The success rate of international financings in Brazil is directly linked to certain factors related to the management of the borrowers.
In our experience assisting foreign banks and funds, we have detected at least 3 aspects that distinguish managements from each other and may indicate greater chances of success or failure of the transaction:
1. In situations of cash problems, how did the company treat its lenders? This is an important point, because it is in crises that attitudes of companies and managers are tested. There is the group that cuts any communication channel with creditors and the other group that, even in times of financial stress and working capital difficulties, maintains dialogue, providing information and open discussion on ways to resolve the situation.
2. Is the company an active litigator? The orange light should be turned on when it is identified that the company under analysis is an active litigator against customers, suppliers and lenders. Lenders often fail to carry out this check and are surprised by legal measures after the transaction is completed and the funds disbursed.
3. How is the governance, transparency and realiability of the borrower’s financial statements? In the information age, where transparency, accuracy of accounting and financial information and corporate governance are valued, extra care must be taken with borrowers and their controlling shareholders who do not promote all these aspects. Opaque companies, where access to operational and management information are limited, numbers are not reliable and/or there is no segregation between the individual interests of the partners and those of the company itself, should raise a red flag in the continuation of the operation.
Each of the 3 aspects above has a direct impact on the probability of success of financings and must be considered at the time of the risk assessment.