LATAM WRAP-BTG bonds tailspin on CEO's arrest

(Corrects day to Wednesday in 1st, 5th, 10th paragraphs)

By Paul Kilby

NEW YORK, Nov 25 (IFR) - Bonds issued by BTG Pactual were leading the Brazilian bond complex lower on Wednesday following news of the arrest of the bank's CEO and a ruling party senator.

The bank's recently issued perp bond suffered a 20 point collapse to hit 70-74, while the senior 2020s fell a good 16 points to trade at 72.00-75.00.

BTG Pactual's CEO Andre Esteves was seen as one of the wunderkinds of Brazil's boom years, and his arrest as part of the corruption investigation at oil company Petrobras is seen having broad implications for what is now the country's largest investment bank.

"This is a bank that relies on wholesale funding and it is really dependent on perception," said a New York based investor. "Their cost of funding will increase substantially, and best case scenario their profits will go lower. Its magic touch has gone."

While the bank itself has not been accused of wrongdoing, Moody's said Wednesday that the prolonged absence of Esteves could be credit negative for the bank.

The rating agency, nevertheless, underscored BTG (LSE: BTG.L - news) 's access to liquidity and its track record in managing market risks.

"Notwithstanding its dependence on market funds, the bank can count on a large pool of liquid resources," said Alcir Freitas, senior bank analyst at Moody's, which has a negative outlook on the bank's Baa3 rating.

Other observers agree that BTG Pactual's ability to access reasonably priced funding is still not an issue.

"I am not sure this is a main concern because they can still finance themselves in the interbank market," said Klaus Spielkamp, head of fixed-income sales at Bulltick. "The international market is closed anyway for any Brazilian issuer so that doesn't change anything."

Still, the unusual arrest of ruling Workers' Party senator Delcidio Amaral on Wednesday has only created more uncertainty among investors, lending further weight to secondary bond prices in Brazil.

"I never expected to see the arrest in Brazil of a ruling senator. It (Other OTC: ITGL - news) is very difficult," said the investor. "The mere fact they went after a senator is a game-changer."

The 2024s issued by Petrobras were also falling in sympathy and were down about two points to hit 79.00, while the sovereign five-year CDS was about 25bp wider at around 425bp.

"Today Brazil is a mess," said a New York based trader.

PIPELINE Arcos Dorados, the largest McDonald's franchiser in South America, held a Swiss roadshow in the week ended November 6 via Credit Suisse (LSE: 0QP5.L - news) . The Argentina-based, NY-listed company is rated Ba3/NR/BB+.

Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays (LSE: BARC.L - news) , Bank of America (Swiss: BAC.SW - news) Merrill Lynch, Citigroup (NYSE: C - news) and JP Morgan. Ratings are BB+/BB+.

Mexican REIT Fibra Uno completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.

Brazilian airline Gol (B3/B-/B-) has completed roadshows with Morgan Stanley (Xetra: 885836 - news) , Credit Suisse and Citigroup. (Reporting By Paul Kilby; Editing by Jack Doran)