Casas Bahia pede RJ com dívidas de R$ 17 bilhões e negocia DIP de R$ 1 bi

Brazilian retailer Casas Bahia is seeking judicial recovery in Brazil, with debts totaling R$ 17.3 billion. In an attempt to navigate through the next months and complete its second turnaround, the company is negotiating a R$ 1 billion debtor-in-possession financing (DIP), which has priority over other creditors. This is the first judicial recovery for the company founded by Samuel Klein, although it had previously sought an extrajudicial recovery two years ago.

The DIP, to be provided by Bradesco, Banco do Brasil, and other creditors, is expected to be in place until 2027, when the company anticipates receiving the benefits of two additional liquidity sources: the release of judicial deposits and the renegotiation of tax liabilities. Casas Bahia currently holds about R$ 2 billion in court deposits, of which just over R$ 1 billion is tied to labor and pension issues.

The company plans to ask for the release of around R$ 1 billion of this amount from the courts. In terms of taxation, Casas Bahia aims to use tax transaction mechanisms to stretch payments and potentially obtain discounts.

Together, these measures could release or delay approximately R$ 2.5 billion of cash over the next year, according to a source. However, the cash is not available yet, so the company estimates it still needs more than R$ 1 billion this year to replenish inventories and survive the adjustment period. The company wished to disclose this plan alongside the judicial recovery, but there are still a few details to finalize.

Casas Bahia also intends to change its relationship with suppliers, extending non-current liabilities without a haircut, while making new purchases in cash. This approach aims to resume purchasing merchandise even after losing part of its credit limits with suppliers. The petition comes a few months after Casas Bahia completed a restructuring that effectively eliminated its financial debt.

The company converted billions of reais in debentures into shares, consolidating Mapa Capital as the controlling shareholder and drastically reducing its leverage. In the second quarter, adjusted liquid debt was R$ 1.2 billion and leverage stood at 0.5 times EBITDA, compared to 2.2 times a year earlier. Despite reporting R$ 800 million in free cash flow in the second quarter, much of the generation came from a R$ 1.15 billion reduction in inventories, a leverage that could not be repeated indefinitely, according to a source.

"In the first trimester, the company used suppliers for liquidity, lengthening the payment term. In the second, it reduced inventory. There was not much else to draw from," said a source close to the company.

Casas Bahia then tried to bring in new money through equity and credit, but the poor market performance closed the window for equity and raised the cost of credit. In a relevant fact announced with the judicial recovery, the company acknowledged that the liquidity alternatives being structured did not materialize. The judicial recovery was accompanied by another phase of the turnaround.

On Friday, Casas Bahia closed 298 deficit stores and laid off more than 3,000 people, including retail and administrative areas, according to Brazil Journal. "The company never made such a strong adjustment because it didn't have cash. If Casas Bahia had managed to capture some liquidity, it would have had to carry out the adjustment anyway," said the source.

The only cuts expected to generate an annual saving of around R$ 400 million include technology, rent, contracts, and other expenses. Structural reduction is expected to reach about R$ 2 billion annually, including capex, which was cut by approximately R$ 150 million. According to the source, Casas Bahia's strategy is to operate a smaller company, prioritizing margin, cash flow, and return on capital employed over sales volume and market share.

The company expects that the combination of the new money, the liquidity freed by the judicial recovery, and the cost cuts will allow the operation to generate positive cash flow in 2027. Casas Bahia's stock has fallen 77% over the past twelve months, and the company is now valued at R$ 670 million on B3.