Judicial recovery requests skyrocket in 2023 – 05/03/2023 – Market

Requests for judicial recovery and bankruptcy grew at the beginning of 2023, in an environment of high interest rates and more restricted credit by banks. The trend goes far beyond large companies, such as Americanas, and seems to be far from changing, according to specialists.

Between January and March of this year, there were 289 requests for judicial recovery, according to Serasa Experian. In 2022, in the same period, there were 210 – an increase of 37.6%.

In the case of bankruptcies, the growth is even greater. According to Serasa, in the first quarter of this year, there were 255 requests made, against 177 in 2022, an increase of 44%.

“With the worsening of corporate defaults, which have been growing since September 2021, it was inevitable that they would reach this level. assesses the economist at Serasa Experian, Luiz Rabi.

Antonio Nachif, partner in the Conflict Resolution area at Dias Carneiro Advogados, there is a “snowball” effect that ends up worsening the scenario. “Large companies enter into judicial recovery, stop paying their debts, and the creditors end up having financial problems and also need to resort to recovery”, he says.

For Nachif, the tendency is for the number of companies in this situation to continue rising this year. “We should even see more bankruptcies. The judicial recovery process is very rigid. If you don’t meet the deadlines, there is no way out”, says the lawyer.

The Dias Carneiro office mainly serves creditors of companies undergoing judicial recovery, according to Nachif. He points out some alternatives that can even avoid the whole process.

“There may be a direct negotiation with the creditors, outside the process. This negotiation can happen with the mediation of a third party. There is also the option of extrajudicial recovery, when the judge only approves the agreement already closed with the creditors.”

Max Mustrangi, founding partner of Excellance, a company that works on corporate restructuring, says that it is necessary to give companies a real management shock.

“They come to us already in a very complicated situation. We removed the president and directors, took over the company, and executed a plan that changes strategies while the debt renegotiation takes place”, says Mustrangi.

The founder of Excellance claims that, from the moment he takes charge of the business, conversations with creditors change radically.

“Family businesses are very resistant, it’s difficult to deal with them. So, the contract I close with these groups is very tough. Fundraising is negotiated personally with me.”

TCP Partners, an investment boutique that operates in the restructuring of companies, acts in a similar way.

“We put four or five people to make the diagnosis, and then a plan is made. We assume the execution of this plan, with these professionals taking over the presidency, the financial management, and even marketing”, says Ricardo Jacomassi, economist partner at TCP Partners .

Both Mustrangi and Jacomassi claim that the demand for the services of the companies they command increased a lot in the first quarter of this year.

“You can say that more than half of a company’s problem lies with the shareholder. That’s why we took control. All of them have the wrong people in charge in common”, says Mustrangi.

Jacomassi, from TCP, states that the success rate in recovering companies in difficulty is 80%. But he makes a point of highlighting what leads to the failure of 20% of the cases he handles. “The controller wants to change the proposed plan, and succeeds. There is an emotional attachment, the shareholder does not want to relinquish decision-making power. The situation gets even worse.”

Another common feature of this type of service is that it attends to few cases, due to the complexity of the problems to be solved.

“Currently, TCP is working on three cases. A hospital group in the North region, a company in the plastics sector, and another one that provides cleaning services. Together, they have around 25,000 employees”, says Jacomassi.

“I have a small team, and I go into administration. It’s difficult to serve many ‘patients’ at a time. I’ve done this work with about 15 companies, with 100% success”, says Mustrangi, who treats the companies he serves as patients, since they are “already in the pit” when they look for him.

For Mustrangi, the judicial recovery model in Brazil makes it very difficult for companies to take over effectively. “It doesn’t act on the cause of the problem. It sells all the noble parts, and practically nothing is left. The natural path is bankruptcy”, he says.