Brazilian companies gear up for dollar-denominated crop bonds
Brazilian companies and foreign investors began to structure the first issues of dollar-denominated agribusiness receivables certificates (CRA) to fund the productive sector, a move allowed by Law 13,986, enacted in April as a result of the provisional measure known as "MP do Agro." Two transactions involving a grain farmer and a biofuel mill may raise $550 million.
The transactions are expected to be concluded by October, with registration abroad, increasing a market that was already growing. In 2019, CRAs issues increased 78.5% and this year they raised more than R$8 billion despite the uncertainty caused by the pandemic.
"It is a process of letting foreign investors know how attractive dollar-denominated CRAs are," says Lúcio Feijó, a partner in the law firm Feijó Lopes, who advises both companies with annual revenues close to R$1 billion, according to him.
The issues being structured will raise $200 million and R$350 million. The proceeds will fund inputs for cereal and sugarcane farmers of Brazil's South and Southeast regions.
Although the launch of the first dollar-denominated CRAs is on its way, the productive sector is cautious. The Brazilian Agriculture and Livestock Confederation (CNA) believes that this option will not fund farmers in a direct and massive way. CNA says it's an advantageous alternative for cooperatives and input resales.
"It is unlikely to reach the small and medium-sized farmers alone. The great gain is for cooperatives and resellers, which will be able to raise cheaper funds to finance farmers at the end," says Fernanda Schwantes, a technical adviser to CNA's agricultural policy commission.
Moacir Teixeira, a partner at securitization firm Ecoagro, Brazil's largest CRA issuer with more than R$20 billion raised since 2016, says the path is clear for dollar-denominated issues and medium-sized companies based in the country's interior to issue CRAs of up to R$150 million backed by securities like Rural Producer Bills (CPRs).
Carlos Augusto Lopes, the founding partner of UqBar, Brazil's leading structured financing firm, says there is room for medium-sized farmers being more active in the segment and to change the profile of those who buy the securities from individuals to institutional investors, funds and asset managers, especially with the dollar option.
"The environment of credibility and trust in the Brazilian agribusiness can drive this," Mr. Teixeira says. According to him, the dollar-denominated issues also...
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