Why are so many companies in crisis in 2023? – 02/23/2023 – Market

The first days of 2023 have been marked by an unusual number of companies seeking help to get out of financial crises. Americanas, Oi, Marisa and CVC are just some of the companies that, in less than two months, had to knock on the door of Justice or advisory firms in order to be able to renegotiate debts.

The list, however, is long. Data from Serasa Experian show that, in January of this year, 92 companies filed for judicial recovery in Brazil, a growth of 37% compared to the same month of 2022. Bankruptcies were also high in the period. 72 requests were registered, a number 56% higher than those of January 2022.

Although each episode has its specific causes, specialists say that conjunctural factors —such as high interest rates, inflation and defaults— help to understand the boom of crises that the private sector has been experiencing at the beginning of 2023.

Artur Lopes, a partner at Iwer Capital, a consulting and management company, points out that no company has been in financial trouble since the turn of the year. The origin of the problems is ancient, but it was being masked through specific aid, such as the special lines of credit made available during the pandemic.

“These lines of credit ended up covering operating losses or masking deficiencies. The companies had been able to roll this, however, either for conjuncture or specific issues of each business, this scrolling ended”, he says.

Iwer Capital specializes in business recovery and, according to Lopes, demand has been greater in recent months.

In most cases, he says, these are companies that raised funds with different conditions to protect themselves during the health crisis, and thus avoid layoffs and stimulate the economy.

The problem is that the monetary landscape has changed. In 2020, the basic interest rate ended the year at 2%. Today, the Selic is at 13.75% —and a year ago it was in double digits— which makes it more difficult for companies to roll over debts, especially those that finance their consumers, such as retailers.

The increase in interest rates responds to another economic factor that also impacts business: inflation. Mainly driven by a supply shock provoked by the War in Ukraine, the rise in prices reduced the purchasing power of the population, which was reflected in the companies’ cash flow.

Although it comes as a remedy for inflation, the high Selic ends up aggravating the indebtedness. A survey by the CNC (National Confederation of Trade in Goods, Services and Tourism) showed that household debt closed 2022 at a historic level, reaching 77.9%.

Such an economic situation has become unsustainable for many companies, which now have to carry expensive debts in a period of weak consumption, high interest rates and record defaults.

Lopes points out that, faced with the need to comply with payments, many companies are resorting to judicial recovery or restructuring processes. According to him, this has been more or less the pattern of cases, with the exception of the Americanas.

The retailer’s episode was triggered after the revelation that the company had been “hiding” debts equivalent to R$ 20 billion in its balance sheet. With creditors rushing to enforce the debts, Americanas resorted to the courts in order not to go bankrupt.

It is different, for example, from the case of Oi, which received protection against creditors after declaring that it had BRL 29 billion in financial debts. The company, which has just left Brazil’s biggest judicial recovery process, argues that “unpredictable and uncontrollable” factors made it essential to resort to the measure to ensure its survival.

Marisa, on the other hand, announced in early February the hiring of BR Partners to advise her in the process of renegotiating her financial debt of almost R$ 600 million.

In a conference call for results at the end of 2022, the then president of the retailer had complained about the cost of funding (raising third-party funds) and the increase in defaults as factors for the greater indebtedness in the period.

The furniture and decoration store Tok&Stok also indicates having problems at the checkout. Recently, the company was the target of an eviction action after the owner of a property said that the company did not pay the rent for a warehouse in Extrema (MG).

Wagner Moraes, founder of A&S Partners, says that the case of Americanas —although it differs from the others in relation to the causes of the crisis— stimulated a tightening of credit, especially for retailers, which are very dependent on raising money to maintain turnover. of operations.

The insecurity of financial institutions, he says, has increased the cost of money, bringing additional pressure that many companies did not expect. “This justifies this movement by Tok & Stok and Marisa to seek the renegotiation of the bank debt”, he says.

In his view, the current “boom of crises” is just the beginning and should reach other major retailers. Lopes of Iwer Capital agrees.

“The big retailers are putting pressure on suppliers who, once pressured, will put pressure on their suppliers, who will have to fire… We are observing a chain reaction, which has not yet reached its apex”, he projects.

Retail specialist Alberto Serrentino, a partner at Varese Retail, also points to the impact of inflation, high interest rates and the Americanas case in this wave of crises. However, he points out that care must be taken with the idea of ​​structural fragility in retail.

“There is no such situation of systemic vulnerability of the Brazilian retail, in any way”, he says.

Serrentino points out that the Americanas case is a specific situation, which has nothing to do with the economic scenario or conjuncture.

He says that the same care must be taken with regard to Marisa, who has been in crisis since 2015. “In the consumption boom cycle of 2012 and 2013, [a varejista fez] some aggressive strategic moves that had consequences”, he says.

Among the choices she considers wrong, Serrentino highlights the disorderly expansion of stores and the distancing from the target audience that used to be made up of women from the C class.

“When the 2016 crisis came, Marisa was caught in a fragile situation, because all this movement was made with an increase in debt”, he says.