Restructuring offers growth for Moelis in Brazil
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CAPITAL MARKETS

Restructuring offers growth for Moelis in Brazil

Brazil office opened in 2014 and has won several prestigious mandates; firm argues changes to bankruptcy code would boost M&A.

There has been huge interest among international financial sponsors in acquiring Brazilian assets, but the country’s bankruptcy code is preventing deals happening, according to Jório Salgado-Gama, managing director and co-head of Moelis Brazil.

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Jório Salgado-Gama

“We have had many financial investors coming to São Paulo in search of buying opportunities given the country’s situation, but it’s very difficult,” he says.

“Once we have explained the regulations, they see that it is a very difficult legal situation and that’s why we haven’t seen many distressed M&A sales.”

Salgado-Gama points to the fact that separating liabilities in divestitures is complex in Brazil. Also, probably the biggest issue is that judges can invalidate any asset sales that occur six months before a company going into judicial review – which is the country’s 2005 bankruptcy protection law.

“You have much more certainty in other jurisdictions,” says Salgado-Gama, who believes revisions to the 2005 code could help spur M&A for companies.

“It is difficult for a foreign investor to buy anything from a company that could be in a [judicial review] situation within the next six months.”

Otávio Guazzelli, managing director and the other co-head of Moelis Brazil, also suggests the law should be changed for privately held businesses – currently there is no limited liability protection and so entrepreneurs can lose everything in the case of bankruptcy.

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