At 15.49 hours on 17 Aug 1942 the unescorted and neutral Itagiba (Master José Ricardo Nunes) was hit on the port side at #3 hold by one torpedo from U-507 about 9 miles off the São Paulo Lighthouse, Bahia. The ship carried 121 passengers, mainly soldiers returning to their garrisons in northeast Brazil. The most crew members and passengers abandoned ship in the lifeboats, but some of them were swamped when the boiler of the sinking ship exploded after 10 minutes. Ten crew members and 26 passengers were lost. At 18.03 hours, the Arará was torpedoed and sunk by U-507 just after she stopped to pick up the survivors of Itagiba. The survivors of both ships landed at the coast the next morning, went to the small village of Valença the following day and were taken to Salvador aboard the Rio Grande do Sul (C 11).

The sinking of five Brazilian ships by U-507 with over 500 casualties within two days, led to the Brazilian declaration of war against Germany on 22 Aug 1942.