Brazil court grants bankruptcy protection for retailer Americanas

SAO PAULO, Jan 19 (Reuters) – A Rio de Janeiro court on Thursday accepted Brazilian retailer Americanas SA’s (AMER3.SA) bankruptcy protection request, days after the company disclosed nearly $4 billion in accounting inconsistencies that have sparked a legal feud with creditors and investors.

Americanas, a 93-year-old company with stores all over Brazil and a major e-commerce unit, said in a securities filing that it would restructure debts of about 43 billion reais ($8.2 billion).

Shares in the company plunged about 42.5% to 1.00 real following news of the filing, extending its year-to-date drop to around 90%.

The firm, backed by the billionaire trio that founded 3G Capital, said the move had come “despite the efforts and measures that the management has been taking in the past few days alongside its financial and legal advisers to protect the company from the effects” of the accounting scandal.

Investors had expected the decision, with some deeming it unavoidable, especially after lender BTG Pactual (BPAC3.SA) obtained on Wednesday a court decision overturning part of the firm’s protection from creditors.

Americanas is also facing seven different investigations launched by securities regulator CVM, as well as an arbitration process requesting compensation of 500 million reais to the firm and the trio that founded 3G Capital.

In a document filed with the court, law firms Basilio Advogados and Salomao Kaiuca Abrahao attributed the urgency in filing for bankruptcy to the creditors’ decision to seize the companies’ assets.

The retailer also mentioned a debt downgrade by ratings agencies, which prevented any new loans from being extended. S&P, Moody’s and Fitch all downgraded Americanas’ credit ratings following the accounting scandal.

Earlier, Americanas had said that its current cash position stood at only 800 million reais, down from a previously reported 7.8 billion.

Lucas Pogetti, a partner at M&A advisers RGS Partners, said a large part of Americanas’ previously disclosed cash position was linked to the prepayment of receivables or deposited with creditors.

“Naturally, when the banks became aware of the company’s real situation they began to adopt a more aggressive posture to protect themselves, consequently restricting access to resources,” Pogetti said.

In the filing, Americanas asks to exclude its fintech, Ame, from the bankruptcy protection, as it is regulated by the central bank, and for authorization to increase its capital.

Americanas’ stores are ubiquitous at Brazilian shopping malls. It e-commerce unit, which traded as a separate company before a recent restructuring, is one of the country’s top online retailers.

Chief executive Sergio Rial resigned last week, less than two weeks after taking the job, citing the discovery of “accounting inconsistencies” totaling 20 billion reais.

Rial, the former head of Banco Santander’s Brazilian arm (SANB3.SA), attributed the inconsistencies to differences in accounting for the financial cost of bank loans and debt with suppliers.

Chief financial officer Andre Covre, who had just joined Americanas as well, also left the firm, which has Brazilian billionaires Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles as reference shareholders.

Americanas said the reference shareholders intended to maintain the company’s liquidity at levels that allowed for a “good operation” of its stores, digital channel and other entities.

($1 = 5.2226 reais)

Reporting by Gabriel Araujo, Tatiana Bautzer and Peter Frontini in Sao Paulo and Carolina Pulice in Mexico City; Editing by Rosalba O’Brien and Bradley Perrett

Our Standards: The Thomson Reuters Trust Principles.

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