The Operational Dilemmas Of Debt Restructuring

Since 2005, when the Bankruptcy Act was approved, the Brazilian market has been experiencing a continuous evolution of the operational aspects resulting from the debt restructuring or recovery processes.

The crisis that has affected the Brazilian economy in recent years has considerably increased the number of companies which have been forced to restructure their debts, whether by extending terms, assigning new collateral and sharing them, or through a recovery plan.

It is misleading to assume that having a recovery plan approved by creditors, judges and judicial administrators (in the case of court judicial reorganization) is sufficient. Many documents require the hiring of an "agent" to act as collateral agent, escrow agent, administrative agent or paying agent. In practical terms however, the activities to be performed by the agent are seldom formalized as they should be. We have noted that this matter is addressed quite differently by debtors and creditors.