Americanas (AMER3): business model and few resources make judicial recovery “inevitable”, according to specialists

After Americanas (AMER3) obtains protection from the Justice against the blocking of resources and has the approval to file a judicial recovery request (RJ) until the first half of February, what the retailer must “put” on the negotiating table with the banks , main creditors of a gross debt estimated by the company at 40 billion reais – without considering the cost of the work and any compensation to investors.

Americanas has not publicly stated whether it will opt for judicial recovery to deal with the 20 billion reais accounting deficit, announced last week – if it does not present a recovery plan to justice by February 13, the injunction will lose effect and the company he will have to look for other means to protect himself from seizures.

However, the retailer’s capital and asset structure mean there will be little means to avoid RJ, despite a possible sequel, which its core shareholders, Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, have pledged. This is the evaluation of the specialists consulted by the Money info.

“Americanas is practically a convenience store, has a very narrow profit margin and generates little value,” assesses Max Mustrangi, partner of Excellance, manager specializing in corporate restructuring. In the third quarter of 2022, Americanas recorded the worst net margin compared to its competitors, with -3.9%, against -1.7% for Magalu (MGLU3) and Via (VIIA3), with -1.9% – i three recorded a net loss in this interval.

“And if you look at financial performance indicators, it’s been giving a negative return for almost a decade. How Businessshe doesn’t stand still.”

However, Mustrangi points out that there are some assets that could have value in any judicial recovery that involves “cutting” the company to be negotiated. “There is value in the location of the outlets, the items in stock and the brand itself,” she points out. But he stops there, since Americanas has a business model”patrimonial light”, that is, with few own physical goods.

The measure was born in 1999, when Americanas split off its property management company, São Carlos (SCAR3), which began to operate as a separate company from the group, despite having the same reference shareholders. Since then, the retailer no longer bears the cost of transporting most of its outlets by leasing these spaces, as do other retail companies.

What assets can be exploited?

In the event of dissolution of the company, the company would have approximately 26 billion reais of book value at the disposal of creditors, without considering possible discounts and insolvencies. The data collected refers to the latest balance sheet published by Americanas, referring to the third quarter of 2022, which will undergo adjustments and many numbers will have to be revised.

Based on this premise, there is R$21 billion in the short term, since the company has R$8.6 billion of cash and financial investments. In addition, it is expected to receive BRL 5.4 billion in installment payments – where there is a risk of default of a major party -, BRL 5.8 billion in product inventories and BRL 1.6 billion in short-term recovery taxes term.

Already considering long-term credits, there is an additional R$5.3 billion, of which R$4.1 billion in tax credits and R$1.2 billion in securities, investments and credits.

Among fixed assets and intangible assets, which require more time to materialize in cash and with the risk of a steep discount for cash requirements, there are R$ 13.5 billion. With R$9.1 billion in intangible assets, such as trademarks and patents, for example, and R$4.4 billion in fixed assets, such as administrative property, warehouses and equipment.

“These are subjective values ​​and it really depends on the context in which they are being negotiated. When it comes to retail, the brand itself is precious, it is what gives credibility to the consumer, in which he decides whether to go to one store or another”, explains Sérgio de Carvalho, partner of the consultancy firm Match Capital, specialized in the retail market acquisitions of companies.

“There’s also all the logistical knowledge, the location of points that haven’t been listed yet,” he adds. Carvalho indicates that a brand can represent between 3% and 30% of the company’s market value, depending on the sector of activity and the company analysed.

Interest in subsidiaries such as Natural da Terra and Vem – a joint venture with Vibra for convenience stores – is budgeted at R$ 3.3 billion.

In this regard, Carvalho estimates that there should be a significant discount at Natural da Terra. Purchased by Americanas in 2021 for 2.1 billion reais, today it would be worth around 1.3 billion reais, following an optimistic multiple of five times earnings before interest, taxes, depreciation and amortization (Ebitda, in English).

Would the sequel be enough?

Experts are questioning whether a subsequent equity issue will save the company. The assessment is that there is a great risk of burning resources in a business that requires a lot of investment to a turn around robust. It is worth mentioning that, in 2020, Americanas has already made a follow-on of BRL 8 billion and, even so, the problem has surfaced.

“Does it make sense as a company to relaunch the business? The turnaround is complex, it requires capex and we have better competitors. It takes a lot of investment for a business that hasn’t been efficient,” Mustrangi summarizes.

Behind the scenes of the negotiation between Americanas’ key shareholders and creditor banks, the founding trio of 3G Capital has proposed a contribution of US$1.2 billion, which would provide approximately R$6 billion in the further issuance. However, the banks are demanding at least R$10 billion to extend the retailer’s debts.

“It is not possible to know whether it will be R$6 billion, R$8 billion or R$10 billion, but if funds arrive, it will signal credibility. The question is: is it worth it? But it’s also a lot of money [a perder] that the parties do not want to talk,” reflects Sérgio de Carvalho, of Match Capital.

‘haircut‘ in bank debt is a trend

The debate at the moment, experts point out, is how creditors “lose less”. For them there is no equation in which banks do not have to discount the debts of Americans.

“If you go to an RJ, then the haircut [desconto] can be high, there have been cases of 80% of the original value being cut in a judicial reorganization. Sometimes it’s better to look for a negotiated exit than to go RJ”, assesses Max Mustrangi, of Excellance. “That’s why it’s important for shareholders to contribute resources, as this mitigates losses for banks.”

For him, a unionized recovery with the banks would be the best alternative. In this case, a compromise can be discussed that does not damage the banks’ balance sheets or “kill” the company.

Furthermore, in the event of a judicial reorganization, the banks will have to wait for the employees to receive their rights, being placed in the hands of the government, depending on the formalization of the debts.

“It is nobody’s business that the Americans fail. If it would take a lot of work [a Americanas emprega cerca de 40 mil pessoas], small and medium-sized enterprises, as well as hindering the financial system. Some banks’ exposure numbers to Americanas are nearly net quarterly income for the institution, which is no mean feat. This puts the whole economy at risk”, concludes Mustrangi.

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