The collapse of the US investor, the reorganization of the club and its football corporation, and the BRL 80 million financing authorized under Section IV-A of Law 11,101/2005.
Few recent episodes bring together, in a single storyline, so many themes central to insolvency law as the encounter between 777 Partners and Vasco da Gama. On one side, an international investment platform built on receivables-backed financing, undone by collateral fraud and now reorganizing under United States Chapter 11. On the other, one of the most popular football clubs in Brazil, a pioneer in incorporating a football corporation under Law No. 14,193/2021, which saw its foreign investor collapse mid-contract and had to resort to court reorganization to restructure billion-real liabilities.
At the point of contact between the two crises lies the subject of this piece: debtor financing in court-supervised reorganization, whose Brazilian regime, introduced by Law No. 14,112/2020 in Section IV-A of Law No. 11,101/2005, was tested in the case and emerged from it as the discreet protagonist of a successful crossing.
777 Partners, an investment platform based in Miami and founded in 2015, grew out of structured financing over litigation settlement receivables and expanded aggressively into aviation, insurance, media and sports, assembling interests in football clubs in several countries, among them Everton, Standard de Liège, Genoa, Hertha Berlin and, in Brazil, the Vasco da Gama football corporation.
In May 2024 the asset manager Leadenhall Capital filed a civil fraud action in New York alleging that assets of approximately USD 185 million pledged as collateral appeared simultaneously in the collateral records of different creditors, with estimated shortfalls of around USD 310 million and statements altered to show non-existent balances. There followed the founders' resignation, the de facto assumption of management by the main creditor, insurer A-CAP, the enforcement of portfolios and, in August 2026, the Chapter 11 filing of 777 Partners and twenty-three affiliates in Texas, with DIP financing of USD 24.95 million granted by the pre-petition creditors themselves.
For present purposes the episode matters for three reasons. First, the investor's collapse did not stem from bad luck with sporting assets but from the failure of the most basic element of secured credit, the uniqueness and existence of the collateral, a warning that will accompany the analysis of the security granted in the Brazilian case. Second, the cross-border insolvency of the shareholder of a Brazilian football corporation has immediate corporate effects on it, since the interests held by the distressed group become part of the estate subject to the foreign proceeding, with all the constraints that follow for the local company's governance. Third, and revealingly, even the reorganization of a group brought down by collateral fraud had to be sustained by DIP financing granted precisely by its earlier creditors, confirming that credit to a distressed debtor is, for the financier as well, an instrument for containing loss and preserving the residual value of its position.
Vasco da Gama incorporated its football corporation under Law No. 14,193/2021 and, in February 2022, transferred control to 777 Partners under funding commitments that would make the US investor the financier of the sporting project. The relationship deteriorated in proportion to the investor's crisis.
On 15 May 2024, two weeks after the Leadenhall action was filed in New York, the Rio de Janeiro court, in a decision by Judge Paulo Assed Estefan, granted relief sought by the association suspending the effects of the investment agreement and the shareholders' agreement, suspending the investor's corporate, voting and economic rights and returning control of the corporation to the club, appointing consultants to prepare an economic and financial report on the transactions carried out under the ousted management. From then on the corporate dispute ran in parallel with the financial deterioration, with subsequent decisions imposing judicial control over management acts and asset disposals.
Without the promised funding and with consolidated liabilities of around BRL 1.4 billion, club and corporation sought insolvency protection. In October 2024 preliminary relief suspended attachments, and in February 2025 a petition for court reorganization was filed covering both the association and the corporation, allowed to proceed on 25 February 2025 by Judge Caroline Rossy Brandão Fonseca, of the 4th Business Court of the Capital District of Rio de Janeiro, with a stay of actions and enforcement proceedings for the statutory period and a requirement of judicial authorization for material dispositions.
The case thus formed part of the second wave of Brazilian football insolvency proceedings, and its admissibility premise deserves note. Law No. 14,193/2021 expressly allows the club or original legal entity to resolve its liabilities through court or out-of-court reorganization under Law No. 11,101/2005, and the case law formed in the Guarani, Avaí, Fluminense and comparable matters has consolidated the standing of the sporting association to file, on the basis that it carries on organized economic activity, a reading scholarship supports by reference to article 25 of the same statute.
