The Brazilian Securities and Exchange Commission (CVM) has issued Instruction No. 600, which provides for the public offering of Agribusiness Receivables Certificates (CRA) and was implemented on 1 November 2018.
This has been long awaited by the market. Prior to now, the CRA was using the Real Estate Receivables Certificates (CRI) as a parameter for CRA's offerings.
CRA was created by law No. 11.076 in 2004 and had not yet been subject to specific regulations issued by CVM. This, however, did not impede the development of the market for this type of credit. CRA are freely negotiated notes that are issued by securitization companies which are used to raise funds for rural producers, cooperatives and companies in agribusiness production chain. There were not any regulations for CRA until 2008 when it was determined that the same regulation that was being used for Real Estate Receivables Certificates (CRI) would be applicable to the registration of public offers of CRA. During this 10-year period, we have seen a more rapid increase in the volume of public offerings of these securities. The total volume of CRAs offered jumped from approximately R$ 1.2 billion in 2013 to approximately R$ 13.3 billion in 2017.
Specifically, in 2016, the amount of CRA issued in Brazil reached R$ 14.2 billion which was almost three times the amount issued in the previous year. Due to the increasing numbers of CRA public offers and since they are very particular and different than CRI, new rules and procedures will now have to be adopted through Instruction No. 600. This allows a greater number of companies to use CRA to raise funds.
Despite the lack of specific regulations, it had not prevented the development of the CRA market in Brazil. There were many challenges faced by market participants in using rules that had been designed for CRIs to regulate CRAs. It was important to mature the market and the CVM itself, by structuring different types of CRA offers that were registered with CVM.
One example during this time was the case of Burger King. CVM decided that a debenture issued by a company that did not fall under the definition of rural producers could serve as a backing for CRA, provided that the proceeds from the issue were fully destined to payments due to rural producers. This decision was replicated for other offers structured by companies that were not necessarily rural producers, but who had commercial relations with the sector.
CVM Instruction No...