Brazil’s Americanas Rushes to Produce New Financials, Strike Deal With Debt Holders

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Brazilian retailer Americanas SA is scrambling to finalize its fourth-quarter income statement even as it redoubles efforts to get creditors on side for a bankruptcy restructuring plan, according to people close to the matter.

Americanas, which filed for bankruptcy protection in January after uncovering 20 billion reais, some $4 billion, in accounting fraud, is now negotiating changes in the plan to win over debt holders who have previously indicated they would reject it.

At the same time, the company is putting together the audited financial reports, said a source at the company, who asked to remain anonymous, as it seeks to reassure creditors that the dimensions of the accounting debacle have been fully disclosed. Since the initial January announcement, Americanas has uncovered an additional $1 billion in accounting fraud.

These steps are seen as key for the company to be able to comply with deadlines and avoid postponing approval of its recovery plan, the source added.

While presenting an audited income statement is not mandatory to hold the general meeting, it is essential “to convince” creditors to approve the plan, the source said, given that they will hold a higher stake of the company as part of a proposal to convert 10 billion reais of debt into equity.

Americanas said in a securities filing it expected to disclose its previous financial information by August 31. That was the “best estimate” from the company to report them, it added.

Earlier this month, top management at Americanas slammed former executives, banks, and audit firms after a report by the company’s legal advisers alleged their involvement in “fraudulently altered” financial statements.

Americanas’ current top executive Leonardo Coelho last week assured lawmakers investigating the company’s implosion that board members were not among at least 30 insiders he said had conspired to hide its deteriorating balance sheet, adding that those involved were being fired.

The housecleaning could delay processing the income statements because the financial team had been reshuffled, the source said, adding “with some firings, rediscovering the past gets even more complicated.”

With almost 11 billion reais ($2.31 billion) in Americanas debt in hand, the debt holders are considering demanding smaller haircuts than the roughly 70% the restructuring plan calls for and additional compensation for their losses, according to two sources close to the matter.

The company’s original proposal to convert debt to shares would also run contrary to the mandates of many debt holders who are barred from holding equities and talks are underway to find an alternative, two sources close to the matter said.

“Most of the (debt) can’t be converted into shares – for pension or credit funds, there are legal restrictions, said Adriano Casarotto, a credit manager at Western Asset which holds 300 million reais in Americanas debt.

The plan should be discussed before the court by the end of July, and a general meeting could be called for its vote. But if there is no agreement, the process for the recovery plan’s approval could be restarted.

In a statement, Americanas said it remains “committed to its creditors” to build a consensus on its recovery plan and that is still subject to adjustments.

($1 = 4.7777 reais)

Source : usnews