by: Vitor Ferrari and Ivan Kubala
According to Serasa Experian data, the number of receivership requests increased in the last months of 2022, affecting all type of companies, from to small to large. Observing the present politic and economic scenario, is probable that the number of judicial recovery requests keeps high.
Recently, the topic became more popular due to receivership request proposed by “Lojas Americanas”, one of the biggest and most popular Brazilian retail stores, which joined the selected group of receivership companies listed in the stock exchanges, compound by huge companies, such as Oi S/A, which recently requested its second judicial recovery, Paranapanema, MMX Mineração, and Ethernit.
The maintenance of the high number of receivership requests is due, among other factors, to the increasing of the interest rates; the speaks of Brazilian government against austerity and fiscal control polices, the market´s fear of the possibility of other listed companies request judicial recovery procedure: domino effect caused by Lojas Americanas requests, the “Efeito Americanas”
In its last meeting, which happened in the begging of February, “COPOM”, the Brazilian institute that corresponds to the American FOMC, decided to keep the basic interest rate (Taxa Selic) in 13.75% per year, aiming to discourage the consumption and control the inflation.
The Selic applies directly affects the interest rate charged by banks and other financial institutes em its loans concessions, which elevates the price of banking lends. Due to the high prices, the businessman is discouraged to take loans and make investments in its own business, hampering the maintenance of the company, slowing down the economy.
Another fundamental consequence caused by the high interest rates is the increasing of debts backed by Selic rates. In other words, loans whose interest incidence varies according to variations in the Selic rate presented a large increase in their installments, so that many borrowers could not afford these costs and became defaulters.
At last, there is the still of “Efeito Americanas”: the Brazilian market is apprehensive with the possibility of others huge companies presenting problems in its fiscal documents that will reveal unpayable debts. This fear hoover of Brazilian financial market, in the midst of which are the investors, who avoids investments in Brazilian stocks and withdraws its capital at the slightest sign of instability.
Recently it was speculated that companies such as Centauro, Lojas Marisa and Ambev, all listed, would also request for a judicial reorganization. These speculations, joined to the large number of listed companies that are already in receivership, corroborates the maintenance of the fear.
Thus, the current scenario is extremely hostile to the development and expansion of business activity. It is worse for indebted and defaulting companies, whose option is to resort to judicial reorganization procedures to avoid future bankruptcies. Although the Brazilian market remains unfavorable to economic activity, the number of judicial recoveries will continue to be high.