Ambipar CEO Loses Part of Stake as Ex-CFO Disputes Allegations

(Bloomberg) — Ambipar Participações e Empreendimentos SA continued its downward slide as the waste management firm’s controlling shareholder lost some of its shares and a former top executive challenged in court that his actions were to blame for the debt crisis.

As investors became concerned about Ambipar’s liquidity, Brazilian bank Bradesco SA, broker Genial Investimentos and Grupo Opportunity sold shares held as collateral owned by Chief Executive Officer Tércio Borlenghi Jr., according to a filing Friday.

The company stated that Borlenghi’s shares fell from 73% to 68% in the sales from September 25 to October 6, and claimed that the transactions were against the court protection order.

Borlenghi said he would fight in court to reverse the dilution. Bradesco declined to comment and Genial did not respond. Opportunity said the sale of shares in the secondary market was not tied to any debt enforcement and did not affect Ambipar’s cash position.

Ambipar, which does business in more than 40 countries, sought emergency protection from creditors through a Rio de Janeiro court last month, saying the payment demands could trigger cross-default terms on a debt pile of about 10 billion reals ($1.82 billion). Ambipar is working to file for bankruptcy next week, Bloomberg News reported earlier this week.

Its shares have fallen more than 90% since late September. They rose as much as 54% on Friday but gave back most of those gains by 2:21 p.m. in São Paulo.

Borlenghi said in his filing that the “disorderly” sale of Ambipar shares in a short period of time led to an estimated loss of about 20 billion reais in market value.

Ambipar blames the addendum signed with Deutsche Bank for the swap agreement, which was first established in February, as responsible for the crisis it is experiencing. In the addendum to the swap agreement dated August 18, it is stated that Ambipar’s payments to the bank can be made through credit instruments, including bonds with nominal value. This allowed the company to receive financing at much lower interest rates, according to the document, which states that the derivative deal was approved by Ambipar’s chief financial officer, CEO and treasurer.

The company’s former CFO, João Arruda, began telling his side of the story, arguing in court that the addendum signed with Deutsche Bank was a smart financial management move.

He also said that the deterioration in the company’s credit risk was due to a series of measures taken by the CEO, according to a document filed with the Rio de Janeiro court.

–With help from Matheus Piovesana and Giovanna Bellotti Azevedo.

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