Puerto Rico, with 132 brokers who manage money for the island’s elite, including local real estate magnates and wealthy foreigners. UBS often puts this money in mutual funds the bank itself manages. It can be a lucrative business. The broker and the bank get a commission on each sale, and the bank itself gets a fee for managing the fund.

For years, the bank’s funds had strong returns and paid healthy dividends. The Tax Free Puerto Rico Fund II, with $357 million in assets, has a five-year return of 6.8 percent, according to UBS documents.

But as Puerto Rico’s economic woes have deepened, UBS customers have seen the value of their holdings fall. The fund’s shares don’t trade on an exchange, but UBS documents show it had a per-share value of $6.16 in early September, down from $7.75 a share at the end of June. The fund’s value has fallen even further in recent weeks, according to brokers in the region.

American mutual funds have sharply reduced exposure to the island in recent months, according to the mutual fund research firm Morningstar. In recent weeks, UBS and Wells Fargo were among the banks that warned their brokers to steer clear of recommending Puerto Rican debt to clients. UBS has told them they need to affirm to the bank that they have warned clients who want to buy Puerto Rican debt about its risks.

UBS’s problems on the island have been aggravated by the use of leverage, on behalf of the bank and its clients.

“The losses can be, and usually are, very swift, especially when there’s limited or no liquidity,” Mr. Mullholland reminded brokers last month.

The funds UBS manages are themselves highly leveraged. For instance, the Tax Free Puerto Rico Fund II has a leverage ratio of 53 percent, meaning for every dollar of customer assets it holds, it has roughly another dollar of assets bought with borrowed money. UBS’s other Puerto Rico funds are similarly leveraged, according to firm documents.

The average leverage ratio on funds similar to UBS’s in the United States is roughly 22 percent, according to Morningstar.

In addition, many clients took out margin loans to buy into the funds. Other investors, according to local brokers and a lawyer representing some UBS clients who are considering suing the bank, were encouraged by their brokers to borrow on credit lines, which customers typically use to buy items like second homes or even to expand their businesses.

Most banks require investors who are given a credit line to sign a document saying they will not use it to buy securities. Instead, investors use margin loans, which are specifically governed by regulators and allow banks to more closely monitor what sort of risks their clients are taking on.

“When you add leverage on top of leverage, and then add more leverage, it usually doesn’t end well,” said Thomas R. Ajamie, a lawyer who frequently represents investors in financial cases.

UBS brokers who encouraged the use of credit lines had an incentive to do so. They receive commissions for securities bought on the credit line and make additional money if the customer uses the credit line.

“This is a scheme that is very questionable,” said Harold D. Vicente, a lawyer in San Juan who says he is representing 15 to 20 clients who he estimates have lost more than $50 million on UBS-managed investments. He said that UBS brokers encouraged some of his clients to take out credit lines to invest in funds, and that these clients did not sign documents saying they should not turn around and invest the money in securities.

Mr. Vicente said some of his clients drew checks from the credit lines originating in UBS’s bank in Utah. Those funds were then reinvested in UBS-managed funds in Puerto Rico.

Ms. Byrne, the UBS spokeswoman, declined to comment on that, but she said any client who used credit lines to buy securities signed documents saying they would not do so.

Mr. Mullholland told brokers at the San Juan meeting that the margin calls in Puerto Rico were “piling up” and that many of the funds were hard to trade because the market was fairly illiquid. In the event of margin calls, he encouraged brokers to search out clients’ most liquid assets “whether they are in the account or outside of the account.”

Cerberus Seeks to Examine BlackBerry’s Books

Cerberus Capital Management is seeking a confidentiality agreement that would allow it to examine the books and internal operations of BlackBerry, a person briefed on Cerberus’s plans said on Wednesday.

It was not clear whether the move would ultimately lead to a bid for BlackBerry, which reported a $1 billion quarterly loss last week largely because its new line of smartphones flopped. The company has already agreed to a preliminary and conditional offer from its largest shareholder, Fairfax Financial Holdings of Toronto. While it remains free to look for a better offer, BlackBerry will have pay Fairfax $157 million if it accepts another bid before Nov. 4. Fairfax can walk away without penalty.

Fairfax intends to bring only its 10 percent holding in BlackBerry to its proposed transaction, which values the company at $4.7 billion. Skepticism about Fairfax’s ability to gather other investors and borrow billions of dollars more for what many view as a risky purchase has kept BlackBerry’s shares well below the $9-a-share bid from Fairfax.

BlackBerry’s stock sank further in early trading on Wednesday. Financial filings released on Tuesday night indicated that the company is now in trouble in developing markets, previously its last stronghold, and that it would most likely run up $400 million in costs during its final two quarters as it lays off 40 percent of its remaining staff, or about 4,500 people.

After The Wall Street Journal first reported Cerberus’s interest, BlackBerry’s shares picked up and closed at $7.96, up 0.5 percent.

The breakup fee for Fairfax aside, it may be difficult for Cerberus to justify an offer higher than the one proposed by Fairfax. At least two analysts have said over the last few days that $9 a share is excessive.

BlackBerry’s board began a strategic review in August that included the sale of the company among its options. Prem Watsa, the chairman and chief executive of Fairfax, an insurance and investment company, stepped down from BlackBerry’s board at that time. He and the company have repeatedly declined to identify who will join the consortium. But Mr. Watsa has told some news organizations that he intends to close a deal and that he will stick with his offer.

It is not known whether any other investors beyond Fairfax and Cerberus have expressed any interest. There is widespread speculation in Canada that Mike Lazaridis, BlackBerry’s co-founder and its former co-chairman and co-chief executive, may make a bid. Mr. Lazaridis still holds about 5.7 percent of BlackBerry’s shares.

A Charm Offensive to Lure Banking Customers in Britain

Vernon W. Hill II shook up American retail banking more than a decade ago, and now he’s bringing the same model to Britain.

In central London, at the flagship branch of his three-year-old banking start-up, Metro Bank, eager young tellers greet waiting customers as soon as they enter, directing them to plush leather couches.

In one corner of the branch, with polished floors and vaulted ceiling that are more akin to a car showroom than a wood-paneled bank, a machine with bright flashing lights beckons users to swap their pocket change for British pound notes.

And at the branch’s glass-filled entrance, a couple of dog bowls await customers’ pets in need of a drink while their owners cash checks or open a savings account.

“I’m a retailer, not a banker,” said Mr. Hill, a 68-year-old American entrepreneur who regularly brings his Yorkshire terrier, Duffy, to work. “British banks mistreat their customers.”

