“When a company is in a position to file for Judicial Reorganization, it could go bankrupt if it doesn’t do so, and bankruptcy is not good for creditors or anyone else…”
Douglas Duek is the CEO of Quist Investimentos, with a degree in economy, M.Sc. in finance from Business School São Paulo, with specialization in judicial reorganization from Insper.
Quist Investimentos operates in investment fund management and specialized financial consultancy, advising companies in times of restructuring, with or without judicial reorganization, management improvement, etc.
Douglas Duek, CEO of Quist Investimentos
AgriBrasilis – Are Judicial Reorganizations (JR) a “necessary evil”?
Douglas Duek – I consider Judicial Reorganizations to be a necessary good, not an evil. When a company is in a position to request Judicial Reorganization, it could go bankrupt if it does not do so, and bankruptcy is not good for creditors or for anyone else.
Regardless of whether one creditor or another has insurance, the vast majority of creditors end up being harmed in the event of a company’s bankruptcy. So, JR exists so that the company has protection before bankruptcy occurs, and the chance to renegotiate once again. It is a second chance.
AgriBrasilis – Why is there an increase in the number of JR in agriculture in Brazil?
Douglas Duek – There was a 700% increase due to two factors, which occurred at the same time: the crop failure (in several places there was a lack of rainfall, or rain happened at the wrong time) and the drop in commodity prices.
Agriculture as a whole needs to extend the period to pay its debts and JR is one of the best tools for this when you have many creditors at the same time.
“JR exists so that the company has protection before bankruptcy occurs, and the chance to renegotiate once again…”
AgriBrasilis – Do JR processes harm creditors? To what extent does this undermine credibility in the agricultural sector?
Douglas Duek – JR processes do not necessarily harm creditors. Several times Quist has prepared plans which creditors agreed to and were involved in the negotiation. Maybe JR isn’t very good for anyone, but it doesn’t end up harming creditors.
JR ends up undermining credibility a little in the sense that it is necessary to carry out a better credit analysis later. There was a huge boom in agricultural credit and now the market is correcting this.
AgriBrasilis – Why was it necessary to create a special JR law for farmers? What has changed since the approval of Law No. 14112/2020?
Douglas Duek – The issue was that CPF (Natural Persons Register of Brazil) does not go into Judicial Reorganization, but many farmers, due to the ease that the Federal Government gave to farmers in being able to issue invoices and operate as Individuals (Natural Person), paying only income tax and not a balance sheet, they carried out their operations as Individuals (NP).
And so the question arises: is the farmer a company or an individual? Which NP has US$ 20 million in debt, 100 employees, multiple farms, issues invoices, etc.?
Therefore, the farmer was a company in fact, but not according to the law, not on paper, and that is why this correction through the law was necessary.
AgriBrasilis – After April 30th, it is possible to verify the default of farmers. What is the situation in the sector?
Douglas Duek – We still don’t have the best reading of default rates as of April 30th. Many today are asking for the extension of debts directly with creditors, so it is not possible to say what the level of default is, because they are in the process of negotiation and renegotiation.
AgriBrasilis – In what cases does Quist recommend JR? What factors are evaluated for diagnosis?
Douglas Duek – The main points evaluated are:
- When the company has many creditors to renegotiate at the same time – in this case it is difficult to renegotiate with all of them at the same time;
- When executions are already underway – in this case there is not much room for renegotiation. If the bank said: “I’m not going to extend the time limit. I didn’t receive it on April 30th, so I’m going to execute your guarantee and start a process”, JR pauses this process, which sometimes the creditor is starting. Many farmers come to Quist saying: “I was executed. My farm is going to auction”;
- Cases where the extension that needs to be requested from the creditor is unfeasible. For example: the owner of the company comes to Quist and says that they need between a year and a year and a half of grace period and 10 or 15 years to pay, that the margin is lower due to loss in production, that they are without a farm that they leased, etc.
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