The risk of American insolvency could require banks at least R$ 7 billion

THE “factor Americans” can oblige banks to reserve at least R$ 7 billion in their balance sheet to cover the possible risk of insolvency of the retailer. According to financial market executives, Bradesque, Santander, Itau Unibanco, collected, BTG package And Bank of Brazil they are, in order, the entities with the largest volume of loans granted to the company. The amount that each bank has lent varies, but ranges from around R$5 billion, in the case of Bradesco, to R$1.3 billion, in that of BB.

The institutions do not communicate the values ​​out of respect for banking secrecy. By current legislation, they are obliged to set aside part of the money to cover the risk of non-performing loans, the so-called provision. In the case of Americanas, the final value will depend on factors such as whether the reference partner – Jorge Paulo Lemann, Marcel Telles and Beto Sicupira – will inject new resources into the company or if Americanas files for bankruptcy. The retailer’s crisis has been dragging on since last week, after the existence of an “accounting inconsistency” of R$ 20 billion was made public.

FR12 SAO PAULO – SP – 01/12/2023 – CITY – LOJAS AMERICANAS – Photo of the facade of the Americanas store, in Av. Paulista. PHOTO: FELIPE RAU/ESTADAO Photography: CONTENT STATUS / CONTENT STATUS

A default would not decapitalize the banks, but it could reduce their profits. For the provision it is not necessary to set aside the total debt, but a part according to the risk. Assuming a scenario in which banks reserve half of the loans, Bradesco would have to set aside R$2.3 billion to cover losses with Americanas; Santander, R$1.8 billion; Itaú, R$ 1.7 billion; BTG, BRL 950 million; and BB, R$650 million. The calculations are by the analyst Raffaele Frade, from Citi. Wanted, the banks did not comment.

The amount, however, will depend on how negotiations between the banks and the retailer develop. A judicial reorganization would not necessarily lead to the credit being considered in default and there would be a negotiation on the discounts. So far the banks have already made it clear that they will only make a deal if Americanas is capitalized – which has generated an impasse between the institutions and major shareholders.

“If the company seeks judicial recovery and there is no capitalization of any kind, it will be the worst case scenario,” says the director responsible for financial entities of S&P, Guilherme Machado. “This could result in the banks, within a six-month period, providing 100% of the operations.” Genial Investimentos has estimated that, in this more negative scenario, the net profit of the banks could fall from 1.8% (in the case of BB) to 6.9% (in the case of Bradesco).

A portion of the creditor banks went to court to secure early recovery of Americanas’ debts, which would help cut losses. The BTG and the BV (ex Votorantim), for example, say they adjusted operations after the disclosure of the material fact informing the retailer’s BRL 20 billion shortfall. To hedge against this move, Americanas last week obtained an injunction to avoid a freeze on funds.

“All claims that Banco BV had on the aforementioned date (of the publication of the material fact) against the Americanas group have been extinguished,” said BV. According to Estadão/Broadcast, the operations amounted to approximately BRL 400 million. BTG, in turn, managed to recover BRL 1.2 billion from Americanas yesterday – on judge’s decision Flavio Marcelo de Azevedo Horta Fernandes, from Justice in Rio – and would have a balance of R$ 1.9 billion still outstanding. Bradesco yesterday appealed to justice to have the same right, and experts expect other creditor banks to move in the same direction.

This higher risk to the business is perceived by risk rating agencies. Fitch, for example, cut Americanas’ rating to C, while S&P downgraded the company to D. At Moody’s, the cut was to Caa3. In all three cases, the grades indicate a high or very high risk of default. A week ago, the company had better ratings than Brazil itself in some agencies.

The retailer and the banks negotiate the exit for the billion-dollar debt

How did Americanas act to suspend payment of creditors?

On Friday, the company obtained an emergency precautionary measure from the Rio de Janeiro court which suspends the possibility of blocking, seizure or attachment of the company’s assets. The request also postpones the obligation to pay debts until the company opts, within a period of 30 days, for a judicial recovery. Backed by justice, Americanas failed to pay interest on the company’s 17th bond issue on Monday.

What does the decision obtained by BTG say?

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BTG Pactual yesterday obtained an injunction in the Rio de Janeiro court to block approximately R$ 1.2 billion from Americanas accounts. Judge Flávio Marcelo de Azevedo Horta Fernandes, of the Special Body of the Court of Justice of Rio de Janeiro (TJ-RJ), understood the precautionary urgency decision, but stated that one should “avoid the use of the instrument as a means of defrauding creditors.

Besides the lawsuits, what administrative moves did Americanas make to get the company out of the crisis?

The retailer announced Camille Loyo Faria as the company’s new CFO (chief finance officer) and DRI (director of investor relations) on Tuesday. He was responsible for renegotiating the recovery plan of Oi, which had debts of around R$60 billion. The day before, Americanas instructed the Rothschild bank to negotiate debts with international bankers and creditors, in a list that includes more than 50 names and a debt close to R$ 2.5 billion.

How is the situation of the major shareholders of the company?

Billionaires and important investors, Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, have claimed they can inject 6 billion reais into Americans. However, the amount was deemed insufficient by the creditor banks, who estimate that the trio would need to shell out between R$ 10 billion and R$ 15 billion to allow for a capitalization that the retailer will have to do urgently to save itself. In practice, this money would be invested in the form of an offer of new shares.

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