Brazil's harshest recession in eight decades is prompting some of the nation's top banks to reclassify some 90 billion reais (US$27 billion) in problematic corporate loans, eroding profits as banks struggle with a doubling in bankruptcy protection filings, Reuters reported today. Lenders face a deluge of requests to renegotiate existing loans and stretch out guarantees as the economic crisis deprives corporate borrowers of cash. Some companies have been forced to seek court protection from creditors. In June, phone carrier Oi SA filed for Brazil's largest in-court reorganization on 65 billion reais of obligations. That followed a bankruptcy filing by rig leaser Sete Brasil Participações SA as months of tussling with sole client Petróleo Brasileiro SA derailed plans to start repaying 18 billion reais owed to banks this year. As Brazil's largest listed banks start to report second-quarter results this week, bankruptcy filings — which rose 90 percent in the past year — could help trim annual profit for the top four lenders by 18 percent. In addition, about one-third of outstanding corporate loans mature by March, highlighting challenges for companies struggling with fallout from a sweeping corruption probe, the recession and high borrowing costs.
