Successful use of FIDCs requires Mid-Sized companies to focus on receivables quality

In an article published by Valor Econômico, our specialist Renan Granja, partner in the Capital Markets practice at FAS Advogados, examines the use of Receivables Investment Funds, known in Brazil as Fundos de Investimento em Direitos Creditórios or FIDCs, as an alternative source of financing for mid-sized companies.

Against a backdrop of more selective credit conditions and a growing demand for liquidity, FIDCs have gained relevance as a means of monetising receivables and accessing the capital markets. However, this structure requires careful consideration of the quality of the assigned receivables, including payment predictability, debtor concentration, default history, documentation, governance and any legal risks associated with the portfolio.

The discussion highlights the importance of a thorough legal, regulatory, accounting and operational assessment to ensure that the transaction is structured securely and efficiently, in alignment with the company’s financial objectives, while avoiding unintended effects on existing agreements, funding costs and risk exposure.