Word has spread fast about credit receivable funds (FIDCs) in Brazil's domestic market, and the newfangled vehicle has started to attract big players. Banco Santander and Banco Itau have teamed up to develop this structure for Braskem, a leading petrochemical company, and Parmalat Brasil. Neither the banks nor the originators have participated in an FIDC before.
The structure combines features of a typical SPV and an investment fund. For issuers, the appeal of FIDCs over a traditional trust is a much lighter tax treatment. The Braskem transaction epitomizes this preference, with the company earmarking the proceeds of its R$200 million (US$68 million) FIDC to retire a heavily taxed debenture issued in 2000 under an old-fashioned trust. "That structure was almost prohibitive in terms of tax costs," said Ricardo Leoni, vice president of Banco Santander in Brazil. Amounting to R$150 million (US$51 million) at issuance, that debenture raised funds for three of the six companies that eventually merged to form Braskem. It matures in May of next year.