Alerts
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 by different financial markets agents, in July, to address the economic impacts resulting from Covid-19, as well as other matters of interest:
Federal Government and National Monetary Council (NMC)
Provisional Measure (PM) No. 992 of 07.16.2020 and NMC Resolution No. 4,838 of 07.21.2020 – Working Capital for the Preservation of Businesses (CGPE)
By means of PM No. 992 of 07.16.2020 and NMC Resolution No. 4,838 of 07.21.2020, the CGPE credit line was created and regulated, which aims at stimulating the provision of working capital to micro, small and medium-sized companies. As an incentive, the financial institutions that grant loans by means of the CGPE may use part of their losses resulting from the default by borrowers to obtain tax benefits relating to Income Tax and Social Contribution on Net Income (CSLL), by means of the calculation of presumed credit.
Accordingly, credits arising from temporary differences correspond to the application of the rates of the IRPJ and CSLL on the differences between the expenses or losses arising from the activities of the legal entities referred to in MP nº 992, deducted in accordance with the corporate accounting legislation, and the expenses or losses authorized as a deduction for determining the actual profit and the CSLL calculation base, in accordance with current legislation.
We highlight below the following main features of the CGPE line:
- Destination: companies with annual gross revenue of up to R$ 300 million;
- Payment term: 36 months minimum term, with a 6-month minimum grace period;
- Interest rate: to be negotiated between borrowers and financial institutions; and
- Contracting deadline: until 12.31.2020.
According to the Brazilian Central Bank’s estimates, this measure has the potential to release up to R$ 120 billion in new loans.
MP No. 992 of 07.16.2020 and NMC Resolution No. 4,837 of 07.21.2020 – sharing of fiduciary assignment of real estate properties
By means of PM No. 992 of 07.16.2020, certain provisions of Law No. 13,473 of 08.28.2017 were changed in order to allow the sharing of fiduciary assignment of a real estate properties, by means of allowing the use of real estate properties as collateral in more than one credit transaction. On 07.21.2020, the NMC regulated this provision by means of the NMC Resolution No. 4,837.
We highlight below the following main features of the sharing of fiduciary assignment:
- Interest rates: the interest rates and terms of the new credit transaction must be the same as or lower than those of the original credit transaction;
- Contracting: the new credit transaction must be entered into with the same fiduciary creditor of the original credit transaction;
- Default: in case of default of one of the secured transactions, the other secured transactions will also be early due; and
- Restrictions: individuals may only enter into new credit transactions for their own benefit or of their families, and such restriction does not apply to legal entities.
Brazilian Development Bank (BNDES)
Financing Line for the Electric Sector (Covid Account)
BNDES announced on 07.09.2020 the conditions of the emergency financing line for the electric sector (Covid Account), regulated by the National Energy Agency (ANEEL), that aims at addressing the economic effects of the pandemic to distribution companies.
We highlight bellow the following main features of the line of credit:
- Destination: electricity distribution companies;
- Credit line: the total volume provided will be of up to R$ 16.4 billion;
- Interest rate: Certificate of Interbank Deposit (CDI), plus 3.79% per year;
- Payment term: until 2025, with a grace period until July 2021; and
- Resources: 29% of the funds will be provided by the BNDES together with other public banks and 71% by private banks.
Increase of R$ 5 billion of the BNDES Small Business Credit Line
On 07.04.2020, BNDES announced the budget increase of the BNDES Small Business Credit Line by R$ 5 billion and its term extension from 09.30.2020 to 12.31.2020.
The credit line focuses on micro, small and medium-sized companies, and intends at delivering their needs for working capital.
We highlight below the following main features of the credit line:
- Destination: companies with annual revenue of up to R$ 300 million;
- Credit line: credit limit of up to R$ 70 million per year, per company;
- Interest rate: composed of the sum of the financial cost (TFB, TLP or Selic), BNDES rate (1.25% per year) and the financial institution’s rate (negotiated between the company and the financial institution); and
- Payment term: 12 to 60 months, with a grace period of up to 24 months.
Approval of R$ 1 billion for the South Region Development Bank (BRDE)
On 07.20.2020, BNDES approved a R$ 1 billion credit limit to BRDE in order to finance investment projects in different sectors of the states of the Southern Region, namely Paraná, Santa Catarina and Rio Grande do Sul.
The approved amount is 45% higher than the amount transferred in the previous semester and it is valid for the second semester of 2020.
The new credit limit is directed to address and respond the economic crisis resulting from the pandemic, especially for the agricultural sector and the micro, small and medium-sized companies.
Caixa Econômica Federal Bank (CEF)
On 07.02.2020, CEF announced a new set of measures to facilitate the access to real estate credit in order to address the economic effects caused by the pandemic in the construction sector.
We highlight below the following main measures:
- Reduction of the minimum sales percentage: from 30% to 15% for new projects;
- Flexibilization: reduction in the prior construction requirement for new projects; and
- Resources: possibility of allocating the resources resulting from the sale of housing units to the payment of monthly charges.
Our team of Project Finance, Credit Operations, Banking Law and Capital Markets will be available for any clarification required and to assist in respect of the above measures.
