By: Vitor Ferrari and Ivan Kubala

On March 27, 2023, the Petrópolis Group, a brewery that produces brands such as Itaipava and Petra, requested judicial recovery, with immediate granting of a request for incidental precautionary relief in order to avoid the depletion of its cash flow due to the company's large liabilities subject to constraint.

On April 14th, the 5th Business Court of the Capital of Rio de Janeiro accepted the request for judicial recovery proposed by the Economic Group.

As a result, all actions and enforcement actions against the company, relating to debts prior to the request, will be suspended for the next 180 days., which may be extended once for the same period.

According to the request, the Group, responsible for generating more than 24 thousand direct jobs, recorded a drastic reduction in its revenue due to a significant drop in its sales, which reduced the company's cash flow to critical levels. According to the company itself, the maintenance of low levels of net cash continued for approximately 18 months, until reaching a critical moment at the end of March this year.

Another reason that led the brewery group to file for bankruptcy protection was the companies' level of debt, aggravated by the maintenance of the Selic rate at high levels. High interest rates made the costs of loans already taken out, based on the Selic rate, more expensive, directly impacting the company's cash flow; in addition to making it difficult to obtain new credit to leverage the company's production. According to the Petrópolis Group itself, the high debt rate, the maintenance of the spread banking operations for obtaining credit and the increase in interest rates in the country generate an impact of R$395 million per year for the company.

Before the effective granting of the judicial recovery, the judge responsible for the case understood that the necessary requirements for granting the precautionary request were present., which was granted at the end of March.

This was essential for the Group, as it enabled the release of amounts retained by financial institutions, so that it could use them to remain in operation., even though it is heavily in debt and has little cash.

Now, once the judicial recovery process has been approved, the company has the duty to present a Judicial Recovery Plan to its creditors within 60 days, the approval of which is essential for the continuation of the judicial recovery process.

Once the proposed plan is approved, the payment of the credits included in the process will no longer be subject to enforcement, and will be paid under the exact terms and future amendments to the plan that may be approved. However, it is important to note that new debts not included in the Judicial Recovery Plan will not be paid under the terms thereof, nor will they be included in the judicial recovery process, and may be subject to enforcement.

Therefore, it is necessary for the Petrópolis Group to act quickly to approve the plan and set up a strict legal and financial framework that prevents it from getting into debt.

With the collaboration of Luís Felipe Simão