Publicado em 09/06/2020

Covid-19 | Updates – Emergency support measures presented by the main agents of the financial market and other matters of interest

In another round of updates, we have selected below the main economic measures launched in the last month by different financial markets agents to address the economic impacts resulting from Covid-19, as well as other matters of interest to the financial markets:

Brazilian Development Bank (BNDES)

Financing Line for the Healthcare Sector (Emergency Direct Credit)

On 06.08.2020, BNDES approved the creation of a financing line of up to R$ 2 billion to support the healthcare sector’s working capital needs. We highlight the following main features of the financing line:

  • Destination: Companies in the healthcare industry, such as hospitals and laboratories, with annual gross operating revenue of R$ 300 million or more;
  • Financing Line: Each loan must be of a minimum of R$ 10 million and a maximum of R$ 200 million per economic group;
  • Annual interest rate: Special System of Settlement and Liquidation (Selic), plus an additional rate of 1,5%, plus a risk spread; and
  • Payment term: 48 months, with a grace period of up to 12 months.

Financing Line for the Sugar and Alcohol Sector (Support Program for the Sugar and Alcohol Sector – PAAS)

On 05.04.2020, BNDES approved the creation of a financing line of up to R$ 3 billion to guarantee the storage of ethanol in sugar and alcohol plants in Brazil, which will be also supported by other financial institutions. We highlight the following main features of the financing line:

  • Destination: Companies, cooperatives and individual entrepreneurs with gross operating revenue of R$ 300 million or more;
  • Financing Line: BNDES will provide up to half, R$ 1.5 billion, and limited to the amount of R$ 200 million for each economic group, while the rest of the line must be made available by commercial banks;
  • Annual interest rate: Long-Term Rate (TLP) plus rate of 1.5%, plus risk spread; and
  • Payment term: 24 months, with a grace period of up to 12 months.

Large Companies Supply Chain Financing Line (Supply Chain Credit)

On 05.04.2020, BNDES approved the creation of a financing line of up to R$ 2 billion to finance the supply chain of large companies, which will work as the operation’s “anchors”. We highlight the following main features of the financing line:

  • Destination: Companies with annual revenue of R$ 300 million or more;
  • Financing Line: BNDES will provide up to R$ 2 billion to large companies, called “anchor companies”, which will obtain the loan from BNDES and on-lend to its suppliers (smaller companies). Each loan must be of a minimum of R$ 10 million and a maximum of R$ 200 million;
  • Annual interest rate: Special System of Settlement and Liquidation (Selic), plus a remuneration rate of 1.1%, plus a risk spread; and
  • Payment term: 60 months, with a grace period of up to 24 months.

Federal Government

Provisional Measure (PM) No. 975 of 06.01.2020

It created the Emergency Credit Access Program (Emergency Program) that aims at facilitating the access of credit through the provision of guarantees, having the following main features.

  • Destination: Companies with gross revenue between R$ 360,000 and R$ 300,000,000;
  • Authorization: The Federal Government is authorized to increase the budget of the Investment Guarantee Fund (FGI) of the Brazilian Development Bank (BNDES) by up to R$ 20 billion, with the additional resources being applied exclusively as guarantee for credit transactions made through the program; and
  • Coverage: Financial institutions may use the FGI coverage for defaults it may support, being the guarantee limited to 30% of the total amount of credit provided through the Emergency Program.

The MP No. 975 also changed the limit of the guarantee to be provided by the Operations Guarantee Fund (FGO) for financial institutions participating in National Support Program for Micro and Small Business (Pronampe), being possible to guarantee 100% of the amount of each transaction, being limited to up to 85% of the financial agent’s portfolio.

Federal Government

Law No. 13,999 of 05.18.2020

Institutes the National Support Program for Micro and Small Businesses (Pronampe), creating  a line of credit of up to R$ 15,9 billion to micro and small businesses.

