Bloomberg Línea — Brazilian retailer Americanas (AMER3) is considering a 1-billion-reais ($196.3 million) loan from Jorge Paulo Lemann, one of the company’s main shareholders, in order to continue operations after having interrupted contracts with suppliers, and will need to seek authorization from the country’s judiciary to procure its own financing.
The company, which filed for bankruptcy protection on January 19, announced the possibility of the loan in a material fact late Tuesday, and the request for financing in the debtor-in-possession (DIP) mode, for companies undergoing restructuring, must be authorized by the 4th Business Court of Rio de Janeiro, where the company is headquartered.
The announcement that the beleaguered retailer is evaluating financing comes as the company has begun interrupting contracts with suppliers, is facing eviction threats from shopping malls due to unpaid rent, and the threat of having the electricity supply to some of its stores cut off, and as it has begun to layoff some outsourced workers.
The company’s cash reserves are around 800 million reais ($157.1 million) and which would only cover around four months of payroll, not including other expenses such as store rentals.
“If implemented, the DIP financing will not have any guarantees, and will allow the participation of the company’s creditors, and should have a remuneration equivalent to the company’s average financing cost (around 128% of the CDI),” Americanas said in the statement.
Bradesco and Santander Brasil are among the main creditor banks of Americanas, which declared to the courts a debt of 41.2 billion reais ($8.09 billion) owed to 7,720 creditors.
Initially, the company had announced debt of 43.1 billion reais with 16,300 creditors.
In the material fact statement, the company informed that it has been discussing with its reference shareholders the possibility of them subscribing to the totality of the minimum value.
This is the first time that 3G Capital, owned by billionaires Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, has announced the amount of a capital injection in Americanas, although analysts say the creditor banks are expecting a larger contribution from the trio, estimated at at least 15 billion reais ($2.94 billion), as they try to recover the funds borrowed in a legal battle with the company.
“The DIP financing may eventually be replaced by new financing that is convertible into shares of the company, and that will ensure the preemptive rights of all shareholders,” the material fact adds.
With more than 40,000 employees and 2,400 stores across Brazil, not including the stores of its joint venture with Vibra Energia (VBBR3) , the retail group also has the sale of assets as an option to raise funds.
Owner of the Natural da Terrra chain, with 79 stores, and of Uni.co (which owns Puket, Imaginarium and Love Brands), Americanas entered into crisis after discovering an accounting gap of around 20 billion reais on January 11. Brazil’s Securities and Exchange Commission (CVM) is investigating the case and evidence of insider trading, balance sheet manipulation and market manipulation.