Owner of the Starbucks, Eataly and Subway brands, SouthRock declared a debt of almost R$2 billion
The market, once again, was caught last week with the news of another request for judicial recovery. This time, it was the SouthRock Group, owner of the Starbucks, Subway and Eataly brands, which declared a debt of R$1.8 billion.
In a press release, the company said that, in addition to the Covid-19 pandemic, economic challenges in Brazil, such as inflation and high interest rates, worsened the situation for retailers, ‘including SouthRock’.
“SouthRock requested Judicial Recovery to financially protect some of its operations in Brazil linked to strategic decisions to adjust its business model to current economic reality”, said part of the note.
The SouthRock Group also explained that the Subway brand is not part of the judicial recovery request. “In relation to the other brands in the company’s portfolio, including Starbucks, SouthRock continues to operate them in the Brazilian market.”
SouthRock joined the list of important market players that requested judicial recovery in 2023 Americanas, Grupo Petrpolis, Maxmilhas and 123 Milhas were some of the companies.
A survey by Serasa Experian showed that, in the first half of 2023 alone, 593 companies requested judicial recovery, a number 52% higher than the same period last year: 390 requests.
High interest
Jos Sarkis, professor of the Administration course at FAAP, recognizes the increase in judicial protection and says that, not by chance, the fact is largely due to the change in the market.
“During the pandemic, the Selic rate reached its lowest level in history and, in less than three years, even before some companies had actually recovered their cash, a reversal in the trend raised this rate, leaving Brazil among the countries with the highest highest real interest rates in the world”, he guarantees.
This scenario, he continues, caused some companies to be exposed to loans in an extremely fragile situation, in some cases, making it impossible to continue paying.
“Judicial recovery then, in some of these cases, can be a way out, a way of oxygenating the operation, offering the possibility of reversing this process and aiming to resume operations”, explains Sarkis.
Finance professor at ESPM, Cassius Otharan believes that the rapid increase in interest rates made the cost of credit heavy. As a result, he reinforces, companies that were already operating under leverage now have an even higher cost of maintaining their debt levels.
“Given that money became more expensive quickly, there was no time for businesses to be able to generate proportional cash growth. Therefore, many companies were faced with unsustainable levels of financial commitments and, not finding timely solutions, requesting judicial recovery was to be, in addition to being an option, the last resort”, he states.
