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Brazil government, banks in talks about bailing out companies

BRASILIA/SAO PAULO (Reuters) - Brazil’s Economy Ministry is talking with banks about providing bailouts to sectors such as airlines, automakers, power companies and large retailers to help them survive the coronavirus crisis, bank executives confirmed on Wednesday in live presentations.

Cars pass by Paulista Avenue during a sunset, amid the coronavirus disease (COVID-19) outbreak, in Sao Paulo, Brazil, April 15, 2020. REUTERS/Rahel Patrasso

Reuters reported earlier on Wednesday that Brazil's biggest lenders - such as Banco Bradesco, Itau Unibanco Holding SA ITUB4.SA, Banco Santander Brasil and Banco do Brasil SA BBAS3.SA - have discussed with the country's central bank and development bank BNDES how and which financial instruments could be used to rescue embattled companies.

The auto sector is demanding in talks with government and banks a 100 billion reais ($19.10 billion) bailout, three people with knowledge of the matter said. Still, sources doubted that the package would reach that amount.

"Talks among banks, BNDES and the Treasury have been very productive," Banco Santander Brasil SA SANB11.SA CEO Sergio Rial said in a live presentation to discuss the impact of coronavirus on the economy, mentioning sectors such as airlines, hotels and automakers.

In another live presentation, Bradesco CEO Octavio de Lazari said a bailout for the power sector is likely to be concluded over the next two weeks.

The ministry wants BNDES, whose role Economy Minister Paulo Guedes had previously been seeking to scale back, to lead talks. The development bank could use part of its roughly 80 billion reais ($15.23 billion) cash position to buy conventional or convertible bonds sold by troubled companies, alongside other banks and investors under the ministry’s plan.

A source close to the government said BNDES does not plan to take all the risk in a given company alone, because that would limit the total outreach of bailouts. By sharing risks with more banks and investors, more companies could be helped.

To receive the funds, companies would have to present a restructuring plan to BNDES.

The participants discussed using either convertible debt or loans partially guaranteed by the Treasury, the sources said. But the Treasury is unwilling to directly inject funds into companies.

Divisions remain in the ongoing talks, with the banks willing to cooperate in some way but insisting the government take most of the risk in some cases, the sources said.

BNDES and the Economy Ministry did not comment on the matter.

ONGOING DISCUSSIONS

Rial said discussions with listed airlines and retailers include the use of convertible bonds, which could be redeemed in shares or money in the future.

Airlines including Gol Linhas Aereas Intelligentes GOLL4.SA, Azul SA AZUL.N and Latam Airlines Group SA LTM.SN have previously been reported to be in talks with BNDES about funding.

Azul CEO John Rodgerson said on Wednesday the carrier was still “somewhat far away” from reaching a deal on a loan from the BNDES.

Santander Brasil’s CEO said carmakers are more likely to use debt with collateral, without specifying how it would work. Rial added that hotels could use their real estate assets as collateral for debt.

($1 = 5.2539 reais)

($1 = 5.2367 reais)

Reporting by Carolina Mandl in Sao Paulo and Marcela Ayres in Brasilia; Editing by Paul Simao, Richard Chang, Jonathan Oatis and Cynthia Osterman

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