LCI and LCA issuances fall, and CRIs and CRAs rise – 03/31/2024 – Market

With the change in the rules for new issuances of LCIs (real estate credit letters) and LCAs (agribusiness credit letters) as of February 1st, the volume of issuance of letters declined, while that of new debentures, CRAs (certificates of agribusiness receivables) and CRIs (certificates of real estate receivables) increased.

The changes imposed by the CMN (National Monetary Council) aim to increase the Union’s revenue and, in fact, stimulate the real estate and agricultural sectors. To achieve this, the instruments used as backing by LCIs, LCAs, CRIs and CRAs will have to be directly linked to the sectors for which they are intended, without companies that are not in the sector issuing the papers, as happened in the past with the CRA of the operator of the Burger King in Brazil, issued to finance the fast food chain’s purchase of JBS burgers.

In the case of bills, which are issued by banks so that they can finance the sectors, there was also an increase in the minimum investment redemption period, which discourages the short-term use of the instruments and may explain the drop in new issuances.

For LCIs, the minimum grace period increased from 90 days to 12 months. Real estate bills adjusted monthly by a price index, such as the IPCA, continue to have a minimum maturity of 36 months. For LCAs, the minimum of 3 months was increased to 12 months, when the letter is updated by price index, and to 9 months in other cases.

Longer redemption periods inhibit the use of these instruments by companies that need to protect their cash from inflation for a short period, without paying taxes. The same goes for investors who used the instruments as an emergency reserve.

This year, the volume of LCIs issued fell from R$30.7 billion in January to R$10.8 billion last month, according to data from B3. Compared to February 2023, when LCI emissions accumulated R$18 billion, the drop is 40%.

LCAs have a similar effect. Emissions slowed down 56% from January to February this year, from R$45 billion to R$20 billion. Compared to last February (R$ 26.8 billion), there is a decrease of 26%.

“We are already seeing a material drop in new investments in LCI and LCA. The tendency is for these resources to flow to CDB, which is also guaranteed by the FGC [Fundo Garantidor de Créditos]”, says Pedro Breviglieri, partner at Empírica Investimentos.

For the expert, the incentivized debentures, however, should be the “big winners of these changes”, with a flow of issuers that no longer fit the rules of letters and certificates.

Furthermore, these debt securities can attract more investors because they are exempt from income tax, like bills and certificates, but with greater profitability, as they are more risky.

According to data from Anbima (Brazilian Association of Financial and Capital Market Entities), debenture issues increased 170%, from R$8.3 billion in January to R$22.4 billion in February. Comparing last month with February 2023 (R$7 billion), the increase was 237%.

The issuance of CRIs, in turn, more than doubled from January to February this year, going from R$3.6 billion to R$7.4 billion. Compared to February 2023, the jump was 306%. CRAs increased by 137% from January (R$ 1.5 billion) to February (R$ 3.6 billion) this year and by 54% compared to the same month last year, when the volume totaled R$ 2 .35 billion.

The reduction in bill issues was expected by experts, but such an increase in the volumes of other fixed income instruments was not predicted.

“This may indicate that companies that remained within the rule are taking advantage of the moment of low supply and high demand for exempt products to increase the volume raised”, says Mayara Rodrigues, fixed income analyst at XP.

The expert notes that the increase in the number of operations was modest, which means that they are more robust.