RIO DE JANEIRO & SAO PAULO--(BUSINESS WIRE)--Fitch Ratings expects to assign a long-term foreign currency rating of 'BBB-(exp)' to Banco BTG Pactual S.A.'s (BTG Pactual) upcoming issue of senior unsecured notes in Chinese yuan renminbi (CNY) with maturity of three years.
The notes will be issued by BTG Pactual's Cayman branch. The amount of the notes and the interest rate will be set at the time of the issuance. Interest payments will be made semiannually, and the principal will be paid at the maturity of the issuance. The notes are part of a global medium-term notes program of up to USD3 billion and its proceeds shall be used to enable new business generation.
KEY RATING DRIVERS
The expected rating assigned to BTG Pactual's issuance corresponds to the bank's Issuer Default Ratings (IDRs) ('BBB-'; Outlook Stable) and ranks equal with its other senior unsecured debt.
BTG Pactual's IDRs are determined by its viability rating of 'bbb-', which reflects its solid franchise as a merchant bank and solid profitability through economic cycles. Management has expanded the balance sheet rapidly over the last several years, although risk controls are considered strong. These strengths are counterbalanced by weaker leverage and a steady increase of less liquid assets, although the long-term financing is growing accordingly.
RATING SENSITIVITIES
Fitch may downgrade BTG Pactual's VR and IDRs due to a deterioration of its leverage (adjusted leverage above 8x), a decrease in its operating profit ratio or unexpected large trading losses. Also, a sudden deterioration of the operating environment or a troublesome performance of one or more of its subsidiaries may negatively affect BTG Pactual's ratings. Fitch believes that the potential for near-term rating upgrades is limited due to the bank's business model, wholesale funding structure, and weak leverage. Future upgrades would be dependent on a broader business mix, consistent adjusted leverage below 5x, and a lower share of income derived from proprietary trading.
Founded in 1983, BTG Pactual is controlled by Andre Esteves, the main executive of UBS Pactual until 2008 and one of the controlling partners of the former Banco Pactual S.A.
Additional information available at 'www.fitchratings.com' or 'www.fitchratings.com.br'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Securities Firm Criteria' (Aug. 15, 2012).
Applicable Criteria and Related Research
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Securities Firms Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686137
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