King of Rio gets a R$ 40 million discount at Santos bank.
This is the amount that contractor Fernando Cavendish, owner of Delta Engenharia, saved to settle an estimated debt of R$ 54,4 million with the bankrupt estate of Edemar Cid Ferreira's bank; the receiver defends the reduction.
Marcio Kroehn_247 - Even with billions in revenue from its business, Delta Construções managed to obtain a 75% discount on its debt with Banco Santos, a financial institution owned by Edemar Cid Ferreira that was declared bankrupt in September 2005. Due to financial updates and penalties applied for non-payment of the R$ 20 million loan, contracted in June 2004, Fernando Cavendish's company, which obtained numerous tax privileges in the State of Rio de Janeiro, would have had to disburse R$ 88,4 million to settle its debt at the time of the agreement. But Delta was among the first group of debtors to obtain a generous reduction in the amount owed by the bankrupt Banco Santos to make the payment in cash. At the end of last year, Cavendish signed a check for R$ 13,6 million, a judicial agreement, and was legally removed from the bank's blacklist. The R$ 88,4 million debt was settled with that payment.
According to Cid Ferreira's lawyers, the construction company was given preferential treatment. Brasil 247 had access to the lawsuit filed in his name, which is currently in court. There is a strong questioning of the Delta agreement, approved by Santos' Creditors' Committee. In the document, the banker questions how a healthy company can benefit from such a large discount. After all, he argues, full payment would not compromise the company's cash flow, leaving it with ample resources to settle the debt with Santos. This is according to the arguments presented in the lawsuit to the judge of the Second Bankruptcy and Judicial Reorganization Court of São Paulo, case number 000.05.065208-7/439. (see full text below)The agreement lacks criteria and places companies with billions in revenue, such as Cavendish's Delta, alongside small companies in the same negotiation. In this mix, the creditors are the ones who lose out, as they could receive more money than has been deposited into the bankruptcy estate's account.
But for the receiver Vânio Aguiar, administrator of what remains of Banco Santos, there is no reason for lamenting. “There will always be a genius who thinks they could do better. But the resources recovered from creditors and which are currently in the bankrupt estate's coffers pay 30% of the nominal value, or 16% in updated values, of the credits receivable,” he told 247. “We achieved this result in five years of work.” According to Aguiar, the Delta case is representative of how Cid Ferreira's bank operated. Cavendish's company requested R$ 20 million in loans, but did not receive the money. The funds were immediately invested in debentures of SantosPar, the financial institution's investment arm. This combined operation served to demonstrate to Delta Construções that it was capable of operating in the São Paulo market, which would have made the debt illiquid and impossible to recover. “What Delta paid is practically more of an indemnity to Banco Santos than a settlement of a liquid debt,” says Aguiar.
In addition to the 75% discount for cash payment offered by the bankruptcy administrators, which all creditors were able to take advantage of last year, the debate revolves around the yield on the debt. According to Cid Ferreira's lawyers, the amounts should be updated according to market conditions, with the same penalties that existed when the contract was signed in 2004. With this, Delta's debt, initially R$20 million, would reach R$88,4 million under current conditions. Even discounting the Santospar debentures purchased by Cavendish, the real liability would still be R$65,3 million.
According to the receiver Vânio Aguiar, all Banco Santos debt cases were standardized at the Reference Rate (TR, the same base as savings accounts) + 1% per month. "It's necessary to create incentives to reach an agreement and prevent the process from stalling," the receiver argues. Delta, owned by Cavendish, took advantage of this benefit at the first opportunity and reduced its debt from R$ 54,4 million – according to the bankruptcy estate's calculations – to R$ 13,6 million. With the approval of the Creditors' Committee, the Public Prosecutor's Office, and the judiciary, Cavendish saved no less than R$ 40,8 million, in the most modest calculation, at the expense of the bankrupt Banco Santos. Quite a gift.
See here the complete document.