Livraria Cultura has been declared bankrupt by the Justice

Judge Ralpho Waldo De Barros Monteiro Filho, of the 2nd Bankruptcy and Judicial Recovery Court of São Paulo, decided this Thursday (9) for the bankruptcy of Livraria Cultura.

High production costs, drop in demand for books, lack of interest in reading and the deep economic crisis that Brazil has been going through since mid-2014 were pointed out by the bookshop’s management as the main reasons for the financial collapse.

The request for judicial recovery was filed in 2018.

In this Thursday’s sentence, Monteiro Filho states that despite recognizing the importance of Livraria Cultura, the group was unable to overcome its economic crisis. According to the judge, the court-supervised reorganization plan had been breached and the provision of information in the process had been incomplete.

“The role of Livraria Cultura is notorious”, he wrote. “And not just for the economy, but for people, for society, for the community of not just readers, but consumers in general.”

“It is with a certain sadness that it is recognized, in the legal field, that the group has not been successful in overcoming its crisis”, said the judge.

In São Paulo, the bookshop is installed in Conjunto Nacional, a mixed-use condominium between Avenida Paulista, Alameda Santos, Rua Augusta and Rua Padre João Manuel. There is a second unit in Porto Alegre (RS).

Livraria Cultura was already at risk of having the judicial recovery turned into bankruptcy since 2020, when creditors rejected the final version of the plan in which the company demonstrated how it would pay off debts and become solvent again. At the time, the company managed to maintain the plan thanks to a decision by the São Paulo Court of Justice.

According to the judge of the 2nd Bankruptcy and Judicial Recovery Court, labor claims that should have been fully paid by June 2021 were still open. The monthly activity reports, which are made by the judicial administrators, were hampered by the failure to send documents and the lack of payment of fees that should have been fully paid in April 2021.

Judge Ralpho Monteiro Filho also mentions, in this Thursday’s decision, that the judicial administrator appointed in the judicial recovery reported evidence of fraud in financial transactions carried out by the company’s partners. Creditors also reported that the group was still in default.

“The recovery was designed to help only debtors who really demonstrate conditions to recover, since its processing should only support viable debtors”, wrote the judge.

When it filed for bankruptcy protection, Livraria Cultura declared it had BRL 285.4 million in debt.

In the bankruptcy decision, the judge determined that, within the next 48 hours, the assets, documents and books, as well as the valuation of these assets, should be identified. Financial assets and accounts in the name of the bookstore and 3H Participações (the holding company that controlled the company) must be blocked.

Alvarez & Marsal, the trustee who had handled the case until then, asked to leave it. Now, the bankruptcy process should be handled by Laspro Consultores (the same one that manages the recovery of the Maksoud group).

The closing of the two stores should not be immediate yet. Some steps are foreseen before that.

Livraria Cultura may appeal against the decision of the 2nd Bankruptcy and Judicial Recovery Court. At the same time, Laspro, named by the court in the case this Thursday, has yet to receive the commission and take over the bankruptcy process.

Lawyer Daniel Báril, from the insolvency and restructuring area at Silveiro Advogados, explains that once these stages have passed, with confirmation of second-degree bankruptcy, then the closing rites would begin.

“The tendency is for Laspro to accept the assignment, become a judicial administrator, and then begin the rites of sealing the stores, closing, realizing assets, assessing liabilities and proceeding with bankruptcy, which is the death of the business. From there, the stores become an asset in liquidation.”

Báril says that judicial recovery is a kind of photograph that looks into the past. “What are the debts that the company has up to that moment. Either the operation finds a way out, to generate results, cash and, like this cash, with this business turning, pay its past, or there is the conversion of bankruptcy.”