Market trends and change in corporate restructuring

The recent moves involving Raízen and Grupo Pão de Açúcar (GPA) are noteworthy not only because of the size of the companies, but also because of the timing of their occurrence. Instead of waiting for the financial situation to worsen, these groups are signaling a more strategic and proactive approach to reorganizing their liabilities, revealing a significant shift in how the market has been dealing with situations of economic stress.

In this context, out-of-court restructuring stands out as an increasingly relevant tool in Brazilian business law.

What is out-of-court restructuring and how does it work?

As provided for in articles 161 to 167 of Law No. 11.101/2005, extrajudicial recovery consists of a debt renegotiation mechanism carried out directly between the debtor and its creditors, with subsequent judicial approval. In practice, the debtor structures a payment and restructuring plan, negotiates individually with creditors, and obtains their formal agreement. Only after reaching the legal quorum is the plan submitted to the Judiciary.

Types of out-of-court restructuring in Brazil

The legislation allows for two main ways of using this mechanism. In the optional modality, the effects of the plan only affect creditors who have voluntarily adhered to it. In the mandatory modality, it is possible to extend the effects to all creditors of a given class, provided that more than half of the credits adhere to it, which allows for collective solutions even in the face of specific resistance.

Advantages of out-of-court restructuring in companies

Recent developments indicate that restructuring has ceased to be merely a response to crisis and has become an integral part of corporate strategy. Extrajudicial recovery offers significant advantages, such as less reputational damage, greater negotiating flexibility, faster procedural steps, and preservation of business management. Added to this is the legal possibility of entering into parallel agreements with certain creditors, expanding the available settlement options.

Out-of-court restructuring as an autonomous instrument of reorganization.

Out-of-court restructuring should not be understood as a preliminary step to judicial reorganization, but as an autonomous instrument of reorganization.

It proves particularly suitable in scenarios where liabilities are structured and identifiable, there is a significant concentration of creditors, negotiating power still exists, and the company seeks to preserve its operations.

The Raízen and GPA cases and the evolution of corporate restructuring in Brazil.

The moves by Raízen and GPA reinforce a central point: the Brazilian market has evolved in how it deals with situations of financial stress. Negotiated, technical, and proactive solutions tend to gain ground, and out-of-court restructuring is consolidating as an efficient alternative, provided it is used with planning and strategy.

Article written by: Vitor Ferrari and Samar Majzoub.