Americanas must have more difficult judicial recovery – 01/24/2023 – Market

Americanas’ judicial reorganization, authorized last Thursday (19), has the potential to be one of the most complex and far-reaching in Brazil’s recent history.

Experts consulted by Sheet estimate that the retailer will have difficulties in restructuring itself, even more so than companies with larger debts and that have gone through the same process in recent years, such as Odebrecht, Oi and Samarco.

The company’s current financial condition, the peculiarities of the business model and the dispute with creditor banks are some of the elements that should affect Americanas’ ability to raise funds to honor its obligations.

The case already differs from others by the speed at which it unfolded. The crisis was triggered on January 11, when CEO Sergio Rial resigned from his position and revealed that the company had been “hiding” debts equivalent to R$ 20 billion in its balance sheet.

The announcement of the accounting scandal started a battle between the retailer and its biggest creditors, which culminated in a request for judicial recovery in less than ten days.

With a total debt of BRL 43 billion, Americanas ranks fourth among the largest judicial recoveries in Brazil, behind only Odebrecht (BRL 80 billion), Oi (BRL 65 billion) and Samarco (BRL 55 billion) . Soon after come Sete Brasil (R$ 19 billion) and OGX (R$ 12.3 billion).

For Marcela Cavallo, specialist in business law at Zilveti Advogados, the retailer’s situation may be one of the most difficult among major lawsuits due to the lack of assets to face the crisis.

“Oi, for example, had gigantic contracts. In addition, it sold the mobile service, which was basically what took it out of the ICU”, he says.

Like the telecommunications giant, Odebrecht also had strong assets, which signaled to creditors not only the ability to generate cash to honor the debt, but also a certain liquidity reliability.

Artur Lopes, a partner at Iwer Capital, a consulting and management company, recalls that Americanas even has assets to dispose of and operations to demobilize. However, the impact would be negligible given the size of the debt.

The retailer owns Hortifruti Natural da Terra and Uni.co, in addition to having a stake in Vem Conveniência, a joint venture with Vibra (formerly BR Distribuidora).

“Americanas’ business is to buy from the industry and resell. If it doesn’t have working capital to buy, it’s dead”, he says.

This is a peculiarity that adds another challenge for the company. Dependent on capital to run the business, the retailer entered into a dispute with its main creditors in the days leading up to the request for judicial recovery.

The retailer even claims to be the victim of a “real attack” by the banks, which blocked receivables and reduced the company’s cash to R$250 million.

According to Cavallo, given the lack of assets to liquidate, Americanas’ strategy to honor its debts must involve obtaining investments. “But if the main financial institutions are at war with the retailer, who will invest in it?”, he asks.

The lawyer says it is not uncommon for companies undergoing judicial recovery to do business and attract investment. The problem is precisely the size of the debt in question: R$ 43 billion.

“It is not two investors that are going to solve this problem, there are several. It needs a set of operations. So Americanas will be in the hands of third parties and that leaves the company very vulnerable.”

The difficulty in raising capital poses another problem: the relationship with suppliers. Confidence that they will receive payment is essential for them to agree to do business with the company, which depends on these partners’ goods.

Wagner Moraes, founder of A&S Partners, says that if Americanas loses purchasing power, suppliers will want to sell in cash, and the retailer will not have cash to maintain the same volume of acquisitions.

“There will be a strong rupture in the recomposition of stocks. This reduces the amount of products available in the store, which is directly reflected in a drop in sales and, logically, in the need to reduce the structure”, he says.

Unless there is a large injection of cash from investors and shareholders, he says that Americanas could start to have problems maintaining sales volume – aggravating the judicial recovery.

Scope of recovery may be unprecedented

Artur Lopes, from Iwer Capital, says that Americanas’ weight in the production chain could make the process have a dimension and “a greater social cost” than other recent cases.

He recalls that many suppliers practically depend on the retailer. Therefore, the need to terminate contracts can have a domino effect, challenging the survival of small and medium-sized businesses.

“We are talking about a very large population of suppliers, some of them already fragile, who do not have a capital structure to withstand such a blow”, he says.

Marcela Cavallo agrees and says that the judicial recovery of Americanas has the potential to be one of the most serious cases in Brazil due to the radius of impact of the problems.

“The risk we see now, unlike what happened to other companies, is the scope of the crisis, which would affect many people directly or indirectly”, he argues.

This is a point that Americanas itself explored in the request made to Justice. The company highlighted having 3,600 points of sale in the country, serving around 50 million consumers and generating more than 100,000 direct and indirect jobs.

The magnitude of the company in the economy is even mentioned by Judge Paulo Assed Stefan in the sentence that authorized the judicial recovery.

“It is one of the largest and most relevant judicial recoveries filed so far in the country, not only on account of its liabilities, but for all the market repercussions that the applicants’ crisis situation has been causing and, for all the aspects involved, given the large number of creditors, direct and indirect employees dependent on the business activity now protected”, he wrote.

Filipe Denki, director of the Business Recovery and Bankruptcy Commission of the Federal Council of the OAB and partner at Lara Martins Advogados, says that the coverage of Americanas in fact draws attention to cases such as Odebrecht, Oi and Samarco.

Another crucial point for him, when comparing processes, is the origin of the problem. In the case of the retailer, the hypothesis that the leak was caused by fraud is crucial and must be investigated.

“If the fraudulent intent is confirmed, the chance of filing for bankruptcy is very high.”

This is an aspect that distances Americanas from other large judicial recovery cases.

Oi’s lawsuit, for example, originated in a market crisis, aggravated after the merger with Portugal Telecom. OGX, created by businessman Eike Batista, entered a crisis after becoming frustrated with the search for oil reserves in the country.

The Odebrecht case was related to accusations of corruption in the Lava Jato operation, while Samarco was responsible for the environmental tragedy in Mariana (MG).

“Despite not being the largest in volume of liabilities, the Americanas case may be marked as the biggest fraud in Brazil by companies that filed for judicial recovery. This is a negative aspect that will become more striking”, says Denki.