Welcome to “Management in Focus,” the monthly bulletin from Galeazzi & Associates. Each month, in the final week, we bring you exclusive analyses, key topics, and insights from Galeazzi & Associates on the dynamics of the market and business strategies. This information is designed to enhance your planning and decision-making, informed by the expertise of our professionals.

As February draws to a close, the news is still dominated by judicial recoveries (Chapter Eleven process), a recurring theme in market discussions. The past year ended with a record number of judicial recovery requests from Brazilian companies, and the trend is expected to continue. However, many businesses are not fully aware of the complexities and the demanding nature of this process.

Take Gol, for instance, the subject of January’s newsletter. The airline has recently secured a 30-day extension for the return of aircraft to its lessor, AerCap, after the initial deadline expired on February 25th. During the judicial recovery process, airlines are protected from having their planes repossessed or debts collected. Now, both parties have agreed to postpone the repossession for an additional month. Latam and Arajet are also in line, awaiting similar resolutions.

Americanas presents another notable case. Its judicial recovery plan was only ratified by the court on February 26th, despite early signs of distress being evident as far back as January 2023. It is only from March that the payment schedule to creditors will commence, alongside other restructuring steps for the network, which reported a loss of R$1.5 billion from January to September, before interest, taxes, amortization, and depreciation.

As the company prepares to implement short-term operational support measures, it faces several challenges. A report by Valor Econômico highlighted that, as of the end of September, the company’s uncovered liabilities (or negative net worth) reached R$31.2 billion, the highest among publicly traded companies in Brazil. Concurrently, Americanas has requested S&P Global Ratings to withdraw its “D” global and national credit ratings following changes in corporate governance. Sales figures, totaling R$10.3 billion from January to December—a 45% decrease—indicate that Americanas is no longer ranked among the top 10 retailers.

In conclusion, despite government efforts to lower interest rates and stimulate economic growth through various initiatives, businesses continue to face challenges. They require assistance to change their fortunes, whether through debt renegotiation or securing special credit lines. Yet, it is crucial for companies to act promptly and not wait for a crisis to seek support. This need becomes more acute when considering the possibility of filing for judicial recovery, a strategy that demands specialized consultancy and considerable patience.

Enjoy the read!