The Brazilian securities named “Agribusiness Receivables Certificates” (Certificado de Recebíveis do Agronegócio – CRAs) have become a major means of funding for Brazilian agribusiness companies and cooperatives.
Because they are attractive to Brazilian and foreign investors who want exposure to “ag sector” and also because of their tax benefits, there is a growing demand in the market for CRAs issued by companies with corporate governance, audited financial statements and consistent business model.
According to Upbar, CRA offerings exceeded BRL 10 billion in 2023 (through May), represented by 52 transactions.
See below 5 characteristics of these securities:
1. What are “Agribusiness Receivables Certificates” (Certificado de Recebíveis do Agronegócio – CRAs)? CRAs are fixed income securities in the Brazilian capital market, backed by receivables from agribusiness. They can be issued in Brazil reais or foreign currency;
2. Who can raise funds via CRAs? Commodity companies, tradings, cooperatives, industries, dealers, logistics companies, among others, related to agri products, inputs and machinery;
3. How CRAs are issued and who are the investors who buy CRAs? There are generally 2 ways of issuing CRAs: (i) the “corporate” issuance, where the company issues a debt bond (such as debentures) to a securitization firm, which will issue the CRAs backed by the debt bond, or (ii) the “pulverized” issuance, where the company assigns receivables generated in its activity (such as barter, credit) to the securitization firm, which will issue the CRAs backed by such receivables.
In both cases, the CRAs will be acquired by Brazilian or foreign capital market investors, including individuals (who are exempted from Income Tax), funds and family offices;
4. Is there a minimum offering size and term for CRAs? CRA issuances are shaped according to the size of the borrower, risk of the receivables portfolio, business cycle, investors interest, among other market conditions. They tend to be medium to long term funding ranging from 3 to 10 years;
5. Is the issuance of CRAs registered with the Brazilian Securities and Exchange Commission (CVM)? CRA issuances can be (i) registered with the CVM if carried out via a public offering (Regulation 400), where the securities may be offered openly to anyone, or (ii) waived from registration with the CVM if carried out via an offering with restricted efforts (Regulation 476).
These securities certificates are expected to become very popular in the agribusiness chain in the coming years and represent one of the main ways of raising medium / long-term funds outside the banking system.
