top of page

Anti-Stress Funds Lend R$ 20 Billion and Prevent Widespread Defaults

Writer's picture: Seneca Evercore | NotíciasSeneca Evercore | Notícias

(Folha de S. Paulo) - By Julio Wiziack

July 29, 2023


Daniel Wainstein has been on the other side of the table. He served as president of Goldman Sachs in Brazil and knows how tough it can be for a bank to lend to struggling groups.


Now, as a partner at Seneca Evercore, a subsidiary of the investment bank Evercore, he helps Brazilian groups find partners, especially foreign ones. He estimates that two out of every ten deals are now being handled by funds that rescue companies from financial distress.


Fitch said Lula would take statist measures if it weren’t for Congress acting as a counterweight. Do you agree? I disagree and think that’s a bias. Lula has a more radical discourse for his base. However, he is pragmatic and understands the need for a calm and trusting environment to attract investment. The progress made with the tax reform and fiscal agenda was significant. It demonstrated strong coordination with Congress.

Has the risk perception changed? The elections marked the worst moment. The country’s default risk reached 5%. Today, it’s at 2.5%, consistent with a BB rating. When risk drops like this, investors return. Since April, we’ve noticed this shift.


How many deals are you working on, and what areas interest investors?We closed ten deals in the first half of the year and currently have 35 in progress. Foreign investors who have never operated here are showing interest in infrastructure, alternative energy, and financial services. About 20% of these deals involve what we call special situations funds. With the worst liquidity crisis of the past decade, these funds have saved companies from bankruptcy.


How so?Like in politics, the market doesn’t leave a vacuum. Imagine a company whose revenue drops by 30%, burdened by debt taken out when the Selic rate was 2.5% but now sits at 13.75%. The financial cost skyrocketed. These funds have taken on a role banks typically play by providing credit.


How much have they injected into the market?I estimate around R$ 20 billion. It’s hard to project because companies don’t like to disclose these transactions—it’s a warning sign of financial stress.


Was this liquidity crisis caused by the Selic rate hike or the Americanas case?Interest rates quintupled, rising from 2% to 13.75%. Corporate debt servicing costs soared, while profits, used to pay down debt, plummeted. It was the perfect storm. There was the Americanas case, the Light case, but the issue was broader. The capital to rescue these companies came from special situations funds.


Profile | Daniel Wainstein, 53Education: Bachelor’s in Economics from USP and an MBA from the University of Rochester.Career: Started his career at Lehman Brothers and also worked at Greenhill; served as president of Goldman Sachs in Brazil for 13 years and is a senior advisor for the IFC in Brazil.


0 views

Comments


Commenting has been turned off.
Seneca Evercore Logo Branco

The information contained in this website is solely for information purposes and should not be interpreted as an offer, recommendation or investment analysis. Seneca Evercore does not sell or distribute securities.

Av. Brigadeiro Faria Lima, 2277, 19º andar  

São Paulo - SP, 01452-000

Brazil

Email: info@senecaevercore.com

Tel: +55 (11) 2039-0600

  • Ícone do LInkedin Branco
bottom of page