Brazilian firm Ambipar Participacoes e Empreendimentos, already grappling with severe financial difficulties, faced a fresh blow as its head, Tércio Borlenghi Junior, and co-investor Nelson Tanure, reportedly lost collateral pledged in a debt issuance. Creditors' representatives moved swiftly over the weekend to seize their shares in Empresa Metropolitana de Águas e Energia SA (Emae), a hydroelectric power company, marking a significant development in Ambipar's unfolding crisis.

Borlenghi Junior and Tanure had utilized Emae shares as collateral for a local bond issuance. It was previously established that a fund called Phoenix FIP, associated with Tanure, had gained control of Emae last year through debentures that were backed by both individuals, as detailed by Brazil's securities regulator. This intricate financial arrangement underpinned the ownership structure of Emae prior to the recent creditor actions.

Ambipar, a global waste management company, has seen its shares and bonds plummet in recent weeks. The company disclosed to a Rio de Janeiro court that it was facing the risk of financial collapse, prompting it to hire advisory boutique BR Partners to assist in restructuring its liabilities. Furthermore, Ambipar has secured emergency protection from its creditors as it attempts to navigate its precarious financial state. Both Borlenghi and Ambipar have declined to comment on these developments.

The seizure of Emae shares culminated in Cia. de Saneamento Basico do Estado de Sao Paulo (Sabesp), a major water utility, acquiring a majority stake in Emae. Sabesp announced on Sunday that it had acquired approximately 70% of Emae’s total capital. Sabesp CEO Carlos Piani clarified on Monday that the deal was "originated passively," indicating that the company was approached by a lender rather than initiating the acquisition. The agreement was finalized with Vórtx, the trustee representing Phoenix FIP’s debenture holders, and with Centrais Eletricas Brasileiras SA (Eletrobras).

Nelson Tanure, a figure well-known in Brazilian distressed debt circles for his assertive tactics and risk-taking, is actively challenging the transaction. He seeks to retain control of Emae and has initiated legal proceedings. Notably, Tanure also holds a stake in Ambipar through Trustee DTVM. The intricate backstory of the deal, which also involved XP Inc. as Phoenix FIP’s administrator, has drawn significant attention.

For Sabesp, the investment in Emae is considered "small but very strategic," as stated by CEO Carlos Piani to analysts. The acquisition is aimed at bolstering water supply security in the São Paulo metropolitan region, which currently experiences water availability per capita below the UN's recommended levels. Beyond its hydroelectric operations, Emae manages a crucial hydrological system adjacent to Brazil’s largest city. Despite anticipating a legal dispute over the transaction, Sabesp expresses confidence in its robust documentation to finalize the acquisition.

Industry analysts, such as Ilan Arbetman of Ativa Investimentos, view the acquisition favorably, describing it as a "good, synergistic, and operational asset" with an "interesting risk-return profile." Even if direct financial gains are not substantial, the enhanced water security for an expanding São Paulo could render the deal profoundly worthwhile in the long term.