PR and Itaú end dispute that threatened to sell Copel – 04/10/2023 – Market

The government of Paraná and Itaú bank sealed an agreement in the STF (Federal Supreme Court) to end one of the largest debt collections in Brazilian history, also removing an obstacle to the privatization of Copel, the energy company in the southern state.

After mediation by Minister Ricardo Lewandowski, who retired last week, the debt of R$ 4.5 billion will have a 62% discount. The remaining BRL 1.7 billion will have to be settled in two years, avoiding involving court-ordered payments, which could end up exceeding BRL 7 billion with interest, according to Paraná accounts.

The confusion began in 1998, when the government of Paraná pledged shares of the state energy company as collateral for a loan taken out by Banestado, the local state bank. In 2000, the bank was sold to Itaú Unibanco, in a deal worth R$1.6 billion at the time (R$6.6 billion today, in restated amounts).

As the government of Paraná stopped paying the debt in 2002, Itaú went to court to keep the Copel shares used as collateral. As they are real assets, they would avoid the use of precatorios, debts recognized by governments that are the constant subject of negotiations, defaults and payment extensions.

The government appealed, and the state court ruled in its favor, arguing that Copel’s shares could not be acquired by the bank without a privatization process or the energy company going public. Itaú went to the STJ (Superior Court of Justice), which saw constitutional issues involved and, now, the case has been resolved in the Supreme Court.

With all this, the settlement made this Monday (10) seems to close the issue once and for all and removes the specter that the question of the shares in dispute could hinder the energy privatization process. It was proposed to the Legislative Assembly by Governor Ratinho Junior (PSD) last year, and approved.

The expectation is that the auction will take place until October and be one of the biggest of the year at B3, although it should still face legal challenges by sector unions.

“Paraná is going to end up with a debt of more than 20 years that could compromise the public coffers for the next ten years”, celebrated Ratinho Jr., who affirmed that the discount obtained in the negotiation “demonstrates responsibility with the public accounts”.

Itaú has yet to comment. In the final analysis of the case, Lewandowski states that there were “reciprocal concessions” and that “the negotiated installment plan will allow the public administration to plan ahead and predictably”.

Both Copel and Banestado were at the heart of famous scandals in the 1990s. Doleiros operated special bank accounts abroad, in a preview of what would be seen in the investigations of Operation Lava Jato about money laundering —with the protagonist Sergio Moro, then judge and now a senator for the União Brasil do Paraná. Energy, which had its privatization postponed since that time, was the target of fraud.