Distressed funds buy real estate loans as defaults soar

Surging construction costs are sending delinquency rates skyrocketing among Brazilian developers, persuading a growing number of lenders to dump their loans and creating a feast for distressed-asset funds, Bloomerg News reported.

“I’m dealing with explosive demand from banks trying desperately to sell loans they made to construction firms”, said Eduardo Martins, a partner at MGC Holding, one of Latin America’s biggest distressed-asset managers.

MGC, which oversees a face value of 23 billion reais ($4.21 billion) in consumer loans, has hired three executives since August to start a unit to analyse corporate real estate credit.

The delinquency rate for builders reached as high as 20% in May for loans carrying market rates, meaning borrowers weren’t paying on time on 3.4 billion reais in loans, according to the central bank. The rate fell to 4%, or about 141 million reais in defaults in September, a reduction the central bank said could be explained by different forms of debt renegotiation.

Original Story: Bloomberg|Cristiane Lucchesi 
Photo: Photo of Afonso Lima in
Edition: Prime Yield