A backdrop of high interest rates and uncertainty has driven up defaults in structured transactions and brought the restructuring of Real Estate Receivables Certificates (CRIs) into focus for funds, asset managers and investors.
Corporate default in Brazil has reached its highest level on record, hitting 9 million companies (CNPJs) with negative credit records and totaling more than R$220 billion in overdue debt, according to data from Serasa Experian.
Below are 4 points of attention for creditors/investors in the restructuring of CRIs:
1. Restructuring Format in Light of the Backing (Lastro) Rules: Choosing the restructuring model is not merely a financial decision, but a regulatory one. Because in most restructurings the target development’s construction has already been completed, there is no longer any “future expense” to finance, which often creates a barrier to issuing new debt as the CRI’s backing (lastro), given the prohibition on expense reimbursement introduced by CMN Resolutions No. 5,118/2024 and No. 5,121/2024.
In these scenarios, acquiring and renegotiating the existing CRI may be the safer route.
2. New Debt Issuance and Loss of Priority over the Collateral: Issuing new debt and settling the prior one extinguishes the original security interests (fiduciary lien over the property, fiduciary assignment of receivables and personal guarantees such as fiança/aval), causing the creditor to lose the registration priority it held and to cede rank to encumbrances recorded in the interim.
A structure that preserves the existing legal relationship and security interests tends to be more advantageous.
3. Due Diligence on the Debtor’s Level of Indebtedness: A default typically reveals a financial imbalance in the borrower, which calls for fresh due diligence on the debtor and on the transaction’s collateral. Debts owed to other creditors and, above all, to the tax authorities (federal, state or municipal), even if incurred after the CRI was issued, may affect and, at times, prevent the enforcement of the collateral.
Mapping the debtor’s level of indebtedness before renegotiating prevents the collateral from being eroded and avoids surprises at the enforcement stage.
4. Verifying the Status of the Real Estate and the Units of the Target Development: At the CRI’s original issuance, the development’s units are often not yet individualized, with only the master property record (matrícula mãe) in place. In a restructuring scenario, where the units may already have been individualized, it is essential to examine the updated property records to check for attachments, notices of ongoing enforcement proceedings against the debtor, or other encumbrances recorded by third-party creditors that could jeopardize the investor’s priority over such assets.
Restructuring CRIs is no longer the exception but has become routine for funds, asset managers and investors. Observing the points above allows transactions to be renegotiated while preserving collateral, priority and investor protection, turning a default event into a recovery opportunity with controlled risk.
