People walk to Brookfield Place off Bay Street in Toronto in this file photo.© Mark Blinch / Reuters
Brookfield Asset Management Inc., Canada's largest alternative-asset manager, is considering investing more than 3.3 billion reais ($1.1-billion) in Brazil, with distressed assets accounting for about two-thirds of the total, according to two people with direct knowledge of the matter.
Commercial real estate, sugar, ethanol and construction are some of the businesses Toronto-based Brookfield is considering because they've been hit hardest by tumbling prices and a credit squeeze, the people said, asking not to be identified because the plans are private. Brookfield already acquired a portfolio of renewable-energy assets from Energisa SA for 1.4 billion reais, excluding debt, in November, and bought a $312-million Sao Paulo property in September.
"We have historically been very successful in acquiring large-scale businesses during periods when capital has been constrained," Sam Pollock, chief executive officer of Brookfield's infrastructure-investing unit, said in a February letter to investors. Kristhian Kaminski, a spokesman for the firm, declined to comment on specific investments.
Asset prices in Brazil have dropped amid forecasts Latin America's largest economy will suffer its worst contraction in a quarter century this year, and as the government struggles to shore up fiscal accounts and tame inflation to avert a credit– rating downgrade. Fallout from Petroleo Brasileiro SA's corporate-corruption scandal has also trapped suppliers of the company, known as Petrobras, in a credit squeeze.
OAS Financing
Brookfield's new investments may include 800 million reais in financing for OAS SA, the construction company that filed for legal protection from its creditors in Sao Paulo last month, the people said. OAS was banned from bidding on new projects with Petrobras amid an investigation into whether its executives received bribes in exchange for work contracts.
Brookfield, which was founded in Brazil in 1899 as Brascan Ltd., would provide financing enabling OAS to pay its creditors in exchange for a stake in Invepar, an airport and toll-road operator, according to the people. OAS owns 24.4 per cent of Invepar.
OAS's director of corporate development, Diego Barreto, said on April 22 in Sao Paulo that the company was negotiating the 800 million reais debtor-in-possession financing, without citing the name of the possible creditor. He declined to comment about negotiations with Brookfield.
BTG Pactual
A Brookfield unit teamed up with Grupo BTG Pactual in February to take private BR Properties SA, whose shares have dropped 60 per cent from their peak in October 2012. If all current shareholders decide to sell, Brookfield would invest 405 million reais to buy the stock while holding on to some of the firm's properties, according to a Feb. 26 regulatory filing.
The deal wouldn't affect BR Properties' junk rating of BB, according to Standard & Poor's.
An additional 560 million reais of new investments could be added to the total if Brookfield buys BTG's stake in a commercial real estate property known as WTorre Morumbi. That transaction depends on BR Properties being taken private, according to the regulatory filing.
Real estate prices fell 3.1 per cent in the first three months of this year discounted for inflation, according to the FipeZap home-price index.
The Brazilian real fell almost 28 per cent against the dollar in the past year, the biggest drop among the world's major currencies, according to data compiled by Bloomberg. That makes Brazilian assets cheaper for foreign investors such as Brookfield.
Renuka Talks
The Canadian asset manager is also in advanced talks to acquire sugar processor Renuka do Brasil SA for about 1.5 billion reais in debt, two people with direct knowledge of the matter said on April 17.
Brookfield will take on the debt and negotiate with Renuka's creditors over repayment terms, the people said.
Brazil's sugar producers have been struggling after prices for the commodity tumbled to a six-year low and the worst drought in eight decades wreaked havoc on producers' ability to meet obligations.
Brookfield has been in talks to inject capital in sugar and ethanol producers Tonon Bioenergia SA and Virgolino de Oliveira SA, which are seeking to restructure dollar debt, three people with knowledge of the matter said on April 17.
Officials at BR Properties, Renuka, Tonon and Virgolino de Oliveira declined to comment.
Falling prices have attracted investors besides Brookfield. Peninsula Investimentos SA, the Brazilian asset-management firm backed by Credit Suisse Group AG, plans to raise a fund of as much as 500 million reais to buy distressed corporate loans, according to CEO Antonio Quintella.