Americanas’ Rial Explains How He Discovered ‘Failures’ of $4 Billion in 9 Days as CEO

The Brazilian retailer will have to undergo external audits, revise balance sheets and carry out capitalization with the participation of the main shareholders, according to the exec

Sergio Rial told investors that Americanas did not count loans with suppliers as bank debt on its balance sheets
January 12, 2023 | 02:35 PM

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Bloomberg Línea — One of the most traditional retail groups in Brazil, with about 1,800 shops, Americanas (AMER3) has plunged into a crisis of confidence with investors after the discovery of a R$20 billion (about $4 billion) accounting loss in its latest balance sheets. The company will be subject to an external audit, will have to make a capitalization, which should involve its reference shareholders, and still need to negotiate with banks to avoid a foreclosure of part of its debt, according to the now ex-CEO Sergio Rial.

The case was revealed on Wednesday in a material fact that included the news about Rial’s resignation. The executive justified his decision and gave details of the situation on Thursday at noon in a call with investors and analysts promoted by BTG Pactual. Rial said he was not in a position to say whether there was a fraud, but pointed out “important distortions” in the group’s accounting.

The last management of Americanas did not account for financing operations of its supply chain as bank debt in its balance sheet.

Rial said he had discovered these “accounting inconsistencies” in the nine days he remained CEO, starting on January 2.


He did not know when Americanas began to stop accounting for the financial cost of its loans with suppliers, treating the R$20 billion as an estimate, not validated by an audit, of the amount improperly posted to the “suppliers” account.

“In the circularisation letters sent to the banks, this amount is not reported as debt. If it is debt, where is the financial cost?”, questioned Rial.

He also said that the reference shareholders of the company - Brazilian billionaires Jorge Paulo Lemann, Marcel Telles, and Carlos Alberto Sicupira - were informed of the accounting and financial problem, and committed to transparency and to participating in the capitalization of the company.


Rial recalled that in 2021, the company completed a subsequent share offer (follow-on) of around R$8 billion ($1.5 billion) with the three main shareholders coming in with a third of the capital injection.

“Americanas will need cash, capitalization. There is the shareholders’ seriousness to be part of the solution, but it cannot be only them”, said Rial during the call with investors.

The exec also added that, in addition to the capitalization, the company should also reduce CAPEX (investments) and may have to make “strategic moves”, without specifying if this would be the sale of assets, for example. In 2021, Americanas bought HNT (Hortifruti Natural da Terra), a retail network specializing in fresh produce, for R$2.1 billion.

Rial said that the company will have to review its balance sheets and redesign its capital structure. About the company’s debt with banks and the increase in leverage, he said that 92% of the obligations are free of restrictive clauses (covenants), but 8% have this trigger, which means that Americanas will have to renegotiate terms with these creditors.


“The banks may decide to accelerate the [execution] of the debt and the issue will be judicialized,” said Rial, recalling that the company has R$9 billion in cash and that he does not know what the impact of the situation will be on Americanas’ equity.

Market Reactions

The market reacted to the news abruptly: the company’s shares plummeted 75% in an auction before the opening of the trading session, and a wave of downgrades is expected.

The XP team put the recommendation for the paper under revision, pointing out possible lawsuits in the United States, higher leverage and debt cost, and interpreting Rial’s resignation as a warning of more risks ahead.


According to XP, there are risks of lawsuits in the US, “given that the company has ADRs traded in the country, as observed in similar cases in which minority shareholders were harmed by executive decisions”.

The platform analysts also mention the “lack of visibility on what actually happened and the effective impacts to be observed in the company’s financial statements”.

XP also added that maintains a cautious view of the retail scenario because of lower disposable income, the increase in interest rates, and tougher competition.

The report of Banco does Brasil pointed out that “the fact now under discussion reinforces the negative perception, given the uncertainties brought about by the need to resubmit financial statements, which will impact the financial modeling and its fair value, in addition to the lack of transparency that brings additional impacts to minority shareholders.


BB maintained its sell recommendation for the paper. “The target price is no longer a reference until Americanas resubmits its financial statements, at which time we will review our valuation,” the report added.

BB believes that the problem could affect the retail sector. “This discussion about the reclassification of drawn risk operations may negatively impact other companies in the retail sector, given that this is an operation commonly contracted with banks by retailers and the transparency of the information disclosed may vary from company to company.”

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