‘Is it R$ 20 million?’, questioned Rial before learning of ‘inconsistencies’ at Americanas

Chosen to unlock the value of Americanas in the market, banker Sérgio Rial took over at the turn of the year and, in less than 48 hours, was faced with a billionaire accounting scandal that triggered one of the biggest retail – and personal – crises.

In jargon, “unlocking value” means that, although the company has an enormous cash generation capacity, it was perceived by investors as unattractive.

Two of the group’s executives, however, came to him with a report showing what they thought was a procedural error in the postings.

Initially, Rial did not grasp the order of magnitude: “Ah, it’s R$ 20 million”, he reacted, according to interlocutors. Soon after, the assistants repeated the real figure: “No, it’s R$ 20 billion”. At that moment, he ordered everything to stop and called the entire team on an emergency basis, including the director of investor relations at the time, André Covre.

Also according to reports, Rial thought it was a “minor” inconsistency, which would only require an adjustment to the balance sheet. For a company the size of Americanas, BRL 20 million would be “nothing”, in the words of those who witnessed the scene.

The proportion of “inconsistencies”, however, led the executive and the director of market relations to resign eight days after taking stock of the situation.

Rial immediately called the trio of billionaires Jorge Paulo Lemann, Beto Sicupira and Marcel Telles – who together own 31% of the company. He told what was going on at Americanas, resigned, and agreed to provide informal advice to shareholders in an attempt to save the company.

He also warned that, in the event of a conflict of interest with Santander, he would not leave the bank’s board of directors to continue helping the group. Rial chairs the board of directors of Santander Brasil —one of the creditors of the retail chain.

Sought, Rial declined to comment. Americanas did not respond until the publication of this text.

Shortly after the former banker determined to disclose the problems encountered, Americanas went to court to try to protect itself from lawsuits by its main creditors —mainly the largest banks in the market.

The Court of Justice of Rio de Janeiro granted a kind of grace period, barring any type of advance payment to creditors, so that the company could prepare for a possible request for judicial recovery.

BTG Pactual was the first to appeal the decision. He lent R$ 1.9 billion to the company as a way to finance purchases of goods by suppliers.

Other banks, such as Bradesco and Safra, plan to follow suit.

In its request, BTG —controlled by André Esteves— raises the possibility of fraud and contests the judicial protection given to the network to avoid collection.

The revelation of accounting inconsistencies in the order of R$ 20 billion triggered a contractual mechanism in which creditors can collect the debt in full in advance. There is speculation in the market that it is around R$ 40 billion, but network executives say that it should reach R$ 30 billion at the most.

Did you know or didn’t you know?

“The question remains… Did Rial already know?” asked investor Pedro Menin, founding partner of Quantzed and QTZ Investimentos, in social media post which raises several questions about the accounting scandal.

According to people close to him, Rial said he did not know about the problems. Interlocutors of the executive at the company claim that he agreed to run it having access to open data. They also say that, as it is a company listed on B3, the former banker could only carry out a due diligence (prior inspection) with a signed contract. That’s what happened, according to reports.

Another question from bankers refers to the fact that the executive has “changed sides” and supposedly started working for billionaire shareholders.

One of the conditions imposed by Rial to help the three save the company was the wide publicity of the failures. The executive stated internally at Americanas that the disclosure was proof that he had no prior knowledge.

The former banker wanted to use his accumulated experience at Santander —an institution he presided over and consolidated as an important retail chain— and at Marfrig to reposition Americanas.

Rial’s argument for leaving the network’s presidency was that, with the discovery of flaws, he would have to use his experience as a banker to renegotiate debts and avoid the worst for the company, something for which he had not been hired.

If he agreed to perform this function, he would have to negotiate with Santander, something that would constitute a conflict of interest, making his permanence on the bank’s board unfeasible.

For this reason, Rial agreed to continue as a consultant to the group of shareholders, as long as he was shielded. The way out was the hiring of Luiz Muniz, who runs the Rothschild bank in Brazil, the institution that will lead talks with creditors.

The banks entered this imbroglio because they prepaid receivables to Americanas suppliers. These transactions —known as drawn risk— were incorrectly recorded on the balance sheet. Instead of postings to the supplier expense account, debts to financial institutions should have been considered. Creditors still do not know if the interest charged on these operations has been computed, which would make the debt even greater.