Brazilian tyre co files Chapter 15 to probe “detrimental” transactions

By Declan Bush

Marangoni Tread’s Brazilian subsidiary is restructuring in Lagoa Santa.

A subsidiary of the Italian tyre conglomerate Marangoni has asked a Miami court to recognize bankruptcy proceedings it has entered in Brazil to investigate possible US assets.

Marangoni Tread Latino America filed for Chapter 15 protection on 15 February in the US Bankruptcy Court in Miami, with Sequor Law partner Gregory Grossman advising.

In the Chapter 15 filing, Marangoni Tread’s judicial manager Otávio De Paoli Balbino said he was appointed by the Second Civil Court of Lagoa Santa, Minas Gerais, on 25 January to investigate “detrimental” transactions between the company and its subsidiaries.

Balbino, a partner at law firm Paoli Balbino & Barros Sociedade de Advogados, asked the court to recognize the Brazilian restructuring so he could investigate the company’s US dealings.

Marangoni Tread filed judicial reorganization proceedings in the Lagoa Santa court in September 2017 and the case was accepted on 13 November.

The company claimed it was hit by Brazil’s 2014 recession, low sales, payment defaults and a higher rubber price. It said it had about 58 million reais (US$15.6 million) and about 850 creditors at the time of filing.

But the Brazilian court noted “many mistakes and inconsistencies” in the accounting records the company had provided, including an incomplete list of its managing director’s personal assets.

The court tasked Balbino and accountant Cleber Batista de Sousa with investigating transactions between Marangoni Tread and its Italian owners, its one Argentinean subsidiary, and four Brazilian subsidiaries.

Batista found “several inconsistencies between the balance sheets and the financial books provided” and concluded several transactions “had detrimental impacts to the debtor’s finances”. He also found the subsidiaries may have acquired products manufactured by Marangoni Tread for less than their production cost.

Balbino said Marangoni Tread “may have had transactions with the US subsidiary of the (Marangoni) conglomerate and other American companies”.

“I need to investigate the possibility that assets in the US may have been acquired using funds belonging to the debtor,” Balbino added.

Marangoni Tread was incorporated in 1998 and is owned by Italian companies Marangoni and Eurorubber.

The company owned 51% of Marangoni Argentina and 99% of four Brazilian subsidiaries, but sold its shares in the subsidiaries “for little or no consideration” a year before its bankruptcy filing, according to the documents filed in the Chapter 15 case.

In the US Bankruptcy Court for the Southern District of Florida, Miami

Marangoni Tread Latino America Industria e Comercio de Artefatos de Borracha, case 19-12070

• Judge Laurel Isicoff

Counsel to Marangoni Tread Latin America

• Sequor Law

Founding shareholder Gregory Grossman and associate Bruno de Camargo in Miami

In the Second Civil Court of Lagoa Santa, Minas Gerais

• Judge Carlos Alexandre Romano Carvalho

Judicial manager to Marangoni Tread

• Paoli Balbino & Barros Sociedade de Advogados

Partner Otávio De Paoli Balbino De Almeida Lima in Belo Horizonte