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Investment Bank Spinning Off Commodity Trading Unit, Default Service Supplier

April 8, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

BTG Pactual has decided to implement the separation of its commodity trading activities, with the exception of those activities carried out by the Brazil energy trading desk ("Commodities Platform") from the operational structure of BTG Pactual and to rearrange the Commodities Platform under a new Luxembourg-based company named Engelhart Commodities Trading Partners.

In the U.S., BTG Pactual acts as a default service supplier, among other activities

The Commodities Platform will operate separately from BTG Pactual under the new brand name Engelhart Commodities Trading Partners, with limited administrative and operational services to be provided by BTG Pactual based on arm’s length contracts in accordance with market practices, including cost sharing and infrastructure sharing agreements, until such services are fully assumed by Engelhart CTP.

The new company will have approximately $ 1.6 billion in shareholders’ equity and $5.7 billion in total assets (based on the reference date of February 29, 2016). It is anticipated that a portion of such equity will be held by senior employees of Engelhart CTP under an incentive program, the material terms of which have been agreed and which are now being set forth in definitive agreements.

"BTG Pactual is currently considering a transaction involving the delivery of approximately 65% of its equity stake in Engelhart CTP to BTG Pactual’s shareholders and, upon completion of the Transaction, BTG Pactual should no longer be required to consolidate the assets and liabilities of Engelhart CTP for accounting and regulatory purposes and, accordingly, BTG Pactual will recognize the remaining stake it holds in Engelhart CTP after the Transaction as an investment in an associate entity based on the equity method. This deconsolidation is another step towards the simplification of BTG Pactual’s balance sheet, and upon its conclusion, coupled with the completion of the previously announced sale of BSI S.A., should result in a 500 bps increase in the total Basel ratio of BTG Pactual," BTG Pactual said

"The Separation is the outcome of this growth and maturity, representing a distinct business model apart from BTG Pactual’s other core business areas. The Separation is expected to allow for the optimization of the Commodities Platform’s capital structure and enable the business to operate independently in a manner that is compatible with those of its main competitors, including the ability to operate under a more suitable global credit risk profile," BTG Pactual said

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