The group went through both procedures of Brazilian Law 11,101/2005 in just over two years. What the first act lacked, the second pursues: new liquidity under the Section IV-A regime.
The crisis of the Casas Bahia Group offers Brazilian insolvency law a case study of rare completeness. Founded by Samuel Klein in the 1950s and turned by consumer instalment credit into one of the best known retail brands in the country, the company went through both procedures of Law No. 11,101/2005 in just over two years: an out-of-court reorganization, confirmed in 2024 to reprofile its financial debt, and a court-supervised reorganization, filed in August 2026 with declared liabilities exceeding BRL 17 billion.
The interval between the two acts, and above all what the first did not contain and the second seeks, illuminates one of the central propositions of the law of distressed corporate finance: restructuring liabilities without providing new liquidity is a remedy of temporary effect for companies whose operations structurally depend on working capital. This piece reconstructs both acts, examines the legal questions the second has already raised, from ipso facto clauses to prior verification, and analyses the place that debtor financing, under the Section IV-A regime, occupies in the proceeding now beginning.
In April 2024, pressed by the cost of concentrated financial debt, the group filed for confirmation of an out-of-court reorganization plan before the 2nd Bankruptcy and Reorganization Court of São Paulo, covering claims of BRL 4,077,957,061.59 represented by four debenture issues and by bank credit notes, with initial adherence of 54.53% of the covered claims, corresponding to the positions of its two largest financial creditors.
The plan imposed no haircut, extended maturities through the issuance of new debentures in separate series and reserved to supporting creditors a series convertible into shares, with principal of up to BRL 2.58 billion, which was in fact converted in the following years, turning the bank creditors into significant shareholders and materially reducing the company's leverage.
What the 2024 out-of-court reorganization did not do was provide new money. The confirmation route reorganizes existing liabilities, and the wording of Section IV-A refers to financing contracted during court-supervised reorganization.
The point is far from settled, however. Fabiana Bruno Solano Pereira argues that the regime also applies to out-of-court reorganization, reading articles 66, 66-A, 67 and 69-A to 69-F together and relying on the analogy authorized by article 4 of the Brazilian Law of Introduction to the Rules of Law, while noting controversy as to the reach of the priority in article 84, item I-B. Taking a partly contrary view, Daniel Carnio Costa accepts functionally equivalent transactions in the consensual route but denies that super-priority may be conferred by private agreement, treating article 84, item I-B, as a matter of public policy tied to court reorganization, and points to fiduciary security as the practical path.
Practice is already testing the thesis. Out-of-court plans have begun to provide for financing, as reported in the St. Marché and Two Square Transmission matters, on the strength of that same systematic reading. What does not yet exist is settled case law recognizing qualified super-priority in the out-of-court route. For the debtor the practical difference is significant: in court reorganization the financier contracts knowing its position; out of court, it contracts exposed to the risk that priority will later be contested, and that risk shows up as a rate, as additional security, or as a refusal to lend.
For a retailer whose operations consume working capital on a billion-real scale, that asymmetry is decisive. The 2024 reprofiling bought time and cleaned up the balance sheet, but the company remained dependent on current trade and financial credit to turn over inventory and sustain its instalment credit book, and that was precisely the tap that closed again.
The second act opened on a different order of magnitude. After posting losses of BRL 10.1 billion in the second quarter of 2026, accumulating BRL 11.18 billion in the half-year, and facing a credit contraction that reduced inventories from BRL 5.4 billion to BRL 4.2 billion in three months, the group announced the closure of 298 stores and thousands of dismissals and filed, on the night of 16 August 2026, for court-supervised reorganization before the 2nd Bankruptcy and Reorganization Court of São Paulo, on behalf of nine entities and with declared indebtedness of BRL 17,322,397,047.00, of which approximately BRL 16.4 billion unsecured.
The initial petition focused, significantly, less on the future plan and more on the immediate survival of the business, seeking interim relief against the contractual triggers that the filing itself could set off.
