BRAZIL Law and Practice Contributed by: Thiago Fernandes Chebatt and Luiz Eugênio Araújo Müller Filho, Müller Chebatt Advogados
1. Private Credit Overview 1.1 Private Credit Market
vate credit’s advantage is its ability to align under - writing with bespoke protections, such as tighter cov - enants, delayed-draw flexibility, stronger information rights and collateral packages designed for practical enforcement. As a result, private credit is often pre - ferred when lenders need a clear downside plan rather than relying on refinancing optionality. 1.4 Challenges The main obstacles to private credit expansion in Brazil are practical rather than conceptual. Collat - eral perfection is registry-driven and formalistic, and enforcement can be delayed by defensive litigation and interim relief requests, which makes timelines and outcomes sensitive to asset type and local prac - tice. Judicial reorganisation adds another layer of uncertainty, including the statutory stay and recurring disputes over claim classification, guarantee treat - ment and the extent to which collateral enforcement is restricted for assets deemed essential to opera - tions. In receivables-based structures, servicing and verification risk also remains a key constraint, push - ing investors toward platforms with robust operational controls and mature workout capability. 1.5 Sponsored/Non-Sponsored Debt Brazilian private credit providers allocate capital across sponsor-backed, founder-owned and, through capital markets instruments, public-company expo - sure. Sponsor situations can offer stronger govern - ance and reporting, but they also demand flexibility through baskets, equity cures and refinancing rights, requiring careful drafting to preserve creditor lever - age. Founder-owned companies remain a large seg - ment, often providing tangible collateral but some - times with less institutional reporting discipline and more concentrated governance risk. Public-company exposure is typically accessed through debt securi - ties with trustee mechanics and disclosure-based pro - tections, which can limit bespoke negotiation. Across all borrower types, the decisive factor is increasingly execution design: enforceable covenants, credible monitoring and collateral that can be perfected and realised in practice.
Compared with 12 months ago, Brazil’s private credit market has remained active, but it is more selective and more focused on execution risk. Pricing contin - ues to reward structures that deliver demonstrable cash-flow visibility and credible downside protection, which means tighter reporting packages, earlier trig - gers and stronger collateral discipline. Recent activ - ity has been concentrated in receivables-rich busi - nesses and asset-backed situations where monitoring can be operationalised, while borrowers with weak disclosure or complex corporate groups have faced longer diligence cycles and more conservative lev - erage. In practice, market participants increasingly underwrite not only the borrower’s credit profile but also the enforceability path: perfection steps, registry timelines and the likely behaviour of courts in a dis - tressed scenario. 1.2 Interaction With Public Markets Public debt markets and private credit compete and complement each other in Brazil because many pri - vate credit strategies use capital markets instruments as either the initial channel or the refinancing takeout. When issuance windows are open, debt securities and broadly distributed products can offer longer tenors and lower all-in cost, encouraging borrowers to refi - nance bespoke private facilities. When windows nar - row, private credit becomes the bridge or the alterna - tive, usually with more bespoke covenants, enhanced collateral and faster execution. Investors manage this interaction through call protection, clear mandatory prepayment mechanics tied to refinancings and a documentation package that anticipates a takeout while preserving economics and controls during the hold period. 1.3 Acquisition Finance Private credit has been an important acquisition finance tool over the past 12 months, particularly in mid-market and sponsor-led transactions where speed, confidentiality and tailored terms are decisive. For very large or investment-grade borrowers, bank syndications and capital markets solutions remain competitive, especially when the buyer can accept standardised terms and public-style disclosure. Pri -
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