DIP financing, properly speaking, is credit granted to the debtor in possession, the debtor that remains in control of its assets during a Chapter 11 reorganization, subject to court authorization and to the incentive regime of Section 364 of the Bankruptcy Code. The system is tiered. The debtor may incur unsecured credit in the ordinary course with administrative expense treatment; may obtain, with court authorization, priority over other administrative expenses, the superpriority, and liens on unencumbered assets or junior liens on encumbered ones; and may, at the highest tier, offer security ranking ahead of pre-existing liens, the priming lien, conditioned on showing that credit could not be obtained otherwise and that the primed creditor remains adequately protected. The design is completed by the stabilization rule of § 364(e), under which appellate reversal of the authorization does not affect the validity of the credit or of the security of a good-faith financier. Specialized literature has shown that these agreements have become the principal governance instrument of contemporary reorganization and that financed companies show a higher probability of successful reorganization and shorter proceedings.
Brazilian law did not transplant that model, and the precision matters. Section IV-A of Law No. 11,101/2005, introduced by Law No. 14,112/2020, does not regulate a contract type but a statute of privileges applicable to any debt financing instrument, subject to the statutory requirements.
Article 69-A authorizes the court, after hearing the Creditors' Committee or, in its absence, the judicial administrator, to approve financing agreements secured by encumbrance or fiduciary transfer of non-current assets of the debtor or of third parties, with proceeds earmarked for funding operations and restructuring or asset-preservation expenses. Article 69-B stabilizes the transaction, preventing appellate reversal of the authorizing decision from altering the super-priority nature of the credit or the security of a good-faith financier after disbursement. Articles 69-E and 69-F ensure full subjective breadth, allowing any person to finance and to grant security; article 69-D preserves, upon conversion into bankruptcy, security and preferences up to the amount actually delivered; and the economic key to the system lies in article 84, item I-B, which places the financier at the top of the super-priority order, paid ahead of claims in the proceeding generally. On the requirements of article 69-A, scholarship identifies three cores: judicial authorization preceded by the hearing of the supervisory body, security over non-current assets, and the earmarked purpose of the proceeds.
It was under that regime that the Vasco proceeding solved its liquidity problem. With the plan approved at a general meeting held on 9 October 2025, with 97.7% of votes in favour across all classes, the 4th Business Court authorized, on 16 October 2025, financing of BRL 80 million from Crefisa under the debtor-financing model of Law No. 11,101/2005, earmarked for payroll, maintenance of football operations, acquisition of economic rights and payment of taxes and administrative expenses.
The approved security consisted of the fiduciary transfer of ten thousand class A common shares issued by Vasco SAF, representing ten per cent of its capital, and the approval process displayed a revealing dynamic: the judicial administrator and the public prosecutor initially opposed the transaction for insufficiency of information and only expressed support after the full agreement was produced and its terms adjusted. According to reports, the final structure contemplated staged disbursements matched to cash needs and a personal guarantee from the association, with the original proposal, which contemplated encumbering twenty per cent of the corporation's capital, halved in the course of judicial scrutiny. Two months later, on 21 December 2025, the same judge granted the reorganization and confirmed the approved plan.
The transaction is technically exemplary of the Brazilian regime in almost all its elements. The financier was a third party outside both the creditor body and the capital, a scenario article 69-E naturally accommodates. The security fell on shares issued by the corporation and owned by the debtor, an asset classified as an investment among non-current assets, in line with the wording of article 69-A, reinforced by a guarantee from the association within the breadth of article 69-F. The proceeds were earmarked for named operating and payroll expenses, mirroring the statutory purpose clause. And the procedural path, with technical objection by the judicial administrator and the public prosecutor followed by renegotiation and a favourable opinion, embodied precisely the model of useful adversarial process that the best reading of article 69-A calls for, in which scrutiny is not an obstacle to credit but an instrument for calibrating its terms, as the reduction of the required collateral from twenty to ten per cent of the company's capital demonstrates.
The central question is whether the Section IV-A regime was a condition of the transaction's success. An affirmative answer follows for four sets of reasons.
The first is counterfactual. Before Law No. 14,112/2020, Brazilian experience with significant financings to companies in reorganization amounted to failed attempts, of which the OAS case is the eloquent example, precisely because the financier had no certainty as to the stability of the authorization and the priority of its credit. No rational agent would lend tens of millions of reais to a club in reorganization, with billion-real liabilities and a pending corporate dispute with its former investor, without the qualified super-priority of article 84, item I-B, and without the shield of article 69-B for amounts disbursed.
The second reason is functional. The credit arrived at the most sensitive moment of the proceeding, between approval at the creditors' meeting and confirmation, funding payroll and operations exactly when the strain of the crossing could have compromised implementation of the plan, a bridging function that empirical literature associates with a higher probability of a successful reorganizational outcome.
