Financial Transactions | Debt Restructurings in Brazil Must Be Documented with Debt Confession Agreement

The last three years has witnessed a number of restructurings of real and dollar/euro denominated debt raised by Brazilian companies with local and foreign lenders. 

From the lenders’ standpoint, it is important that the restructuring of the original debt’s terms and conditions is documented with a debt confession by the borrower and the guarantors.

Debt confession provisions may be added as a section to the restructuring agreement, as a built-in provision, or as an independent legal instrument. The key is that it must be prepared with objective and clear language, so that the confessed debt is qualified as liquid, determined and payable at its terms.

Once observed such characteristics and requirements, it constitutes a legal document widely accepted by Brazilian courts in all levels and gives creditors the right to demand the underlying debt and attach the debtor and guarantors’ assets in courts through a fast track procedure (execution).

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