Publicado em 09/04/2020

Covid-19 | Updates – Emergency support measures presented by the main public agents of the financial market

As published on March 30, 2020, the main public agents of the financial market have been attentively launching economic measures to combat the economic impacts resulting from Covid-19. Hereunder are a brief containing the main updates:

Central Bank of Brazil (BACEN) and National Monetary Council (NMC)

CMN Resolution No. 4,803 of 04/09/2020

• it allows financial institutions to reclassify renegotiated transactions in the period from 03.01.2020 to 09.30.2020 to the level of risk that they were classified in February 2020, before the economic effects of measures to combat COVID-19 began;
• it increases the institution’s capacity to take on new risks and, consequently, grant new loans; and

• it does not apply to operations with a delay of 15 days or more on 02.29.2020, as well as operations with evidence that the counterparty will not be able to honor the obligation under the conditions agreed upon in the renegotiation.

 BACEN Circular 3,998 of 04/09/2020

Decreased the capital requirement for credit operations aimed to small and medium-sized companies, lowering the Risk Weighting Factor (RWF) from 100% to 85%, with the following main features:

• covers companies with annual gross revenue ranging between R$ 15 million and R$ 300 million;
• potential to release approximately R$ 3.2 billion, allowing also the eventual restructuring of R$ 228 billion in credit operations for small and medium-sized companies; and
• applicable only to new credit transactions or restructured transactions to the benefit of the borrower, limited to the period ranging from 04.01.2020 to 12.31.2020.

 Resolution NMC No. 4,798 of 04.06.2020

Establishes special credit lines to be granted by banks managing the Constitutional Financing Funds of the North (FNO), the Northeast (FNE) and the Midwest (FCO), using resources of the Funds, under the following main features:

• aims at benefiting individuals and legal entities, including cooperatives that develop non-rural productive activities in the industrial, productive, commercial and service sectors of municipalities with a state of public calamity recognized by the Executive Authority as a result of the public health emergency related to COVID-19;
• finance working capital, limited to R$ 100 thousand per beneficiary, and investments, limited to R$ 200 thousand per beneficiary;
• interest rate of 2.5% per year;
• term for repayment: (i) working capital line, 24 months; and (ii) for the investment line, it will follow the deadlines set out by the Deliberative Councils of the Constitutional Funds;
• December 31, 2020 is the deadline for contracting all credit lines and applying for the grace period; and
• suspends, for up to 12 months, the overdue installments of the financing (up to 90 days counting from the date of issuance of the Resolution hereof) and coming due until December 2020, with potential increment to the final maturity date of the transaction.

Resolution NMC No. 4,795 of 04.02.2020   and Circular No. 3,996 of 04.06.2020

Regulated the terms and conditions in which BACEN may grant loans to financial institutions by issuing a Financial Guaranteed Bill (Special Temporary Liquidity Line (STLL)), with the following main features.

• total amount: R$ 650 billion;
• cost: 0.60% per year;
• the loan will be granted to financial institutions through monthly fund releases; and
• financial institutions must present items from their credit portfolio (financial assets or securities) as collateral for the loan that have a good risk assessment (AA, A and B), whose value is higher than the loan amount.

The STLL is awaiting approval of the Constitutional Amendment Bill No. 10/2020 (PEC 10/2020), which has already been approved in 2 rounds in the House of Representatives and awaits the analysis by the Senate.

Resolution NMC No. 4,797/2020 of 04.06.2020

Prohibits, in order to avoid the expenditure of funds that may be vital for maintaining credit during the COVID-19 pandemic and for the eventual absorption of future losses regarding financial institutions and other institutions authorized to operate by BACEN, until 09.30.2020, to:

• payment of interest on capital and dividends above the mandatory minimum established in the bylaws on 04.06.2020 or by law, when applicable;
• repurchase of shares, which, however may be authorized by BACEN, provided that the transaction is carried out through stock exchanges or an organized over-the-counter market, to remain in treasury and later sale, up to the limit of 5% of the issued shares, which includes the shares accounted for in treasury at the moment that this Resolution has entered into force;
• capital reduction;
• increase the wages of administrators; and
• the advance payment of any of the previous items.

The retained amounts cannot constitute a future obligation or be linked in any way to dividend payments in the future.

Brazilian Development Bank (BNDES)

Provisional Measure No. 944 of 04.03.2020

Institutes a credit line to finance the payroll of companies, with the following main features:

• total amount: R$ 40 billion, of which R$ 34 billion (85%) funded by the National Treasury and R$ 6 billion (15%) funded by the main financial institutions in the country that were transferred from BNDES.
• designed for companies with annual gross revenue greater than R$ 360 thousand and equal to or less than R$ 10 million, calculated based on the year of 2019;
• interest rate: 3.75 per year;
• 6-month grace period for start payment, with interest capitalized during such period and payment term of 36 months; and
• conditioned on the company’s commitment not to dismiss any employee without cause during the period of contracting the credit and 60 days after receiving the last installment, under penalty of acceleration of the debt maturity.

Caixa Econômica Federal Bank (CEF)

On 04.09.2020, CEF announced new economic measures destined to the real estate market, with the following main characteristics:

• total amount: R$ 43 billion;
• anticipation of up to 20% of financing for the commencement of construction works;
• anticipation of the release of funds corresponding to up to 3 months, limited to 10% of the financed cost, for construction works in progress and without delays in the schedule;
• release of production financing proceeds not disbursed by the company in previous months, limited to 10% of the financed cost;
• implementation of pause for 90 days in the production financing, for customers in compliance with or with up to 2 installments overdue, including construction works contracts;
• permission for partial payments of the financing installments, for up to 90 days, for customers in default or with up to 2 installments overdue;
• grace period of up to 06 months, for projects with works completed and financing being paid;
• possibility to postpone the commencement of construction works for up to 06 months; and
• acceptance of reformulation of the work schedule, in the event of contingencies in the execution due to issues arising from the COVID-19 pandemic.

In addition, CEF has also announced its program for the concession of working capital to small and medium-sized companies:

• total amount: R$ 60 billion;
• interest: between 0.57% and 1.51% per month, with up to 6-month grace period for start payment
• payment term of up to 60 months;
• types of accepted guarantees: machines, equipment, checks, bills of exchange, real estate property, vehicles, credit card bills, financial investments; and
• line of credit limited to R$ 2 million.

CEF is working to create financing lines for machinery and equipment with reduced rates, with a 6-month grace period and a term of up to 60 months for payment.

Brazil Northeast Bank (BNB)

BNB has launched two types of emergency renegotiation programs for agribusiness debts, aiming at individuals and legal entities that were complying with their payments until 12.17.2019, with the following main features.

• First program: extension of installments due up to 90 days and installments due up to September 2020, extending the final financing term by up to 6 months;
• Second program: renegotiation of installments overdue up to 90 days and due until September 2020, adding the amount to the next installments provided for in the transaction, without changing the final maturity; and
• Interest rates and performance bonuses will have the same conditions as the original contract.

South Region Development Bank (BRDE)

BRDE has released the Recupera Sul Program, by means of which each State (Rio Grande do Sul, Paraná and Santa Catarina) will have its own program for strengthening companies’ cash flow during the COVID-19 pandemic helping the local economy to recover. Such program has the following main features already announced for the State of Rio Grande do Sul (RS):

• total amount: R$ 500 million;
• grace period of 6 months for commencing the payment; and
• renegotiation of the amount of R$ 1 billion in contracts, granting a grace period of principal and interest for 06 months.

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.