BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
validity and effectiveness of such documents (subject to the general assumptions of the truthfulness and effectiveness of ancillary documents submitted for the opinion). To the extent that the documents involve the creation of a security interest over any assets, the opinions usually cover the valid perfection of this.
Any loans are usually secured by shares of the obligor or subsidiaries, receivables and inven- tory, and provide restrictive covenants on the distribution of dividends, payments, change of control and corporate reorganisations. Securitisation Securitisation has become a widespread form of financing in Brazil as an alternative to credit facilities granted by major banks. Under Brazilian law, two specific vehicles may be used in such structures: financial securitisation companies and receivables funds ( Fundos de Investimento em Direitos Creditórios , or FIDCs) regulated by the Central Bank of Brazil and the CVM. Private Equity Fund Another common structure for private equity investments is to channel investments through a special type of vehicle regulated by the CVM in Brazil, called a private equity fund ( Fundo de Investimento em Participações , or FIP), which is akin to the limited partnership structure in the USA. These provide major advantages and benefits to sponsors compared to the traditional corporate structures, notably by not being taxed as an incorporated entity, allowing for a flexible and tailored structure and, at the same time, pro- viding tax exemptions on capital gains for cer- tain classes of sponsors (provided that certain requirements set forth under Brazilian laws and regulations are met). As the FIP’s units (or inter- est equity), called quotas, are deemed securities under Brazilian law and may be marketed to the public, such vehicles help to foster a second- ary market and set the foundation for LBO-like structures. There has also been a recent trend towards the establishment of special purpose acquisition companies (SPACs), which conduct initial public offerings of shares for the purpose of acquiring
3. Structures 3.1 Senior Loans
Most of the acquisition finance transactions in Brazil involve the granting of direct loan facili- ties, the execution of CCBs in favour of banks, or the issuance of debt securities, such as bonds (debentures), per the structures below. The prevalent arrangements for acquisition finance in Brazil do not involve a series of tranches, as may be common in other jurisdic- tions. Therefore, the usual lending structure is comprised almost exclusively of senior parallel or syndicated loans. Direct Loan The typical direct loan is straightforward, and the set of documents comprises a loan agreement whereby the lender extends a loan facility with specific proceeds for the relevant transaction. Issuance of Bonds (Debentures) Borrowers may also take on debt through the issuance of bonds (debentures), which may be offered publicly or privately to a single lender or a series of syndicated lenders, as the case may be. Bonds are also typically subordinated to other debts of the company (but rank higher than capital payments to equity holders).
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