Just months after a massive accounting error dragged retailer Americanas SA into bankruptcy protection, a second corporate blowup is tarnishing Brazilian billionaire Carlos Alberto Sicupira’s reputation and fortune.
(Bloomberg) — Just months after a massive accounting error dragged retailer Americanas SA into bankruptcy protection, a second corporate blowup is tarnishing Brazilian billionaire Carlos Alberto Sicupira’s reputation and fortune.
The 74-year-old dealmaker, who co-founded buyout firm 3G Capital Inc. and helped build global juggernauts Anheuser-Busch InBev SA and Kraft Heinz Co., has lost 86% on his investment in Rio de Janeiro-based utility Light SA as the cash-starved firm tries to fend off default.
Sicupira’s 10% stake in Light falls outside the norm for the elusive businessman, who’s made most major investment decisions since the 1970s alongside his 3G partners Jorge Paulo Lemann and Marcel Telles.
He went out on his own to bet on the electricity firm in 2020, persuaded by friend and fellow investor Ronaldo Cezar Coelho, according to a person familiar with the wager, who asked not to be named discussing private matters. It was pitched as a chance to cash in on Light’s comeback, but has instead resulted in losses of about 480 million reais ($97 million), based on the date when his investment was disclosed.
For Sicupira, it’s a matter of both cash and image. He’s been the most active of the 3G trio in Brazil in recent years, even getting personally involved in talks with creditors of Americanas to try to reach a solution after the retailer imploded earlier this year.
The accounting errors and subsequent downfall of Americanas dealt a blow to the reputation of all three 3G billionaires. Telles, Lemann and Sicupira, who currently own a stake of around 30%, have invested in the century-old company since the 1980s, leading to questions about how some of Brazil’s most successful business executives could have missed a massive liability.
But the bet on Light comes down to Sicupira. His net worth is near $8.7 billion, according to the Bloomberg Billionaires Index, making him Brazil’s fourth-richest man.
A representative for Sicupira said he wasn’t available for comment.
Fading Light
Light, which began activity in 1899, provides power to some 11.6 million people in the billionaire’s hometown of Rio. Management has struggled to combat illegal power connections — especially in the densely populated communities that crawl up the mountains of the city. That’s compounded issues with payment collection and delinquencies under the pressure of soaring interest rates.
Shares are hovering near a record low after the company posted a much wider-than-expected loss for the fourth quarter. Light’s $600 million in bonds maturing in 2026 collapsed to an all-time low of 27 cents last week, according to Trace bond data.
“This is going to be a mess,” said Declan Hanlon, chief strategist for emerging-market corporate credit at Santander Investment Securities. “In a normal restructuring you have the company and a group of bondholders. Here you have the regulator and the concessions as well.”
Light, which as a power utility has to abide by different bankruptcy protection laws, has won court approval to suspend payments on about $2.2 billion of debt for 30 days while it negotiates with creditors. The company is also trying to extend a key contract which ends in 2026, and it has retained financial adviser Laplace and legal firm BMA.
Representatives for Light didn’t respond to requests for comment.
“From an investor’s perspective, this legal uncertainty about Light is extremely worrying,” said Marcelo Farias, a manager at BB Asset and one of the 26-member group that holds 4.7 billion reais in Light debt. “We criticize the company’s lack of diligence with capital markets and this ‘kamikaze’ approach from management. They screwed their shareholders and all the possible financing routes and kidnapped their creditors.”
Farias said the investor group has been trying to talk with the company since February and has received only curt answers.
Moody’s Investors Service’s junk rating implies a “high likelihood of default” with an average recovery rate for bondholders between 65% and 80%. Fitch Ratings last week warned that a formal restructuring plan announcement would warrant a downgrade to default.
At the turn of the 20th century, Light brought hydroelectric power to Rio while also operating tram lines and a telephone unit, according to its website. In the 1990s, it was privatized but failed to solidify a growth plan. It disappointed investors further as a recessionary hangover hit the city after the 2014 World Cup and 2016 Olympics.
Its major creditors include funds tied to Banco do Brasil SA’s asset-management unit and Itau Unibanco Holding SA, according to investor disclosures and data compiled by Bloomberg. The data, which reflects just 29% of Light’s outstanding debt, includes holdings of passive funds and doesn’t necessarily include stakes that aren’t required to be disclosed.
Coelho remains Light’s top shareholder with a 20% stake, followed by Sicupira, who invested through a Banco Santander SA vehicle. BlackRock Inc. has the third-biggest stake, of about 9.3%, according to data from Brazil’s securities regulator. Light’s market value now stands at 790 million reais.
“There will be a solution that recognizes this situation in Rio, where more than half of the energy distributed to residences is stolen,” Coelho, 76, said in an interview. “In Rio, even luxury electric cars are charged with stolen power.”
–With assistance from Barbara Nascimento.
(Updates net worth figure in seventh paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.