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Rating Action:

Moody's assigns definitive ratings of Baa3 (sf) / Aaa.br (sf) to the first series of the 25th issuance of Gaia Securitizadora S.A.'s agribusiness certificates, a Brazilian trade receivables securitization

 The document has been translated in other languages

17 Dec 2020

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 third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

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.

Moody's ratings are constantly monitored, unless designated as point-in-time ratings in the initial press release. All Moody's ratings are reviewed at least once during every 12-month period.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.br.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see ratings tab on the issuer/entity page on www.moodys.com.br for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com.br for further information.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com.br for further information on the meaning of each rating category and the definition of default and recovery.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

Please see www.moodys.com.br for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com.br for additional regulatory disclosures for each credit rating.

Ely Mizrahi
Asst Vice President - Analyst
Structured Finance Group
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

Daniela Jayesuria
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's America Latina Ltda.
Avenida Nacoes Unidas, 12.551
16th Floor, Room 1601
Sao Paulo, SP 04578-903
Brazil
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

No Related Data.
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