Distressed Funds Buy Brazil Real Estate Loans as Defaults Soar

Surging construction costs are sending delinquency rates skyrocketing among Brazilian developers, persuading a growing number of lenders to dump their loans and creating a feast for distressed-asset funds, Bloomberg News reported. “I’m dealing with explosive demand from banks trying desperately to sell loans they made to construction firms,” said Eduardo Martins, a partner at MGC Holding, one of Latin America’s biggest distressed-asset managers. MGC, which oversees a face value of 23 billion reais ($4.21 billion) in consumer loans, has hired three executives since August to start a unit to analyze corporate real estate credit. The delinquency rate for builders reached as high as 20% in May for loans carrying market rates, meaning borrowers weren’t paying on time on 3.4 billion reais in loans, according to the central bank. The rate fell to 4%, or about 141 million reais in defaults in September, a reduction the central bank said could be explained by different forms of debt renegotiation. Read more.