Presentation on theme: "Agro Loan Securitizatons How can the Capital Markets Finance Brazilian Agriculture Bernardo Costa Associate Director Fitch Ratings - International Structured."— Presentation transcript:
Agro Loan Securitizatons How can the Capital Markets Finance Brazilian Agriculture Bernardo Costa Associate Director Fitch Ratings - International Structured Finance (P) 312-606-3315 email@example.com October 08, 2008
www.fitchratings.com1 Cedula de Produto Rural: CPR >Authorized by Law 8.929 of 1994 (modified by 10.200 of 2001) >May be Issued by Producers, Cooperatives and Rural Associations under two types –Financial: a bond/security paid through Price x Quantity –Physical: Like a Futures/Forward Contract paid through delivery >Needs to be Registered at a Notary Republic >First Lien Pledge on Product being Financed –Article 17: False Statements or Actions may cause criminal prosecution >Including Product is already in lien of other debt >Fiscal responsibilities –Article 18: Products cannot be seized by other issuer creditors
www.fitchratings.com4 Certificado de Direitos Creditorios do Agronegocio (CDCA) >Authorized by Law 11.076 of 2004 >Debt Securities representing promises of payment in cash backed by receivables originated through rural activities (mostly CPRs) >Pledge on Product being Financed –Products cannot be seized by other issuer creditors >Custodian is in charge of servicing receivables >Registered at Under the Counter Exchanges (BM&F + Cetip) >Cannot issue more debt than amount of receivables
www.fitchratings.com7 Analyzing CPRs and CDCAs = What to Look for… >CPRs and CDCAs don’t have a maximum term –They can finance more than one harvest (recovery through product only for first harvest) >Basis Risk –Accrue at Inflation Indexes, Exchange Rate, Interbank Rate –Spot Prices for Sugar Cane, Cattle, Soybeans, etc… >How are you assigning value to your Collateral? –Receivables + Take Out Provider = 100% or – Debt or Receivables = Take Out Provider? >Surveillance Companies –Somebody has to make sure the collateral is still there…
www.fitchratings.com8 Financing Agriculture Through Capital Markets >Historically, the credit markets haven’t really financed agriculture… –Credit Analysis –Low Individual Transaction Volumes –Concentration!!!! >That’s where the Investment Banker Comes In… –Create a different vehicle, of larger volume –Diversified Producers (Management Issues) –Diversified Sectors (Price Volatility Issues) –Diversified Regions (Natural Causes Issues)
www.fitchratings.com9 Fundos de Investimento em Direitos Creditorios - FIDC >Ruled by CVM (SEC) Instruction 356 of 2003 (altered by 442 of 2006) –Main Vehicle used for Securitization in Brazil –Follows European Model – True Sale through Funds and not through Trusts >Issuance Highlights –Union National Agro+ FIDC Financeiros Agropecuarios (BRL500 MM) –Vision Brazil Agro FIDC MultiCredito (BRL200 MM) –Banif FIDC Agro I (BRL82.5 MM) Now How do These Transactions Work?
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