BRL 285.61 million of Senior CRA rated
Sao Paulo, December 17, 2020 -- Moody's America Latina Ltda. has assigned definitive ratings of
Baa3 (sf) (global scale, local currency) and Aaa.br (sf)
(Brazilian national scale) to the first series of the 25th issuance of
agribusiness certificates (certificados de recebíveis do agronegócio,
or Senior CRA) issued by Gaia Securitizadora S.A. (Gaiasec,
not rated). The CRAs are backed by trade receivables originated
by BASF S.A. (BASF Brazil, not rated), subsidiary
of BASF (SE) (BASF, long term rating A3, global scale,
outlook stable), related to the sale of defensives for crop protection
to agricultural producers, distributors and cooperatives.
Issuer: Gaia Securitizadora S.A.
First series, 25th issuance -- Baa3 (sf) (global scale,
local currency) / Aaa.br (sf) (national scale)
RATINGS RATIONALE
The transaction is the fourth amortizing securitization backed by a static
pool of trade receivables originated by BASF Brazil. The pool of
trade receivables consist of electronic invoices related to BASF Brazil's
sale of defensives for crop protection.
The definitive ratings on the Senior CRA are based on a number of factors,
including:
- Initial credit enhancement of 15% in the form of subordinated
Mezzanine and Junior CRAs (2nd and 3rd series, respectively).
The enhancement is based on the discounted receivables' value and
is available to cover for losses and dilutions on the collateral.
The receivables are discounted at the weighted average interest rate of
the CRA plus 126 business days of interests accrual to cover potential
delinquencies.
- Sequential waterfall. The Senior CRA benefits from a sequential
waterfall that allocates cash collections to amortize the Senior CRA.
No payments will be made to the mezzanine or subordinated CRA before the
Senior CRA are paid down in full.
- Strong and experienced originator. BASF Brazil is a subsidiary
of BASF SE, one of the world's largest chemical companies
and a one of the leading players in the global agrichemical industry.
BASF Brazil has originated the receivables according to the company's
global credit underwriting policies and remains ultimately responsible
for the correct formalization of the underlying assets, for potential
dilutions that may arise and to operate as a backup servicer in the transaction.
The three prior transactions originated by BASF Brasil performed within
expections, with the Senior CRA amortized.Finally,
BASF Brazil has the obligation, under the transaction documents,
to repurchase the underlying receivables in case of dilutions or incorrect
formalization.
- Diversified pool of trade receivables. The final pool
has a maximum concentration of 3% per obligor, by economic
group, consisting of 84 distributors, 3 agricultural producers
and 13 cooperatives. The initial credit enhancement is sufficient
to cover the 5 largest obligors in the pool. The receivables are
distributed in 12 Brazilian states, with 35% of concentration
in the state of Rio Grande do Sul, 17% in Minas Gerais,
12% in Paraná e 9% in São Paulo. Approximately
81% of the receivables will mature between March and May 2021 and
19% between June and September of the respective year.
- Stable and low historical delinquency levels of BASF Brazil agricultural
trade receivables portfolio.
- Dilution risk. Cumulative monthly dilution events in the
9-month period ended in July 2020 represented approximately 1.72%
of BASF's total agrichemical sales and 2.78% for the
eligible clients stratification, primarily related to products returned.
The risk of the Senior CRA being impacted by dilutions is mitigated by
the obligation under the transaction documents of BASF Brazil to repurchase
any diluted receivables and by the credit enhancement available in the
transaction.
- Receivables' formalization. The obligors in the pool were
electronically notified and informed that: (i) BASF Brazil has sold
the receivables to Gaiasec; (ii) payments should be made directly
to the trust account at the receivables due date and (iii) an acknowledgment
from the obligor that the products have been delivered in accordance with
the descriptions in the invoices. Afort Serviços e Soluções
Financeira Ltda (Afort, not rated) is a third party that verifies
the correct formalization and the receivables eligibility criteria.
Despite Afort role, BASF Brazil, as the originator and seller
of the receivables, remains as the ultimate responsible for the
existence and correct formalization of the underlying assets.
- Interest rate mismatch risk. The receivables are purchased
at a fixed discount rate and the Senior CRA are indexed to the DI rate
(interbank deposit rate). This risk will be covered through an
interest rate option negotiated with B3 S.A. -- Brasil,
Bolsa, Balcão (B3 S.A., long term rating
Ba1, global scale, outlook stable), with notional value
equal to Senior CRA total volume and with a maturity date as close as
possible to the receivables' maturity date. The senior CRA are
subject to a residual interest rate risk in case delinquencies extend
the duration of the pool beyond the interest rate options expiration dates.
Moody's considers the hedge mechanism, as well as this residual
risk, consistent with the ratings assigned to the Senior CRA (for
more information, see the "Interest Rate Mismatch Risk" ("Risco
de Descasamento de Taxa de Juros" section in the Pre-sale Report).
- Commingling risk. The receivables are serviced by a third
party, GaiaServ Assessoria Financeira Ltda (GaiaServ, NR),
that is responsible for sending payments slips to the obligors registered
with Banco do Brasil S.A. (Banco do Brasil, long term
deposit rating Ba2, global scale, local currency; and
Aa1.br Brazilian national scale), so that payments will flow
directly to the transaction's segregated trust account. In addition,
the obligors were notified electronically of the assignment to make payments
directly to the trust account. In case the obligors incorrectly
pays directly to the seller, BASF Brazil will have to remit the
cash flows to the trust account within 5 business days.
