The São Paulo state judiciary granted Casas Bahia temporary protection from its creditors on Wednesday, shielding the troubled retailer from immediate debt enforcement as it pursues a judicial recovery plan. The protection covers more than 28,000 creditors and stems from a filing made Sunday night in which the company declared debts of 17.3 billion reais (approximately USD 3.2 billion at recent rates).
Judge Grants Temporary Protection
Judge Tainá Maria Leonardo de Oliveira of the 2nd Bankruptcy and Judicial Recovery Court of São Paulo ruled that creditors cannot declare accelerated maturity of contracts based solely on the recovery request. She emphasized that denying the protective measures could itself trigger the collapse the law aims to avoid, given the case’s national repercussions on credit markets, supplier chains, and consumer relations.
Scope of the Protective Measures
The decision obliges suppliers to continue delivering goods already in transit to Casas Bahia’s stores or distribution centers. Essential contracts—including those with water and electricity utilities, technology providers, security firms, and real estate lessors—must remain active. The judge did not set an expiration for the protection, but clarified that any time under this shield will be deducted from the 180‑day “respite” period afforded if the judicial recovery is ultimately approved.
Audit Ordered to Verify Operations
To assess the veracity of the company’s filings, the judge appointed ACDB Administração Judicial to conduct a forensic audit. The experts must examine whether physical stores, distribution centers, the website, and the mobile app are effectively operating, check for noticeable shelf shortages, and confirm that both online and in‑person sales systems are functioning normally. The audit report is due within 30 days.
Broader Context: Judicial Recovery in Brazil
Casas Bahia described its situation as the "worst crisis since its foundation" and said it had closed 298 stores—about 30% of its total footprint—and laid off nearly 3,000 employees, roughly 10% of its workforce. CEO Renato Franklin told outlets that the shuttered units "were already in the ICU," referring to their below‑average profitability.
The protection falls under Brazil’s Judicial Recovery Law (Law 11.101/2005), which allows a debtor to suspend creditor actions while proposing a reorganization plan. The law aims to preserve the company as a going concern and maximize creditor recovery compared to outright liquidation.
While the judge’s ruling halts immediate creditor actions, it does not guarantee that the recovery plan will be approved. Creditors may still contest the proposal during the subsequent 180‑day period, and the audit’s findings could influence the court’s final decision.