Alternatives for financial restructuring: two steps before bankruptcy

Judicial Recovery (RJ) is a recurring theme in the business market. In Brazil, the outstanding case of recovery was the financial restructuring of the Oi group, which lasted 6 years. The company filed a request with RJ in 2016, due to the contraction of its operation due to a drop in revenue in previous years and an accelerated increase in debt. Oi reached R$ 65BI of gross debt with more than 55 thousand creditors.

When we approach the issue of financial restructuring in companies, it is important to take two steps back from the subject of Judicial Recovery, as this alternative tends to be the last solution for companies with liquidity difficulties and negotiations with creditors. A good manager needs to keep in mind that the readjustment of liabilities for business sustainability can happen at the administrative level before legal support and manage the best alternative for each negotiation process.

This financial redesign can be divided into three main paths: white negotiation, extrajudicial recovery and Judicial Recovery. The options differ in the way they are traded and also in aspects such as cash protection, costs involved and attrition of the partners.