Exit Strategies, Turnarounds, Debt Collection and Distressed Assets Investments
In 2005, inspired by US and French models, the Brazilian bankruptcy and restructuring law was entirely reformed. Since then, the law has broadened its range of alternatives for indebted companies, as well as those available to their creditors and investors of distressed assets.
Debtors and creditors are well advised to seek professional guidance on the best strategy to adopt in an upcoming or actual insolvency scenario. Particularly at stake during times of economic difficulties, from a debtor’s perspective, are the maintenance of corporate control, the limitation of management and shareholder liability, as well as self-controlled (partial) liquidation and/or the continuation of any profitable or strategically important business activities that may remain in Brazil. Creditors, in turn, as a debtor’s crisis approaches or already occurs, can improve their outlook within a Brazilian insolvency procedure by applying certain measures.
In many cases, the legal measure of “judicial rescue” is often the most attractive option for all parties involved. This consists of a debtor in possession procedure together with a rescue plan, approved by both creditors and the Brazilian insolvency judge, and an upstream automatic stay period. However, depending on what interests might be at stake, as the case develops, a regular Brazilian bankruptcy proceeding may be a more favourable alternative. This leads to the complete liquidation of the debtor’s assets being supervised by a court and executed by a trustee, in order to satisfy the creditor’s claims in the correct prioritized order, while providing the option to make privileged investments in distressed assets.