INSUBCONTINENT EXCLUSIVE:
Brazilian companies are grappling with mounting financial pressure as interest rates surge, threatening their ability to manage debt and
financial leverage rose to 2.4 times net debt-to-EBITDA by the end of 2024.This marks the first increase since 2021, when the ratio peaked
at 3.3 times, reversing a three-year trend of deleveraging
businesses.The average loan rate for companies now stands at approximately 22% annually, significantly straining cash flows
Sectors such as transportation, commercial real estate, agribusiness, healthcare, aviation, retail, and construction are particularly
vulnerable due to their reliance on credit or sensitivity to economic slowdowns.Approximately 21% of the companies studied had leverage
ratios exceeding 3.5 times EBITDA by the end of 2024, surpassing the healthy threshold of three times
This heightened debt burden has led to a surge in judicial recovery filings.Brazilian Companies Face Debt Crisis Amid Rising Interest Rates
records began in 2005 and a 62% increase compared to 2023
Experts anticipate this figure could rise further in 2025 as more firms struggle with debt repayment.High-profile cases like FMU Group and
Smaller firms face greater challenges due to limited access to capital markets and reliance on bank loans.Companies are increasingly
exploring restructuring options such as debt renegotiation and asset sales to alleviate financial strain
Gol Airlines implemented a plan in early 2024 that reduced $1.7 billion of debt through equity conversion.The updated Brazilian Bankruptcy
Law (2020) has facilitated smoother recovery processes by extending payment timelines and enabling debt-to-equity swaps.Banks have also
improved their restructuring capabilities, providing more support for struggling businesses
Despite these measures, persistently high interest rates continue to tighten credit conditions and curb growth initiatives across
While proactive restructuring offers some relief, many businesses remain at risk of insolvency in this volatile financial landscape.
