(Adds context, analyst comment)
SAO PAULO Feb 22 Brazilian homebuilder PDG
Realty SA said it was seeking protection from
creditors by filing on Wednesday to restructure its debt in
court, the country's second publicly listed builder to do so in
less than six months.
PDG's gross debt was 5.4 billion reais ($1.75 billion) at
the end of September, according to a quarterly earnings report.
The company had 235 million reais of cash on hand at the time.
The company said its efforts to restructure about 74 percent
of its bank debt last year "did not achieve the originally
desired effect." PDG said it continues to struggle with weak
demand, growing sales cancellations, stalled construction
projects and lawsuits from clients and contractors.
The bankruptcy filing in a São Paulo court follows a similar
move by Viver Incorporadora e Construtora SA in
September and underscores risks for the sector, which boomed
early this decade due to plentiful capital and government
incentives for low-income housing.
PDG passed on the low-income housing boom and focused on
more custom-built projects in the middle-income segment as it
pushed into new corners of the country.
That made it harder to achieve economies of scale as it
tripled the size of its operations in three years to become
Brazil's biggest homebuilder in 2011.
As PDG's finances deteriorated, management hired São
Paulo-based RK Partners in November as adviser on a new round of
talks with its creditors. RK's mandate included helping PDG
access credit to obtain construction financing, the builder said
in Wednesday's filing.
PDG shares fell as much as 5 percent in early Wednesday
trading and then rebounded to a 3 percent gain before they were
suspended at 3.33 reais on the São Paulo Stock Exchange.
If a court grants PDG bankruptcy protection, it will have 60
days to present a debt restructuring plan to its creditors,
which then must vote to approve or reject it. Under Brazil's
bankruptcy procedures, the company is protected from lawsuits
for six months, a period known as a "stay of execution."
During the in-court restructuring, PDG said it would do its
best to keep up commercial and operation activities and follow
through on commitments to clients.
($1 = 3.0788 reais)
(Reporting by Ana Mano and Gabriela Mello; Editing by Brad
Haynes and Lisa Von Ahn)