Metro Bank is Mr. Hill’s first foray back into the banking sector since 2007, when he was forced out of Commerce Bancorp. He had started Commerce in the early 1970s, but left amid federal scrutiny over his business dealings with family members and other company insiders. Soon after his departure, Commerce Bank was sold to TD Bank Financial of Canada for $8.5 billion, while the regulators’ investigation ended with no charges.

In his three decades at the helm, Mr. Hill expanded Commerce to around 460 branches, mostly in the Northeast, with combined retail deposits of more than $40 billion. To attract customers, Commerce kept its branches open seven days a week, and focused on amassing large deposits and improving customer service, instead of offering the best interest rates.

And that is exactly what he is doing in Britain. Metro Bank’s branches are open seven days a week and offer same-day replacement service for customers’ lost or stolen debit cards. At one location, customers can use drive-through tellers, a first in Britain.

Mr. Hill’s goal is to charm enough British consumers into switching their checking accounts and mortgages from the likes of Lloyds Banking Group and Barclays, which continue to dominate Britain’s retail banking sector.

“We’re running the exact same banking model here as we did in New York,” Mr. Hill said recently in an interview in his corner office above Metro Bank’s first branch in central London, which opened in 2010. “Banks in Britain act like a cartel. I’m in the business of gaining market share.”

His bullish words about taking on the country’s largest banks have resonated among British politicians. Local policy makers want to open up the country’s banking sector to new entrants after a series of bailouts and forced mergers during the financial crisis left Britain’s five largest firms with an estimated 85 percent of personal checking accounts. The continued dominance by a small number of firms, including those in which the British government own big stakes, and a series of scandals have fed anger toward British financial institutions.

Local banks have set aside more than $20 billion, in total, to repay customers who were sold insurance that was either not necessary or difficult to claim. Barclays and Royal Bank of Scotland have been caught up in British and American inquiries into rate-rigging. Lawmakers and British businesses have also voiced anger that the big banks are still not lending enough to local firms, hurting the wider British economy.

Despite efforts by British regulators to jump-start competition, including from the British retail giant Tesco, the country’s banking sector has remained stubbornly closed.

“There needs to be greater support,” said Omar Ali, head of the European retail banking advisory team at Ernst & Young in London. “Tough capital requirements and costly I.T. systems make it difficult for new entrants.”

The hurdles are high for even the most determined firms to get into British banking. It can take up to two years to get approval to start a bank. Widespread consumer apathy toward switching bank accounts adds to the difficulties for new firms trying to break into the market. Ambitious plans by several firms have also gone awry.

In April, the Co-operative Bank, a small financial institution, pulled out of a $1.2 billion agreement to buy 632 branches from Lloyds Banking Group. The deal, which would have made the Co-operative Bank a major player, fell apart after the firm was found to have a $2.4 billion capital shortfall.

“It’s a hazardous environment for any new entrant,” said Steve Davies, a retail banking partner at PricewaterhouseCoopers, in Edinburgh. “Customers in the U.K. market are disbelieving that it will be different elsewhere.”

For Metro Bank, which has 19 branches in southeast England and splits its lending equally between commercial and retail customers, the learning curve has been steep.

After deciding to enter the British market in 2008, Mr. Hill and his backers had to wait two years before their banking license was approved. Faced with stiff competition from well-established competitors for prominent commercial space, Metro Bank has had to wade through complex planning applications to get its branches approved. And analysts say that its financial products, which include checking and savings accounts and mortgages, are not the most competitive on the market.

“A lot of what Metro Bank has come up with, other banks have copied,” said Peter Hahn, a banking professor at Cass Business School in London. “It will be hard for Metro Bank to differentiate itself from its large competitors.”

The bank’s finances have remained on shaky ground as it invests millions of dollars to add more than 100 branches to its network by the end of the decade.

After raising around $400 million in three rounds of investment, Metro Bank, which still represents a small fraction of the British banking sector, has reported a combined loss of roughly $150 million since 2010. In contrast, many of Britain’s largest banks have returned to profit as they shake off the bloated balance sheets that helped lead to the financial crisis.

British regulators have also raised concerns over Mr. Hill’s past. Local authorities initially blocked him from becoming chairman of Metro Bank in 2010, though he eventually assumed the post this year after the firm increased the independence of its board.

Ever the optimist, Mr. Hill said he still expected his fledgling bank to report a profit next year, with deposits reported to reach $1.4 billion. Metro Bank will also probably raise $400 million more next year, either through an initial public offering or from existing investors, and is hoping for a market value of up to $14 billion.

“If I knew how hard it would have been to start, I wouldn’t have done it,” said Mr. Hill, who splits his time between Philadelphia and London, where he has a home in the city’s affluent Mayfair neighborhood synonymous with Russian oligarchs and Persian Gulf wealth. “If we don’t go for an I.P.O. in 2014, we’ll do it in 2016.”

Still, Mr. Hill sees taking on incumbent banks and other start-ups as part of the challenge of breaking into Britain’s financial sector.

“I don’t mind more competition,” he said. “People in Britain have had enough of their banks, but they don’t have a choice. That’s what we are offering.”

Apax Wins and Loses in Rue21 Conundrum of Its Own Design

The endgame for the rue21 buyout is all about Apax Partners vs. Apax Partners, with one of them losing.

If you’re scratching your head about how this can happen, here is why Apax finds itself torn: Two of Apax’s funds â€" SKM Equity Fund II and SKM Investment Fund II â€" own about 30.2 percent of rue21, the fashion retailer. Apax inherited the investment when it acquired the firm of Saunders Karp & Megure in 2005. The two funds have been around since the 1990s and are in their liquidation phase; the rue21 investment is their last holding.

On the other side of the table, four newer funds originated by Apax are buying rue21. These funds are collectively providing up to $283 million in equity to finance this acquisition. This compares with the approximately $300 million the SKM funds will receive in the buyout.

This is quite an unusual transaction even in normal times. Apax is essentially rebalancing rue21 among its funds, simultaneously giving a nice cash-out to its old investors paid for by its new investors. This form of “pass the baby transaction” has typically taken the shape of one private equity firm selling assets to another. It is a sale that has been heavily criticized by commentators for merely passing along overinflated assets, leaving the final, buying private equity firm holding the bag. The twist is that Apax is passing the baby to itself, raising a host of conflict-of-interest issues about whether Apax’s old or new investors are getting the better deal.

In Apax’s defense, it was well aware of the conflict and appeared to use best practices to address it. Apax recused itself from advising the SKM funds on this transaction, and the independent directors of these funds, advised by independent legal counsel, made the decision. Rue21’s shareholders are also suing the company in Delaware Chancery Court, contending this conflict resulted in a lower share price being paid to benefit Apax’s new funds.

