Brazilian boutique investment bank Unitas is using a tuition deal it arranged for Universidade Luterana do Brasil (Ulbras) as a template for an upcoming transaction for Rio de Janeiro-based UniverCidade, said Unitas partner Joao da Rocha Lima.

In particular, the pipelined deal will also feature a true-sale debenture structure, a route that has fallen out of favor with the rise of the more tax-friendly receivables investment funds (FIDCs). Da Rocha argues that the particular future-flow nature of the receivables deal for Ulbras would not jibe with the FIDC structure.

"It's a potential flow not defined by a contract," he said. There have only been three future-flow FIDCs executed so far. Two of them are backed by contracts, which have either been generated already or are linked to customers having some kind of history with the originator. In the Ulbras transaction, the contracts stem from new students and do not last more than six months.

A multi-originator future-flow tuition FIDC has also materialized, but it was a revolving, open-ended fund whose initial amount of R$20 million reflected the amount of existing receivables. That deal would grow as more receivables were snatched up. The Ulbras transaction was issued at R$205 million, with an eight-year final legal maturity and 4.2-year duration. While that deal is revolving, at no point is there enough cash to purchase more than R$30 million to R$40 million in receivables, da Rocha said.

While the particulars of the Ulbras transaction have certainly not been seen in the FIDC sector, there is ongoing discussion about what kind of future flows regulators will approve for the vehicle. One banker said that, as the funds actually securitize credit rights, any kind of future flows should be acceptable, as long as the arranger and originator take the time to argue their case before regulators.

FIDCs are exempt from taxes that hit debenture deals, such as the financial operations tax and a tax that applies every time the SPV purchases receivables.

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