A Brazilian land developer controlled by U.S. buyout firm Carlyle Group LP (CG.O) investment vehicles has appointed turnaround specialist Ivix Value Creation to help it reverse mounting client lawsuits and avoid filing for bankruptcy protection.
São Paulo-based developer Urbplan Desenvolvimento Urbano SA named Ivix partner Alberto Tepedino chief executive officer and appointed another partner, Nelson Bastos, to a key advisory position this week, Tepedino and Bastos said.
The move is intended to help Urbplan find a way to avoid restructuring a pool of asset-backed securities and credit worth 450 million reais ($144 million) and recover from a period of weak housing activity, they said.
Their first task, they told Reuters on Wednesday, will be reviving confidence among creditors that Urbplan will repay them.
“We are not here to carry out an autopsy of the company, which means we’ll do whatever it takes to avert Urbplan’s bankruptcy protection,” Bastos said.
Urbplan declined to comment.
Creditors have increasingly questioned a three-year, Carlyle-led turnaround of Urbplan, saying it took years for management appointed by the private equity giant to address rising customer delinquencies and stem fast debt growth, Reuters reported in February.
Urbplan, which develops residential lots by laying out basic infrastructure, is the target of more than 2,000 lawsuits nationwide. Most of them come from clients who want their land purchases annulled, saying Urbplan halted work during a shareholder dispute that lasted for years.
Under Carlyle, Urbplan embarked on an ambitious debt-fueled expansion, often running afoul of complex local urban development rules. Between 2007 and 2012, Urbplan raised about 700 million reais from the sale of real estate receivable-backed notes.
The rift between Carlyle and Urbplan creditors has escalated since then, even after the private-equity firm’s investment vehicles, clients and co-investors injected fresh equity and provided the developer with additional funding.
Carlyle did not have an immediate comment but has previously defended its record and said Urbplan has largely completed pending projects thanks to its investment.
The situation highlights the risks facing global private-equity firms in Brazil, a country of unstable legal and business environments that is still coping with the fallout from a long and harsh recession.
Ivix has helped clients – most of them privately held companies strained with soaring debt and legal liabilities – restructure over 10 billion reais since it was founded in May 2011. The firm’s partners will replace a group of Carlyle-appointed executives.
Expectations that domestic interest rates will hit a record low by year-end are helping cut Urbplan’s debt-servicing costs, Tepedino said. Still, signs of a recovery in land development may fail to help Urbplan trim unwanted inventory of about 3,500 land lots, he said.