BRAZIL Law and Practice Contributed by: Thiago Fernandes Chebatt and Luiz Eugênio Araújo Müller Filho, Müller Chebatt Advogados
allocations to Brazilian funds, each with distinct exe - cution requirements. Cross-border loans typically do not require a Brazilian banking licence, but they do require disciplined FX settlement and reporting, and careful tax structuring for interest and fees. Taking col - lateral over Brazilian assets is generally possible, but perfection is Brazilian-law driven and often requires Portuguese documentation, sworn translations, local tax IDs and registry filings that define priority. Second - ary transfers can also be operationally heavy if secu - rity is held directly by individual lenders rather than through a representative. As a result, many sophisti - cated structures aim to simplify transfers and enforce - ment through clear agency mechanics and borrower co-operation undertakings. 3.4 Use of Proceeds and Acquisition Financings Use of proceeds is primarily managed contractually, reinforced by disclosure obligations where the chan - nel involves a securities offering or a regulated fund. Private credit documents typically implement restric - tions through negative covenants and permitted-use baskets, with enhanced discipline when proceeds relate to acquisitions, dividend flows or related-par - ty transactions. Acquisition financings often require particular attention to corporate approvals for guar - antees and security, sequencing of post-closing col - lateral migration, and a defensible narrative of corpo - rate benefit to reduce later challenge risk in distress. Where the borrower group is complex, lenders also manage proceeds through draw conditions, mandato - ry prepayment triggers and reporting obligations that track application of funds. The overarching objective is to ensure that the legal package remains enforce - able and defensible if the transaction later becomes scrutinised in a restructuring forum. 3.5 Debt Buyback Borrower or sponsor buybacks of debt are gener - ally feasible, but they are typically constrained by the transaction documents to avoid hidden subordina - tion and value leakage. Sophisticated lenders often regulate who can buy, with what funds, and whether purchased debt must be cancelled or held subject to standstill and non-voting limitations. In distressed situations, buybacks can become contentious if they are used to create a structurally advantaged insider
position or to pressure minority lenders, and they can raise insolvency-related challenges depending on tim - ing and effect. For that reason, buyback mechanics are increasingly drafted with governance controls and disclosure requirements that preserve the integrity of the creditor decision-making process. The aim is not to prohibit liability management, but to keep it trans - parent, controlled and compatible with the agreed Recent market practice has moved toward more detailed and execution-focused documentation. Lenders increasingly prescribe registry and perfec - tion steps, notice mechanics, servicing standards, data access rights and cash-flow routing, rather than relying on generic security language that may be dif - ficult to operationalise in stress. Refinancing optionali - ties through public markets have also sharpened call protection and mandatory prepayment drafting, par - ticularly for refinancings and extraordinary proceeds. Compliance language has become more robust, reflecting heightened expectations on AML/KYC, sanctions, anti-corruption undertakings and data- handling commitments in receivables-heavy models. Overall, the trend is toward designing transactions that are resilient under pressure, reducing the bor - rower’s ability to exploit procedural and documentary weaknesses when conditions deteriorate. 3.7 Junior and Hybrid Capital Junior and hybrid capital is commonly provided through contractual subordination in multi-tranche facilities, structurally subordinated HoldCo debt, and mezzanine-style instruments tailored to sponsor and cash-flow dynamics. The practical differentiator is enforcement control: senior lenders usually require standstills, turnover provisions and restrictions on jun - ior amendments and remedies, because fragmented enforcement can destroy value. HoldCo structures are frequent where OpCo collateral is already pledged or where upstream support is constrained; they rely heavily on share/quotas pledges, distribution con - trols and leakage covenants. To be workable in Bra - zil, these structures must translate economic priority into clear decision-making and executable proceeds enforcement and voting framework. 3.6 Recent Legal and Commercial Developments
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