Brazil Prosecutors Oppose Court Approval of Retailer GPA’s Debt Recovery Plan

BRAZIL · COMPANIES

São Paulo’s public prosecutor’s office has formally opposed court approval of GPA’s out-of-court debt restructuring, saying the plan for the Pão de Açúcar supermarket group mixes unequal creditors and tilts the deal toward big banks.

What the prosecutor’s office said

The Ministério Público de São Paulo, the state’s independent public prosecutor’s office, issued a formal opinion against confirming the retailer’s recovery plan. Valor Econômico broke the story on August 27.

The opinion, signed by prosecutor Robe Andrade, argues the plan has structural flaws. It says the way creditors are grouped and paid could violate legal principles of equality and good faith.

Importantly, the prosecutors are not asking for the company to be liquidated. They recommend naming a judicial administrator to review the deal and want the company to revise its creditor groups and payment clauses.

Only after those fixes, the opinion says, should the court confirm the plan. The company filed its formal defense on August 27, the same day the prosecutor’s position became public.

The creditor classes at the heart of the dispute

The plan restructures R$4.5 billion (US$873 million) of unsecured financial debt. In Brazilian law these creditors are called quirografários, lenders with no collateral to claim.

The prosecutor’s office says the retailer put very different players in that single basket. The group includes banks, debenture holders, investment funds, real-estate certificate holders and creditors with court judgments.

Treating them as identical, the opinion argues, ignores their economic reality. A global bank and a small individual investor do not have the same power to negotiate or absorb losses.

The prosecutors also criticize a subcategory the plan created, called “non-current unsecured creditors”. They call it ambiguous and say it exists to ease approval, not to share the burden fairly.

“Option A” and the debenture question

The sharpest criticism targets the plan’s main payment route, known as Option A. It offers creditors two series of debentures, long-term corporate bonds, totaling about R$2.6 billion (US$505 million).

The two series are worth R$1.5 billion (US$291 million) and R$1.1 billion (US$213 million). There is no nominal haircut, meaning creditors keep the face value of what they are owed.

The catch, prosecutors say, is who can actually use this option. Managing complex capital-market instruments requires expertise that small creditors simply do not have.

More striking still, the opinion notes that the debenture limits match almost exactly the credit volume of the banks that backed the plan from day one. That raises the question of whether the structure was designed around specific lenders.

Six creditors filed their own legal challenges in July. One of them, retailer Casas Bahia, alleges conflicts of interest involving Itaú Unibanco, Brazil’s largest private bank, in the negotiations.

How GPA defends the plan

GPA, formally Grupo Pão de Açúcar, says the plan was built to guarantee its survival as a going concern. The company insists every stage followed Brazilian law and involved broad negotiation.

The group points to the numbers in its favor. It says 88 percent of creditors chose the main payment option, and the dissenting creditors represent less than 8 percent of the restructured debt.

The group also warns of the alternative. Rejecting the plan, it argues, would deepen the company’s financial stress and could push it toward a far messier in-court bankruptcy process.

How one of Brazil’s biggest retailers got here

The company runs some of Brazil’s best-known supermarket brands, including Pão de Açúcar and Extra. It spent years under the control of indebted French retailer Casino, which gave up control in 2024 after its own debt crisis.

The company chose an out-of-court route known in Brazil as recuperação extrajudicial. Under it, a company negotiates with one group of creditors and then asks a court to make the deal binding on all of them.

That is why confirmation matters so much. Without the judge’s stamp, the deal only binds the creditors who signed up voluntarily, and the legal shield around GPA stays incomplete.

A São Paulo court accepted the plan for processing on March 11, 2026, and by early May creditors representing 57.5 percent of the eligible debt had backed it. The terms stretch repayments over 6.4 years on average, with 70 percent only starting in 2031.

If fully implemented, the plan would cut the group’s total debt by more than half, to about R$700 million (US$136 million) by 2028. But the group is still losing money, and its second-quarter net loss widened as restructuring disrupted stores.

What happens now

The decision sits with the São Paulo judge overseeing the case. The judge can confirm the plan as filed, demand the changes prosecutors want, or refuse confirmation altogether.

The ruling will set a reference point for Brazilian restructurings. It will test how far majority creditors can go in designing a deal that smaller, dissenting creditors are forced to accept.

For shoppers and employees, little changes in the short term. Suppliers, staff and store leases were deliberately left outside the plan, so supermarkets keep operating normally while the lawyers fight.

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Sources: Valor Econômico, Painel Político, DCI/Diário do Comércio, Guia do Investidor, Giro News. Exchange rate: US$1 = R$5.15 (August 28, 2026).

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