EMTA Special Seminar: Brazil: Recent Developments in Restructuring and Bankruptcy Reform (NYC) - June 6

EMTA SPECIAL SEMINAR:
BRAZIL: RECENT DEVELOPMENTS IN RESTRUCTURING AND BANKRUPTCY REFORM
Tuesday, June 6, 2017

Sponsored by
  

EMTA
360 Madison Avenue, 17th Floor
(on 45th St. between Madison & 5th Aves.)

This EMTA Special Seminar will focus on issues surrounding the potential restructuring of a number of Brazilian corporates, including Oi, Gol, CSN, The Odebrecht Group and QGOG.  The Petrobras "saga" will also be discussed.  Expert analysis of recent developments in the bankruptcy process, and potential future reforms will also be addressed.

3:15 p.m. Registration

3:30 p.m. - 5:00 p.m. Panel Discussion
Robert Rauch (Gramercy) - Moderator
Richard Cooper (Cleary, Gottlieb, Steen & Hamilton LLP)
Carla Buffulin (EMSO)
Ivo Waisberg (Thomaz Bastos, Waisberg, Kurzweil Advogados)

5:00 p.m.
Cocktail Reception

Additional Support provided by MarketAxess. 

This Special Seminar is part of a continuing series of panels and presentations that EMTA is pleased to sponsor on various topics of interest to Emerging Markets investors and other market participants, and is part of EMTA’s Legal & Compliance Seminars*. 

 

*CLE credit will be available for NY attorneys.  This Seminar is non-transitional and appropriate for experienced attorneys only.  Please click here for details on EMTA’s Financial Hardship Policy. 

Registration fee for EMTA Members: US$95 / US$695 for Non-members / Credentialed Media Complimentary. 

Brazil Panel Discusses Effects of Insolvency Law

An EMTA Special Seminar “Brazil: Recent Developments in Restructuring and Bankruptcy Reform” was held on June 6, 2017 at EMTA’s NYC offices. Robert Rauch (Gramercy) moderated the panel, with the following panelists: Richard Cooper (Cleary, Gottlieb, Steen & Hamilton LLP), Carla Buffulin (EMSO) and Ivo Waisberg (Thomaz Bastos, Waisberg, Kurzweil Advogados).

The panel focused on issues surrounding the potential restructuring of a number of Brazilian corporates, including Oi, Gol, CSN, The Odebrecht Group and QGOG. The Petrobras “saga” was also discussed. Expert analysis of recent developments in the bankruptcy process, and potential future reforms was also addressed. The panelists’ PowerPoint presentations, together with a document of relevant links, can be accessed by Clicking Here.

In Rauch’s introductory remarks, he presented a table showing that a significant number of Brazil’s corporate bonds were either in default ($18.1 billion) or in significant stress ($10.9 billion). Since the introduction of the new bankruptcy law, creditors and shareholders have been getting minimal recoveries because of an inherent flaw in the restructuring regime where significant numbers of extra-concursal creditors are outside the framework and due to the judicial culture and lack of commercial sophistication, leading to few large corporates actually being successfully reorganized.

Cooper explained how Brazil reformed its insolvency laws 12 years ago “with the stated goal to promote a more efficient process to reorganize troubled private corporations”. At the time of enactment, it was heralded as the most “modern” insolvency law in the region, containing 2 distinct procedures – one modeled on Chapter 11 and the other a largely out-of-court process. The law explicitly permitted DIP financing, allowed debtors to sell businesses and assets free and clear of liens and allowed creditors in one class to be “crammed down” if certain requirements were met. Since the law’s enactment there have been hundreds of cases (some small involving single assets and some large involving multijurisdictional corporate groups), and while there have been advances in the restructuring process (particularly compared to the old liquidation-type regime), much work still needs to be done in this area and the “actual restructuring experience has not lived up to the law’s original promise”. The current law still “heavily favors debtors over creditors, is not understood or followed by the judiciary, imposes impediments on creditor involvement and allows debtors to act largely with impunity and without requiring the most basic disclosure”. The basic paradigm between debtors and creditors – where debtors can threaten liquidation if creditors don’t agree with their plan – has not changed. Creditors are left with the choice of taking less than they think is warranted or contributing to sinking the ship for all concerned, including equity holders. This dynamic has lengthened the process and has not particularly resulted in restoring a distressed debtor to good health. While failing to level the playing field for creditors,

the law has also failed to serve debtor interests and has detrimental effects on Brazilian taxpayers. Cooper’s PowerPoint presentation included materials outlining the law, creditor concerns with it and a comparison of the RJ process with US bankruptcy law. The Brazilian legislature is seeking to amend the law this year and time will tell if it results in much needed further improvements.

Buffulin provided her analysis of various case studies (particularly CSN) and her PowerPoint presentation drilled down to specifics of those cases.

Waisberg provided the local law perspective. He posited that 12 years was not that long for a law to be assessed, that it was better than the old regime and not that bad of a law at present, that creditors don’t like the law, but debtors need it, and that he wasn’t optimistic that the government will amend the law’s provisions to make it more efficient. Who will “have the pen” and control for a fresh start, the fact that banks in Brazil “are like spoiled kids” and “victory of hope over spirit, like second marriages” were some of his other conclusive remarks.