Odebrecht Files For Bankruptcy Protection, The Largest In Brazil’s History

Odebrecht’s Request May Surpass Oi’s Request and Become the Largest Bankruptcy Recovery Process in Brazil’s History

Although it was already expected by the market, it is still bad news. The largest corporate conglomerate in the country filed for bankruptcy protection on Monday (06/17).
The process for Odebrecht S.A. (ODB) will take place in the 1st Bankruptcy and Judicial Recovery Court in São Paulo and involves R$ 51 billion in debts subject to restructuring. An additional R$ 14.5 billion consists mainly of debts backed by shares of Braskem and is not subject to restructuring.

The total debt amount of the company is R$ 83.627 billion, which would be the amount of liabilities subject to recovery, making the process the largest bankruptcy recovery in the country’s history, surpassing Oi’s in 2016, which was R$ 64 billion.
This amount may still increase due to the presentation of a second list of creditors by the judicial administrator, should the bankruptcy protection be approved by the courts, and it could reach around R$ 98 billion.

In a statement, Odebrecht announced that the company and its subsidiaries continue to operate normally in an effort to ensure financial stability and sustainable growth, thus preserving the social function of guaranteeing and creating jobs.
However, it is known that among the group’s companies, Braskem, contractor OEC, Ocyan, developer OR, Odebrecht Transport, and shipyard Enseada are outside of the process.

Atvos Agroindustrial, which filed for bankruptcy protection last month, is also not part of this process precisely because it already has its own ongoing case.

The Fall of the Empire

Odebrecht was one of the main targets of the Lava Jato operation and saw its workforce plummet from 276,000 employees in 2014 to the current 48,000.
The economic crisis facing the country also affected the company’s revenues, and debts have accumulated to the current stage.

The company believes in the approval of its request due to the relevance of its economic activity and stated to employees: “It represents a change of environment to continue our efforts for financial restructuring. From now on, negotiations will take place collectively with creditors and will unfold with judicial protection for the company and its members, with more coordination, security, and transparency”.

The process consists, after acceptance by the courts, of appointing a judicial administrator and will need to be approved by the company’s creditors at a meeting.
After this, Odebrecht has two months to present a recovery plan proposal, and actions and executions against the company are suspended for 6 months.

The company has two years, under the management of the judicial administrator, to pay its debts, negotiating discounts with creditors, during which time the company may remain operational.

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