• HSA opened Sao Paulo office last week with three staffers
  • Expectation of long recession is weighing on company outlooks

As Brazil’s economy worsens, the outlook for the country’s restructuring industry is getting better and better.

The latest example is HSA Solucoes em Financas, the Curitiba, Brazil-based debt renegotiation shop, which just opened its first office in Sao Paulo. Chief Executive Officer Lazar Halfon, speaking in a phone interview Monday, said the office opened last week with a staff of three. That brings HSA’s total headcount to nine.

The restructuring industry is one of the few beneficiaries of a Brazilian recession that economists project will be the longest since the 1930s, as companies from real estate to construction seek relief from creditors. OAS SA, the Brazilian builder seeking to emerge from bankruptcy protection, agreed to sell its stake in a toll-road operator to pay bondholders, people familiar with the matter said last week. Homebuilder PDG Realty SA in August hired Rothschild to help restructure 5.8 billion reais ($1.5 billion) of debt.

To make the most of the boom in corporate restructurings, firms including Rothschild and the local affiliate of Evercore Partners Inc. have already bolstered their teams in the Latin American nation. Founded in 1994, HSA helps companies with revenue of at least 500 million reais ($131 million) renegotiate agreements with creditors. The Sao Paulo office will be the only office outside of the Curitiba headquarters.

“The economy deteriorated so quickly, and the majority of the companies didn’t have time to react,” Halfon said.

Trailing 12-month revenue for cos. on Brazil's benchmark Ibovespa index
Trailing 12-month revenue for cos. on Brazil's benchmark Ibovespa index

After almost no growth in 2014, economists forecast Brazil’s economy will contract this year and next. Halfon said the length of the downturn is a big part of the problem; unlike previous crises, it’s hard for companies to see any light at the end of the tunnel. As a result, he said 40 percent of his clients’ cases this year involved judicial recovery, the Brazilian equivalent of Chapter 11. Last year, it was about 8 percent -- the rest were settled directly with banks and suppliers.

“The expectation is that the end to the crisis is very far off,” Halfon said. “It’s impossible to carry out negotiations without judicial protection.”

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