BRAZIL Law and Practice Contributed by: Renata Iezzi, Nicole René Gomes e Cunha and Marcela Correa, Basch & Rameh
3. Aircraft Debt Finance 3.1 Structuring 3.1.1 Restrictions on Lending and Borrowing There are no particular restrictions on foreign lend - ers financing an aircraft. However, financing aircraft and engines through loans is rare in Brazil for various reasons, including repossession precedent and tax efficiency. 3.1.2 Effect of Exchange Controls or Government Consents The exchange controls and registration requirements applicable to finance leases also apply to loans; see 2.1.4 Exchange Controls . 3.1.3 Granting of Security to Foreign Lenders Borrowers are permitted to grant security to foreign lenders. 3.1.4 Downstream, Upstream and Cross-Stream Guarantees Downstream, upstream and cross-stream guaran - tees are permitted in favour of lenders. Guarantees should be carefully drafted to ensure certain statutory benefits provided to guarantors are waived; see 2.3.8 Requirements for Documents Concerning Regis- tration . Guarantees tend to be registered in an RTD rather than the RAB. 3.1.5 Lenders’ Share in Security Over Domestic SPVs Special purpose vehicles are rare in Brazil. Pledges over share agreements are recognised in Brazil; see 2.3.8 Requirements for Documents Concerning Reg- istration . In addition, the pledge should be listed in the company’s share register. If shares are publicly traded, the pledge may be subject to additional registration and disclosure requirements. 3.1.6 Negative Pledges
tion apply. Intercreditor agreements would usually be registered with an RTD. 3.1.8 Syndicated Loans Facility agents and security trustees are read - ily accepted as parties in interest in loan and lease transactions. The RAB frequently registers interests in aircraft in the name of such agents or trustees (rarely Brazilian). 3.1.9 Debt Subordination Subordination is achieved through written agreements and consents. Most debt subordination relating to air - craft and engine financing is achieved outside Brazil. Lease Subordination Agreements should be registered with the RAB (see 2.3.8 Requirements for Documents Concerning Registration ). 3.1.10 Transfer/Assignment of Debts Under Foreign Laws Assuming the debtor is Brazilian, the transfer or assignment of all or part of an outstanding debt under an English or New York law-governed loan is permis - sible and recognised in Brazil. If an ROF is required (see 2.1.4 Exchange Controls ), it should be amended if the payee changes. 3.1.11 Usury/Interest Limitation Laws Usury rates are applicable in Brazil at twice the Cen - tral Bank of Brazil’s interbank rate, which is called the SELIC rate and at the time of writing is in the region of 14.25% per annum. Charging a premium for holdover rent is not prohibited, but it is uncommon. In 2024, a new federal law came into effect in Brazil, stating that the Brazilian Usury Law does not apply to cer - tain obligations, including those contracted between legal entities and by leasing companies. This settles the long-standing debate regarding whether the lim - its imposed by the Usury Law would apply to aircraft leasing operations. The SELIC rate does not apply to cross-border leases. 3.2 Security 3.2.1 Typical Forms of Security and Recourse A combination of security deposits, maintenance reserves, security assignments of rights under leas - es, guarantees, letters of credit, promissory notes, mortgages and account pledges are typical in avia -
Negative pledges are valid in Brazil. 3.1.7 Intercreditor Arrangements
If an intercreditor arrangement includes any Brazil - ian party (a rarity), the requirements listed in 2.3.8 Requirements for Documents Concerning Registra-
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