The third is institutional. The intervention of the judicial administrator and the public prosecutor did not frustrate the transaction, it improved it, halving the encumbrance on the corporation's capital, a result that illustrates the soundness of the Brazilian design in concentrating in the court, with technical adversarial input, the control of the proportionality of terms.
The fourth reason is systemic, since the case adds to the national repertoire a precedent of financing granted by an entirely new participant, a sign of maturity in a market that, in the early years of the regime, was dominated by pre-existing creditors and related parties.
An honest assessment requires noting the remaining risks, and here the lessons of the 777 Partners collapse return to the foreground. The security for the financing falls on shares of the corporation itself, an asset whose liquidity and value depend on the outcome of the dispute with the former investor and on the sporting and economic fortunes of the company, so that the quality of the collateral is correlated with the very risk it should mitigate, a structural weakness that recommends reinforced monitoring and possible additional security under article 590 of the Civil Code and the usual top-up clauses.
In addition, the residual interest held by 777 group vehicles in the corporation forms, to some extent, part of the estate subject to the US reorganization, and the interaction between the shareholder's foreign proceeding and the company's Brazilian reorganization has no settled case law, projecting uncertainty over long-term governance. Finally, protection of the financier upon conversion into bankruptcy, although assured by article 69-D as to amounts delivered, will depend on the technical soundness of the creation of the security, with proper registration and identification, an area in which the courts have been unyielding.
None of these caveats undermines the central conclusion; they qualify it. The Section IV-A regime does not eliminate the risk of lending to a distressed debtor, it converts it into priceable risk, and it was that conversion which allowed capital to arrive in time in the Vasco case.
The storyline connecting 777 Partners to Vasco da Gama offers a rare synthesis of the present state of the law of distressed corporate finance. At the US end, the collapse of a global investor reaffirmed that there is no secured credit without collateral integrity and that even the financier's own bankruptcy is administered with DIP financing. At the Brazilian end, the reorganization of a century-old club and its football corporation showed that Section IV-A of Law No. 11,101/2005 delivered, in this case, the promise that justified its enactment: enabling new money to reach debtors that, under the previous regime, would have been condemned to asphyxiation.
The transaction authorized in the Vasco proceeding, with a financier outside the liabilities, security over non-current assets, earmarked proceeds, effective technical scrutiny and statutory protection of super-priority and stability, is a textbook application of the regime, and its refinement in the course of the adversarial process shows that judicial control and investment attractiveness are not opposing forces but complementary ones.
While the definitive outcome of the case still belongs to the future, one conclusion can already be drawn. Between the investor's collapse and the club's crossing, the difference was made, to no small degree, by the existence of a legal regime capable of giving capital reasons to trust the process, and that is, ultimately, the function of the whole law of debtor financing in reorganization.
It is credit granted to a company that remains in control of its assets during reorganization, subject to court authorization. In Brazil, Section IV-A of Law 11,101/2005 does not create a contract type but a statute of privileges applicable to any debt financing instrument, provided there is judicial authorization, security over non-current assets and proceeds earmarked for operations and restructuring expenses.
Yes. Law 14,193/2021 expressly allows the club or original legal entity to resolve its liabilities through court or out-of-court reorganization under Law 11,101/2005, and the courts have recognized the standing of the sporting association on the basis that it carries on organized economic activity.
Article 69-E of Law 11,101/2005 allows any person to finance the debtor, including creditors whether or not subject to the reorganization, shareholders and entities of the same group, without subordination or disqualification of the credit.
Yes, up to the amount actually delivered. Article 69-D preserves security and preferences upon conversion, and article 84, item I-B, places that credit at the top of the super-priority order. The practical effectiveness of that protection depends, however, on technically correct creation of the security, with proper registration and identification.
The Gotlib Rocha Restructuring and Insolvency team acts for companies, shareholders, creditors, investors and financiers in court and out-of-court reorganizations, bankruptcy, debtor financing and distressed asset transactions.
Talk to the teamAbout the practiceThis piece reflects the firm’s analysis of the subject as at the date of publication. It is informative in nature and does not constitute legal advice on any specific matter. For advice on a particular situation, please contact our team.
← All Restructuring and Insolvency insightsArticles, news and regulatory updates curated by our team.
Subscription sent. Welcome to our list.
By subscribing, you agree to receive communications from Gotlib Rocha and acknowledge the processing of your e-mail under the Brazilian Data Protection Law (LGPD, Law No. 13,709/2018) exclusively for this purpose. You may unsubscribe at any time.