Inside a Brazilian restructuring

A deal with the lender, fund and key suppliers could buy enough time for the plant to collect invoices and fund another run.

Negotiate a written standstill or revised payment terms. The lender might defer instalments while the resin supplier agrees to keep delivering under separate terms.

Any pause comes from the agreement. Its terms determine which parties and enforcement steps it covers.

The parties with authority to commit must agree. A bank contact may negotiate terms before the bank formally approves them.

A creditor outside the deal can still act. A standstill leaves the plant short of resin if the supplier requires upfront cash the company cannot raise.

Check that revised terms and usable cash cover the next production run. Track collections, funding and the milestones agreed with creditors.

Enforcement threatens the plant while an RJ-eligible company is already in pre-filing mediation or conciliation over its debts.

An RJ-eligible company may seek urgent relief under Article 20-B when debt mediation or conciliation is already underway at the competent court’s dispute resolution centre (CEJUSC) or a specialised mediation chamber. Under the Code of Civil Procedure, the applicant must show a likely right and a risk of harm or of the proceedings losing their practical effect. Article 6(12) is a separate route to bring forward some or all effects of opening RJ.

A judge can suspend pending enforcement against the company within the order’s scope for up to 60 days. Mediation itself generally leaves statutory deadlines running. Read the order for its dates and scope.

A judge decides whether to grant urgent relief. Article 20-B sets no initial creditor percentage or plan vote. Under Article 20-C, an agreement goes to the competent judge for approval and binds the creditors who agreed. The relief order has its own scope.

The plant still needs cash for resin and operations. Time used is deducted from an applicable Article 6 stay if the debtor subsequently requests RJ or RE.

Implement a court-approved agreement if the parties reach one. If the order expires or is lifted without agreement, enforcement can resume as the applicable orders allow. The company may separately seek RE or RJ if it qualifies. If it files within 360 days of a qualifying pre-filing agreement, creditors recover their original rights and guarantees, with payments deducted and valid acts preserved. A bankruptcy petition is separate from interim relief. The court must find a statutory ground and issue a bankruptcy judgment.

Rescheduling a defined set of eligible debts could stabilise the factory, and enough creditors within those groups are willing to sign.

Under Article 162 the debtor can seek court approval of a plan for its signatories. An approved Article 163 plan can also bind dissenters within covered claim categories or groups of claims of the same nature with similar payment terms. A plan generally takes effect on approval. Article 165 permits earlier effects only for the amount or method of paying signatories.

For an Article 163 filing, the statutory stay applies from filing only to covered claim categories. The judge ratifies it only if the initial threshold is proved.

Article 163 requires support above half the eligible claim value in each covered category, excluding related-party claims under Article 43. Filing with at least one-third in each gives the debtor 90 days from filing to reach the final threshold by express consent. That deadline cannot be extended.

Tax and certain other claims sit outside the plan. Including labour and workplace accident claims requires collective bargaining with the relevant union. A separate attachment can tie up cash needed for resin and operations.

Creditors have 30 calendar days from publication of the electronic notice to challenge the plan on statutory grounds with proof of their claim. If the court declines approval, the debtor may file a new request for approval after meeting the statutory requirements. Under Article 163(7), the debtor may also request conversion to RJ, subject to the court’s decision.

The company meets the statutory conditions to file and needs a broader collective process. Its ability to keep producing depends on a workable operating plan and funding.

The court decides whether to admit the case for processing. Management usually continues under supervision. The debtor has a non-extendable 60 days from publication of the opening order to file its plan.

The statutory stay generally lasts 180 days from the opening order for covered enforcement. Extensions and creditor plans have specific rules. Tax enforcement and certain fiduciary claims follow separate rules.

With no timely objection, the court can grant RJ without an assembly if the statutory requirements are met, including applicable tax clearance. Where a vote is needed, Article 56-A allows written approvals under the same Article 45 thresholds.

Classes I (labour and workplace accident claims) and IV (micro and small enterprises) require a simple headcount majority. Classes II and III each require a headcount majority and more than half the claim value counted in that class. Claims secured by a right in property vote in Class II up to the collateral value. The excess votes in Class III with unsecured, privileged and subordinated claims.

Article 39 uses the applicable creditor roll, including claims admitted or reserved by court order, subject to the rules for late claims. Related parties and creditors whose original claim amount and payment terms remain intact are excluded. The STJ excludes abstentions from both vote calculations.

Under Article 58, the judge can grant RJ despite a class rejection if the same assembly meets all the statutory tests. These include over half the total claim value counted and approval by at least three classes when four vote, two when three vote and one when two vote. The rejecting class must give more than one-third support by headcount in Classes I or IV, and by headcount and value in Classes II or III. The plan must treat creditors in the rejecting class equally for this purpose.

The supplier can still require cash for new resin orders. Creditors generally retain rights against guarantors, and the factory needs funding while it negotiates.

Carry out the plan once the court grants RJ. The court can close RJ after the debtor fulfils the obligations that fell due during supervision. Later instalments may still be owed.

If creditors reject the plan, a creditor plan or approval under Article 58 may still be available. The court can declare bankruptcy on statutory grounds, including failure to submit a plan within 60 days of publication of the opening order, failure of the applicable plan routes, or default on a plan obligation during supervision.

Article 105 directs a debtor in financial distress that considers itself ineligible for RJ to file for its own bankruptcy and explain why operations cannot continue. A creditor petition or conversion from RJ requires applicable statutory grounds.

Once the court declares bankruptcy, the debtor loses control of estate assets. The judicial administrator handles the estate. The court decides whether operations can continue provisionally under the administrator.

The judgment stays covered individual enforcement and brings estate assets into a collective process. Separate rules can apply to particular claims or third parties.

The judge declares bankruptcy after finding a statutory ground. Check the judgment and any later ruling affecting it.

Even with court-authorised provisional operations, the plant needs funds for resin and production. Creditor payments depend on estate proceeds and statutory priorities.

Check who can operate or sell the plant. Follow asset sales, distributions and the closing judgment. Also check for any judgment under Article 159 declaring the debtor’s obligations extinguished.