- Segregated assets. The CRAs benefit from a fiduciary regime
(regime fiduciário) whereby the assets backing the CRAs are segregated.
These segregated assets are destined only for payments on the CRAs and
payment of certain fees and expenses, and are segregated from all
other assets on the issuer's balance sheet. However, the
transaction is subject to residual legal risk because Gaiasec's agribusiness
credits can be affected by the securitization company's tax, labor
and pension creditors. (For more information, see the "Fiduciary
Regime and Segregation of Assets" ("Regime Fiduciário e Patrimônio
Separado") section in the pre-sale report.
The legal final maturity of the senior CRA will be on March 30,
2022, 15 months after the transaction's expected closing.
The senior CRA accrues, on a daily basis, a floating interest
rate equivalent to DI rate (cumulative daily average accrual of interbank
deposits) plus a spread of 220 bps. Principal and accrued interests
to the senior CRA will be paid monthly, on cash basis, starting
on June 2021, according to the amount of collections received in
the previous month.
Moody's analyzed the sellers' receivables pool for the 79-month
period reviewed by PwC starting in January 2014 and ending in July 2020.
During this period, BASF Brazil generated BRL 28.8 billion
of trade receivables related to its agricultural business. As modeling
input assumptions, Moody's used a central mean of 2.78%
monthly dilutions and 0.08% monthly losses over the outstanding
pool balance, and it assumed portfolio turnover of 187.7
days. The standard deviation assumptions for dilutions, losses
and turnover were 2.41%, 0.24% and 39.8
days, respectively. Moody's calculated loss assumptions using
as a proxy delinquencies between 121 to 150 days past due over the total
portfolio.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that may lead to a downgrade of the ratings include (i) a deterioration
in the credit quality of the originator and/or its parent, (ii)
an increase on losses or dilution levels beyond the level Moody's assumed
when rating this transaction and (iii) any changes in the ratings of B3
S.A.
Factors that may lead to an upgrade of the ratings include (i) improvement
in the credit quality of the originator and/or its parent and (ii) a significant
decrease on losses or dilution levels beyond the level Moody's assumed
when rating this transaction.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of corporate assets from
the current weak Brazilian economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. We regard the COVID-19
outbreak as a social risk under our ESG framework, given the substantial
implications for public health and safety.
The principal methodology used in these ratings was "Moody's Approach
to Rating Trade Receivables-Backed Transactions" published in July
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231931.
Alternatively, please see the Rating Methodologies page on www.moodys.com.br
for a copy of this methodology.
More information on Moody's analysis of the first series of the 25th issuance
of Gaia Securitizadora S.A.'s agribusiness certificates
is available in the pre-sale report published on Moody's website,
www.moodys.com.br.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216309.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
This transaction is considered as structured finance product in accordance
with Instrução CVM nº 521.
Moody's took into account one or more third party due diligence
assessment(s) regarding the underlying assets or financial instruments
(the "Due Diligence Assessment(s)") in this credit rating
action and used the Due Diligence Assessment(s) in preparing the ratings.
This had a neutral impact on the ratings.
The Due Diligence Assessment(s) referenced herein were prepared and produced
solely by parties other than Moody's. While Moody's
uses Due Diligence Assessment(s) only to the extent that Moody's
believes them to be reliable for purposes of the intended use, Moody's
does not independently audit or verify the information or procedures used
by third-party due-diligence providers in the preparation
of the Due Diligence Assessment(s) and makes no representation or warranty,
express or implied, as to the accuracy, timeliness,
completeness, merchantability or fitness for any particular purpose
of the Due Diligence Assessment(s).
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's information.
Information types used to prepare the rating are the following:
financial data, economic and demographic data, legislation,
by-laws and legal documents, asset portfolio data,
historical performance data, public information, Moody's
information, and regulatory filings.
Sources of Public Information: Moody's considers public information
from many third party sources as part of the rating process. These
sources may include, but are not limited to, the list available
in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1235261.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
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The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
Please see the ratings disclosure page on www.moodys.com.br
for general disclosure on potential conflicts of interests.
Moody's America Latina Ltda. may have provided Other Permissible
Service(s) to the rated entity or its related third parties within the
12 months preceding the credit rating action. Please go to the
report "Ancillary or Other Permissible Services Provided to Entities Rated
by Moody's America Latina Ltda." in the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254877
for detailed information.
Entities rated by Moody's America Latina Ltda. and the rated entities'
related parties may also receive products/services provided by parties
related to Moody's America Latina Ltda. engaging in credit ratings
activities within the 12 months preceding the credit rating action.
Please go to the link http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254878
for a list of entities receiving products/services from these related
entities and the products/services received.
The rated entity Gaia Securitizadora S.A. is part of the
Gaia Group which accounted for 5% or more of the annual revenue
of Moody's America Latina Ltda. during the preceding calendar year.
The date of the last Credit Rating Action was 11/12/2020.
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Ely Mizrahi
Asst Vice President - Analyst
Structured Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
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Brazil
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Daniela Jayesuria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
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