It all would work well if rue21 prospers, with the old investors receiving their profit and money back and the new investors profiting as well. The problem is that soon after rue21’s acquisition was announced, the retailer announced significantly reduced sales. In the wake of this announcement, the three banks financing this deal â€" JPMorgan Chase, Bank of America and Goldman Sachs â€" were reported to be struggling to sell the required $780 million in debt, even at as little as 80 cents on the dollar.

I went over earlier this week how the deal for rue21 could collapse based on the contracts that the parties entered into. A key to this analysis is whether Apax and the banks actually want to exit the transaction. That depends on how much each will lose if the deal goes through.

It is here that Apax’s dual roles create some perverse incentives.

Essentially, if the deal goes through at the current $42-a-share buyout price, Apax’s old funds will post a gain but the new Apax funds will start well under water on their investment. There is likely not much overlap between the old investors and the new, so the question is how these new investors and Apax itself will feel about that paper loss. In addition, will Apax prefer to favor its new investors, who are its future, over the old investors? If Apax does scuttle the deal, it may be on the hook for a nearly $63 million termination fee, meaning that the loss has to be pretty severe for Apax to even think about leaving the deal.

Meanwhile, if the deal collapses, rue21’s share price is likely to plummet, leaving the old funds with a loss of possibly more than $100 million.
Weighing all these factors, the question is when Apax begins to feel nervous enough to try and get out of the deal, leaving its old funds with a big loss at the benefit of its new funds.

This depends on how bad the situation at rue21 is. If it is a hiccup, then Apax is likely to swallow hard and try not to torpedo the deal. The financing package is likely flexible enough to get through any period of short-term weakness. Under this option, Apax would rather close with some increased risk of loss then have its new funds eat the termination fee and its old funds take a big loss. Apax may even put up more equity to try and smooth over the deal with the banks. Alternatively, Apax may try and force a price renegotiation to spread the pain among its funds.

If something is placing rue21’s business in permanent decline, then all bets are off. It may just become too expensive for Apax to bear the burden for its new funds. Apax’s current investors may lobby for this outcome. By the way, the current head of its Uniterd States operations, John Megrue, is from SKM.

Because all of these decisions are being made in the shadow of this huge conflict, any such calibration cannot be overt or even stated. Even if the Apax executives use the best procedures here, it is hard to see how these issues cannot at least run through their minds.

Apax ultimately faces some difficult overt and implicit decisions about which funds to benefit. Even if Apax wants to exit the transaction, it will struggle to get around the requirements of the agreements the parties entered into. And as I wrote in my earlier post, it could all come down to how willing the banks are to walk and whether a solvency certificate can be delivered.

Recent reports from LCD News say that the loan has been booked in the low 80-cents-on-the-dollar range and is pricing to close next week. If true, then this is a positive sign for the deal, assuming that solvency certificate comes through.

In the meantime, we will have to wait and see for answers to these questions. A representative of Apax declined to comment.

There is already one lesson here. When a private equity firm stands on both sides of the transaction, there are bound to be problems. If I was an investor in the new Apax funds, I would be wondering why I was buying out the old ones and how this conflict is affecting the decision-making. I would also be thinking that perhaps it would just be better to do what the rest of us do â€" sell at arm’s length.

In any event, this is now Apax’s problem, and one of its own making.

Greenhill Expands Into Brazil Despite Nation’s Woes

SÃO PAULO, Brazil â€" The boutique investment bank Greenhill & Company has opened an office in Brazil and hired the former Goldman Sachs executive Daniel Wainstein to run it, a move that comes as several Wall Street players have been retrenching amid Brazil’s economic woes.

The move is the firm’s first foray into the group of emerging markets known as BRICs, or Brazil, Russia, India and China, said Kevin Costantino, a Greenhill managing director.

While the firm may eventually open up shop in those countries, for now, Brazil is the most attractive among that group. “It is where our clients want to be,” Mr. Costantino said in an interview with DealBook Tuesday evening.

Mr. Wainstein, 43, previously headed Goldman Sachs investing banking business in Brazil. He spent 13 years with that firm, 11 of them in Brazil. He also worked at Lehman Brothers.

“He had a fit that was both cultural and business,” Mr. Costantino said of Mr. Wainstein, who graduated from the University of São Paulo.

Greenhill, founded in 1996 by Robert F. Greenhill, a former president of Morgan Stanley, is expanding into South America’s largest economy at a time when a host of economic issues are plaguing the nation’s growth. On Sept. 30, Brazil’s central bank lowered its estimate for gross domestic product this year to 2.5 percent, from its previous forecast of 2.7 percent.

Dealmaking has been hit hard. Merger and acquisition activity in Brazil this year to date totaled just $35 billion, down from $52 billion over the same period, according to data provided by Dealogic.

Still, Greenhill said it was attracted to the growing middle class in Brazil and a mature financial sector not found in other emerging markets. Lowered valuations is also likely to spur dealmaking. “We certainly think that Brazil is an attractive market over the long-term,” Mr. Costantino said.

The firm has looked at Brazil over the past several years and at least as early as 2011 expressed an interest in expanding here, but to date has assessed the country from New York.

The firm’s activity here has been very limited so far. But one deal it advised, according to Mr. Costantino, was the Travelers Companies’ 2010 acquisition of a 43 percent stake for $370 million in the Brazilian company J. Malucelli Participacoes em Seguros e Resseguros.

Now the firm sees more activity to come and with Mr. Wainstein in charge, will add a team based in São Paulo.

3 London Portfolio Managers Leave SAC Capital

LONDON - - Three portfolio managers with a SAC Capital Advisors unit in London have left the firm, according to documents filed with a British agency that tracks corporate registrations.

Alidod Shirinbekov, Woei Chan and Paul Crouch left the firm’s SAC Global Investors unit in London on Sept. 26, according to filings with the U.K.’s Companies House.

The filings don’t indicate the circumstances of their departures, and the traders couldn’t immediately be located for comment Wednesday.

A spokesman for SAC declined comment.

The traders left shortly after review season at the SAC Global unit. It was unclear if the men left voluntarily.

SAC, the hedge fund founded by Steven A. Cohen, is facing criminal charges in the United States, which has alleged employees of the firm engaged in “rampant insider trading” for more than a decade.

Mr. Cohen has been separately charged by the Securities and Exchange Commission in a civil administrative action with failing to supervise two employees charged criminally with insider trading. Mr. Cohen hasn’t been charged criminally.

