On August 25, 2016, the Brazilian Development Bank (Banco Nacional de Desenvolvimento Econômico e Social – BNDES) approved a Program to Promote the Revitalization of Productive Assets (Programa de Incentivo à Revitalização de Ativos Produtivos), which aims to support the transfer of economically viable assets (productive assets) held by insolvent companies, i.e. companies in judicial or extrajudicial recovery, bankruptcy or, at the discretion of BNDES, in economic-financial crisis and high risk of
The alienation of these assets must be made to companies that wish to acquire them to undertake economic activity and reinstate such assets to the production system. The new program aims to promote the exploitation, utilization and conservation of existing assets, avoiding their deterioration and preventing the formation of environmental liabilities.
This program will have a budget allocation of BRL 5 billion and will be valid until August 31, 2017.
The transfer of productive assets will stimulate economic activity and the social function of the company, preserving jobs and generating income. In addition, the program will strengthen the adoption of best practices of governance and management in relation to the disposed assets.
The direct support from BNDES will be intended solely to the purchaser and will be through loans (fixed income), with the possibility of introduction of securities subscription mechanisms. The seller must be an insolvent company.
The indirect support, through the financial agents of BNDES, may only occur if the company is under judicial or extrajudicial recovery or bankruptcy proceedings. Companies in economic-financial crisis and high risk of credit are not eligible for this purpose.
The beneficiaries (purchasers) of the program will be companies and cooperatives, with headquarters and administration in Brazil, observing the following conditions: (i) the purchaser must have managerial capacity and be in an economic and financial situation compatible with the acquisition and the intended exploitation of the asset as well as with the desired financing; (ii) the asset must be acquired for the purpose of undertaking an economic activity, even if different from that of the seller; (iii) the purchaser must have financial statements audited by an independent audit firm registered with the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM); and (iv) the purchaser cannot integrate the same economic group of the seller, be a related party to the seller, or be identified as the seller's agent.
Among the assets to be financed are industrial units, commercial establishments, equity participation representing the company`s control or part of the block control. The underlying asset of the purchaser's interest is expected to be in the implementation phase, operational or disabled. This financing may also be extended to the acquisition of real estate, used machinery and equipment and intellectual property rights.
Studies, projects, consulting and auditing (in particular for the preparation of business plans, business restructuring, implementation of corporate governance practices and strategic planning), as wells as working capital associated with the acquisition and initial operation of the asset, may also be financed, provided that they are linked to the purposes of the program.
The financial terms and conditions of the proposed financing are the following: (i) interest rate: market cost benchmarks and/or financial cost equivalent to any already existing credit from BNDES by the seller of the asset, limited in this second hypothesis to the value of that credit; (ii) maximum participation of BNDES: up to 100% of the eligible items; (iii) basic spread: 1.5% per year; (iv) spread of risk: according to the risk of the purchaser; and (v) total period: the length of a grace period and amortization must be compatible with the designed cash flow, limited to a ten-year term.
This program will be very attractive for those investors that would like to acquire productive assets from Brazilian insolvent companies to develop their activities in Brazil.
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