Turnaround Getting Hot in Brazil

While not necessarily predicting a bust to Brazil’s boom, a budding group of turnaround professionals in the South American nation are getting ready for what they see as an inevitable shakeup.

An abundant supply of credit over the past decade, a loss of competitiveness in many industries—such as textile and agribusiness—to the likes of India and China, and a large number of family-run companies, are conspiring to unleash a wave of restructuring, said Salvatore Milanese, a partner in the restructuring practice of KPMG in Sao Paulo.

“We can see a shift in the nonperforming loans’ curve for the 60-to-360-days period,” he said. “And we’ve observed a rise not only in the number of bankruptcy filings, but also in the size of companies filing.”

He cited the sugar and ethanol, meatpacking, textile, machinery equipment and agribusiness industries as among the most vulnerable.

Extricating Brazilian companies from financial troubles has been almost exclusively the job of attorneys and the courts, but Milanese is helping spearhead what he calls “the professionalization” of turnaround experts in the country.

As the president of the local chapter of the Turnaround Management Association, he is promoting educational seminars, certification courses and networking events for professionals to ascertain their position in the corporate restructuring process. One of 17 international chapters of the TMA, Brazil’s was founded three years ago and counts 185 members.

The adoption of a new bankruptcy code in 2005, which carries many rules similar to those found in U.S. bankruptcy laws, favors the emergence of turnaround professionals in Brazil, said Milanese, an Italian national residing in Sao Paulo since 2000.

In an interview at the sidelines of TMA’s spring convention in Atlanta this week, he said the old law didn’t allow for a turnaround approach.

“The process is still very legally-driven—dominated by attorneys, or just out-of-court,” said Milanese. “We are trying to instill it with ethics seeking serious turnarounds and not just looking to safeguard the debtor’s estate.”

There isn’t enough case law under the new code yet to give investors in distressed assets the impetus to join in the Brazilian growth miracle en masse. Many firms are comfortable buying portfolios of distressed assets, such as consumer loans, auto loans and corporate bonds, but there is very little investment in single distressed assets, said Milanese.

“There are hundreds of companies that need investors,” he said.

Autor: Mara Lemos Stein

Fonte: http://blogs.wsj.com (05/04/2012)