Understand the request for extrajudicial recovery from the Casas Bahia Group

The Casas Bahia Group announced on Sunday (April 28, 2024) that it filed a request for extrajudicial recovery. The objective is to extend the payment of a debt that exceeds R$4.1 billion. The decision complements the transformation plan announced by the retailer in August 2023. Here is the full statement sent to investors (PDF – 338 kB).

In extrajudicial recovery, negotiations are carried out with a selected group of creditors and the plan is approved by the Court only if one of the creditors does not agree with the proposal.

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The Casas Bahia Group wants to renegotiate the profile of financial debts it has with Bradesco and Banco do Brasil, among other creditors. Banks together account for 54.5% of the credits owed by the retailer in the recovery plan.

The group’s expectation is that the plan will promote a reduction of R$4.3 billion in debt disbursements over the next 4 years, with R$1.5 billion already in 2024.

JUSTICE APPROVES

The TJ-SP (São Paulo Court of Justice) approved on Monday (April 29) the request for extrajudicial recovery of the Casas Bahia Group. The decision, signed by judge Jomar Juarez Amorim, of the 1st Bankruptcy and Judicial Recovery Court, suspends all collections of debt claims by creditors against the company for 180 days.

DIVISION OF THE AGREEMENT

Negotiations take place through the issuance of series of debentures (medium and long-term debt securities issued by the company) and also because of CCBs (Bank Credit Notes).

The titles will be transformed into:

• series 1 – totals R$ 1.5 billion (37% of debts). It will be paid at the CDI rate (Interbank Deposit Certificate) + 1.5%. The interest grace period lasts 24 months and the principal grace period lasts 30 months. Payments will be made every six months after the grace period. The largest installment will be paid in November 2029;
• series 2 – partner creditors may convert this value into shares if the same rules are maintained for operations that do not enter into extrajudicial recovery;
• series 3 – non-partner creditors may receive payment until 2030 with CDI + 1.0% per year.

Series 2 and 3 total R$2.6 billion, equivalent to 63% of debts.

One of the main objectives of the request is to extend debts. The new term for repayment will jump from 22 months to 72 months, with a reduction of 1.5 percentage points in the average cost of debt with creditors. In relation to cost, it fell from CDI +2.7% to CDI + 1.2%.

On the call “reprofiling”, there is a change in the debt payment schedule. By 2027, disbursements fell from R$4.8 billion to less than R$500 million. The group is considering paying off most of its debts after 2029.

NAME CHANGE

In 2023, the group changed its name to Grupo Casas Bahia. Until September 2023, it was called Via. Before, it was called Via Varejo.

The Casas Bahia Group owns 8 brands: Bartira (retail), Casas Bahia (retail), Extra (retail), Ponto (retail), AsapLog (logistics), CNT (logistics), banQi (financial) and Rede Celer (financial ).

TRANSFORMATION PLAN

The Casas Bahia Group announced in August 2023 its transformation plan, which included the closure of 50 to 100 stores during the year and the dismissal of 6,000 employees, in an attempt to reduce costs by simplifying the company’s structures.

In the balance of the year, the company cut 8,600 jobs, equivalent to around 20% of the company’s workforce. It closed 55 stores. The group also reduced marketing expenses by R$90 million.

REVENUE OF R$34 BILLION

Data from the company’s financial statement show that the company’s gross revenue fell from R$36.4 billion in 2022 to R$34.4 billion in 2023. The drop was 2.9%. It recorded a loss of R$2.6 billion last year compared to a negative balance of R$342 million in 2022.

Here is a summary of the company:

• Founded in: 1946;
• gross revenue in 2023: R$ 34.4 billion;
• gross debt in 2023: R$4 billion;
• collaborators: 37,958;
• suppliers: 2,800;
• stores: 1,078;
• tax regime: SA

WHAT IS EXTRAJUDICIAL RECOVERY

When a request is made extrajudicially, the company chooses to negotiate debts only with a group of creditors and/or suppliers. The others are left out of the process, explained Marcello Vieira de Mello, partner at GVM Advogados.

Renegotiation is done directly – not necessarily involving the Judiciary. In other words, the debtor company presents a restructuring plan directly to creditors. Vieira de Mello explains that the group can accept or not the plan presented.

If anyone disagrees, the company responsible for the debts must approve the request in court, “forcing them” to enter the negotiation. To do this, however, there must be 50% group membership.

“I talk to each of the creditors, present my plan and explain what and why I am proposing these conditions. If everyone accepts, the parties draw up private documents so that the agreement is fulfilled.”he said.