Brazil Court Grants Bankruptcy Protection to Americanas

Americanas SA, a Brazilian retailer backed by billionaire Jorge Paulo Lemann, has filed for bankruptcy protection at a court in Rio de Janeiro, citing liabilities of around 43 billion reais ($8.2 billion).

The company's filing comes just days after the disclosure of 20 billion reais of accounting "inconsistencies" on Jan. 11. This sparked a massive sell-off in its stocks and bonds, and led creditors to block deposits and ask for early redemption of debts. This left the company almost without cash for basic operations.

The company has said that it may file for bankruptcy protection this Thursday. This was reported earlier by CNN Brasil and G1 website.

On January 13, a court in Rio de Janeiro granted Americanas protection against creditors, forbidding them from freezing or seizing assets. However, banks quickly filed motions to overturn the decision, and days later Banco BTG Pactual SA was allowed to block 1.2 billion reais to compensate for part of the company's debt, accelerating the crisis.

Creditors of Americanas are preparing for a restructuring after the company's debt blowup. The company is facing significant financial challenges, and a restructuring could help it get back on track. Americanas' creditors will be closely watching the situation to see how it unfolds.

Americanas is still assessing the extent of the accounting flaws, but its disclosures to investors so far imply that it misreported numbers related to financing of debts with suppliers, and also wrongly deducted interest paid to lenders from its liabilities. This had the effect of artificially increasing profits and reducing reported liabilities. The company is still assessing how far back the problems go, so adjustments that have already doubled liabilities are still not final.

Americanas is one of the oldest and most iconic retailers in Brazil. The company has a long history, dating back over 40 years. Today, it operates more than 3,600 stores in 900 cities across the country. It also has a large network of suppliers, with over 5,000 businesses providing goods and services to the company. Finally, it employs 40,000 people, making it one of the largest employers in Brazil.

The reputation of the three 3G Capital Inc. billionaires is also at stake. The trio held control of Americanas for decades until their share was diluted in a 2021 restructuring. Sicupira and Lemann’s son, Paulo Alberto, are on the board of Americanas, representing shareholders. The firm’s chairman, Eduardo Saggioro Garcia, is a partner and CEO at LTS Investments, the family office for Lemann, Sicupira and Telles.

The Americanas scandal has pitted BTG billionaire Eike Batista against 3G Capital's "demigods" Jorge Paulo Lemann, Marcel Herrmann Telles and Beto Sicupira.The scandal began when Batista accused the 3G executives of insider trading and fraud, alleging that they had used inside information to buy shares in Americanas before the company was acquired by 3G.The 3G executives have denied the allegations, but the scandal has put a spotlight on the close relationship between the two companies.

The 3G trio has told the Americanas board that they plan to continue supporting the company, according to a regulatory filing. They offered a 6 billion-real capital injection to creditors in negotiations on Friday, but this was seen as too low by those familiar with the matter. Creditors asked for more than 10 billion reais, and negotiations have since stalled.

On Jan. 16, Americanas hired Rothschild & Co. to advise them on how to best renegotiate their debt.