Opportunities brought about by the pandemic and the acquisition of assets in a special situation of judicial and extrajudicial reorganisation

In times of crisis, the correct use of the tools available in Law No. 11,101/2005 (the Bankruptcy and Company Reorganisation Law – LFRE) can, at the same time, mitigate the impacts of the pandemic and bring about new business opportunities, especially for Credit Receivables Investment Funds (FIDCs), Private Equity Funds and Distressed Funds.

While the Judiciary is studying alternatives to flatten the judicialisation curve, the Market expectation is that there will be a boom in new requests for judicial and extrajudicial reorganisations due to the pandemic. Although the numbers still do not reflect this forecast, experts report that the volume of lawsuits may exceed the record experienced in 2016.

After an initial maturation period, the LFRE is no longer viewed with mistrust by financial agents, who have already assimilated the potential of the tools and the various opportunities brought by the special legislation, with an emphasis on the possibility of acquiring assets without any risk of succession in the debtor’s obligations (tax, employment and/or civil, for example), through the setting up of Isolated Production Units (UPIs).

The structure of the UPIs is very versatile and can include corporate interests, plants and industrial parks, goods and property, trademarks, stock, client portfolios or a combination of all sorts of assets that arouse the buyer’s interest, provided that this is approved by the creditors’ meeting.

Naturally, the volume of business in this period will require greater synergy between the various players in the market, with a focus on sharing efforts and making traditionally litigious positions more flexible. In this regard, the presence of the FIDCs will be crucial to make Market solutions viable, mainly in a scenario with a high volume of default for large financial institutions.

Specialists in the field are increasingly sophisticated and familiar with the tools available, which makes good business viable in the acquisition of assets, with legal certainty for investors.

A typical win-win solution, in which the company’s activities are preserved, guaranteeing, at the same time, liquidity for creditors holding a guarantee and legal certainty for investors/buyers at the time the assets are acquired.