BRAZIL Law and Practice Contributed by: Caio Ferreira Silva, Thiago Braga Junqueira, Vinícius Pimenta Seixas and Rodrigo Vieira, Pinheiro Neto Advogados
ments in the legal certainty of securitisation structures and the development of transactions utilising such arrangements on a larger scale.
eraged transactions. The main concerns about intercreditor agreements relate to the complete definition of the collateral enforceability mecha- nism in the document and the ability of the col- lateral agent acting on behalf of a foreign credi- tor to effect local foreclosure of the collateral and remit funds abroad to satisfy the obligations. Such issues have been mitigated because enter- ing into intercreditor agreements has become more common, and banks are becoming more familiar with the structure, leading to an increase in the number of players willing to act as col- lateral agents in Brazil. In addition, the New Guarantee Framework expressly introduced the “collateral agent” role into the Brazilian legal sys- tem, thus creating greater legal certainty for the scope and powers of this instrumental agent in financing transactions and contributing to the development of the market. Moreover, ranking between creditors with respect to certain types of collateral is often set forth by law in Brazil (eg, the “first-in-time, first-in-right” rule). Therefore, any special rules outlined in intercreditor agreements would either follow the legal priority rankings or determine that the parties should be obliged to relocate the proceeds of any foreclosure proceeding among themselves. 4.2 Bank/Bond Deals The basic terms and conditions set forth in intercreditor agreements for bank or bond deals are substantially the same as those of simple intercreditor contracts, which provide priority over the collateral, sharing of payments, pro- ceeds waterfall and special arrangements for the enforcement procedure. 4.3 Role of Hedge Counterparties As hedge products are not widely available in Brazil and typically involve high transac-
4. Intercreditor Agreements 4.1 Typical Elements
Intercreditor agreements are also available for lenders in Brazil, with the terms and conditions outlined in the relevant document entered into by and between the parties. Until recently, the use of intercreditor agreements was very limited, as syndication agreements would set forth the terms and conditions applicable to all creditors, and priority over collateral is to some extent set forth under Brazilian law. However, in more sophisticated transactions, and in those involv- ing creditors with different profiles, there has been an increase in the number of intercreditor arrangements that lay out detailed voting rules, the appointment of agents and clearer enforce- ment procedures. The typical elements for intercreditor agree- ments are those generally required for any bilat- eral private obligations to be valid and effective in Brazil, which are that: • the parties must be capable; • there must be a lawful, possible and singled- out purpose (or it must be possible to deter- mine or single out a purpose); and • the agreement must be entered into pursuant to the form set forth or not prohibited by law. There are no specific form requirements for inter- creditor agreements. There has been almost no controversy on the validity or enforceability of intercreditor agree- ments in Brazil, which are now customary in lev-
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