A careful reading of the 2002 financial statements issued last week by Globopar and TV Globo brings to light details of the complicated financial situation faced by Brazil?s leading media group.
It?s not just a matter of the debts owed directly or underwritten by Globopar and TV Globo, totaling 1.35 billion US Dollars at the end of 2002, or the consolidated loss of 5.7bn Brazilian Reals, due mainly to currency depreciation in the year.
Globopar?s very survival could be at stake according to auditors Ernst & Young, who say in their statement appended to the financial reports: ?(…) the Company and its subsidiaries have incurred recurring operating losses and have a working capital deficiency. In addition, the Company and its subsidiaries have not complied with certain covenants of debt agreements. These conditions raise substantial doubt about the Company?s and its subsidiaries? ability to continue as going concerns.?
Ernst & Young posit an equally negative outlook for TV Globo, which provided guarantees for 4.9bn BRL of Globopar?s debt in 2002 according to the report. The auditors say they believe TV Globo won?t be able to bankroll the holding company and maintain its own operations afloat.
Another concern expressed by the auditors who examined Globopar?s financial statements relates to Net Brasil. According to an opinion cited in the report but not attributed to a named author, Net Brasil?s problems are due to a certain amount of pending debt and difficulties faced by some of its customers with repayment of their own debts: the report mentions Net Serviços, which owed 113m BRL at March 19.
Restructuring
It?s worth underlining the fact that all the numbers in Globopar?s report are for 2002. Since then the holding company has begun a process of renegotiating its debts, mainly with a view to rescheduling most of obligations so as to gain time for repayment. The 2002 report makes no mention of the proposals submitted to creditors but says management expects to conclude the renegotiation before the end of 2003, without specifying an exact timetable.
Net Serviços is also renegotiating its debts.
Media