Two requests deserve attention. The first addressed ipso facto clauses, the acceleration and termination mechanisms grounded on insolvency, on the reorganization filing or on cross-default, widespread in banking agreements, leases and supply, technology and logistics contracts, whose chain activation could precipitate liabilities exceeding BRL 10 billion.
The second concerned receivables, since the entirety of the company's card and instant-payment flow is assigned by way of fiduciary security to creditors, so that extraordinary retentions outside the ordinary contractual flow would have an effect equivalent to freezing its cash.
The receivables point calls for precision. In REsp 1,629,470/MS the Superior Court of Justice, sitting as the Second Panel, held that claims assigned by way of fiduciary security are not subject to court reorganization and are not capital goods, so the final qualification in paragraph 3 of article 49 does not apply; and in REsp 1,758,746/GO it had already held that a receivables lock-box may not be stayed. On that footing the debtor's request was not, and could not be, to subject the assigned receivables to the proceeding. It was to prevent extraordinary retentions outside the ordinary contractual flow, a distinction that preserves the fiduciary creditor's security while stopping enforcement from becoming a freeze on cash.
By decision of 19 August 2026, the court partially granted the relief, staying terminations grounded solely on insolvency and prohibiting extraordinary retention of receivables and the unilateral suspension of essential contracts, under daily penalty, but did not immediately allow the case to proceed, ordering prior verification by a specialized judicial administrator within thirty days and the completion of documents by the debtor within ten days. The case remains, for now, in that period of scrutiny, and the court's caution, far from being open to criticism, confirms the role of prior verification as a filter of seriousness in proceedings of major impact.
In parallel with the filing, the group began negotiating with its two largest financial creditors, today also significant shareholders as a result of the 2024 conversion, and with other creditors, DIP financing of around BRL 1 billion intended to rebuild cash and inventory during the reorganization period. It is here that the second act departs structurally from the first, and the distance is set by Section IV-A of Law No. 11,101/2005, introduced by Law No. 14,112/2020.
Article 69-A allows the court, after hearing the Creditors' Committee or the judicial administrator, to authorize financing agreements secured by non-current assets of the debtor or of third parties, with proceeds earmarked for funding operations and restructuring expenses. Scholarship breaks the regime down into three essential requirements: judicial authorization, qualifying collateral and earmarked purpose. Credit so authorized receives the most qualified super-priority in the system, being paid, in the event of bankruptcy, ahead of claims generally, up to the amount actually disbursed; the authorizing decision is shielded against appellate reversal as to amounts disbursed to a good-faith financier; and, even upon conversion into bankruptcy, security and preferences are preserved to the extent of disbursements made. Standing is universal: any person may provide financing, including creditors, whether or not subject to the reorganization, and group entities, a provision tailor-made for the configuration of this case.
Negotiating with the financial creditors themselves is no anomaly; it is the standard of comparative experience. United States empirical literature documents that a majority of DIP financings are granted by pre-existing creditors, in a strategy scholarship calls loan-to-loan, in which new credit protects the value of the old credit and of the lending relationship, and that financing agreements have become the principal governance instrument of contemporary reorganizations.
In the Casas Bahia case, however, the strategy acquires an additional layer, since the candidate financiers hold three positions at once: significant reorganization creditors, significant shareholders arising from the 2024 conversion, and providers of super-priority credit. Article 69-E legitimises that triple capacity without regulating it, shifting to the judicial authorization the burden of ensuring the fairness of the terms.
The first lesson is structural, and the contrast between the two acts demonstrates it. The 2024 out-of-court reorganization competently delivered what that route allows, the consensual reprofiling of financial debt with partial conversion into equity, but it could not provide, and did not provide, new liquidity, and the crisis returned through the working-capital door. For retailers, intensive in inventory and consumer credit, balance-sheet restructuring unaccompanied by a new-money regime tends to be a bridge to the next crisis rather than to a solution, a finding that recommends, de lege ferenda, considering the extension of a financing regime to out-of-court reorganization as well, which today does not exist.
