The capital market is increasingly closer to medium and large size companies in Brazil, enabling them to raise medium/long-term funding for growth projects.
Fundraising of this type has been carried out mostly through the offering of Real Estate Receivables Certificates (or Certificados de Recebíveis Imobiliários – CRI), Agribusiness Receivables Certificates (Certificados de Recebíveis do Agronegócio – CRA), Debentures, among others, structured by companies in the real estate, agribusiness, retail and industrial sectors.
In these structures, one of the most important participants is the “Placement Agent” (or Coordenador Líder), who will connect the notes issued by the Borrower/Issuer with investors, whether qualified or retail.
Therefore, the terms and conditions of the Brazilian law contract between the CRI, CRA or Debenture Issuer and the Placement Agent will be key for the offering and will guide the funding, including its potential success.
See below 8 points about the Placement Agreements for CRI, CRA and Debentures in Restricted Public Offerings:
1. What the Placement Agreement is About: Through the Placement Agreement, the Placement Agent is hired to provide the service of distribution and public placement of CRI, CRA, Debentures, with restricted efforts (Regulation 476).
Generally, the hiring is carried out on a best efforts basis by the Placement Agent. That is, the Placement Agent will make its best efforts to find investors for the securities offered, without committing itself to purchase the balance of the offered securities.
2. Who are the Parties Involved in the Placement Agreement for CRI, CRA and Debentures? In CRI and CRA funding, the Placement Agreement is entered into by the issuing securitization company, in the capacity of contracting party, and the Placement Agent, in the capacity of service provider, who is authorized by the Brazilian Securities and Exchange Commission (CVM) to distribute securities to investors in the capital market.
In funding via Debentures, the Placement Agreement is signed by the company issuing the Debentures, as the contracting party, and the placement agent, as the service provider.
3. To which Investors are the Offering Targeted in the Placement Agreements? In restricted offerings of CRI, CRA and Debentures, the Placement Agreement will provide that the offering will be exclusively destined to qualified investors pursuant to art. 11 of CVM Resolution 30.
4. What Main Conditions Precedent Must Be Included in the Placement Agreement? The Placement Agent’s obligation to distribute CRI, CRA and Debentures to the market will be subject to compliance with certain conditions precedent, including (i) that the information provided by the Issuer is correct, complete, true and sufficient; (ii) that all legal documentation is adequate to the offer structure and legislation; (iii) communication of the offering to CVM; (iv) absence of violation or evidence of violation of national or foreign law or regulation; (v) non-occurrence of a material adverse event, among others.
5. How is the Placement Agent’s Remuneration Defined? The Placement Agent is generally commissioned for coordinating and structuring the offering as a percentage of the total amount of securities actually distributed.
6. Do Placement Agreements Provide for an Indemnification Clause? In general, these contracts establish that the Placement Agent and its professionals will be exempt from liability for indemnifying for the services to be provided, except in the case of judicially proven intent.
7. What Is “Market Flex” in Placement Agreements? In the event of material changes in financial and/or capital market conditions that affect the placement of securities, the Placement Agent may propose the cancellation or modifications of terms, conditions, structure, terms, rates or other characteristics of the offer.
8. How is Conflict Resolution in Placement Agreements Taken? In general, Placement Agreements submit disputes arising therefrom to the judiciary.
The above terms seek to highlight the main points negotiated in Placement Agreements of CRI, CRA, Debentures, among other securities, in public offerings with restricted efforts in Brazil.
