Brazilian Firm Ambipar Faces Financial Turmoil as Creditors Seize Collateral in Emae Deal

Title: Brazilian Firm Ambipar Faces Financial Turmoil as Creditors Seize Control of Key Asset

São Paulo, Brazil — In a dramatic turn of events, Tércio Borlenghi Junior, the head of the beleaguered Brazilian firm Ambipar Participacoes e Empreendimentos, and his co-investor Nelson Tanure have reportedly lost their collateral in a recent debt issuance. Creditors moved swiftly over the weekend to seize their shares in Empresa Metropolitana de Águas e Energia SA (Emae), a hydroelectric power company, as financial pressures mount on the duo.

The stakes were high for Borlenghi and Tanure, who had pledged their Emae shares as collateral for a local bond issuance. Tanure’s investment fund, Phoenix FIP, gained control of Emae last year through debentures backed by both men, according to Brazil’s securities regulator.

In a surprising development, Cia. de Saneamento Basico do Estado de Sao Paulo (Sabesp) announced on Sunday that it would acquire a majority stake in Emae. Sabesp’s CEO, Carlos Piani, described the deal as “originated passively,” indicating that the company was approached by a lender regarding the acquisition. The water utility secured approximately 70% of Emae’s total capital in an agreement with Vórtx, the trustee for Phoenix’s debenture holders, and Centrais Eletricas Brasileiras SA (Eletrobras).

This swift maneuver underscores the escalating challenges faced by Borlenghi and Ambipar, a global waste management company that has seen its shares and bonds plummet in recent weeks. The firm recently alerted a Rio de Janeiro court to its precarious financial situation, prompting it to hire advisory boutique BR Partners to assist in restructuring its liabilities after obtaining emergency protection from creditors.

While Borlenghi and Ambipar have refrained from commenting on the situation, Tanure is reportedly seeking to retain control of Emae and has filed a lawsuit in court. The complexities of the deal, which also involved XP Inc. as Phoenix FIP’s administrator, have drawn attention from industry insiders.

Tanure, known for his aggressive tactics in the Brazilian distressed debt market, also holds a stake in Ambipar through Trustee DTVM. Analysts suggest that Sabesp’s investment in Emae, though small, is strategically significant for enhancing water supply security in the São Paulo metropolitan region, which currently faces water scarcity issues.

As Sabesp prepares for potential legal disputes over the transaction, it remains confident in its documentation to finalize the deal. Even if the acquisition does not yield immediate financial benefits, the improvement in water security could prove invaluable as São Paulo continues to grow.

“It’s a good, synergistic, and operational asset,” said Ilan Arbetman, an analyst at Ativa Investimentos. “The risk-return profile seems interesting, despite the anticipated challenges.”

As the situation unfolds, all eyes will be on the legal battles and financial maneuvers that could reshape the landscape for Ambipar and its stakeholders.