The bankruptcy of Lojas Americanas is the Brazilian Lehman Brothers

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Million-dollar “accounting inconsistencies” were detected in the chain of stores. The scandal led to the resignation of the president of the company and could affect the richest men in the country

The bankruptcy of Lojas Americanas is the Brazilian Lehman Brothers

By

Maria ZuppelloFrom São Paulo, Brazil.

The bankruptcy de Lojas Americanas is the Brazilian Lehman Brothers

People walk past a Lojas Americanas store in Brasilia, Brazil January 12, 2023 (REUTERS)

It has been called the tropical version of the bankruptcy of Lehman Brothers. In the eye of the hurricane this time is the Brazilian chain “Lojas Americanas” or, simply, “Americanas”.Founded in 1929 in Rio de Janeiro by an Austrian entrepreneur, Max Landesmann, together with a group of Americans, it is today the fifth largest retailer in the country. In its more than 3,600 stores throughout Brazil, it sells everything from mobile phones to snacks. Americanas even acts as a virtual online marketplace that guarantees its customers' purchases with other retailers.

The scandal erupted on January 11 when, like lightning, President Sergio Rial resigned after discovering and declaring to the press a hole of 20 billion reais (3.85 billion dollars), which became 43 billion reais (8.3 billion dollars) two days later. A “sincericide”, as Thais Heredia, a journalist for CNN Business Brazil, sharply described it, which caused the company's shares to plummet by nearly 92% on the stock market. Along with Rial, CFO André Covre also resigned.

And although the official statement limited itself to describing the holes in the balance sheet as “inconsistencies”, certified however by the multinational Price Water Cooper (PWC), what analysts fear is that it is a fraud.Rial, former president of the Santander Brasil bank, had assumed the presidency on New Year's Eve, replacing Miguel Gutiérrez, who had been leading the group for 20 years. But after a few days he realized the economic disaster in which the company was sunk. Before those who accused him of being part of this criminal scheme, Rial defended himself on his social networks. “I would never compromise with my biography,” he said. “My purpose, my motivation in accepting the position entrusted to me by the shareholders was to add my professional experience and reoxygenate what I received for the benefit of the development of the company.”

The main Americanas shareholders are the richest billionaires in the country, Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira,that only in 2022 some 100.3 million reais, about 20 million dollars, were pocketed in dividends. Lemann is known worldwide for being the owner of Ambev, the largest beer producer in Latin America. He is the 71st richest man in the world according to Bloomberg Billionaires Index , with an estimated net worth of 21,000 million dollars (in 2017 it was 32,000 million). He alone lost 329 million dollars in the Americanas case. This is perhaps one of the reasons why Lemann and his other two colleagues decided not to inject more capital and resort to judicial recovery, which was obtained last Thursday. This is the fourth largest judicial recovery in the country's history after Odebrecht, Oi and Samarco.

The bankruptcy of Lojas Americanas is the Brazilian Lehman Brothers

Brazilian billionaire Jorge Paulo Lemann (Reuters)

The bankruptcy of Americanas now threatens the financial stability of the top twenty Brazilian banks with which the company has contracted debts. A third of them correspond to public banks such as Banco do Brasil, Caixa Económica Federal, Banco Económico de Desarrollo Económico y Social (BNDES), Banco de la Amazonia, Banco del Nordeste and Finep-Financiadora de Estudios y Proyectos . The last loan had been issued by Caixa Economica on December 21, for a value of 450 million reais, 86 million dollars, which have now gone to the black hole into which the company has plunged.

< p class="paragraph">Ironically they find themselves on opposite sides, fighting each other, Lemann on one side and André Esteves on the other. Founder and owner of Banco BTG Pactual, classified as the sixth Brazilian billionaire according to Forbes, Esteves was arrested in 2015, and later acquitted, in the context of the Lava Jato operation that uncovered the black box of Brazilian corruption. BTG Pactual had fought in recent days for the Rio de Janeiro court to authorize the judicial recovery. In Davos, where he attended official meetings, Esteves avoided talking about Americanas. However, the impact on the Brazilian economy is likely to be significant. The risk of bankruptcy could, according to the UOL news site, force the banks involved to block some 7 billion reais (1.35 billion dollars) on their balance sheets to cover the risk of bankruptcy. The group of big Brazilian banks like Bradesco, Banco do Brasil (BBAS3), BTG Pactual, Itaú Unibanco and Santander have lost 36.8 billion reais ($7.05 billion) in market value since the case broke, according to Forbes. BTG alone has lost 12.7 billion ($2.5 billion).

Meanwhile, the highest price is being paid by the more than 1.3 million shareholders of the fixed-income fund of the digital bank Nubank, the “Nu Reserva Immediatea”, which had debentures from Americanas and B2W, the online retail company that has “Lojas Americanas” as the majority shareholder. Speaking of this emergency, on Friday night, the last meeting of the Economy Minister, Fernando Haddad, before the weekend, was with the founder and CEO of Nubank, David Velez.The meeting took place at the ministry's headquarters in São Paulo, with the presence of three other executives. They all left the meeting without making any statements to the press.

And if the thousands of client shareholders of Nubank, one of the stars of the Brazilian fintech scene, are concerned about a fund that allows investments of one real and is proposed as “low risk and high liquidity”, it is precisely the small investors who are now They are among the most aggressive. The association that represents them, Abradin, has asked the Securities and Exchange Commission (CVM), the body that controls securities such as shares and investment funds, to open an investigation into the certifying company PWC, which had already participated in the certification of the state oil company Petrobras at the time of the Lava Jato scandal. “We were struck by the absolute inexperience of the auditing company,” read Abradin's statement, “as well as the omission of the company's fiscal council. We find it hard to believe that the tax hole was not known to the previous managers and also to the majority shareholders.”

In recent days, accounting specialists have expressed skepticism about the explanations given by Americanas, and the Brazilian press has talked about a lack of detail in the company's financial statements. Abradin also attacked Americanas' use of the term “inconsistencies.” “It is an understatement,” he said, “to define a multimillion-dollar fraud that not only destroyed the assets of the company's shareholders, but also undermined the credibility of the Brazilian capital market, scaring away investors at a time when the national economy so much does it need direct investment in production to recover its growth trajectory.”

The bankruptcy of Lojas Americanas is the Brazilian Lehman Brothers

Photo of the Lojas Americanas logo at a store in Brasilia (Reuters)

Consumers are also up in arms. Today there are hundreds of complaints on the Internet from customers who have not received the products they purchased. For its part, Americanas, in its judicial recovery request, affirmed that its eventual bankruptcy “could even affect the price of Easter eggs”, since, in its words, “it is the largest retailer of Easter eggs in the world ”. Meanwhile, for this delicate phase, Camille Faria, former financial director of Tim and Oi, enters as financial director of Americanas. Her mission seems daunting, but the goal is important: to ensure the protection of the majority of the victims of this unexpected financial collapse. A statement from Americanas in recent hours does not rule out the possibility of collective layoffs so that “decisions that guarantee the viability of the company bear fruit in the short term.” The company employs 45,000 people throughout Brazil.

Since the scandal broke, the shares have already accumulated a 94.1% drop. Viernes were excluded from the 13 main Brazilian stock indices and, above all, from Ibovepsa, the main index of B3, the Brazilian Stock Exchange. The index brings together dozens of companies that are among the most traded on the Brazilian stock market and serves as a reference for the entire market.

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