SAC and Mr. Cohen have denied any wrongdoing.

Bloomberg News earlier reported the departures.

Re/Max Rises in Debut, While Empire State Trust Has Subdued Start

Stock market investors are showing an appetite for real estate â€" and discount coats.

The big real estate brokerage Re/Max Holdings was greeted warmly on Wednesday in its trading debut, while a real estate investment trust that owns the Empire State Building had a more cautious reception. The deals are the latest on Wall Street to entice investors looking to bet on a recovery in the property market.

In addition, investors lined up on Wednesday for shares of Burlington Stores, which operates the Burlington Coat Factory retail chain, selling discount apparel and home furnishings. The stock opened trading at $23.05 a share, after pricing at $17 in its initial public offering Tuesday evening.

Re/Max, tapping the public market after 40 years as a private company, began trading at $26.25 a share on Wednesday, nearly 20 percent above the initial public offering price. The company had priced its shares at $22 Tuesday evening, above an expected range, to raise $220 million.

The Empire State Realty Trust had a more subdued start, with its shares opening at $13.05, virtually flat compared with the initial public offering price of $13. The I.P.O. Tuesday evening had reflected a cautious outlook when the shares priced at the low end of the expected range.

With the real estate market emerging from a punishing slump, investors are wagering that companies focused on the sector are poised to benefit. Re/Max, which receives fees and dues from its network of brokerage franchises, has expanded as the recovery has gathered steam. Its network includes 91,809 agents as of June 30.

In its offering prospectus, Re/Max reported $78.3 million in revenue for the six months that ended June 30, compared with $70.2 million in the period a year earlier. It earned $15 million of income in the first half of this year, compared with $13.8 million a year earlier.

The company is following a big rival, Realogy Holdings, into the public market. The stock of that company, which runs Century 21 and Coldwell Banker, has risen 60 percent since its I.P.O. in October 2012.

Other companies focused on real estate have been similarly buoyant. Zillow, a real estate Web site that went public in 2011, has surged this year and recently agreed to buy StreetEasy.com in an effort to strengthen its position in the New York City market.

But investing in the Empire State Realty Trust is an entirely different type of real estate play, offering exposure to a specific set of properties. The deal also comes with a complicated backstory and a few outstanding challenges, including continued litigation.

The main winners in that I.P.O. are the real estate barons Peter L. Malkin and his son, Anthony E. Malkin, with a stake that was valued at about about $460 million. The trust is trading under the symbol “ESRT” on the New York Stock Exchange.

Re/Max, for its part, used two classes of stock, selling Class A shares in its I.P.O. But the Class B shares, conferring control of Re/Max, will be held by a company called RIHI, which is majority owned by the co-founders of brokerage, Dave and Gail Liniger.

The investment firm Weston Presidio, which had a 15 percent stake in Re/Max, planned to sell its Class A shares in the I.P.O. Re/Max trades under the symbol “RMAX” on the N.Y.S.E..

The private equity backer of Burlington Stores, Bain Capital, which bought the company in 2006, did not plan to sell any stock in the I.P.O. Burlington is trading under the symbol “BURL” on the N.Y.S.E.

Morgan Stanley, Bank of America Merrill Lynch and JPMorgan Chase were the lead underwriters of the Re/Max I.P.O., while Bank of America Merrill Lynch and Goldman Sachs handled the Empire State Relty Trust deal.

The underwriters for Burlington Stores included JPMorgan, Morgan Stanley and Bank of America Merrill Lynch.

Loeb Raises Stake in Sotheby’s and Seeks Board Seat

The activist investor Daniel S. Loeb wants to join the board of Sotheby’s and has called for the chief executive to step down.

“Sotheby’s is like an old master painting in desperate need of restoration,” Mr. Loeb, the manager of the hedge fund Third Point, wrote in a letter to William F. Ruprecht, the chairman and chief executive of Sotheby’s, the auction house. Mr. Loeb also disclosed that he is now the company’s biggest shareholder with a 9.3 percent stake in the company. Both the letter and disclosure are included in a filing with the Securities and Exchange Commission.

“As with any important restoration, Sotheby’s must first bring in the right technicians,” Mr. Loeb added. He wants to join the board immediately and recruit several new directors, as well as a new chief executive.

In a carefully worded reprimand, Mr. Loeb outlined what he called “chronically weak operating margins and deteriorating competitive position relative to Christie’s” â€" Sotheby’s main rival â€" and said he was not persuaded by management’s explanation for lower market share relative to Christie’s.

Mr. Loeb, who is a prominent art collector, is agitating for change at the top of the company, contending that a “crisis of management” has created “dysfunctional divisions and a fractured culture.”

Third Point first disclosed it had a 5.7 percent stake in the auction house through an S.E.C. filing on Aug. 26. Two other activist investors, Nelson Peltz and Mick McGuire, have also made recent investments in the company. Mr. Peltz’s Trian Partners has a 3 percent stake and Mr. McGuire’s Marcato Capital has a 6.6 percent stake.

Two weeks after Third Point’s disclosure, the company announced it would review its financial policies and would consider a share repurchase or increasing its dividend. In a statement, Mr. Ruprecht said, “All are complex.”

This was not enough for Mr. Loeb, it would appear. On Wednesday, he called the response a “belated announcement partially addressing poor capital allocation practices.”

“Sotheby’s malaise is a result of a lack of leadership and strategic vision at its highest levels,” he said. Mr. Loeb also attacked Mr. Ruprecht’s pay package, $6.3 million in salary in 2012, and limited stock holdings, adding that it had created a misalignment with shareholders.

A Sotheby’s representative could not be immediately reached for comment.

Portugal Telecom and Oi of Brazil Agree to Merge

SÃO PAULO, Brazil â€" Portugal Telecom and Oi of Brazil on Wednesday announced plans to merge, creating the largest telecommunications company in the Portuguese-speaking world.

The new company will be based in Brazil and listed on the BM&F Bovespa, the New York Stock Exchange, and NYSE Euronext.

PT and Oi together had 37.5 billion reais ($17 billion) in revenue in 2012. Oi is the largest fixed-line and broadband provider and the fourth-largest mobile phone operator in Brazil. The companies said they would have 100 million subscribers combined.

As part of the deal, Oi will issue shares to raise 7 billion to 8 billion reais ($3.2 billion to 3.6 billion) in cash in the first half of 2014. An investor group that includes the Brazilian bank BTG Pactual have already agreed to buy 2 billion reais ($900 million).

