Restructuring debt, especially with local creditors, is focus after four years of Lava-Jato; much of the risk lies with local banks.
The Odebrecht group faces the most difficult liquidity crisis since Operation Lava-Jato put it under the spotlight of anti-corruption actions in Brazil four years ago. The company needs a R$ 1 billion to keep its activities running for another year as it tries to reorganize itself financially. The resources, however, are not to cover debt, but rather to the day-to-day operations of the companies, including payments due to the Public Prosecution Service. Except for the Braskem petrochemical company, which has a life of its own, the other businesses have been in default in the service and debt repayment for at least six months.
In the past four years, the conglomerate has been basically backed by its own resources – both to run its operations and to honor financial commitments – and successive stretches of debt. But that came to an end, according to several sources heard by Valor.
The objective for 2019 was to implement a broad financial reorganization, from each business, to adjust the debt of each one to its reality of revenue generation, trying, in this way, to prevent the holding company Odebrecht SA (ODB) from seeking a judicial recovery.
This original plan, however, is not materializing either in speed or in planned form. And the risk in the holding company increases every day. RK Partners works on the design of possible solutions, including for eventual judicial recovery, as of the end of 2018.
The expectation in the company is that, in the coming months, several companies have to enter into judicial or extrajudicial recovery. Among them, Atvos, of sugar and alcohol, the construction company Odebrecht Engenharia e Construção (OEC), the Enseada shipyard and probably the construction company, formerly known as Odebrecht Realizações.
This risk also haunted OTP recently, given the delay in approving the sale of SuperVia to Mitsui by Caixa, more precisely by the FII-FGTS, a partner in the business.
In the holding company, the group’s financial commitments, already discounted from those of Braskem, are in the order of R $ 80 billion. It is more than the R $ 65 billion found in the holding company’s balance sheet – disregarded by petrochemicals – due to the existence of businesses in which Odebrecht is the largest shareholder, even though it is not a controlling shareholder, and operations outside Brazil.
Of the total due, R $ 40 billion is with the six largest Brazilian banks. In the restructuring plan, initially, it was not intended to consider this debt in aggregate form, but to distribute it among its subsidiaries according to their results. But putting that strategy into practice seems harder than previously thought.
On the one hand, the size of the group’s exposure avoids or postpones a collapse, which does not concern any of the major creditors. National banks, for example, have a guarantee of only R $ 12.7 billion of total credits. More than R $ 23 billion have no coverage – it would be a much larger amount of defaulted credit for the financial system than any other company that has had problems in Brazil.
But the other side of this coin is that Odebrecht’s relationship with public banks – Caixa, Banco do Brasil and BNDES – became very difficult after Lava-Jato, which aggravates the group’s negotiations. To complement, these institutions have not acted in the coordinated way, as it has been in the past. There is divergence between them and delay and difficulty in approving reorganizations, proposals and businesses, report several sources. In common, they alone have the possibility of scrutiny by the Union Court of Audit (TCU) as to who conducts the negotiations. Hence the slowness of the process.