The line of credit has the following main features:

  • Destination: The credit may be used to finance business activities, the distribution of profits and dividends to the shareholders being forbidden;
  • Line of Credit: Credit of up to 30% of the company’s annual gross revenue, based on the 2019 financial year. For companies that have been operating for less than a year, the loan limit will be up to 50% of its share capital or 30% of its average monthly income, whichever one is larger;
  • Annual interest rate: maximum equal to the rate of the Special System of Settlement and Liquidation (Selic), plus 1.25%;
  • Payment term: 36 months; and
  • Obligation: The company may not lay off any of its employees until the 60th day after it receives the last loan installment.

Private financial institutions that are authorized to operate by the Central Bank may grant this line of credit, including fintechs and payment institutions, the financing being partially guaranteed by the Operations Guarantee Fund (FGO).

Judicial Decision of the Federal Supreme Court (Supremo Tribunal Federal – STF)

By means of an appeal presented by WSul Gestão Tributária Ltda. and Cooperativa Vinícola Aurora Ltda., against the judicial decision of the Court of Appeals of the Rio Grande do Sul State, STF ruled, by means of general repercussion, that:

  • The assignment of subsistence-related credit does not entail a change of the nature of the writ of payment (precatório).

Hence, the payment of assigned subsistence-related credit still has precedence over common writ of payments (precatórios).

According to the Federal Supreme Court Justice Marco Aurélio, the revision of the writ of payments (precatórios) nature would harm creditors because “considering market conditions, if the credit loses its own quality that allows its preferential payment, there will be a loss of interest in its acquisition or, at least, a decrease in its value”.

Central Bank of Brazil (Banco Central – BACEN) and National Monetary Council (Conselho Monetário Nacional – CMN)

CMN Resolution No. 4,822 of 06.01.2020

Regulates the creation, organization and operation of joint guarantee companies (SGS) and counter guarantee companies (SC).

The SGS is a company created with the purpose of providing guarantee for its participating shareholders who contract credit transactions, in order to facilitate access to credit. The SC, on the other hand, is a company created to offer counter guarantee to the SGS.

We highlight the following main features of the regulation:

Mutual Guarantee Companies (SGS)

  • Corporate Type and Minimum Share Capital: Must be incorporated as a corporation with a minimum share capital of R$ 200,000;
  • Risk Fund Limit: Cannot exceed 8 times the sum of its share capital and reserves;
  • Guarantee Exposure Value: It cannot be greater than 2 times its resources, formed by the sum of the share capital, reserves and the risk fund;
  • Agreement: Agreements can be signed with funds intended to provide guarantees, such as the Operations Guarantee Fund (FGO) and the Investment Guarantee Fund (FGI), for the allocation of resources to the SGS risk fund; and
  • Investments: The resources contributed to the risk fund must be invested in full, including income, in federal public securities or in an investment fund with a portfolio composed exclusively of such securities.

Counter Guarantee Companies (SC)

  • Corporate Type: Must be incorporated as a corporation; and
  • Corporate Organization: National or foreign legal entities, SGSs and funds destined to provide guarantees, such as FGO and FGI, may participate in SC’s share capital.

CMN Resolution No. 4,820 of 05.29.2020

Supplemented the prohibitions and restrictions, established by the CMN Resolution No. 4,797, of 04.06.2020, for financial institutions in order to maintain the credit supply during the COVID-19 pandemic, with the main following features:

  • Term: (i) It extends from 09.30.2020 to 12.31.2020 the duration of the prohibitions and restrictions established by CMN Resolution No. 4,797, of 04.06.2020, such as payment of interest and dividend on capital, capital reduction, repurchase of shares and increase the wages of administrators, among other restrictions; and (ii) It stipulates that the prohibitions are based on the amounts of the year 2020, regardless of the date in which the amounts were disbursed; and
  • Application: It establishes that the prohibitions and restrictions are applicable to confederations comprised by financial cooperative syndicates as well.

BACEN Resolution No. 4,819 of 05.29.2020

Purpose: It aims at speeding up the release of funds by financial institutions and at facilitating access to real estate credit, through the temporary flexibilization of rules related to the release of funds in connection with real estate financing; and

Requirements: For the real estate financing entered into up to 09.30.2020, the financial institutions may release the funds after the filing (prenotation) of the guarantee with the competent Real Estate Registry, without the requirement of its effective registration.