The revelation of a BRL 20 billion accounting scandal on Americanas’ balance sheet has generated a frenzy among clients, financial institutions and financial market agents. In less than 72 hours, one of Latin America’s largest retail companies saw its CEO resign, its shares plummet on the stock market, and investors denounce the company in supervisory and control bodies.
The succession of events led the company to file an urgent relief request in court this Friday (13th), which could be the first step towards a judicial recovery request.
To explain what happened to the Americans, the Sheet collected what is known so far about the case and some of the key questions from customers and investors.
What happened to the Americans?
Americanas surprised the market after revealing that it has approximately R$20 billion of debt off-balance sheet.
The identification of the so-called “accounting inconsistencies”, according to the company itself, could lead to the early and immediate maturity of debts for approximately R$ 40 billion.
The breach caused a shock among the company’s investors due to its scale. The figure is relevant especially if we consider the shareholders’ equity, of around 14.7 billion reais in September 2022.
As a result, Americanas shares dropped 77% in a single day, losing the equivalent of R$8.4 billion in market value.
The source of the gap is in a type of transaction that is common in retail, called “advances to suppliers”, or “forfeits”. However, it is not yet clear how this operation entered the balance sheet improperly (or if it was not).
How was the Americanas breach discovered?
The crisis involving Americanas began on Wednesday (11), after the announcement of the resignation of CEO Sergio Rial as head of the company just ten days after taking office.
André Covre, director of investor relations, also left with Rial.
It is not yet known how the executives have identified the problem in such a short time. Nor is it clear since when such accounting behavior has occurred at the retailer.
In a conversation with investors, the now former chief executive said that “throwing risks” deals, when a company hires a bank to advance receivables from a supplier, have been misrecorded for years.
Experts consulted by Sheet they said it was unlikely a leak of that size would have gone unnoticed. Rial himself had indicated that the affair must have already been known to the previous management.
What is the consequence of a deficit of BRL 20 billion?
In addition to the reputational damage, an accounting scandal like this causes financial problems for the company. One of the main ones is access to credit.
Risk rating agencies, such as Fitch and S&P, have downgraded Americanas’ credit ratings after disclosure of accounting inconsistencies.
Additionally, XP Investimentos calculated what Americanas’ debt would look like if the R$20 billion were recognized immediately on the balance sheet.
According to analysts, net debt would drop from R$ 5.3 billion at the end of September 2022 to R$ 25.3 billion. In this case, the ratio between Net Debt and Ebitda (operating result) of Americanas would go from 1.7 times to 8 times.
In essence, this information shows the market a company’s ability to pay its debts. Therefore, it is common for credit agreements to contain clauses limiting this level of indebtedness, to protect creditors.
By exceeding the limit, creditors of Americanas can, for example, ask for the prepayment of debts.
Can Americans be punished?
In Brazil, as in other countries, publicly traded companies must inform the market about their finances. This process has rules and companies that falsify data or declare values that are different from the true ones can be sued in several cases.
In tax matters, for example, a company may be charged taxes it has not paid by declaring underbilling. In civil matters, it can be sued by investors who have lost money as a result of the mistake.
Creditors can also claim in court that they have been deceived and claim damages.
It is up to the financial market authorities, such as the CVM (Securities and Exchange Commission) to investigate and punish any misconduct.
In the case of Americanas, the agency has already filed at least two trials following the disclosure of the case Wednesday.
On Friday (13), Abradin, an association that brings together minorities of publicly traded companies, filed a complaint seeking an investigation into the retailer’s responsibilities.
The association is calling for Americanas managers to be punished for alleged fraud. “Crimes abound, starting with the crime of deceiving investors,” the complaint reads.
What does PwC have to do with the Americanas case?
Accounting firm PwC was the firm contracted to analyze Americanas’ financial statements. As a result, he has fallen under the radar of those seeking accountability.
Abradin’s complaint, for example, calls for the investigation to include counseling.
The president of the association, Aurélio Valporto, said that “the absolute incompetence of the auditing firm” draws attention and recalled that PwC also audited Petrobras at the time of the Lava Jato scandal.
Auditing firms are not immune from lawsuits. It is also common for them to set aside funds in their balance sheets to pay fines for possible mistakes.
Will Americanas close, fail or survive?
It is not yet possible to know what will happen to the company. What is known so far is that, on Friday, the 4th commercial court in Rio de Janeiro granted the request for urgent injunctive relief requested by Americanas.
The measure allows, for example, the company to prevent its assets from being blocked at the request of creditors.
The trader is also exempt from paying his debts until a possible request for judicial recovery to Justice. Therefore, the company must decide on the request within 30 days. If you don’t, the protection loses its effectiveness.
However, Americanas said in a statement that urgent relief is not a recovery procedure.
The purpose of the ordinance would be to preserve the continuity of the offer of services to its customers within the scope of the commitments undertaken, preserve the value of the company and guarantee the maintenance of the continuity of the company and its social function.
According to analysts, Americanas will have excessive debt, which could lead it to enter “survival mode”, cutting investments and jobs.
Should I stop shopping at Americanas or cancel an order?
Americanas does not indicate that it will discontinue its operations. In a statement on the website, the retailer says it will “continue to work hard to bring you the best experience over time and at the price point that every consumer is looking for.”
However, it is also not clear whether the gap and market fallout could impact sales and whether consumers could be affected.
To clarify this, Procon-SP (Consumer Protection and Defense Foundation of São Paulo) informed Americanas. The goal is to know to what extent consumers’ purchases are compromised. The company has until the next 17 to answer questions.
Was Americanas dropped from the BBB?
Following the disclosure of the accounting gap, Americanas dropped its sponsorship of BBB 23.
The retailer was one of three brands paying the most expensive fee. The list value of the sponsorship is BRL 105.1 million, but it is possible for companies to get discounts.
With the company’s departure, Mercado Livre quickly reached an agreement with the broadcaster to fill the vacancy.
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