(Corrects headline and first paragraph to show honoring of debt obligations may be shorter than 180-day period.)
Brazil’s privately owned deposit insurance fund, known as FGC, will pay all of Banco Cruzeiro do Sul SA’s obligations coming due while the lender is under the FGC’s control.
“Whenever the product is mature, the FGC on behalf of Cruzeiro will honor it, no matter what kind of instrument,” Fausto Guimaraes, head of investor relations for Cruzeiro do Sul, said during a conference call.
Brazil’s central bank took control of the lender yesterday through the FGC after saying it found “serious” financial violations. The FGC’s control could be extended for another 180 days beyond the original six-month period if needed, Fabio Mentone, an FGC board member, said during the call today.
Debt payments during the intervention period are being funded by assets Cruzeiro do Sul sold to the FGC in an asset- backed receivables fund last year. The fund has 2.3 billion reais ($1.1 billion) to be disbursed during the remainder of the 180-day period, Mentone said.
“We are confident this portfolio is good,” Mentone said. “We do not have a problem with future disbursements for the next 180 days.”
Cruzeiro do Sul has $175 million of senior unsecured dollar bonds maturing on Sept. 17, 2012. The bonds traded at 59.85 cents on the dollar at 1:30 p.m. in Sao Paulo, according to data compiled by Bloomberg. They traded at 97.82 cents on the dollar on June 1.
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