With the huge challenge of getting Correos out of the worst crisis in history, the head of the state-owned company, Emmanuel Rondon, received a stern message from the National Treasury at a meeting on Tuesday: there is no chance for the body to grant approval for a loan at an interest rate higher than the approved standard for this type of operation, which is 120% of CDI.
Despite the bad news for the state-owned company, which is looking at at least R$10 billion for a short-term break, Rondon was not the last recipient of the Treasury’s letter. It was directed to inform banks that the government would not accept creditors putting a “knife at the throat” of any federal state-owned enterprise.
The 136% CDI rate offered by the consortium BTG Pactual, Citibank, ABC Brasil, Banco do Brasil and Banco Safra is considered “abusive” to a consortium-approved process. In practice, if the company does not pay, the Treasury assumes the liability, with no risk of default for the financial institution.
The Treasury Guarantees Committee determines the maximum cost that must be considered in order for the operation to be eligible for Union approval. For a loan lasting more than 10 years, this maximum is 120% of CDI.
In theory, it is possible to negotiate the flexibility of the interest ceiling depending on the risk of the operation, but in the case of Curios, this option was ignored. The Treasury did not even analyze the other terms of the loan – the cost served as the cancellation criterion.
The strategy is to put pressure on financial institutions to improve loan conditions. BTG, Citi and ABC Brasil already have an active contract worth R$1.8 billion with Correios, without guarantee. Therefore, they will be interested in exchanging the process, to ensure that they get money.
However, the loan is also important for the government, because ultimately, if solutions are not found for the SOE, the company may become dependent on the union. In this case, the company’s expenditures for space must compete with other expenditures, such as public policies. But the economic team was already thinking of other alternatives.
The Treasury’s refusal cut off Correos’ second attempt to raise R$20 billion and raised doubts about the company’s ability to reverse its dire financial situation.
On the SOE side, it is a good time to evaluate the possibilities, but the company must “start a fight” with institutions to try to lower interest rates. Post Office leadership should continue to insist to banks that it is not necessary to “solve everything at once.”
The idea is to replicate that the process can be split at a lower value initially, but at a more reasonable cost. This was the strategy of the second round of negotiations, which aimed to obtain at least R$10 billion in the short term, but it had no effect, as the terms were quite similar in the offer now rejected by the National Treasury.
Caixa Econômica Federal was excluded from the negotiations and did not participate in the credit offer to Correios. But the bank’s management can enter into negotiations if the government asks it to do so. In partnership with BB, there is potential for a lower price to help Correios, an executive said. Interest is due to the treasury guarantee.