By: Vitor Ferrari and Ivan Kubala

On February 16, 2023 The Paranapanema Group published its Judicial Recovery Plan in its judicial recovery records, through which it intends to rise again. The main idea is to overcome its economic and financial crisis by restructuring its liabilities., which, consequently, will deleverage its debt and resume its economic growth in a sustained manner.  According to the company under recovery, with the approval of the judicial recovery plan, the company will be able to reorganize itself internally, preserving the jobs created, meeting the interests of its creditors, resuming its operations and establishing viable payment methods for the credits.

In order for the plan to be properly implemented, the Paranapanema Group understands that it is important to resume its operations., in order to keep its recovery process operational. To this end, it seeks to enter into new contracts with suppliers, and it is necessary to treat them differently, so that in return they provide and maintain the supply of raw materials, since many are large creditors of the company under recovery.

However, due to the large debt it has, simply maintaining its economic activities, with possible future growth in its net margins, will not be enough to fulfill all its obligations to creditors.

Therefore, the Paranapanema Group focuses on key points to enable the success of the recovery process: granting special terms and conditions for the payment of certain credits, partial sale of assets, obtaining new financing and corporate reorganization..

About payment of credits and possible renegotiations, which will begin upon approval of the plan, Paranapanema Group explains that there is no distinction between the types of creditors, so that, Under the terms of the Plan, there will be novation of all amounts, which will be paid in the exact terms of the Plan, in cash and directly into the account that the creditor informs in the records. However, it is important to note that the restructuring of credits varies according to their respective class and amount to be received, with discounts, different payment terms and unique correction rates for each class. Therefore, the creditor must pay attention to the class they occupy, the amounts of their credit, the payment term and whether there is any discount.

Regarding the collection of amounts for payment of credits, the Paranapanema Group clarifies that it will constitute Integrated Production Units (commonly called “UPI’s”) to raise the values. To the UPIs are companies with the specific purpose of being sold to third parties., through judicial auctions in this case, so that the value generated by the sale is used to fulfill the Plan.

In addition to the UPIs, the Plan presented contains the possibility of carrying out reverse auctions. These are procedures by which creditors, competing with each other, give discounts on the quantum of their credits in order to receive the amounts, either partially or in full, in advance. In this way, the creditor benefits because he receives it first and the recovering party benefits because he gets a discount on the payments.

Without prejudice to the collection of amounts raised through the methods described above, the company will also avail itself of new financing. However, these amounts will not be allocated to creditors, but to the maintenance and development of their business activities.

If the proposed plan is approved, there will be a suspension of executions and requests for seizure of credits subject to the plan for a period of 6 months, which may be extended for up to the same period. However, if the plan is not approved, there will be new rounds of renegotiation and mutual concessions, so that a new proposal can be approved by the competent Court.

With the collaboration of Luís Felipe Simão.