Grupo BTG Pactual stock plunged Monday after Brazilian billionaire Andre Esteves was jailed indefinitely and resigned all of his posts at the firm he helped build. The bank's leaders spent the weekend in emergency talks to sell assets and acquire his controlling stake.
Shares tumbled as much as 14% in Sao Paulo, extending the drop since Mr. Esteves was arrested to 34%. Yields on the bank's $1 billion in bonds due 2020, its most liquid dollar-denominated notes, dropped 0.1 percentage points to 11.66% midday Monday, after having peaked at 12.32% on the day of the arrest.
Roberto Sallouti and Marcelo Kalim, both partners at the firm, will take over as co-CEOs, the company said late Sunday. Persio Arida, who was named interim CEO when Mr. Esteves was arrested in a corruption probe last week, will become chairman. Huw Jenkins, a partner who is also a member of the company's board, will serve as vice-chairman.
BTG is racing to calm investors after Mr. Esteves' arrest Nov. 25 sent the shares down 21% that day, doubled yields on the lender's benchmark bonds and prompted clients to pull 4.2 billion reais ($1.1 billion) from some of its most liquid fixed-income funds in two days. (The withdrawals represent about a third of the combined net assets of the 10 fixed-income funds listed on the bank's website.)
Mr. Esteves is being held on suspicion that he tried to interfere with testimony of a former executive of Petroleo Brasileiro SA who was jailed in January under allegations of paid bribes.
BTG's appointment of new leaders wasn't prompted by a belief that Mr. Esteves engaged in wrongdoing, but instead by a need to navigate the turmoil set off by his arrest, according to a person close to the discussions.
In a letter sent to clients Nov. 27, Mr. Arida said the bank was on solid footing and not part of any investigation.
Mr. Esteves has long been synonymous with the firm, guiding it through rapid growth and famously joking that its name stands for “better than Goldman.” BTG's partners, seeking to insulate the bank from his travails and stem fund withdrawals, are trying to work out terms to buy his controlling stake, a person with knowledge of the matter said Sunday, asking not to be identified because discussions are private.
As part of a push to boost cash, the bank is looking to sell its remaining 12% stake in hospital chain Rede D'Or Sao Luiz SA, two people with knowledge of the matter said late last week. The most likely buyer is Singapore sovereign wealth fund GIC, a person with knowledge of the matter said Sunday.
BTG spokesmen declined to comment on the bank's next steps, asset sales or fund withdrawals. Representatives of Rede D'Or and GIC declined to comment. It might take days for a deal to be hashed out, one person said.
The group is also mulling options for its commodities business including bringing in external investors to bolster funds, according to people with knowledge of the plan. It is considering whether to spin the commodities arm into a separate entity, one of the people said, asking not to be identified because the details are private. The board has made no final decision on the strategy.
