Cruzeiro Debt Buyback Deadline Extended; Shares Soar

The administrator of Brazil's Banco Cruzeiro do Sul gave bondholders a few more hours on Thursday to agree to a debt buyback that is central to saving the lender from bankruptcy, Reuters reported. Privately owned deposit guarantee fund FGC planned to analyze bondholders' responses until 1800 local time (2100 GMT), buying more time to consider takeover bids for the lender, according to a securities filing. The prior deadline on the debt buyback expired at midnight Wednesday. A lack of firm takeover bids threatens Cruzeiro do Sul, which the central bank seized on June 4 following fraud-related losses, with liquidation. FGC's failure to win a 90 percent approval from bondholders for the debt buyback is likely the main reason a sale of the bank has not yet been sealed. "It's in the interest of all parties involved and the banking system as a whole that Cruzeiro do Sul finds a buyer," a financial industry consultant who advised the FGC in previous similar deals told Reuters, speaking on condition of anonymity. "It's hard to tell at this point if this story will end well." The FGC is seeking to convince bondholders to accept an average 49.3 percent discount on the value of their Cruzeiro do Sul bonds. The lender has $1.59 billion in outstanding, dollar-denominated bonds. A liquidation of Cruzeiro do Sul would be Brazil's second bank liquidation since October and the nation's biggest bank collapse since Banco Santos was shut down in 2005 amid allegations of fraud. Years of fast credit growth resulted in deteriorating funding and liquidity conditions for mid-sized lenders and, in some cases, led to the relaxation of accounting controls. Read more.