The second lesson concerns ipso facto clauses. The line taking hold in the state courts is that such triggers do not operate against a reorganization filing, as held by the Paraná Court of Appeals in interlocutory appeal 1,292,381-0 and by the São Paulo Court of Appeals in interlocutory appeal 2196477-98.2019.8.26.0000, alongside a line favouring party autonomy under article 474 of the Civil Code. Deborah Kirschbaum, in pioneering work published in Revista Direito GV, had already subjected the question to law-and-economics analysis, showing that automatic termination destroys value that continuity would preserve. The case exposed, on a billion-real scale, the capacity of those triggers to convert a petition for judicial protection into the detonator of the crisis itself, and the contrast with the Section IV-A financing agreement is instructive, since there the legislature resolved directly in the statute, in article 69-D, the fate of the relationship upon conversion, removing the most sensitive relationship in the proceeding from the case-by-case treatment of interim relief, a technique whose generalization the case invites us to debate.
The third lesson bears on the financing under negotiation. For the BRL 1 billion DIP to serve its purpose without replicating the flaws experience has already catalogued, three safeguards appear necessary at the moment of authorization. The first is qualified transparency as to the financiers' position, disclosing their reorganization claims, their shareholdings and any links between the financing and negotiations over the future plan. The second is scrutiny of the proportionality of the terms, rates, security and covenants against market alternatives, a task the ongoing prior verification can support with independent information. The third is vigilance against unsignalled roll-up structures, since, among reorganization creditors financing the debtor itself, the boundary between new money, deserving the priority of article 84, item I-B, and the repositioning of old debt, which should not benefit from it absent demonstrated justification, requires segregated documentation and attentive judicial control. None of this is an obstacle to credit. It is, rather, the institutional counterpart that makes credit sustainable, in line with the best reading of article 69-A.
The insolvency trajectory of the Casas Bahia Group is still unfolding, and any judgement on the outcome is by definition provisional. What the two acts already allow us to state, however, is not trivial. The out-of-court reorganization demonstrated its merits and its limits, reorganizing financial debt without being able to irrigate the business, and court reorganization was sought precisely to access what the first route does not offer: protection of cash against the contractual triggers of insolvency and the new-money regime of Section IV-A.
If the financing under negotiation is authorized with the safeguards argued here, the case may become a precedent of maturity for the Brazilian regime, showing that creditors, shareholders and debtor can converge towards preserving the business under qualified judicial oversight. If it is not, the company will face the same arithmetic that defeated the first act, since no liability restructuring survives, in retail, the asphyxiation of working capital.
In any scenario the lesson holds. In the law of the distressed company, liabilities are renegotiated on the timetable of the proceeding. Operations are not. They need cash tomorrow.
Out-of-court reorganization is a plan negotiated directly with creditors and submitted for judicial confirmation, reaching only the classes of claims it covers. Court-supervised reorganization is a full proceeding, with a stay of enforcement actions, claim verification, a judicial administrator and a general meeting of creditors. Only court reorganization benefits from the debtor-financing regime of Section IV-A of Law 11,101/2005.
On its wording, Section IV-A of Law 11,101/2005 refers to financing contracted during court-supervised reorganization. There is, however, a well-argued doctrinal position extending it to out-of-court reorganization by systematic reading and by the analogy authorized in article 4 of the Law of Introduction to the Rules of Law, defended by Fabiana Bruno Solano Pereira. Taking a partly contrary view, Daniel Carnio Costa accepts functionally equivalent transactions but denies that the super-priority of article 84, item I-B, may be conferred by agreement, suggesting fiduciary security instead. Out-of-court plans providing for financing already exist, but there is no settled case law on the priority of that credit, and the risk should be priced.
They are contractual provisions allowing acceleration or termination on the mere fact of insolvency, of a reorganization filing or of default under another agreement of the same debtor. When widespread across banking agreements, leases and supply contracts, they can be triggered in a chain and accelerate significant liabilities precisely when the company seeks protection.
It is the inspection ordered by the court, before deciding whether the case may proceed, to verify the company's actual operating conditions and the regularity of the documents filed. It works as a filter of seriousness and is common in large proceedings or where documentation is incomplete.
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.
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