Credit Suisse, Jive raise largest Brazil distressed asset fund

SAO PAULO: Credit Suisse Group AG and Jive Investments Holding Ltd raised Brazil's largest-ever distressed asset fund, underscoring growing interest in an asset class that has become the flavor of the month as Latin America's largest economy slips into recession.

So Paulo-based Jive raised 500 million reais ($145 million) from Credit Suisse's private-banking clients in Brazil seeking to diversify into toxic credit and real estate assets, Jive said in a statement. The fund will be called Jive Investments, the statement added.

The appetite for problematic property, defaulted loans and other distressed assets is surging in Brazil, where inflation is eroding disposable income and households are defaulting on their loans at the fastest pace in six years. Companies are also succumbing to flagging sales and rising borrowing costs, stoking fire asset sales and loan defaults. Economists expect Brazil's economy to shrink this year at the steepest pace since 1990. Reuters had reported the joint fundraising efforts between Jive and Credit Suisse last month.

The fund was raised among 50 Brazilian clients at Credit Suisse in a so-called restricted effort offering, a source with direct knowledge of the situation said on Monday.

Public offerings with restricted efforts differ from standard ones in that a fund does not have to request registration of the plan with regulators, only qualified investors can participate, and the deals cannot be marketed through road shows or the media.

Distressed asset funds acquire large credit pools from a bank at a steep discount and then rework each loan individually, profiting after repackaging them into securities, taking over the collateral or restructuring the debt. Funds also make money with toxic property deals by buying them on the cheap and then disposing of them at a higher price.

Brazil's downturn is quickly hitting the quality of credit card, auto and low-ticket working capital loans.

Collateralized credit such as payroll or mortgage credit have performed relatively well, although signs of deterioration are showing.

Jive, which has about 200 million reais under management, is Brazil's largest independent buyer of distressed assets.

Credit Suisse Hedging-Griffo oversaw about 47 billion reais in client money.