Markets in Brazil have seen a notable uptick in corporate out-of-court debt restructurings as firms contend with heavy borrowing taken on during the pandemic and a high benchmark interest rate. The trend drew widespread attention earlier this year when a sugar and ethanol company completed what was described as the country's largest-ever negotiated restructuring, amounting to $12.5 billion.
Industry data compiled by the Brazilian Out-of-Court Restructuring Observatory, or Obre, shows a sharp escalation in the use of this mechanism. Filings rose from 16 in 2021 to 84 in 2023, covering a wide array of industries including manufacturing, mining, retail, agribusiness and logistics. In the current year, 33 companies have already pursued out-of-court deals.
Executives and analysts point to two main drivers behind the surge. The first is the pressure exerted by high interest rates. Brazil's benchmark Selic rate reached 14.25 percent, imposing substantial servicing costs on firms that accumulated debt when rates were much lower during the pandemic period, when the Selic had fallen to a record-low of 2 percent.
The second driver is a 2020 reform to Brazil's legal framework that strengthened out-of-court restructuring as a formal option, prompting what Obre director Juliana Biolchi described as "a cultural shift." The reforms increased flexibility in negotiations, enabling companies to exclude some creditor classes from talks and encouraging earlier engagement with creditors before the need for a court-supervised process arises.
Luiz Fabiano Saragiotto, managing partner at Journey Capital, explained why many firms find the out-of-court path preferable. In-court restructuring can be complex and costly because it involves all creditors, can restrict access to financing, harm a company's reputation and disrupt operations. "Once a court accepts a restructuring filing, that label tends to stick," he said.
Out-of-court restructurings operate on a simpler premise: distressed companies negotiate directly with selected creditor groups and, if a majority approves the plan, it becomes binding across creditor classes involved, limiting the ability of holdouts to block an agreement. Biolchi noted that the relative simplicity has led to the mechanism being "increasingly associated with less severe financial distress."
The process drew broader market focus in 2024 when a large retailer obtained court confirmation of an out-of-court restructuring for roughly 4.1 billion reais. The retailer said the agreement did not impact suppliers, business partners, customers or employees. That case was followed by other high-profile restructurings in 2024, including a prominent furniture retailer.
More recent notable filings include a major retail group that in March sought judicial approval to reorganize about 4.5 billion reais of debt. Agricultural firms, currently facing elevated debt loads, have also adopted the mechanism, illustrating its cross-sector use.
Market participants say the growing slate of restructurings is already material. Supported by the large deal in the sugar and ethanol sector, companies pursuing out-of-court restructurings have reported combined debts exceeding 109 billion reais in 2026, compared with 41.5 billion reais in 2024. That increase has contributed to heightened investor focus on credit risk.
"Investors today are more concerned about credit risk," said Caio Viggiano, managing director for fixed income at investment bank Itau BBA, citing global conflicts, high rates and the wave of corporate restructurings as factors behind growing caution.
Looking ahead, the number of out-of-court restructurings is expected to remain elevated. Local reports and a person familiar with discussions indicate that Latin America's largest oncology treatment provider is among companies considering a negotiated restructuring, though that company declined to comment.
The shift toward negotiated, out-of-court arrangements reflects both the immediate pressure of high borrowing costs and the longer-term impact of legal changes that made such restructurings more practical as a corporate tool. The approach offers companies a route to rework liabilities with a narrower set of creditors and with less public disruption than formal insolvency procedures, while markets and investors watch how the trend affects credit dynamics across sectors.