Americanas: judicial recovery is still a stigma – 01/13/2024 – Market

The number of requests for judicial recovery of companies rose by almost 73% in 2023 compared to 2022, after two years of decline, according to projections by EXM Partners based on data from Serasa Experian.

Despite the increase in volume compared to the previous year, last year had a number of processes close to the average for the years before the Covid-19 crisis.

Even so, the topic received greater attention, driven by the lawsuits of large companies such as Americanas, Oi (which made the second request in six years), Light, Petrópolis and Southrock, which went to court to ask for authorization to reorganize the house without their creditors execute their debts.

Others, such as Marisa, TokStok and Amaro, adopted measures such as restructuring, the first two, and extrajudicial recovery, the second. The chocolate factory Pan and Saraiva filed for self-bankruptcy and Livraria Cultura had to appeal to higher judicial authorities to suspend its bankruptcy.

During the pandemic years, interest rates were low, the government paid benefits that stimulated consumption, gave incentives to sectors and credit institutions postponed deadlines. In 2023, the hangover came hard.

Basic interest rates reached 13.75% at the end of the previous year, consumption was reduced, bills began to fall due and despite the tacit end of the pandemic, there was no movement towards resuming activities.

The projection of EXM Partners, a consultancy specializing in judicial recovery and restructuring, is that 2023 will have closed with at least 1,400 requests. From January to November, the latest data available, 1,303 cases were sent to court.

The penultimate month of the year concentrated the volume of requests, there were 175, most of them in the services sector (112) and classified as micro and small companies (137). Luiz Rabi, economist at Serasa, says that despite the improvement in companies’ default rates (with the Selic rate retreat), the scenario of judicial recoveries has reacted at a slower pace.

For Angelo Guerra Netto, partner at the consultancy, growth in 2023 takes the situation to the levels recorded before the pandemic, or a certain normality. “What grew was [a presença] of large companies. The overall result is a return to the historical bases recorded from 2015 to 2019”, he states.

Even though domestic and macroeconomic scenarios intervene, what leads companies to request RJ is, almost always, bad management, says Guerra – ex-PWC, he has worked for 20 years as an independent auditor and since 2007 with restructuring and judicial recovery.

According to the executive, the failures range from investments in bad assets and capital immobilization to difficulties with the modernization of production processes. Even in cases where the trigger was different, the end of the line will be improper management.

This is the case of Samarco, the mining company responsible for the tailings containment dam in Bento Rodrigues, and which became known as the Mariana environmental disaster, in Minas Gerais, which occurred in 2015. In 2023, the mining company, an association between Vale and BHP Biliton, reached an agreement with its creditors.

For this company, management failures did not affect the cash flow, but the image crisis that followed the disaster (which resulted from management problems) ended up leading the company to collapse.

For Ana Beatriz Moroni, lead partner of Deloitte’s restructuring area, Brazil still has a large volume of family businesses, where a certain denial of the financial situation ends up prevailing, until it is too late.

Companies avoid seeking mechanisms such as restructuring and recovery due to the potential damage to the company’s image. What could be a restructuring turns into a recovery, and an RJ can turn into bankruptcy.

Maílson da Nóbrega, former Minister of Finance and partner at Tendências Consultoria – the company is currently providing services to Americanas – considers that, in the retailer’s case, “no one can deny that its reputation is damaged”.

Therefore, Maílson believes that there is a lot of interest in the company’s recovery. “It will not be next year that Americanas will be recovered. It is a gradual process of fully reestablishing trust with suppliers.”

He assesses that the recovery of Americanas is also important for the credit market to reestablish itself and return to the level of supply before the crisis.

According to a Delloite survey released in December, businesspeople, judges and lawyers consider that insolvency processes are still associated with a negative image, of a company about to close its doors without paying what it owes.

This is not quite the case, but it also does not mean that creditors go through the processes unscathed. When the RJ request is accepted, the company is able to suspend its obligations to creditors and consumers for 180 days.

The period is used to survey and classify creditors and construct the judicial recovery plan, in which the debt payment parameters and the discount are defined, that is, the discount on the updated value.

Breno Miranda, from Ibajud (Brazilian Solvency Institute), says that the system has been evolving since 2005, when the first version of the bankruptcy and judicial recovery law was published. Until then, concordats, as bankruptcies were called, were regulated by decrees.

In his assessment, even if there is misuse of judicial recovery, improvements in legislation help to narrow down cases, such as the creation of prior verification, which came into force at the end of 2020. This expertise is carried out before the judge decides whether the process whether or not RJ is able to follow.

The expert informs the judge whether the company exists, whether it is active, and the size of the business group. This is what happened in the case of Southrock, the controller of Starbucks in Brazil.

For Angelo Guerra, from EXM, the previous observation has caused the level of processes to rise. “As a result, the request for judicial recovery no longer has the objective of merely delaying bankruptcy, there is a filter at the start.”

The filter reduced the number of approvals, which are no longer almost automatic, but the number of processes closed with the company’s recovery tends to increase. Despite the deterioration of the image of judicial recovery, cases in which the company continues to operate until the process is closed are common – this is what happened with Viracopos, for example.

Another recent change that improved the progress of these processes was the creation of specialized courts. In 2019, the CNJ (National Council of Justice) published a recommendation for courts of justice to create chambers or classes specializing in bankruptcy, judicial recovery and other topics linked to business law.

The creation of these courts changed the processing panorama of recovery and bankruptcy requests, making them faster, especially those presented in districts in the interior of the states, where the same judge accumulates cases on the most diverse subjects.

According to the CNJ, only eight Brazilian states have specialized courts: Ceará, São Paulo, Tocantins, Paraná, Santa Catarina, Mato Grosso, Mato Grosso do Sul and Espírito Santo. Together, these courts have 20 courts dedicated to bankruptcy and RJs.

‘Endless’ bankruptcies should become less common

Distant bankruptcy cases, some without any procedural movement for years, should start to become rarer. In Deloitte’s survey on the market’s impressions regarding the current bankruptcy scenario, interviewees reported optimism regarding the speed of processes.

Ana Beatriz Moroni, lead partner of the consultancy’s restructuring area, says that there is now greater concern about accelerating the liquidation process. The recent bankruptcy of the Pan chocolate factory is a case in point. It took seven months between the declaration of bankruptcy and the first auction of the company’s assets.

The federal government wants the duration of processes to be cut in half. Bill sent to Congress on Wednesday (10) changes the law so that creditors can appoint a judicial administrator and to accelerate the payment of labor claims even when there is a dispute between priorities.

Júlia Moura collaborated