Brazil’s Beleaguered Americanas Files For Bankruptcy Protection

The retail group, which reported having 16,300 creditors, admitted to a 20-billion-reais accounting shortfall last week, and says it has debts totaling $8.23 billion

With a total of 16,300 creditors, Americanas admits to having debts totaling 43 billion reais ($8.23 billion).
January 19, 2023 | 12:41 PM

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Bloomberg Línea — Brazil retail giant Americanas (AME3) on Thursday filed for bankruptcy protection and restructuring at the 4th Business Court of Rio de Janeiro, the city in which the retailer is headquartered.

With a total of 16,300 creditors, the company admits to having debts totaling 43 billion reais ($8.23 billion), up from a previous estimate of 40 billion reais, and 800 million reais ($153.3 million), while its creditor banks are demanding the payment of debts and even requesting the sale of the retailer’s assets in court.

The company’s lawyers requested a 48-hour deadline to present the complete list of creditors, a breakdown of liabilities and any missing documents, so that it “reflects as accurately as possible the reality of the group’s indebtedness,” they wrote.

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The request for judicial protection comes eight days after the announcement of the resignation of the retailer’s CEO, Sergio Rial, who pointed out “accounting inconsistencies” of 20 billion reais ($3.83 billion) in the company’s accounts.

At the end of Thursday morning, the company’s shares had plummeted more than 20% in the B3 trading session, quoting at 1.37 reais (-21.26%).

Founded in 1929, the group is one of Brazils’ most traditional retailers, with around 1,800 stores throughout the country, and which in decades has focused on household items, stationery, gifts, clothing, electronics, computers, food and beverages.

The problems highlight the trio of Americanas’ three main investors, billionaires Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, who appear on the list of the richest persons in Brazil. They run acquisition company 3G Capital and are known for having invested in giants of the beverage and food sector such as AB InBev, Kraft-Heinz and Burger King.

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Brazil’s Securities and Exchange Commission (CVM) has already opened four proceedings to investigate suspicions of insider trading, balance sheet manipulation, and market manipulation. Creditors point to indications of accounting fraud. Suppliers fear a default and are monitoring the case.

B3 is evaluating the removal of Americanas’ shares from 13 reference indices of the variable income market, including the Corporate Sustainability Index, which calculates the commitments of the companies with an Environmental, Social and Governance (ESG) agenda.

The bankruptcy protection request does not come as a surprise to the market. Since the crisis erupted last week and brought down the company’s stock, which has accumulated a devaluation of 95% in 12 months, analysts were already working with this expectation, especially in view of the impasse over the size of the capital injection that the major shareholders indicated to the creditor banks, and which is considered insufficient.

The first bank to publicly accuse Americanas’ management of bad faith and of having committed the “biggest fraud in the Brazilian stock market” was BTG Pactual (BBPAC11), as revealed by Bloomberg Línea on January 15.

Bradesco, Itaú Unibanco, BofA (Bank of America) and Goldman Sachs have filed lawsuits due to the debts owed them by Americanas.

‘Hasty measures’

Law firms Basilio Advogados and Salomão Kaiuca Abrahão Raposo Cotta presented the reasons for Americanas’ bankruptcy filing, request.

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“A few creditors, without thinking about the impact on the community, took hasty measures that culminated in the dangerous emptying of the company’s cash flow and, consequently, made its short-term operation and a collective business solution unfeasible without a recuperation remedy,” the law firms state.

The company acknowledges that it faces “a very serious liquidity crisis” and complains about its treatment by the banks.

“The company’s entire cash flow is being dredged by financial institutions that hold credits against Grupo Americanas,” the law firms state, adding that the “bleeding can be stopped” with the granting of the benefit of judicial restructuring.