Welcome to "Management Spotlight," the monthly newsletter from Galeazzi & Associates. Each month's final week delivers exclusive analyses, key topics to watch, and perspectives from Galeazzi & Associates on market trends and business dynamics. Our insights aim to enhance your planning and inform better decision-making through the expertise of our professionals.

As a new year unfolds, echoes of last year's trends persist, exemplified by the dominant theme of this newsletter: bankruptcy proceedings. In the initial weeks of January, Gol's pursuit of bankruptcy protection made headlines, albeit in an unconventional manner—through a Chapter 11 filing in the United States.

On January 25, the airline filed for Chapter 11 bankruptcy protection in the U.S. courts, mirroring the process of judicial restructuring in Brazil. The move was swiftly accepted by the New York Bankruptcy Court, granting Gol access to a $950 million financing facility aimed at sustaining operations while addressing debts totaling R$20 billion.

But why opt for bankruptcy protection in the U.S. over Brazil? Below, we outline four key distinctions between Brazil's judicial restructuring process and the American Chapter 11, shedding light on Gol's strategic choice and presenting a new landscape of possibilities for businesses navigating similar challenges.

1. Access to Fresh Capital (DIP Financing)

In Brazil, securing Debtor-in-Possession (DIP) loans has historically been complex and time-consuming, despite recent legal reforms. Conversely, the U.S. bankruptcy system offers a more expedited process for DIP financing, facilitating prompt access to capital. Recent cases, such as Latam and Gol, underscore the efficiency of the American system in this regard.

2. Negotiation Dynamics

Brazil's financial landscape faces challenges in insolvency negotiations, characterized by a lack of familiarity among certain stakeholders and disparate expectations regarding resolution timelines. In contrast, the U.S. financial market boasts greater sophistication and familiarity with bankruptcy proceedings, fostering a more conducive environment for negotiation and resolution.

3. Legal Framework

Brazil's judicial environment is often marked by procedural complexities and judicial variability, with inconsistent decisions across different courts. In contrast, the U.S. legal system provides greater predictability and uniformity in judicial decisions, ensuring a more stable and expedited bankruptcy process.

4. Asset Protection

Asset protection is a critical consideration in bankruptcy proceedings, and Brazil's complex guarantee system can complicate asset preservation efforts. Conversely, the U.S. bankruptcy framework offers clearer guidelines for asset protection, facilitating smoother recovery efforts.

As we monitor Gol's next steps and the broader landscape of corporate restructuring, both domestically and internationally, we anticipate further developments that may shape the trajectory of businesses facing financial challenges.

Until next time!

P.S.: Curious about the nuances of bankruptcy laws in Brazil and the criticisms they face? Check out an article by our executive director, Luís Felício, exploring this topic in depth.