Ambipar Emergency Response shares plunge 31% after bankruptcy filing

Shares of Ambipar Emergency Response (NYSE American: AMBI) dropped 31% to 77 cents on Thursday after trading resumed, following a two-day halt triggered by the company’s bankruptcy filing earlier in the week.

The stock fluctuated between a low of 48 cents — its 52-week low — and a high of 95 cents during intraday trading.

The US-listed subsidiary of Brazilian waste management company Ambipar Participações e Empreendimentos SA filed for Chapter 11 bankruptcy protection in Texas on Monday.

Meanwhile, its parent company filed for insolvency protection in Brazil’s courts, citing irregularities in financial transactions linked to a former senior executive.

Despite the filings, Ambipar said that its normal operations will continue during the restructuring process.

However, the NYSE American exchange announced plans to begin delisting proceedings, though the company retains the right to appeal the decision.

Ambipar Emergency Response specializes in crisis management and emergency response services, including environmental, chemical, and biological incidents.

Irregular financial activity and rising debt pressures

Ambipar’s financial turmoil deepened following the resignation of Chief Financial Officer João de Arruda last month.

The company disclosed that its bankruptcy protection became necessary after uncovering irregularities in swap operations managed by the finance department under Arruda’s tenure.

According to filings, swap contracts were transferred from Bank of America to Deutsche Bank, with later amendments that introduced speculative elements, a move that raised red flags during internal reviews.

Deutsche Bank subsequently requested additional loan guarantees, prompting other creditors to seek early repayment.

Ambipar declared total debt of 10.48 billion reais ($1.94 billion) in its Brazilian bankruptcy filing.

The company also has roughly $1.05 billion in outstanding green bonds maturing in 2031 and 2033.

The Bank of New York, acting as trustee, has listed unsecured claims of about $328 million related to those bonds.

An ad hoc group of green bondholders has retained Davis Polk & Wardwell LLP as legal counsel and Houlihan Lokey as financial advisor.

Meanwhile, Ambipar has hired FTI Consulting to conduct a forensic accounting review.

Governance issues and broader market impact

The collapse of Ambipar adds to a series of corporate debt troubles rattling markets in recent weeks, following bankruptcies at First Brands and Tricolor, a subprime lender.

Analysts say that while these cases appear idiosyncratic, investor sentiment remains fragile.

JPMorgan CEO Jamie Dimon warned that more “cockroaches” could emerge in the credit markets, referencing potential hidden financial risks.

Brazilian companies, including Ambipar, are under additional strain due to high domestic interest rates, with the central bank maintaining its benchmark rate at 15% amid rising fiscal concerns.

Ambipar’s shares have plunged nearly 96% year-to-date and were removed from all B3 stock indexes earlier this month due to governance concerns.

Analysts at UBS said the company’s rapid expansion through over 70 acquisitions has exposed weaknesses in its balance sheet and internal controls.

As of 2023, Ambipar derived 57% of revenue from Brazil, 25% from North America, 15% from Latin America, and 3% from Europe.

The company’s struggle to manage its growing complexity now leaves it facing a long path to regain stability and investor confidence.