It is not yet possible to predict mathematically what the impact of changes implemented by the government will be on the trillion-dollar industry. real estate and agricultural securities exempt from Income tax. But experts say that the movement should reduce the supply of assets — especially in the case of certificates of real estate receivables (CRI) and agribusiness (CRA).
“We understand that the market will see an important reduction in the volume of issues of these types of papers due to the severe restrictions imposed by the resolution”, assesses Pedro Ferronato, structured credit analyst at Brio Investimentos.
It is worth remembering that the new rules, published last Thursday (1) by National Monetary Council (CMN)prohibit the structuring of CRIs and CRAs backed by securities issued by publicly-held companies not related to agribusiness and the real estate market.
The restriction aims to prevent emblematic cases such as Burger King, which used a CRA to finance the purchase of hamburger meat.
However, it must also end up targeting companies that are part of the agro or real estate chain, but do not have more than two thirds of their consolidated revenue coming from the sector — the level required by the new rules —, and create a legal “gray zone”.
“There will be room for interpretation about what types of activities can be considered inherent to the world of real estate or agribusiness. There are obvious situations, a construction company, in real estate, and a rural producer, in agribusiness, for example, but there are other borderline circumstances that can be discussed”, says lawyer José Alves Ribeiro Jr., capital markets partner at VBSO Advogados .
Real estate funds should not suffer, but the supply of CRI and CRA to individuals may decrease
Carlos Ferrari, founding partner of NFA Advogados and specialist in securitization, assesses that, even with some cases still open for discussion, the changes limit the use of CRI and CRA in the market.
“By making a change that results in a reduction, even if partial and segmented, the change will represent a setback, reduce the total volume of the industry and cause some challenges for the resumption of the structure that existed until today”, assesses Ferrari.
And the reduction in this industry should be most felt among individuals, responsible for subscribing to more than half of the CRIs and CRAs issued last year — R$48.2 billion out of a total of R$90.97 billion, according to information of the Brazilian Association of Financial and Capital Market Entities (Anbima).
“The legislation focuses more specifically on public companies and rent payment structures, a large part of the industry and which has more dispersed and non-institutional investors”, explains the expert.
For VBSO lawyers, the new restrictions, combined with some requirements of the Securities and Exchange Commission (CVM) resolution no. 60, which deals with securitization companies, “in practical terms it makes new CRA issues aimed at the unqualified public very difficult”. Non-qualified investors are those with less than R$1 million in financial investments, that is, retail investors.
Already the “paper” real estate funds — who receive this nickname precisely because they invest in real estate securities — should not feel the changes so much, as they already focus on assets that meet the new standards.
“In principle, there may be a reduction in the pipeline, but a large part of the portfolios would be eligible. It may be necessary to further improve the rule by the CMN for clarification. In any case, CRIs linked to development projects, home equity, property purchase and sale contracts are already predominant in FIIs’ portfolios”, highlights Caio Araújo, analyst at Empiricus.
The Brio analyst, who manages FIIs with CRIs in the portfolio, also predicts little impact on the house: “We do not have any corporate credit operations in our pipeline that will be subject to restrictions. Perhaps the only impact we will have is some minimal adjustment in the volume of CRI to exclude any reimbursement portion of the issuance backing, but our estimate is that the adjustment will be minimal, due to the risk profile and type of structure we use here.”
But, despite the possibly smaller number, there may still be cases that fall foul of the legislation. Ferrari — who provided legal advice in more than 300 public offerings in structured operations and securitization of receivables totaling more than R$10 billion in funding — cites some examples.
The first is complementary allocations or for equity liquidity adjustment purposes, in which lower-remunerating CRIs issued by publicly-held companies “were very well used and welcomed in institutional portfolios”.
Securities backed by rental contracts in operations that have related parties, something common in sale and leaseback operations or intra-group businesses, are also no longer authorized and may be required.
When these assets expire, they will certainly have to be replaced or occupied by other types of CRI with traditional backing, and we hope that this demand will be met by the growth of the real estate industry and agribusiness. But we have an antagonistic stance on the part of the Monetary Council in dissonance with the concept of market advancement and in favor almost exclusively of a desire to collect revenue in what may not be the most appropriate place, as it can cause effects of which we are not sure of the proportion
Carlos Ferrari, NFA Advogados
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Changes also affect LCIs and LCAs
In addition to CRIs and CRAs, the changes also affect other securities known to small investors and very popular among individuals, such as real estate credit letters (LCI) and agribusiness letters (LCA) and guaranteed real estate letters (LIG).
Among the main news, the CMN decided to extend the minimum period for issuing LCAs from three to 12 months and that of LCIs to nine months.
In relation to the LCA, the government imposed limits on the investment of resources by banks. From July onwards, for example, resources will no longer be able to go to operations that receive subsidies from the Union.
For José Alves Ribeiro Jr., from VBSO, the new rules could make LCI and LCA issues more scarce, as the list of assets eligible to serve as backing for these securities has been reduced.
“At LCI, home equity operations with legal entities or home equity involving commercial property are excluded. For LCA, different types of debts are issued, such as ACC, NCE, CCE, CRA and debentures, and there is a phased reduction in the use of subsidized rural credit operations until it becomes prohibited in 2025”, explains the lawyer.
But it is worth highlighting that, for all types of paper, the new rules will only apply to future issues. For anyone who holds any of these financial instruments, everything remains as it is until the bond matures.
The measure also does not affect CRI and CRA emissions that are already under analysis at the CVM.