A Brazilian court grants bankruptcy protection to retailer Americana

SAO PAULO (Reuters) – A Rio de Janeiro court on Thursday accepted Brazilian retailer Americana. (AMER3.SA) It filed for bankruptcy protection, days after the company disclosed nearly $4 billion in accounting discrepancies that sparked a legal dispute with creditors and investors.

Americana, a 93-year-old company with stores across Brazil and a major e-commerce unit, said in a securities filing that it would restructure about 43 billion reais ($8.2 billion) of debt.

Shares in the company fell about 42.5% to 1.00 real after news of the filing, extending its year-to-date decline to about 90%.

The company, backed by the trio of billionaires who founded 3G Capital, said the move came “despite the efforts and actions taken by management in the past few days along with its financial and legal advisors to protect the company from the effects” of the accounting scandal.

Investors had been anticipating the decision, with some seeing it as inevitable, especially after the BTG Pactual agreement (BPAC3.SA) On Wednesday he obtained a court decision to cancel part of the company’s creditor protection.

Americana is also facing seven different investigations launched by the Financial Conduct Authority (CVM), the securities regulator, as well as an arbitration process seeking compensation of OMR 500 million for the company and the trio who founded 3G Capital.

In a document filed with the court, law firms Basilio Advogados and Salomao Kaiuca Abrahao attributed the urgency in filing for bankruptcy to the creditors’ decision to seize the companies’ assets.

The retailer also cited a debt rating downgrade by the rating agencies, which prevented any new loans from being extended. S&P, Moody’s and Fitch downgraded Americana following the accounting scandal.

Earlier, Americana said that its current cash position was only 800 million riyals, down from 7.8 billion previously reported.

Much of Americanas’ previously disclosed cash position is related to prepayment of receivables or creditors, said Lucas Pogetti, partner at mergers and acquisitions consulting firm RGS Partners.

“Naturally, as banks became aware of the real situation of the company, they began to adopt a more aggressive stance to protect themselves, thus restricting access to resources,” Boghetti said.

In the filing, Americana is asking for its fintech, Ame, to be excluded from bankruptcy protection, as regulated by the central bank, and for permission to raise its capital.

Americana stores are ubiquitous in Brazilian malls. The e-commerce unit, which traded as a separate company prior to the recent restructuring, is one of the best online retailers in the country.

Chief Executive Sergio Real resigned last week, after less than two weeks in charge, citing the discovery of “accounting discrepancies” totaling 20 billion reals.

Real, former head of the Brazilian arm of Banco Santander (SANB3.SA)He attributed the discrepancies to differences in accounting for the financial cost of bank loans and debts with suppliers.

CFO Andre Coffer, who also just joined Americana, also left the company, which includes Brazilian billionaires Jorge Paulo Lehmann, Carlos Alberto Secubira and Marcel Telles as reference shareholders.

Americanas said the reference shareholders intend to maintain the company’s liquidity at levels that allow the “good operation” of its stores, digital channel and other entities.

($1 = 5.2226 riyals)

Additional reporting by Gabriel Araujo, Tatiana Bautzer and Peter Frontini in São Paulo and Carolina Police in Mexico City; Editing by Rosalba O’Brien and Bradley Perrett

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