Capital Markets | Brazilian Authority Updates Rules For Eligible Underlying Assets of CRI and CRA; Reimbursement of Expenses Remains Restricted

The National Monetary Council (CMN) promoted specific adjustments to regulation that substantially impacted the offering of Agribusiness Receivables Certificate (CRA) and Real Estate Receivables Certificate (CRI) by agribusiness and real estate related companies, respectively.

See below the changes that Resolution No. 5,121, of March 1st, made to Resolution No. 5,118:

1. The Definition of “Debt Instruments” Does Not Include Commercial Contracts: The wording of Resolution 5.118 generated doubt among market agents whether or not it included contracts of a commercial nature, which are common in securitization transactions.

The CMN clarifies, through Resolution 5.121, that contracts of a commercial nature, such as rental contracts, purchase and sale contracts and usufruct contracts related to real estate, can be used as underlying asset for CRA and CRI offerings.

2. Possibility of Issuing CCI as Backing for CRIs: The revised regulation now allows debt instruments whose issuers are not characterized as debtors, co-debtors or guarantors to also be backed by CRA and CRI, such as the Real Estate Credit Certificate (CCI), which is a title issued by a real estate lender.

3. Prohibition of Backing with Debt Instruments of Financial Institutions: Another amendment to Resolution 5.118 sought to restrict the application of the new prohibitions to financial institutions or their respective subsidiaries.

4. Possibility of CRI Offerings for Reimbursement of Expenses Remain Prohibited: One of the points that market agents expected that the CMN would review was regarding offering of CRI for reimbursement of expenses.

Resolution 5.121 did not change the restriction imposed by Resolution 5.118 that CRAs and CRIs cannot contain as collateral credit rights “arising from financial operations whose resources are used to reimburse expenses”.

Although the changes introduced are welcome, the CMN should have also allowed the possibility of CRI for reimbursement of expenses, which is a typical real estate transaction and brings liquidity to the sector.


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