Number of Brazil in-court reorganizations hit record in Jan-Sept

The number of requests for bankruptcy protection in Brazil soared to an all-time high in the first nine months as the steepest recession in a quarter century and rising borrowing costs hammered hundreds of small- and mid-sized firms, credit research company Serasa Experian said on Monday.

The number of requests for court protection from creditors jumped almost 45 percent in the January-through-September period to 913 filings, compared with 631 made in the same period a year earlier, Serasa said in a report. The number is the highest for the period since 2006, when a new law on corporate restructurings was enacted.

Small-sized companies led the tally with 466 requests, followed by mid-sized firms with 277 requests. As many as 170 large firms sought protection from creditors in the period, Serasa added.

The latter included big engineering companies involved in a corruption scandal at state-controlled firms. Grupo Schahin SA, Galvão Engenharia SA and two other rivals have filed for bankruptcy protection since January as the scandal undercut their access to financing and compounded the impact of a flagging economy and a slumping currency.

Economists expect Brazil’s economy, the largest in Latin America, to post back-to-back annual contractions this year and next for the first time since the 1930s.

Companies across the country are grappling with dropping sales, margin compression, the highest borrowing costs in nine years and high dismissal costs, which will test their ability to stay current on their financial obligations, Serasa said in the report.

(Reporting by Guillermo Parra-Bernal; Editing by Cynthia Osterman) Reuters