WRAPUP-Ambipar bankruptcy filing in Brazil cites 'irregularities'

Adds several new paragraphs with information on Ambipar´s former CFO and the company´s swap operations. Also includes global context and information about corporate debt concerns.

By Luciana Magalhaes, Ananya Palyekar and Manya Saini

SAO PAULO, Oct 21 (Reuters) - Brazilian waste management company Ambipar AMBP3.SA filed for bankruptcy protection late on Monday, citing signs of irregular activity involving a former senior executive, in a move that added to concerns running through corporate debt markets.

Ambipar made its bankruptcy filing in a Rio de Janeiro court and its U.S.-listed subsidiary Ambipar Emergency Response AMBI.A, filed for Chapter 11 protection in Texas, according to a regulatory document made public early on Tuesday.

Ambipar said it made the filings after the "discovery of evidence of irregularities in the contracting of swap operations by the Finance Department and the abrupt resignation of the former Chief Financial Officer."

Ambipar's former CFO João de Arruda resigned last month, after serving just over a year in the role. While he was in the role, Ambipar said swap contracts "were transferred from Bank of America to Deutsche Bank and subsequently amended, with the inclusion of a new rule that introduced a speculative element."

Arruda's attorney did not immediately respond to a request for comment.

Ambipar's bankruptcy filing adds to corporate debt troubles rattling the market in recent weeks, led by the bankruptcies of auto parts retailer First Brands and subprime lender Tricolor .

While several analysts have described the cases as idiosyncratic and stemming from lapses in risk controls, investor sentiment has been fragile.

JPMorgan Chase JPM.N CEO Jamie Dimon said last week that there are likely more "cockroaches" in the credit market in reference to the auto bankruptcies, and cautioned that more troubles may emerge ahead.

Pressure on Brazilian firms has been intensified by some of the world's highest interest rates, with the central bank holding its benchmark rate at 15% amid growing fiscal concerns.

Ambipar said its bankruptcy protection became urgently necessary after Deutsche Bank DBKGn.DE requested more loan guarantees, prompting other creditors to seek early repayment.

According to Monday's filing, the Bank of New York Mellon BK.N, acting as trustee for bondholders, has listed unsecured claims of about $328 million tied to Ambipar's 2031 and 2033 green bonds.

Both Deutsche Bank and Bank of New York Mellon declined to comment.

The waste management firm previously got an injunction blocking creditors from demanding accelerated payment.

The company had already said such demands could open a "financial hole of more than 10 billion reais" ($1.85 billion), as one creditor demanding immediate repayment could set off a domino effect.

Ambipar, whose stock has lost nearly 96% of its value so far this year, was removed from all indexes of Sao Paulo stock exchange operator B3 this month, due to governance issues. On Tuesday, the stock was down around 30% in Brazil.

The company, which had been pursuing international expansion, has struggled to integrate newly acquired assets and manage its growing financial complexity amid management turnover, UBS analysts said in a late September report.

"After years of expansion through more than 70 M&A transactions and growing financial complexity, recent events have exposed weaknesses in governance and balance sheet strength," UBS then said.

According to the bank, as of 2023, 57% of Ambipar's net revenue came from Brazil, 15% from the rest of Latin America, 25% from North America and 3% from Europe.

(Reporting by Luciana Magalhaes in Sao Paulo, Ananya Palyekar and Manya Saini in Bengaluru, Tatiana Bautzer in New York; Editing by Brad Haynes, Hugh Lawson and Nick Zieminski)

((Luciana.NovaesMagalhaes@thomsonreuters.com;))