In light of the growing number of distressed Brazilian companies, we wrote an article, published in the New York Law Journal last July, that provided an overview of the Brazilian bankruptcy system to highlight the important differences between restructurings under the U.S. Bankruptcy Code and the Brazilian bankruptcy law implemented in 2005.1 At the conclusion of the article, Brazilian restructuring attorney Marcos Leite de Castro stressed that the lack of precedent on plan confirmation requirements and other important aspects of the Brazilian Bankruptcy Law has led to a “state of flux” in Brazil’s “bankruptcy and restructuring framework.”2
To further understand the issues facing the bond investors in distressed Brazilian entities, we chose as a case study for this article the recent judicial reorganization of Rede Energia S.A..3 We have also asked de Castro to address certain interesting questions raised by the Rede judicial reorganization and what best practices have been adopted by creditors in Brazilian reorganizations in light of this important precedent.
Review of Restructuring Laws
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