R$ 17.3 billion (about US$ 3.2 billion). That is the size of the debt Brazilian retailer Grupo Casas Bahia will try to renegotiate in court, an amount equal to more than R$ 85 for each of the country's roughly 203 million inhabitants. On Wednesday (21), the São Paulo state court authorized the start of the company's court-supervised restructuring, along with nine other companies in the group, according to G1.
For customers and employees, little changes day to day: stores, distribution centers and the website keep operating. Recuperação judicial, the Brazilian equivalent of a Chapter 11-style reorganization, lets an indebted company renegotiate what it owes under court supervision without shutting down. The goal is to avoid bankruptcy and preserve jobs.
Understand what happened: the authorization does not approve a recovery plan or guarantee the company will survive. At this stage, Judge Tainá Maria Leonardo de Oliveira, of the 2nd Bankruptcy and Judicial Recovery Court of São Paulo, only verified that the group meets the legal requirements to enter the process. The payment plan still has to be reviewed and approved by creditors.
Unsecured debt and shrinking inventories
Of the total owed, R$ 16.4 billion is unsecured debt, meaning no collateral such as real estate or pledged merchandise backs it. In practice, it works like a giant store credit account: if the company fails, those creditors go to the back of the payment line, InfoMoney explains.
When it filed for protection on August 16, the company said it faces "the worst financial crisis since its founding". It blames high interest rates, families' loss of purchasing power and rising default, meaning more customers unable to keep up with installment payments. An expert report cited by InfoMoney found a 40.5% drop in inventory value between April and August: for every R$ 100 in merchandise, about R$ 60 remained.
The same report recorded a reduction of 4,647 people on the payroll. Despite the cut, the review confirmed the operation was still running in physical stores, distribution centers and digital channels.
Deadlines and oversight
The judge gave the group 30 days to deliver pending documents, such as the 2023 cash flow statements of four companies and an updated creditor list; if it fails, the authorization can be revoked. "This is not, therefore, a grave and absolute documentary deficiency, but individualized issues", the judge wrote in the decision.
AJ Ruiz Consultoria Empresarial was named judicial administrator, a court-appointed monitor that follows the companies and reports to the court. After the official notice is published, creditors will have 15 days to contest amounts or add credits missing from the list. The suspension of judicial collections against the group, lasting 180 days from August 19, when the injunction was granted, was also upheld.