Grupo Gennius, the parent company of Brazilian fast-food chain Habib's, filed for judicial recovery, Brazil's equivalent of Chapter 11 bankruptcy protection, on Monday in a São Paulo court, declaring debts of R$ 265.2 million (roughly $47 million), according to G1 and Folha de S.Paulo. The request was approved Tuesday by judge Jomar Juarez Amorim, who appointed consultancy KPMG as court-appointed administrator to oversee the process.

The group, controlled by Alberto and Belchior Saraiva, operates 119 company-owned Habib's restaurants, 26 units of the Ragazzo chain and six Tendall steakhouses, per G1. Habib's has operated in Brazil for nearly 40 years. In a statement, the company said the filing is part of a financial restructuring meant "to preserve the sustainability and evolution of the business in the long run" and that day-to-day operations continue unchanged, with no impact on customer service.

Where the debt came from

In its court filing, the group blamed three factors that hit its operation in sequence. First, the Covid-19 pandemic cut foot traffic in shopping malls and urban centers, where many of its stores are located. Then the rise of delivery apps changed consumer habits and further emptied dine-in locations. Finally, rising interest rates made servicing debt more expensive: according to Folha, the group notes that Brazil's benchmark Selic rate climbed from 4% to around 15% over the period, increasing the cost of borrowing and refinancing right as cash flow was already squeezed by lower foot traffic. The result, Habib's said, was difficulty keeping payments to suppliers current.

The court ruling suspended all debt collection lawsuits against the group and ordered creditors, including ingredient suppliers and service providers that do business with the chain, not to cancel existing contracts because of the filing. Judge Jomar Juarez Amorim, however, denied the release of bank receivables pledged as fiduciary collateral, a mechanism in which a company temporarily transfers rights over a credit or financial asset to a lender, keeping that portion of cash flow out of the group's immediate reach. Folha reported that the process covers 178 legal entities linked to Gennius. The group now has 60 days to submit a restructuring plan to the court; failure to do so could see the case converted into a straight bankruptcy liquidation.

For franchisees and suppliers of meat, Arabic bread and other ingredients that stock the chain, the filing brings partial, immediate relief: legal collection actions are frozen while a payment plan is negotiated, but full recovery of what they are owed now hinges on what gets approved within the next 60 days. For customers, Habib's says nothing changes at the counter for now, but the outcome of negotiations with banks and suppliers in the coming months will determine whether the chain keeps its current footprint or closes some locations to balance its books.