Portugal Telecom bought 22.3 percent of Oi in 2010. Since June the two companies have had the same chief executive, Zeinal Bava, who will also lead the new company. Portugal Telecom’s current shareholders will own 38.1 percent of the new company.

Oi shares on the BM&F Bovespa were trading up over 4 percent after the announcement, while Portugal Telecom’s American depositary receipts were up over 10 percent on the New York Stock Exchange.

The merger is not expected to encounter any antitrust problems, because Portugal Telecom sold its stake in another Brazilian telecommunications firm in 2010. But other mergers in Brazil in the industry have drawn attention.

Spain’s Telefónica announced last month that it was increasing its stake in Telecom Italia, which owns the Brazilian cell phone operator TIM, to 66 percent, from 46 percent. But Telefónica already owns the Brazilian operator Vivo, and Brazilian antitrust law prohibits a single company from controlling two cellphone operators.

Brazil’s minister of communications, Paulo Bernardo, had initially said that Telecom Italia would probably have to sell its Brazilian operations. President Dilma Rousseff quickly intervened, saying that Mr. Bernardo had only expressed a personal opinion.

Mr. Bernardo subsequently said that Brazil’s antitrust council would wait to examine the Telefónica-Telecom Italia deal until after it was closed.

Alex Pardallas, telecom analyst with CGD Securities in Rio de Janeiro, said the Portugal Telecom-Oi merger “makes all the sense in the world.”

“Ever since they had the same C.E.O., all they had to do was agree on the ownership stakes in the new company,” he said.

JPMorgan issued a report Wednesday with a more cautious take on the merger, saying the “massive capital increase should be an overhang to Oi shares” that “outweighed” the positives.

A person with knowledge of the operation said BTG Pactual is also advising Oi on this merger, but BTG, Oi, or Portugal Telecom would confirm the details.

Portugal Telecom and Oi of Brazil Agree to Merge

SÃO PAULO, Brazil â€" Portugal Telecom and Oi of Brazil on Wednesday announced plans to merge, creating the largest telecommunications company in the Portuguese-speaking world.

The new company will be based in Brazil and listed on the BM&F Bovespa, the New York Stock Exchange, and NYSE Euronext.

PT and Oi together had 37.5 billion reais ($17 billion) in revenue in 2012. Oi is the largest fixed-line and broadband provider and the fourth-largest mobile phone operator in Brazil. The companies said they would have 100 million subscribers combined.

As part of the deal, Oi will issue shares to raise 7 billion to 8 billion reais ($3.2 billion to 3.6 billion) in cash in the first half of 2014. An investor group that includes the Brazilian bank BTG Pactual have already agreed to buy 2 billion reais ($900 million).

Portugal Telecom bought 22.3 percent of Oi in 2010. Since June the two companies have had the same chief executive, Zeinal Bava, who will also lead the new company. Portugal Telecom’s current shareholders will own 38.1 percent of the new company.

Oi shares on the BM&F Bovespa were trading up over 4 percent after the announcement, while Portugal Telecom’s American depositary receipts were up over 10 percent on the New York Stock Exchange.

The merger is not expected to encounter any antitrust problems, because Portugal Telecom sold its stake in another Brazilian telecommunications firm in 2010. But other mergers in Brazil in the industry have drawn attention.

Spain’s Telefónica announced last month that it was increasing its stake in Telecom Italia, which owns the Brazilian cell phone operator TIM, to 66 percent, from 46 percent. But Telefónica already owns the Brazilian operator Vivo, and Brazilian antitrust law prohibits a single company from controlling two cellphone operators.

Brazil’s minister of communications, Paulo Bernardo, had initially said that Telecom Italia would probably have to sell its Brazilian operations. President Dilma Rousseff quickly intervened, saying that Mr. Bernardo had only expressed a personal opinion.

Mr. Bernardo subsequently said that Brazil’s antitrust council would wait to examine the Telefónica-Telecom Italia deal until after it was closed.

Alex Pardallas, telecom analyst with CGD Securities in Rio de Janeiro, said the Portugal Telecom-Oi merger “makes all the sense in the world.”

“Ever since they had the same C.E.O., all they had to do was agree on the ownership stakes in the new company,” he said.

JPMorgan issued a report Wednesday with a more cautious take on the merger, saying the “massive capital increase should be an overhang to Oi shares” that “outweighed” the positives.

A person with knowledge of the operation said BTG Pactual is also advising Oi on this merger, but BTG, Oi, or Portugal Telecom would confirm the details.

Morning Agenda: Wells Fargo Braces for Suit on Foreclosures

New York’s attorney general is preparing a lawsuit against the nation’s largest home lender, Wells Fargo, accusing the bank of flouting the terms of a multibillion-dollar settlement aimed at stopping foreclosure abuses, Jessica Silver-Greenberg reports in DealBook. The lawsuit, which claims Wells Fargo violated the guidelines of last year’s agreement between five big banks and 49 state attorneys general, is expected to be filed as early as Wednesday.

Attorney General Eric T. Schneiderman previously fired a warning shot at Bank of America and Wells Fargo, announcing in May that he had found that both banks violated the settlement’s terms. That prompted negotiations with the two banks, but the outcomes for the lenders are starkly different. Bank of America is poised to announce a series of additional protections. But Wells Fargo is bracing for a lawsuit, with Mr. Schneiderman having fielded complaints from borrowers struggling to save their homes.

Vickee J. Adams, a spokeswoman for Wells Fargo, said the bank had not been served with a copy of the lawsuit. But, she said, “if true, it is very disappointing that the New York attorney general continues to pursue his course, given our commitment to the terms of the National Mortgage Settlement and ongoing engagement.”

EMPIRE STATE BUILDING GAINS A TICKER SYMBOL  | The Empire State Building has gone to Wall Street. Empire State Realty Trust Inc., whose office properties include the iconic 102-story Art Deco tower, raised $929.5 million on Tuesday in one of the biggest initial public offerings of a United States real estate investment trust, or REIT, Julie Creswell reports in DealBook. The 71.5 million shares priced at $13, the low end of the expected range. The REIT is expected to begin trading on Wednesday on the New York Stock Exchange under the symbol ESRT.

“The public offering allowed unit holders, whose stakes in the building date back to the early 1960s, the flexibility many sought to eventually cash out by selling their REIT shares,” Ms. Creswell writes. “The big winners are Peter L. Malkin and his son, Anthony E. Malkin. The public offering allowed them to consolidate their intricate empire of buildings that they either owned or controlled in Manhattan and in Stamford, Conn. The offering values their stake at about $460 million. Anthony Malkin is chairman and chief executive of the trust.”

