How to stabilize cash and operations in a Brazilian turnaround

01

Establish how much cash the business can use today

Take a dated snapshot from bank statements and reconcile it to the cash ledger. Show each Brazilian legal entity and bank account, including restricted accounts, balances pledged to lenders, automatic sweeps, unpresented payments and money in transit. Mark who controls releases and when they can act. A cash balance at an affiliate may be unavailable for payroll at the employer; an undrawn line is only a funding source if the borrower can meet the draw conditions and the bank can fund in time.

Make a payment calendar for the next few days before optimizing the quarter. Match payroll, benefits, taxes, rent, utilities, insurance, logistics and debt service to the correct entities and payment dates. Verify Brazilian bank cutoffs and holidays for each material payment. Ask counsel and the responsible teams what can lawfully be changed, what must be authorized and which obligations or court orders cannot be handled as ordinary treasury decisions.

• Separate cash on the statement, cash legally available for use and conditional funding.
• Identify the person who confirms bank availability and the person who approves disbursements.
• Flag any payment whose failure stops a facility, affects payroll or triggers an enforceable right.

02

Build a rolling 13-week forecast from actual receipts and payments

Use 13 weeks as a rolling management window. For each entity and week, add expected usable receipts to opening available cash and deduct the payments expected to clear. Keep material receipts at invoice or contract level and give the most sensitive days a daily view. Closing cash becomes the next week’s opening balance. Put receivables trapped in controlled accounts, financing subject to approvals and prospective asset sale proceeds on separate lines so they cannot silently fill a gap.

Use a base case, a downside case and funded responses. Give each significant assumption an owner, expected date and evidence. Compare the forecast with actual cash every week and separate timing misses from amounts that will never come in or costs that are now higher. Roll the schedule forward and carry missed collections explicitly. For a seasonal or project business, extend the view to the next important operating milestone beyond week 13. The forecast complements statutory cash reporting and any required projections in a judicial restructuring filing.

Sources for this section: Law 11,101/2005, Article 51 II: financial statements and cash flow projection for an RJ filing · Brazilian Accounting Pronouncements Committee: CPC 03 (R2) on cash flow statements

03

Turn receivables and inventory into cash the right entity can use

For the largest customer balances, confirm delivery and acceptance, invoice and due date, disputes, return rights, offsets and the destination account. Ask whether any balance was assigned to a bank, securitizer or FIDC and verify any notice and release conditions. For a boleto payment, confirm the beneficiary and payment instructions through an established channel before changing them. Focus collections on resolving the particular obstacle: one customer may need evidence of receipt, another a corrected fiscal document or an agreed credit for a return.

Tie each inventory purchase to units that can be produced, shipped, accepted and paid for in time. Check stock by site, including third-party or consigned goods, committed quantities, aging, title and liens. A bulk purchase can lower unit cost while exhausting cash. An inventory clearance can show accounting proceeds while releasing little spendable cash if stock is pledged or delivery costs are high. Use a before-and-after cash bridge and confirm the necessary consents.

• Split collections into confirmed, disputed, assigned or restricted, and conditional.
• Track promises to pay against deposits and reconcile receipts to the correct invoices.
• Record the cash date and net cash contribution for each proposed discount, factoring or stock sale.

04

Keep the parts of the business that generate cash safely

Review products, contracts and facilities at the level where a decision can be made. Estimate incremental cash from a run or order after inputs, labor, freight, taxes, returns and the lag to collection. Then ask which costs truly disappear and when. Shutting an unprofitable site may still create severance, storage, contract, restart or remediation costs. Keeping an apparently profitable line running can require a prepayment that consumes the cash needed for a stronger order.

Create a weekly operating plan with purchasing, production, logistics and commercial teams. Confirm critical spares, maintenance, licenses, safety staffing and environmental controls with the responsible managers. Escalate serious safety or compliance issues immediately through the relevant channels and preserve the decision record. A controlled pause can protect staff and preserve the ability to restart; model its cash and customer consequences before treating it as a saving.

For support testing how operating decisions affect liquidity, Rafael Pinto ↗ (opens in a new tab), a founding partner at Ritus Partners (PreservaCred’s restructuring partner), works on financial modelling and operating decisions.

Sources for this section: Brazilian Ministry of Labor and Employment: occupational risk management programme

05

Treat financing as a decision with conditions and a value date

Compare a shareholder contribution, an operating amendment, eligible receivables finance, an asset sale and rescue financing by the date usable cash arrives. List the exact borrower, investor or lender, security, conflicts and approvals. Test lien priority, contractual restrictions, minimum cash conditions, fees and any release or draw mechanics. A term sheet can advance diligence while the cash remains conditional. Keep legal review, diligence, signing, funding and bank clearance as distinct milestones.

In a recuperação judicial (RJ), Brazil’s insolvency statute addresses restrictions on selling or encumbering non-current assets after filing, and provides a framework for court-authorized financing under Articles 69-A to 69-F. Have local counsel match the proposed transaction to the statute, plan and operative orders. Compare the available proceeds and timing to the lowest cash point before relying on any funding source.

Sources for this section: Law 11,101/2005, Articles 66–67 and 69-A–69-F: asset transactions and financing in RJ

06

Tell each audience what it needs to decide

Give employees and site leaders concrete operating information: scheduled shifts, who answers payroll questions and how to report a safety problem. Give suppliers the orders the company is authorized and funded to place, and a contact for past invoices. Give customers evidence about delivery capacity and milestones. Give creditors the agreed liquidity report with assumptions, sensitivities and changes. Keep proposed payment dates and uncommitted financing clearly identified; use a named spokesperson and a written record for major updates.

For a listed issuer, involve investor relations and counsel promptly to evaluate material disclosures, confidentiality and who may receive information. CVM Resolution 44 governs disclosure of material acts and facts and trading while relevant information is undisclosed. Have the disclosure team coordinate the Brazilian and any cross-border channels and review whether a private stakeholder update can be made as planned. Limit financial and personal information in circulated files to what is needed and authorized.

Sources for this section: CVM Resolution 44: material disclosures and securities trading

07

Define escalation before the next miss

Set a minimum operating buffer and decision triggers that suit the company. Examples include an uncertain collection needed for payroll, a vendor putting the next shipment on hold, a projected covenant breach, an incident affecting safety or a cash release taking longer than its approval window. Define the evidence that activates each trigger, the decision-maker, a deputy and the latest action date. Separate treasury choices from safety incidents, formal notices and legal decisions that have their own routes.

Bring a short action log to each review: what moved since the last forecast, which decision is needed, what happens if it slips and which person owns the fallback. If the company cannot fund the next critical operating milestone, bring forward a decision on new money, consensual changes, procedural options or a smaller operating footprint. A business plan should specify what can actually be funded under a downside case.

08

Report progress in measures that change decisions

Once cash is stable enough to look further ahead, connect the forecast to an operating plan and a credible debt capacity. Make clear which cash gains came from one-time collections or asset sales and which came from recurring improvements. Track a few metrics that can trigger action: available cash versus buffer, forecast misses, confirmed collections, critical deliveries, and how much cash funded orders generate. If an intervention improves the income statement but pushes out usable cash, keep that difference visible in board and creditor reporting.

• Ask for the weekly cash bridge, the next three decisions, and the operating risks that could change either.
• Require a clear distinction between forecast actions, approved actions and cash that has cleared.
• Revisit debt payment capacity using actual collections and production data as conditions change.