National Monetary Council restricts CRI and CRA issues.
The Resolution of the National Monetary Council (CMN) n⁰ 5.118, of February 1, 2024, introduced several relevant limitations to the securitization structures of real estate and agribusiness receivables certificates (CRI and CRA) currently carried out in the Brazilian capital market.
Firstly, the new resolution prohibits the issuance of CRI or CRA backed by debt securities whose issuer, debtor, co-debtor or guarantor is a publicly-held company or financial institution, or parties related to any of them, noting that this restriction does not apply to publicly-held companies whose main sector of activity is real estate (for CRI) or agribusiness (for CRA), such sector being understood as the one from which more than two-thirds (2/3) of their consolidated revenue comes, calculated on the basis of the financial statements for the last published fiscal year.
The following credit rights are also no longer eligible to back CRI or CRA: (i) arising from transactions with related parties (e.g.: lease agreements under suspensive conditions entered into with a company in the same group; sale & leaseback agreements entered into with a company in the same group; etc.); and (ii) "arising from financial transactions whose funds are used to reimburse expenses".
Finally, it is forbidden to structure a CRI or CRA whose backing is effectively pulverized if a publicly traded company or financial institution, including related parties, retains any risks and benefits of the assigned portfolio.
We would point out that the restrictions imposed by CMN Resolution 5,118 are likely to have a significant impact on the composition of the backing of CRI and CRI operations, which will have repercussions on the entire industry of service providers linked to the receivables securitization market.
To access CMN Resolution n⁰ 5.118, click here.
The Capital Markets team at Barcellos Tucunduva Advogados is available to answer any questions on the above subject at [email protected].