Fitch downgraded the rating of Americanas

Budrigannews.com – Following the announcement of an injunction safeguarding the Brazilian retailer from creditors, Fitch Ratings downgraded Americanas SA’s long-term foreign currency and local currency ratings into junk territory on Tuesday.

Americanas disclosed on Tuesday that it had not paid the $392 million in local bond interest that was due on Monday on more than 2 billion reais. It made the disclosure in a filing in response to a question from securities regulator CVM, stating that the injunction permitted it to avoid payment.

According to Fitch, Americanas’ ratings will be downgraded to RD or D in response to an official announcement of a debt restructuring plan, indicating a default. Fitch stated that the retailer, which is supported by the billionaire founders of 3G Capital, has an unsustainable capital structure and an estimated 20 billion reais in liabilities that have not been disclosed.

After nearly $4 billion in accounting inconsistencies were discovered, Americanas’ outgoing chief executive Sergio Rial stated in a LinkedIn post on Tuesday that the company’s billionaire backers gave him “unconditional support.”

Rial stated that Jorge Paulo Lemann, Carlos Alberto Sicupira, and Marcel Telles, three Brazilian billionaires who founded 3G Capital and are reference shareholders of Americanas, fully supported him on a “course correction” following the discovery of the accounting scandal.

Following the discovery of distortions that he attributed to differences in accounting for the financial cost of bank loans and debt with suppliers, Rial resigned on Wednesday, less than two weeks after taking the position.

An injunction was granted to protect Americanas from creditors and set a 30-day deadline for it to file for possible bankruptcy protection. The company is expected to repay up to 40 billion reais ($7.82 billion) in debt earlier than planned.

Rial, who succeeded Miguel Gutierrez as CEO in the second half of 2022, stated, “We reached the scenario seen in the securities filing with transparency and reliability.”

Former Banco Santander CEO Rial (BME:) Brasil SA, the local division of Banco Santander in Spain, where he continues to serve as board chairman.

Rial and chief financial officer Andre Covre, who had just joined Americanas, both left the company.

Rial stated, “With the initial diagnosis there was an urgent need for a course correction,” and he added that the board and shareholders were in his support. In addition, he impliedly denied having been aware of the accounting issues prior to January.

Despite a gain of more than ten percent on Tuesday, Americanas shares are still down nearly seventy-seven percent year to date since Rial announced the accounting inconsistencies.

Banks have questioned the company’s request for protection from creditors since then; The issue has been the subject of three probes launched by securities regulator CVM; in addition, two industry groups have filed a lawsuit to seek compensation.

Markets are looking into the variable compensation of management during the time that the accounting problems occurred, following news that managers of the company sold approximately 42 million reais worth of shares in the months prior to the revelation of the problems.

Despite Americanas’ losses from 2017 to 2020, the company paid managers 169.6 million reais ($33 million) in compensation over the past five years, including a portion of variable compensation, according to documents filed with the securities regulator.

According to securities filings, the company distributed dividends in 2021 worth 516.6 million reais.

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