More companies expected to seek protection from creditors in 2021

The demand for judicial recovery filings, held back in 2020, is growing at an accelerated rate and may break a record this year. The forecast of consultancy Alvarez & Marsal is that it will reach the same level as in 2016, when a political and economic crisis resulted in a strong recession. There were 1,865 cases that year.

The first figures released by credit research firm Serasa Experian show an acceleration. In February, 90 companies sought protection from creditors, up 11% from the same month in 2020 and 83.7% from January. Very small and small businesses led the increase.

The figures for March have not been compiled yet. But lawyers foresee an even greater volume as the search for specialized law firms has exploded. The worsening of the pandemic coincided with the maturity of debt terms that were renegotiated by companies in 2020. Most of these payments were due in March or will expire in April.

"Everyone pushed back [debts] last year. But the situation has not improved. It's even worse. Businesses [face] a very big cash flow insecurity," says Juliana Bumachar, a partner at law firm Bumachar.

Moraes & Savaget Advogados, another law firm, is currently studying 38 cases of companies interested in reorganization procedures - judicial and extrajudicial. They are mainly tourism companies, in the hotel and transportation sectors. Last year, according to partner André Moraes, only three companies sought protection from creditors.

"I prepared judicial reorganizations in 2020 that were not filed because it was easy to negotiate with the banks. This happened to more than one customer, including a large hotel chain. But the grace periods that were granted back there are running out and banks are no longer willing to negotiate," he says.

In 2020, according to Alvarez & Marsal, 1,176 requests for judicial reorganization were filed across the country. This amount was below that seen in previous years. In 2019, 1,387 had been filed and in 2018, 1,408.

The impact that was expected for 2020 did not happen because, in addition to private negotiations, experts say, there was government interference. The federal emergency aid boosted consumption and companies were allowed to postpone the payment of taxes, reduce wages and suspend workers' contracts. They got from banks lower interest rates for new financing.

"This year, we don't see that. The emergency aid is scaled down, so the outlook for consumer spending is [worst], and we also don't see the same...

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