BATISTA’S OIL FIRM DEFAULTS  | 
The Brazilian petroleum exploration and production company OGX was pushed closer to bankruptcy after it announced on Tuesday that it would default on a $44.5 million interest payment, Dan Horch reports in DealBook. The decline of the firm, founded by the entrepreneur Eike Batista, reflects its founder’s struggles.

Luana Helsinger, a petroleum analyst with Grupo Bursátil Mexicano in Rio de Janeiro, said “the logical next step is for OGX to request a court-supervised reorganization.” The company has a 30-day grace period to negotiate with creditors, which include the bond giant Pimco. Should a bankruptcy occur, it would be the largest corporate default in Latin America’s history, Mr. Horch reports.

ON THE AGENDA  |  In addition to Empire State Realty Trust, Re/Max Holdings is expected to begin trading, after raising $220 million in an I.P.O. Shares of Burlington Stores are also making their trading debut. David M. Rubenstein, the Carlyle Group co-founder, is featured at the Titans of Industry gathering in New York, which is closed to the press. Steven Mandis, author of the new book “What Happened to Goldman Sachs,” is on CNBC at 6:40 a.m.

A LACK OF CONTROL AT J.C. PENNEY  | “The latest events at J.C. Penney provide a hard lesson: With today’s public company, it is sometimes difficult to be sure who is in control,” Steven M. Davidoff writes in the Deal Professor column. One example of the issue is the messy way that the struggling retailer raised capital last week, abruptly reversing course after the chief executive said, according to news reports, he didn’t see “conditions for the rest of the year that would warrant raising liquidity.” (The company denies that he made the comments.)

“In the old days, identifying the person in charge was easy,” Mr. Davidoff writes. “Today, the board is increasingly prominent, and chief executives serve at the whim of a sometimes fractious board. Shareholders are also increasingly active, willing to struggle with a board over company strategy and direction. And advisers are always circling, willing to charge fat fees to help, and in doing so, they end up driving the bus.”

Mergers & Acquisitions »

Tesco to Pay $550 Million in Supermarket Deal in China  |  The deal will give the British supermarket chain Tesco 20 percent of a new joint venture with China Resources Enterprise, which will have more than 3,000 outlets in China and Hong Kong. DealBook »

Microsoft Investors Said to Push for Gates to Step Down  |  Reuters reports: “Three of the top 20 investors in Microsoft Corp. are lobbying the board to press for Bill Gates to step down as chairman of the software company he co-founded 38 years ago, according to people familiar with matter.” REUTERS

Cargill Said to Approach Deal for A.D.M. Unit  |  The giant trading firm Cargill “is in the final stages of a deal” to buy Archer Daniels Midland’s cocoa business, Reuters reports, citing unidentified people familiar with the situation. REUTERS

Portugal Telecom to Merge With Oi of Brazil  |  Shares of Portugal Telecom jumped more than 15 percent after the announcement that it would merge with the Brazilian telecommunications giant Oi, of which it is the biggest shareholder, Reuters reports. REUTERS

BlackBerry Reveals Its Slide Is Global  |  BlackBerry said in a regulatory filing on Tuesday evening that customers were turning away from its products in the developing world, which previously had been its one remaining bright spot. NEW YORK TIMES

Qatar Fund Buys Stake in Local Exchange  |  Qatar Holding, an arm of the country’s sovereign wealth fund, bought a 12 percent stake in Qatar Exchange from NYSE Euronext. BLOOMBERG NEWS

New Owner for Harlem Globetrotters  |  Herschend Family Entertainment, a private group that operates Dolly Parton’s Dollywood theme parks, agreed to buy the basketball troupe from the private equity firm Shamrock Capital Advisors. Terms of the deal were not disclosed. DealBook »

INVESTMENT BANKING »

British Banks Wary of Government Mortgage Program  |  The Financial Times reports: “Some of Britain’s leading mortgage lenders have expressed misgivings about the government’s latest ‘Help to Buy’ initiative, leaving the state-backed banks Royal Bank of Scotland and Lloyds as the only pair to have endorsed the scheme.” FINANCIAL TIMES

Dividing Up the Job of Legal Counsel  |  Goldman Sachs and JPMorgan Chase have figured out that allowing the general counsel to also run regulatory compliance invites trouble, Reynolds Holding of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

New Head of R.B.S. Plans to Emphasize Retail Business  |  In his first day as chief executive, Ross McEwan said he wanted the Royal Bank of Scotland to win back the trust of its customers. DealBook »

Barclays Head of Customer Service Resigns  | 
REUTERS

Bank of America Names Sole Head of Asia-Pacific Investment Bank  | 
REUTERS

PRIVATE EQUITY »

Buyout Talks Over MoneyGram Are Said to End  |  MoneyGram International plans to remain a public company after it was not satisfied with talks with private equity firms over a leveraged buyout, Reuters reports, citing three unidentified people familiar with the matter. REUTERS

HEDGE FUNDS »

Icahn Reviews Dinner on Twitter  |  In fewer than 140 characters, the hedge fund billionaire Carl C. Icahn said he “pushed hard” for Apple to do a $150 billion buyback during a “cordial dinner” with Timothy D. Cook, the chief executive of Apple. DealBook »

A Step Toward ‘Peer to Peer’ Lending Securitization  |  A New York hedge fund has taken some of its Lending Club loans and sold them in a $53 million securitization. Are more such deals likely to be on the horizon? DealBook »

I.P.O./OFFERINGS »

Twitter Said to Add Banks to I.P.O.  |  Twitter added the boutique investment banks Allen & Company and Code Advisors to the group of underwriters handling its initial public offering, Bloomberg News reports, citing unidentified people with knowledge of the process. BLOOMBERG NEWS

Re/Max Holdings Raises $220 Million in I.P.O.  |  The real estate brokerage firm priced its initial public offering at $22 a share, above its expected range. BLOOMBERG NEWS

VENTURE CAPITAL »

SAP Ventures Raises $650 Million Fund  |  SAP Ventures plans to use the money for direct investments in industries including mobile and social networking as well as more enterprise-related sectors like Big Data. DealBook »

Quantopian Raises $6.7 Million to Help Traders Make Algorithms  |  Quantopian, whose platform allows so-called quants to create trading algorithms based on unconventional data sets, announced on Wednesday that it had raised a financing round from Khosla Ventures and Spark Capital. QUANTOPIAN

LEGAL/REGULATORY »

