Mar 24, 2023
Americanas Managers Presented Conflicting Information Over Debt
(Bloomberg) -- The management team at Brazilian retailer Americanas SA told its external auditor and internal auditing committee as late as December 2022 that there were no supply-chain financing operations taking place at the firm.
At the same time, executives gave the securities regulator CVM conflicting information, and a central bank system showed the account registering supply chain financing at the firm had ballooned to almost 17 billion reais ($3.2 billion).
Just weeks later, a new chief executive officer unveiled massive accounting inconsistencies that led to a historic collapse for the Rio de Janeiro-based firm.
Documents seen by Bloomberg News provide the most detailed account yet of how Americanas’ debt expanded for years, outside of public view. The materials were compiled by a court-appointed administrator, based on auditor reports and information coming from Americanas. The details show that Americanas executives were giving very different figures for the company’s supply-chain debt than the information that could have been available through the retailer’s bank accounts.
PricewaterhouseCoopers LLC, the most recent external auditor for the retailer, said it was told by management that there were no supply-chain financing transactions, according to the report. Written records from the internal auditing committee in May 2021 and December 2022 show executives saying the same. But documents sent by Americanas itself to the capital markets regulator CVM show the company started dabbling in this type of financing in 2015, with about 3.5 billion reais, ending 2022 with 15.9 billion reais, the administrator said.
“Americanas reinforces that its governing bodies (board, management and committees) are working together to disclose its revised, rectified and audited financial statements, as soon as the work of the consultants contracted by the company, its current external auditor, PwC, and of the Committee is concluded,” the company said in an emailed response. PwC declined to comment.
Known as “risco sacado” in Brazil, the supply-chain financing is central to the massive 20 billion real accounting hole disclosed by Americanas in January after Sergio Rial took over. That led to a huge selloff, a rushed bankruptcy protection filing to prevent creditors from seizing assets and another overhaul of company executives.
The accounting errors at the firm artificially boosted profits for as long as a decade and reduced reported liabilities by half under the tenure of Miguel Gutierrez as CEO. Americanas reported 42.3 billion reais of total debt in its restructuring proposal, though that number that would be closer to 50 billion reais if intracompany loans are included.
The country’s wealthiest businessmen, billionaires Jorge Paulo Lemann, Marcel Telles and Carlos Sicupira, collectively hold a 30% stake in Americanas. Sicupira is a previous chairman and is a board member. In their only public statement since the scandal erupted, they said they didn’t know about the errors and added that neither executives, banks or auditors had noted any previous irregularities.
PwC also presented documents to the administrator that show bank creditors didn’t list their supply-chain financing transactions to them when conducting the audit for Dec. 2022 financial statements, according to the report. That’s another contradiction to what had been reported to the central bank by the lenders since about 17 billion reais of that type of debt was outstanding in September 2022, up from nearly 13 billion reais in December 2021.
KPMG, which was the previous auditor for the firm, cited Itau Unibanco Holding SA and Banco Santander Brasil SA saying they had debts tied to supply-chain financing with the company for the financial year of 2016 before retracting the statements in subsequent replies.
A first response by the banks showed that Itau had a total of 1.27 billion reais of debt with supply-chain financing operations between Lojas Americanas and B2W while Santander had 1.88 billion reais owed to it. In a second response to the auditor, they claimed they had no outstanding debts linked to that type of transactions with suppliers, according to the documents.
Lojas Americanas and B2W merged in 2021, creating Americanas SA.
Itau said the information is false, adding that it was Americanas that received the document and asked Itau to exclude the information regarding supply-chain finance from it. The bank said it didn’t agree with the practice, and has documents to prove it.
Santander said the letters from banks were only one of many auditing tools and that the bank always included on the central bank system all information regarding credits from Americanas.
Both banks added that accounting inconsistencies or frauds are exclusive responsibility from the company, its managers, and its board of directors and that it makes no sense trying to blame creditors.
KPMG declined to comment.
While Americanas released a public version of the court administrator’s report on its investor relations website late Wednesday, parts of the report say “information available in confidential version,” including the details about the conflicting bank reports.
“This report is presented in two versions, one public and another confidential version, since part of the information and documents analyzed are covered in secrecy, according to information provided by the companies under reorganization and by the other agents consulted, and it must be observed,” the administrator wrote in the report.
Americanas said in a filing Friday that its 2022 earnings report, slated for release on March 29, won’t be published and didn’t provide a new date.
(Adds Americanas comment in sixth paragraph. A previous version corrected the stake held by billionaires in ninth paragraph.)
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