Surge in court-supervised restructuring filings tests law
Brazil’s surge in requests for court-supervised restructuring (CSR) and the rising number of asset managers and financial institutions operating in the distressed asset sector is putting the recent reform in the Judicial Recovery and Bankruptcy Law to the test this year. The revision, which came into effect on December 24, 2020, provided greater security to "debtor in possession financing," or simply "DIP financing," by ensuring priority in creditor payment. However, despite incentives provided during the pandemic, this financing option has seen little use. Now, multimillion-real transactions are on the rise and are the subject of fierce competition in the market.DIP financing was in the spotlight this year when Americanas’ reference shareholders - billionaires Jorge Paulo Lemann, Marcel Telles, and Beto Sicupira - injected R$1 billion to rescue the retailer through this instrument. Asset managers have seen opportunities in these operations.Brazil boasts approximately 30 specialized independent assets focused on "special situations," apart from medium-sized financial institutions operating within the sector. "Banks used to fulfill this role, but now their presence is diminishing, and funds are becoming stronger and more capitalized. The law reform has encouraged this," said Luiza Oswald, head of "special situations" strategies at JGP, which established the team in 2020 and has already invested R$300 million across five investment funds.JGP expects the segment to show strong growth in the coming months. Ms. Oswald says that five possibilities for DIP financing are under evaluation, with a total value that could surpass R$500 million. "There has been an increase in CSR filings in Brazil, and the movement is not over yet. Many opportunities are coming into our pipeline," added Ms. Oswald.The greatest potential, they say, lies in the middle market, as larger companies have access to alternative sources of financing. According to credit bureau Serasa Experian, the total number of court-supervised restructuring filings reached 593 between January and June, a 52% increase compared to the 390 in the same period of 2022. Micro and small businesses account for the majority (376), followed by medium-sized (155) and large companies (62).DIP financing was already authorized before the law reform but now only requires a judge’s authorization, without the need for a creditors’ meeting. An operation of this kind costs a minimum of 25% per year (e.g., CDI...
Para continuar a ler
PEÇA SUA AVALIAÇÃO