Spain Is Expected to Extradite Former JPMorgan Trader  |  The former trader, Javier Martin-Artajo, appears to be fighting extradition, but Spanish authorities are expected to cooperate with the request, a senior prosecutor said. DealBook »

Insider Trading Trial of Mavericks’ Owner Is Under Way  |  Oral arguments began Tuesday in the insider trading case against Mark Cuban. DealBook »

Former Employees Claim Sexual Harassment at Women’s Networking Group  |  Four female plaintiffs say in their complaint that a former manager, also a woman, regularly harassed them and, when they complained, they were fired or forced to resign. DealBook »

Fabrice Tourre Seeks a New Trial  |  The former Goldman Sachs trader Fabrice Tourre, who was found liable on six counts of civil securities fraud after being accused of misleading investors about a trade he helped structure, contends that there was a lack of evidence to support the jury’s decision on some counts and that evidence was not presented in other instances. DealBook »

Tribes Lose Battle to Shield Payday Sites From New York State Crackdown  |  New York State had clamped down on the tribes’ payday lending sites, arguing that their business was carried out beyond the reservations. A federal judge agreed. DealBook »

Morning Agenda: Wells Fargo Braces for Suit on Foreclosures

New York’s attorney general is preparing a lawsuit against the nation’s largest home lender, Wells Fargo, accusing the bank of flouting the terms of a multibillion-dollar settlement aimed at stopping foreclosure abuses, Jessica Silver-Greenberg reports in DealBook. The lawsuit, which claims Wells Fargo violated the guidelines of last year’s agreement between five big banks and 49 state attorneys general, is expected to be filed as early as Wednesday.

Attorney General Eric T. Schneiderman previously fired a warning shot at Bank of America and Wells Fargo, announcing in May that he had found that both banks violated the settlement’s terms. That prompted negotiations with the two banks, but the outcomes for the lenders are starkly different. Bank of America is poised to announce a series of additional protections. But Wells Fargo is bracing for a lawsuit, with Mr. Schneiderman having fielded complaints from borrowers struggling to save their homes.

Vickee J. Adams, a spokeswoman for Wells Fargo, said the bank had not been served with a copy of the lawsuit. But, she said, “if true, it is very disappointing that the New York attorney general continues to pursue his course, given our commitment to the terms of the National Mortgage Settlement and ongoing engagement.”

EMPIRE STATE BUILDING GAINS A TICKER SYMBOL  | The Empire State Building has gone to Wall Street. Empire State Realty Trust Inc., whose office properties include the iconic 102-story Art Deco tower, raised $929.5 million on Tuesday in one of the biggest initial public offerings of a United States real estate investment trust, or REIT, Julie Creswell reports in DealBook. The 71.5 million shares priced at $13, the low end of the expected range. The REIT is expected to begin trading on Wednesday on the New York Stock Exchange under the symbol ESRT.

“The public offering allowed unit holders, whose stakes in the building date back to the early 1960s, the flexibility many sought to eventually cash out by selling their REIT shares,” Ms. Creswell writes. “The big winners are Peter L. Malkin and his son, Anthony E. Malkin. The public offering allowed them to consolidate their intricate empire of buildings that they either owned or controlled in Manhattan and in Stamford, Conn. The offering values their stake at about $460 million. Anthony Malkin is chairman and chief executive of the trust.”

BATISTA’S OIL FIRM DEFAULTS  | 
The Brazilian petroleum exploration and production company OGX was pushed closer to bankruptcy after it announced on Tuesday that it would default on a $44.5 million interest payment, Dan Horch reports in DealBook. The decline of the firm, founded by the entrepreneur Eike Batista, reflects its founder’s struggles.

Luana Helsinger, a petroleum analyst with Grupo Bursátil Mexicano in Rio de Janeiro, said “the logical next step is for OGX to request a court-supervised reorganization.” The company has a 30-day grace period to negotiate with creditors, which include the bond giant Pimco. Should a bankruptcy occur, it would be the largest corporate default in Latin America’s history, Mr. Horch reports.

ON THE AGENDA  |  In addition to Empire State Realty Trust, Re/Max Holdings is expected to begin trading, after raising $220 million in an I.P.O. Shares of Burlington Stores are also making their trading debut. David M. Rubenstein, the Carlyle Group co-founder, is featured at the Titans of Industry gathering in New York, which is closed to the press. Steven Mandis, author of the new book “What Happened to Goldman Sachs,” is on CNBC at 6:40 a.m.

A LACK OF CONTROL AT J.C. PENNEY  | “The latest events at J.C. Penney provide a hard lesson: With today’s public company, it is sometimes difficult to be sure who is in control,” Steven M. Davidoff writes in the Deal Professor column. One example of the issue is the messy way that the struggling retailer raised capital last week, abruptly reversing course after the chief executive said, according to news reports, he didn’t see “conditions for the rest of the year that would warrant raising liquidity.” (The company denies that he made the comments.)

“In the old days, identifying the person in charge was easy,” Mr. Davidoff writes. “Today, the board is increasingly prominent, and chief executives serve at the whim of a sometimes fractious board. Shareholders are also increasingly active, willing to struggle with a board over company strategy and direction. And advisers are always circling, willing to charge fat fees to help, and in doing so, they end up driving the bus.”

Mergers & Acquisitions »

Tesco to Pay $550 Million in Supermarket Deal in China  |  The deal will give the British supermarket chain Tesco 20 percent of a new joint venture with China Resources Enterprise, which will have more than 3,000 outlets in China and Hong Kong. DealBook »

Microsoft Investors Said to Push for Gates to Step Down  |  Reuters reports: “Three of the top 20 investors in Microsoft Corp. are lobbying the board to press for Bill Gates to step down as chairman of the software company he co-founded 38 years ago, according to people familiar with matter.” REUTERS

Cargill Said to Approach Deal for A.D.M. Unit  |  The giant trading firm Cargill “is in the final stages of a deal” to buy Archer Daniels Midland’s cocoa business, Reuters reports, citing unidentified people familiar with the situation. REUTERS

Portugal Telecom to Merge With Oi of Brazil  |  Shares of Portugal Telecom jumped more than 15 percent after the announcement that it would merge with the Brazilian telecommunications giant Oi, of which it is the biggest shareholder, Reuters reports. REUTERS

BlackBerry Reveals Its Slide Is Global  |  BlackBerry said in a regulatory filing on Tuesday evening that customers were turning away from its products in the developing world, which previously had been its one remaining bright spot. NEW YORK TIMES

Qatar Fund Buys Stake in Local Exchange  |  Qatar Holding, an arm of the country’s sovereign wealth fund, bought a 12 percent stake in Qatar Exchange from NYSE Euronext. BLOOMBERG NEWS

