Debt issuances account for 33% of Brazilian companies’ liabilities; share more than doubles in ten years
02/20/2025
Capital markets have reached a record share of total corporate debt in Brazil, driven by a surge in fixed-income issuances last year. This share rose to 33% in 2024, up from 31% in 2023, according to a study by consultancy firm FTI commissioned by Valor.
Looking at a broader timeframe, the shift in corporate debt composition is even more striking. A decade ago, capital market securities accounted for just 15% of corporate liabilities.
The 2024 figures represent a stock of R$2.2 trillion in debt securities, reflecting an average annual growth of 16.6%.
This increased presence of capital market instruments on balance sheets has not only diversified companies’ funding sources but also introduced new challenges in renegotiating debt with creditors. These challenges come at a time when Brazil is experiencing a record number of bankruptcy filings and out-of-court restructurings.
Recent cases, such as Americanas, Agrogalaxy, and Southrock, involved a significant base of retail investors, prompting the need for debt holder organization—an unprecedented development for individual investors generally unfamiliar with restructuring environments or creditor meetings, which are common in these processes. Another significant case involves the supermarket chain St Marche, which filed for precautionary measures to renegotiate debts and has high exposure to Agribusiness Receivables Certificates (CRAs), widely distributed among retail investors.
Eduardo Parente, director at FTI, noted that this trend has changed the dynamics of debt restructuring negotiations, adding a new layer of bureaucracy to processes that often require agility. The debt products that have seen the most growth in recent years are CRAs and Real Estate Receivables Certificates (CRIs), popular among retail investors due to their income tax exemption. “This made the instrument widely popular,” he said.
Mr. Parente explained that the negotiation dynamics have shifted precisely at a time when restructuring cases are on the rise. “Representatives of CRA and CRI holders are more constrained, and the process has become slower,” he said.
Before the rise of these products, companies and their advisors typically negotiated exclusively with bank creditors and foreign bondholders, who are more accustomed to these negotiations and organized for restructuring discussions. Now, companies must also convince thousands of retail investors. “This complexity brings new bureaucratic and legal challenges,” Mr. Parente added.
Fragmented debt
Bruno Tuca, a partner at Mattos Filho law firm specializing in fixed income, noted that over the past decade, capital markets have become a viable financing alternative, helping companies diversify their funding. However, with high interest rates and numerous restructuring cases, the challenge now is how to make renegotiations more fluid. “The difficulty arose because incentivized securities led to a highly fragmented retail investor base,” he explained.
This fragmentation makes it challenging for companies to gather the necessary quorum for debt renegotiation. In some cases, companies were unable to complete renegotiations because they couldn’t meet quorum requirements. Mr. Tuca noted that this issue is being closely monitored by banks that structure these operations, which are seeking solutions. “This is the first time we’re seeing this situation.”
Last year, Light faced difficulties in achieving the required quorum for one of its debt issuances while undergoing bankruptcy proceedings. After failing to gather the debenture holders, the issuance’s fiduciary agent approached the Securities and Exchange Commission of Brazil (CVM) to request a reduction in the quorum requirement, arguing that all avenues, including hiring a digital influencer, had been exhausted to reach investors. The regulator partially approved the request, marking another step in an already complex process.
Douglas Bassi, a partner at restructuring consultancy Virtus, illustrated the challenge by recounting a case last year where he had to contact each debenture holder individually to amend a debt contract clause that required a 90% quorum. The process took nearly nine months. “During that time, we had to work with the company on a temporary solution,” he said.
The regulatory requirements for incentivized securities add another layer of complexity to restructuring processes. Roberto Zarour, a partner at Lefosse law firm responsible for restructuring, pointed out that regulatory rules prevent incentivized securities from being prepaid, complicating situations where companies need to swap out securities during bankruptcy proceedings. This also limits liability management strategies, such as replacing more expensive debt with cheaper alternatives.
Ricardo Prado, a partner at Lefosse specializing in capital markets, noted that banks and companies are actively seeking solutions to make it easier to gather debt holders for necessary approvals. “Often, a company needs to approve a temporary waiver, but economic conditions change year by year,” he said.
Mr. Prado shared a case where a financially healthy company had to hire nine banks just to gather the necessary quorum, incurring additional costs. “This is yet another cost that companies have to bear,” he noted.
*By Fernanda Guimarães — São Paulo
Source: Valor International