Foreign lenders, investors and insurers doing business in Brazil face from time to time the need of restructuring their transactions, what has increased since the begining of the pandemic.
In the renegotiation of a particular deal is necessary, foreigners should have an Action Plan in place addressing the following points:
1. Risk Assessment: Assess your legal documentation, including collateral package, to understand your rights and obligations towards borrower and guarantors;
2. Collateral: Consider if the current collateral package is enough to provide legal comfort and cover for the outstanding amount or the obligations it supports, and whether there is room to negotiate any sort of collateral enhancement, or if there isn´t such open door, conduct asset search in preparation for any potential litigation;
3. Legal Brainstorming All Potential Scenarios: Brainstorm with your in-house and local legal counsels the potential scenarios and the most appropriate legal actions that may have to be taken in order to protect your rights and collateral. Experience in Brazil shows that the ones who are proactive and lead the pack are the first to enjoy better terms, collateral or full repayment;
4. Restructurings: Think about what proper terms and conditions should be agreed on with borrower and guarantors, and what type of foreign and Brazilian law governed documentation should be required in order to protect lenders and investors of any adverse future situation, including judicial and out-of-court restructuring.
Taking the steps above should help foreign lenders, investors, and insurers to better negotiate any potential scenario of restructuring in Brazil.