New rules for issuing Real Estate Secured Bills

On March 13, 2022, Brazil’s Central Bank released Resolution 225, which presents new rules for issuing Real Estate Secured Bills (Letra Imobiliária Garantida/LIG), referring to (i) authorization for fiduciary agents; (ii) procedures for registering assets that comprise the LIG's portfolio in a central depository; and (iii) provision of information to LIG investors. This Resolution complements Resolution 5.001, issued by Brazil’s National Monetary Council (Conselho Monetário Nacional/CMN) on March 24, 2022, to regulate issuing of LIGs.

I. Fiduciary Agents

The Resolution automatically authorizes brokers and securities dealers to act as trustees. These entities already act as fiduciary agents in issuing other assets, such as debentures and commercial papers.

It also gives real estate securitization companies the opportunity to act as fiduciary agents to issue LIGs. To this end, interested entities must submit a request for authorization to the Central Bank, including information on their corporate and economic status and their controllers, also appointing a director who is responsible for this activity. When analyzing the request, the Central Bank may request additional documents and information, and schedule interviews with entity administrators and controllers.

II. Central Depository

The Resolution also establishes the minimum information that must be presented when registering the assets comprising the LIG portfolio, at the same time as registering the LIG itself in the central depository. 

Information regarding the asset portfolio must be updated by the 8th business day of each month. Furthermore, the assets comprising the portfolio may be replaced by updating the central depositary’s records, provided that the replacement order is transmitted by both the LIG issuing institution and the fiduciary agent.

III. Provision of Information

The Resolution also establishes the minimum information that must be included in the quarterly report to be prepared by LIG issuing institutions and made available to investors.

Among other data, the report must indicate (i) the asset replacements and reinforcements and the LIG repurchases and early redemptions during the period; (ii) the terms to maturity, the types of asset, the updated nominal value and the percentage that each asset represents within the portfolio; and (iii) the percentage ratio between the value of the assets that make up the portfolio and the value of the issuing institution's total assets, so that investors can assess the risks of the issuing and the fulfillment of its conditions.

The Resolution comes into force on May 2, 2022, alongside Resolution 5.001.

Please click  here  to access the entire Resolution. For more information, please contact our Capital Markets team: [email protected].br).