BRAZIL Trends and Developments Contributed by: Thiago Fernandes Chebatt and Luiz Eugênio Araújo Müller Filho, Müller Chebatt Advogados
Finally, tightening means better creditor co-ordination. Clubs and multi-creditor structures can work extreme - ly well in Brazil, but only when decision-making is clear and enforcement authority is not fragmented. Ambigu - ity is expensive. When a situation turns, creditors need to move, and if they cannot move, they lose leverage. Distress Should Be Assumed, Not Treated as a Surprise Brazilian cycles regularly push otherwise healthy com - panies into liquidity stress. Rates, FX, tax friction and demand shocks can turn a normal business into a restructuring candidate quickly. In practice, that reality is showing up more frequently in court: judicial reor - ganisation filings rose materially in 2024 and remained elevated into 2025, and that backdrop is an important input for structuring in 2026. For private credit, this means distress should be treated as a predictable phase, not as an exception. A resilient Brazilian structure is built around four outcomes: reli - able information, controlled cash, preserved priority, and co-ordinated action. If lenders can trust the data, they can act early. If they can control cash, they can prevent leakage. If priority is preserved through clean perfection, leverage remains intact. If creditors can co-ordinate, negotiations happen from strength. When one pillar is missing, outcomes become dependent on litigation and timing – and that is usually where value disappears. In that context, judicial reorganisation (“ recuperação judicial ”) should not be viewed only as an enforcement risk. In certain stressed situations, it can be used as part of the structuring toolkit. A recurring approach is to tie the extension of new credit to an existing reor - ganisation proceeding and condition disbursement on court authorisation, so that the “new money” enters the capital structure within a supervised framework. When properly documented and approved, this can reduce challenge risk, impose clearer operating and reporting rules, and provide a more disciplined execu - tion path than an ordinary out-of-court facility – par - ticularly in a system where procedural incidents can otherwise dilute leverage. The legal framework also contains creditor-protection features for obligations
incurred during the reorganisation, including extracon - cursal treatment in a subsequent bankruptcy scenario. The same logic can be applied to downside design. Instead of relying exclusively on a conventional enforcement sequence after default, some structures link repayment to a defined asset-based outcome, tied to assets that are strategically relevant to the creditor and implemented through court-approved measures. Where appropriate, this can be engineered through a transfer or sale of an isolated productive unit (UPI) or similar court-authorised asset transfer route, which is typically designed to deliver “clean title” dynamics and mitigate successor-liability concerns, subject to proper approvals and careful implementation. This is why the best private credit strategies in Brazil integrate legal and commercial thinking. Underwrit - ing cannot be separated from enforceability, and the workout plan cannot be treated as a last-minute improvisation. A strong term sheet is not the one that looks most sophisticated; it is the one that remains executable in stress. Conclusion Brazil remains a compelling private credit market. Ele - vated rates create yield, and volatility creates disloca - tions. But Brazil does not reward optimism without structure. It rewards disciplined capital that under - stands what can be enforced, how it can be enforced, and how long enforcement will take. Looking into 2026, the themes that will matter most are not exotic. Policy credibility and institutional sta - bility will influence pricing. High rates will expose weak structures. FX will continue to test covenants and liquidity. The dividend taxation debate will shape sponsor incentives and leakage risk. And the judiciary will remain an active arena for contested situations. For sophisticated lenders, this is not a reason to step back. It is a reason to structure better. In Brazil, a well-designed private credit deal can be a very effi - cient way to capture risk-adjusted return, but only if legal architecture, operational controls and the work - out plan are treated as part of the investment thesis – because here, they are.
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