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Brazil court grants bankruptcy protection to Americanas retailer

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SAO PAULO, Jan 19 (Reuters) – A Rio de Janeiro court on Thursday accepted the bankruptcy filing of Brazilian retailer Americanas SA (AMER3.SA), days after the company disclosed nearly $4 billion in accounting inconsistencies. which provoked a legal dispute with creditors and investors.

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

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

The company, backed by the billionaire trio that founded 3G Capital, said the move took place “despite the efforts and measures that management has been taking in recent days alongside its financial and legal advisors to protect the company from the effects” of the scandal accounting.

Investors had been waiting for the decision, with some considering it inevitable, especially after creditor BTG Pactual (BPAC3.SA) on Wednesday won a court ruling revoking part of the company’s protection against creditors.

Americanas also faces seven different investigations initiated by the CVM, the securities regulator, as well as an arbitration process requesting compensation of 500 million reais from the company and the trio that founded 3G Capital.

In a document filed in court, Basilio Advogados and Salomão Kaiuca Abrahão attributed the urgency of filing for bankruptcy to the creditors’ decision to pledge the companies’ assets.

The retailer also mentioned a debt downgrade by risk rating agencies, which prevented the granting of new loans. S&P, Moody’s and Fitch downgraded Americanas’ credit ratings following the accounting scandal.

Previously, Americanas had said its current cash position was just 800 million reais, down from the 7.8 billion previously reported.

Lucas Pogetti, a partner at mergers and acquisitions consultancy RGS Partners, said that a large part of the cash position previously disclosed by Americanas was linked to the prepayment of receivables or deposited with creditors.

“Naturally, when the banks became aware of the company’s real situation, they began to adopt a more aggressive posture to protect themselves, consequently restricting access to funds,” said Pogetti.

In the request, Americanas requests the exclusion of its fintech, Ame, from the request for judicial recovery, as it is regulated by the Central Bank, and authorization for a capital increase.

Americanas stores are omnipresent in Brazilian malls. Its e-commerce unit, which operated as a separate company before a recent restructuring, is one of the country’s largest online retailers.

The chief executive, Sergio Rial, resigned last week, less than two weeks after taking office, claiming the discovery of “accounting inconsistencies” in the amount of R$ 20 billion.

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

CFO André Covre, who had also just joined Americanas, also left the company, which has Brazilian billionaires Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles as reference shareholders.

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

(US$ 1 = 5.2226 reais)

Reporting by Gabriel Araujo, Tatiana Bautzer and Peter Frontini in São Paulo and Carolina Pulice in Mexico City; Edited by Rosalba O’Brien and Bradley Perrett

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