Banco do Brasil default rate driven up by Novonor, says source

By Marcela Ayres

BRASILIA, Feb 13 (Reuters) - Banco do Brasil's 90-day delinquency ratio was hit in its fourth quarter by a 3.6 billion reais ($689.27 million) default by engineering group Novonor, a source with knowledge of the matter said on Friday, requesting anonymity because of confidentiality restrictions.

In its latest earnings report, Banco do Brasil had said that a single corporate exposure helped push its default ratio to 5.17%, adding that without this impact the ratio would have stood at 4.88%.

The lender did not name the company, citing bank secrecy rules, and declined to comment on Friday for the same reason.

According to the source, Novonor's debt is secured by shares in Brazilian petrochemical producer Braskem and fell into default during negotiations with creditors.

The debt was regularized in January and has since been assigned by all creditors to private equity firm IG4 Capital, which is awaiting regulatory approval to take possession of the shares, the source added.

Local media reports on Thursday had suggested that Braskem was the company behind the spike in Banco do Brasil's delinquency ratio, prompting the petrochemical firm to file a securities disclosure later that day denying the claim.

In December, IG4 agreed to buy roughly 20 billion reais ($3.83 billion) in Novonor debt held by major Brazilian banks and secured by Braskem shares. Novonor would in turn transfer its controlling stake in Braskem to an IG4-backed investment fund.

The deal is poised to finally ease Novonor's heavy debt burden, which swelled during the "Car Wash" corruption scandal a decade ago, when the group, then known as Odebrecht, pledged its Braskem shares as collateral for 15 billion reais in loans.

Novonor has long sought to sell its controlling interest in Braskem but repeatedly failed to close a deal.

($1 = 5.2229 reais)