Court converted ex-OAS builder Coesa's recovery straight into bankruptcy

In June 2023 the business-law chamber of São Paulo's Court of Justice (TJ-SP) unanimously converted the judicial recovery (recuperação judicial) of Coesa — the engineering company created from the carcass of constructor OAS — into a bankruptcy decree. OAS, founded in 1976, had spiralled after becoming one of the targets of Operation Lava Jato; its 2020 recovery ended and the group was split, giving rise to Coesa and to Metha, which creditors alleged kept 'the good part of OAS' — the contracts — while Coesa was left with the debts, of the order of R$4.5bn.

Creditors argued the OAS actions that produced Coesa's recovery filing were fraudulent. Coesa entered judicial recovery in 2021 with a plan accepted by labour creditors, small companies and unsecured creditors — the largest class — promising to pay from the builder's cash generation and from arbitration indemnities inherited from OAS, tied to three projects: São Paulo's Rodoanel ring road, the Abreu e Lima refinery and a highway project in Trinidad and Tobago. The company said approval would preserve about 15,000 direct and indirect jobs.

Creditors said Coesa never kept the original recovery's promises before the new filing, and promised an 'avalanche' of challenges to the credits included in the process. Coesa's own filing admitted its liabilities exceeded its wealth-generation capacity, blaming an infrastructure sector that did not grow as expected from 2015, an unfavourable political and macroeconomic environment, and the pandemic. The company booked a net loss of R$11.057m in 2021 and employed 658 people directly.

The 2021 recovery plan rested on arbitration windfalls inherited from OAS — contingencies, not cash flow.

The split that created Coesa and Metha handed the contracts to one entity and R$4.5bn of debts to the other; creditors went to court over it.

Within two years the plan's promises were unfulfilled, and the court converted the recovery into bankruptcy by unanimous vote.

A restructuring that hands the assets to one company and the liabilities to another invites creditors to prove the split was fraudulent — and courts to end the fiction entirely.

The bankruptcy decree was handed down on 27 June 2023; the case file with the court's detailed reasoning was not yet available for consultation. Coesa did not respond to requests for comment. Among the creditors are Gerdau, other suppliers and banks.