New Owner for Harlem Globetrotters  |  Herschend Family Entertainment, a private group that operates Dolly Parton’s Dollywood theme parks, agreed to buy the basketball troupe from the private equity firm Shamrock Capital Advisors. Terms of the deal were not disclosed. DealBook »

INVESTMENT BANKING »

British Banks Wary of Government Mortgage Program  |  The Financial Times reports: “Some of Britain’s leading mortgage lenders have expressed misgivings about the government’s latest ‘Help to Buy’ initiative, leaving the state-backed banks Royal Bank of Scotland and Lloyds as the only pair to have endorsed the scheme.” FINANCIAL TIMES

Dividing Up the Job of Legal Counsel  |  Goldman Sachs and JPMorgan Chase have figured out that allowing the general counsel to also run regulatory compliance invites trouble, Reynolds Holding of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

New Head of R.B.S. Plans to Emphasize Retail Business  |  In his first day as chief executive, Ross McEwan said he wanted the Royal Bank of Scotland to win back the trust of its customers. DealBook »

Barclays Head of Customer Service Resigns  | 
REUTERS

Bank of America Names Sole Head of Asia-Pacific Investment Bank  | 
REUTERS

PRIVATE EQUITY »

Buyout Talks Over MoneyGram Are Said to End  |  MoneyGram International plans to remain a public company after it was not satisfied with talks with private equity firms over a leveraged buyout, Reuters reports, citing three unidentified people familiar with the matter. REUTERS

HEDGE FUNDS »

Icahn Reviews Dinner on Twitter  |  In fewer than 140 characters, the hedge fund billionaire Carl C. Icahn said he “pushed hard” for Apple to do a $150 billion buyback during a “cordial dinner” with Timothy D. Cook, the chief executive of Apple. DealBook »

A Step Toward ‘Peer to Peer’ Lending Securitization  |  A New York hedge fund has taken some of its Lending Club loans and sold them in a $53 million securitization. Are more such deals likely to be on the horizon? DealBook »

I.P.O./OFFERINGS »

Twitter Said to Add Banks to I.P.O.  |  Twitter added the boutique investment banks Allen & Company and Code Advisors to the group of underwriters handling its initial public offering, Bloomberg News reports, citing unidentified people with knowledge of the process. BLOOMBERG NEWS

Re/Max Holdings Raises $220 Million in I.P.O.  |  The real estate brokerage firm priced its initial public offering at $22 a share, above its expected range. BLOOMBERG NEWS

VENTURE CAPITAL »

SAP Ventures Raises $650 Million Fund  |  SAP Ventures plans to use the money for direct investments in industries including mobile and social networking as well as more enterprise-related sectors like Big Data. DealBook »

Quantopian Raises $6.7 Million to Help Traders Make Algorithms  |  Quantopian, whose platform allows so-called quants to create trading algorithms based on unconventional data sets, announced on Wednesday that it had raised a financing round from Khosla Ventures and Spark Capital. QUANTOPIAN

LEGAL/REGULATORY »

Spain Is Expected to Extradite Former JPMorgan Trader  |  The former trader, Javier Martin-Artajo, appears to be fighting extradition, but Spanish authorities are expected to cooperate with the request, a senior prosecutor said. DealBook »

Insider Trading Trial of Mavericks’ Owner Is Under Way  |  Oral arguments began Tuesday in the insider trading case against Mark Cuban. DealBook »

Former Employees Claim Sexual Harassment at Women’s Networking Group  |  Four female plaintiffs say in their complaint that a former manager, also a woman, regularly harassed them and, when they complained, they were fired or forced to resign. DealBook »

Fabrice Tourre Seeks a New Trial  |  The former Goldman Sachs trader Fabrice Tourre, who was found liable on six counts of civil securities fraud after being accused of misleading investors about a trade he helped structure, contends that there was a lack of evidence to support the jury’s decision on some counts and that evidence was not presented in other instances. DealBook »

Tribes Lose Battle to Shield Payday Sites From New York State Crackdown  |  New York State had clamped down on the tribes’ payday lending sites, arguing that their business was carried out beyond the reservations. A federal judge agreed. DealBook »

Doctoroffs to Give $5 Million to University of Chicago Law School

The University of Chicago Law School is expected on Wednesday to announce a $5 million gift to create a business leadership program.

The gift, from Daniel L. Doctoroff, chief executive of the financial data and media company Bloomberg L.P., and his wife, Alisa Doctoroff, president of the UJA-Federation of New York, will create a program that combines law and business classes at the university. It will make available a group of core business courses for all law students, and provide a select group of 15 students per class with a special curriculum, including advanced seminars and an assigned mentor who will provide one-on-one counseling.

“The University of Chicago has a distinguished tradition of scholarship that spans the boundaries of law and business,” the university’s president, Robert J. Zimmer, said in a statement. “Dan and Alisa Doctoroff’s generous gift will allow more students access to that scholarship, and help prepare them for effective leadership across a broad array of enterprises.”

Mr. Doctoroff, a 1984 graduate of the law school who has had a varied career in business and government, said in a statement that it was important for lawyers to have business know-how.

“Throughout my career in government, in business, as an investor and C.E.O., I’ve worked with hundreds of lawyers across dozens of fields,” Mr. Doctoroff said. “Time after time, I’ve seen the value of lawyers who have fundamental business and financial skills, no matter their field of specialty.”

The gift comes as law schools across the United States are overhauling their curriculums in the face of criticism that they have failed to keep up with transformations in the legal profession and the broader changes in the global economy.

Stanford Law School recently completed comprehensive changes to its curriculum, with a focus on allowing students to pursue joint degrees and coursework across various disciplines. New York University School of Law has significantly altered its third-year program to include specialized concentrations in areas like tax or patent law.

The University of Chicago offers a dual-degree program allowing graduate students to attend its law and business schools simultaneously, cramming five years of education into four. But that program, and others like it, requires full tuition payments at both schools, and the soaring cost of graduate education makes such programs prohibitively expensive for most students.

Mr. Doctoroff joined Bloomberg in 2008 as its president and became the chief executive in 2011. He served as deputy director for economic development in the Bloomberg administration for six years, and was perhaps best known for his attempt to bring the 2012 Olympics to New York City.

He earned much of his fortune on Wall Street as a senior executive at the private equity firm Oak Hill Capital Partners. Mr. Doctoroff’s wife, Alisa, is a 1983 graduate of the University of Chicago’s business school. The two met not at Chicago, but as undergraduates at Harvard.