Brazil corporate financial restructuring requests up 48.4% in May over April – Survey

RIO DE JANEIRO, BRAZIL – The number of financial restructuring requests by companies reached 92 in May this year, representing an increase of 48.4% compared to April, according to a survey by Serasa Experian.

The majority concern micro and small companies. Compared to May last year (94 requests), there was a 2.1% drop in the total number of requests.

When analyzing sectors, services stood out with 62 requests in May 2021, followed by commerce (15) and industry (12).

In the case of bankruptcy filings, the data show that compared to May 2020, there was a 2.1% drop in total filings, although there was growth for smaller companies in the period, from 54 in May last year to 60 in May 2021.

According to Luiz Rabito, economist at Serasa Experian, the numbers follow the increase in corporate default, which is higher among micro or small companies.

The survey shows that micro or small companies represent 92.4% of the total legal entities with accounts in the red.

“Opening and closing directly impacts smaller companies, which lack reserves and are faced with the reduction of special credit lines. As a result, they are still strugglin to recover and are the majority in these indicators,” explained Rabi.

For Fábio Astrauskas, economist and professor of the Institute of Education and Research (INSPER), although financial restructuring requests have increased almost 50% in May compared to April, there is no reason for immediate concern, since the data from previous months were in line with May.

“If we compare with the strongest months of the Covid-19 pandemic last year, the current numbers are lower. Therefore, the scenario is still lower than what was expected in 2020 and probably should not be much higher in the coming months.”

According to the economist, the increase observed among micro and small businesses is attributable to the fact that such companies were less able to protect themselves compared to better established and capitalized ones.

“The lack of working capital is what leads companies to financial restructuring requests. Large companies have more access to working capital tools and conditions that prevent them from losing liquidity and going into receivership.”

Regarding the services sector, Astrauskas said that this segment comprises transportation, clothing, footwear, whose sales and revenues largely depend on the presence of consumers.