INSIGHT-Brazil a bright spot for debt restructuring advisors as recession bites hard

jueves 28 de enero de 2016 02:00 GYT

By Tatiana Bautzer and Guillermo Parra-Bernal

SAO PAULO Jan 28 (Reuters) - Debt restructuring firms are poised to pull in record amounts of business in Brazil this year as the country's worst recession in decades and a corruption probe that has cast a shadow over dozens of companies leads to a surge in defaults.

While a slump in prices is squeezing commodities producers - from sugar mills to oil producers and miners - the "Operation Car Wash" investigation into political kickbacks at state oil firm Petroleo Brasileiro SA is also hitting many of its suppliers.

Soaring consumer delinquencies as Brazil's interest rates hit their highest levels for nearly a decade are also putting some major retailers and homebuilders in line for painful reorganizations.

Scenting an opportunity, U.S. restructuring shops including FTI Consulting Inc, Houlihan Lokey Inc, and Moelis & Co have set up shop in Brazil over the past three years to vie for mandates with local banks and independent advisors.

Last year, a record 1,287 Brazilian companies - most of them oil equipment, construction and manufacturing firms - requested court protection from creditors, about 55 percent more than in 2014. Fitch Ratings said last month that the risk of more firms facing cash crunches has risen a lot.

"This will be a record year" for debt restructuring, said Salvatore Milanese, a former head of Latin America debt restructuring at KPMG International who recently set up his own advisory firm, Pantalica Partners. "The biggest construction companies are restructuring, as are many in the oil and gas industry, and most of the ethanol sector."

Milanese said problems extended to mining firms, medium-sized banks and even soy producers. He estimated Brazilian companies were preparing to renegotiate a total 150 billion reais ($37 billion) in debt.

To handle the workload, banks and law firms are boosting their corporate restructuring teams. Some shops are taking equity as payment, or charging higher retainers and success fees - payable when they manage to pull a client out of bankruptcy or restructure debt without having to file for bankruptcy.   Continuación...