Carlyle Group LP, the world’s No. 2 private-equity manager, is in talks to sell its stake in Brazilian lingerie maker Scalina SA, following a series of setbacks that led to a debt restructuring, three sources with direct knowledge of the situation said.
According to two of the sources, who requested anonymity due to the sensitivity of the issue, Carlyle and its partners in the maker of Trifil — a popular pantyhose brand in Brazil — including millionaire Artur Grynbaum and the company’s founding Heilberg family, agreed to put the company up for sale following negotiations with creditors.
Under the plan, proceeds from the deal will be used to help repay part of 160 million reais ($48.65 million) in loans that Scalina took from Itaú Unibanco Holding SA, Banco Santander Brasil SA and Banco do Brasil SA, the sources added. As part of the agreement, the banks will take a loss on the principal of the debt, they added.
Representatives from the banks declined to comment, as did Scalina, Carlyle, Grynbaum and the Heilbergs.
Carlyle, Grynbaum and the Heilbergs, who each own about one-third of Scalina, are in advanced talks to sell Scalina to Lupo SA, a rival Brazilian maker of underwear, the sources said. Both the value of Scalina as well as several contractual details are being negotiated, the sources said. Lupo declined to comment.
The debt restructuring and sale underscore how Brazil’s severest recession since the 1930s is straining relations between corporate borrowers and lenders. It also highlights private-equity firms’ reluctance to use their clients’ money to shore up money-losing investments in countries facing severe economic setbacks.
Scalina’s lingerie, swimwear, pyjamas and hosiery are sold in 100 Scala brand franchised stores which are present in shopping malls throughout Brazil. The company employs more than 4,500 people and has three factories.
Family-owned Lupo sells men’s and women’s underwear, sportswear and other apparel in 312 stores.
Many local and global buyout firms have faced losses in investments made during Brazil’s boom years – when valuations were stretched, the Brazilian currency was overvalued and local interest rates reached all-time lows.
The good times for Brazil ended two years ago, as political turmoil and a slump in commodity prices drove the nation into a harsh recession.
Washington D.C.-based Carlyle has invested over $2 billion in Brazilian healthcare, furniture retailing and tourism companies since 2007 on optimism about the country’s long-term growth prospects.
Despite the difficulties with Scalina, Carlyle has continued investing in Brazil, acquiring last year stakes in specialized assistance provider Tempo Participacoes SA and distance learning college Uniasselvi.
In 2010, when Carlyle bought 51 percent of Scalina, revenue was growing at an annual rate of 20 percent.
But one year later, when Scalina’s retail strategy foundered, the buyout firm allowed a new investor group led by Grynbaum to inject cash in the company in exchange for the minority stake.
Carlyle has been trying to sell Scalina for the past three years, since the economy show signs of cooling, the sources said.