Precatories devalue while Congress discusses default to increase electoral spending

Companies and individuals that try to negotiate federal court orders to anticipate the receipt of money have seen these papers devalue due to the uncertainty about how these payments will be from 2022.

Funds, financial institutions and fintechs that entered this market in recent years and increased competition for these assets now adopt a position of caution in view of the lack of definition about the PEC dos Precatório that is being processed in Congress.

According to people who follow this market, the discount in the negotiation of federal court orders went from less than 20% to up to 40%. The fear arises, mainly, with debts of greater value, since the smaller ones will have priority in the payment queue.

Also called PEC do Calote, the proposal presented by the government and which has already been approved by a special committee of the Chamber ends with the regular payment of these judicial debts. There will be a limit based on the 2016 spending (year of creation of the spending ceiling) corrected for inflation, which reduces next year’s value from BRL 89 billion to about BRL 45 billion.

Unpaid debts queue up, with no time limit for the money to be received. Anyone who wants to receive it the following year must give up 40% of the amount, a discount below market value and arbitrarily created by the Executive and Legislative branches.

The government’s argument is that the change is necessary to make the social program that will replace Bolsa Família viable, but the change, combined with the change in the spending ceiling correction index, will allow for an increase in other expenses in the election year.

Another proposal, which would remove all court orders from the spending ceiling and maintain payment, was rejected by the government and parliamentarians. According to calculations by a large financial institution, which asked not to be identified and treats the proposal as a default, this solution would open up less room for spending in 2022.

The partner of a management company says that he has stopped trading these assets since 2020, when the first conversations about changes in the payment of these securities to make the new social program came about. The lack of forecast receipt of funds, according to him, makes it impossible to price these assets and guarantee a return to investors.

Eduardo Gouvêa, president of the OAB National Precatório Commission, says that the discussions about the PEC drove away new companies that entered this market and helped to value these bonds, in favor of people and companies that need to receive the money in advance.

“The price of court orders on the secondary market was already around 80%, 85% of the face value. Because there started to be competition. [Agora] These new entrants are coming out. The traditional ones will increase the discount. In the end, you are destroying the wealth of people and companies that need to anticipate these credits,” he says.

Victor Cajano, a judicial asset associate at Hurst Capital, an institution that works with assets such as judicial government bonds, business receivables and musical royalties, also says that some negotiations have already been affected by the expectation of a change in the rules on court orders.

“There is a greater tension in the negotiations due to the expectations around the PEC. Especially the higher value businesses, which are more exposed to the PEC, are slower or even stopped”, says Cajano.

Thalles Silva, a tax lawyer at Kincaid Mendes Vianna Advogados, says that there was a heating of this market during the pandemic, with companies and individuals seeking to advance resources and new companies interested in these assets, but that the discussion about the PEC changed the scenario.

“We are leaving a scenario in which the precatory against the Union was valued, with very good payment predictability and the lowest discount percentages, to a scenario of uncertainty,” he says.

In addition to the drop in demand for these assets, the lawyer says that there may be an increase in the number of people interested in selling, even for lower amounts, as there are creditors who had expected to receive the amount from the government soon, but may enter into a queue with no perspective on when they will be paid.

Silva also states that many investors are giving preference to state or municipal court orders over federal ones, especially those with expressive values. “In the feds, we even see a preference for those with values ​​below R$ 400 thousand. In those larger, nowadays, we don’t see the same headquarters that existed before.”

Rodrigo Moratelli, CEO of Veritas Capital, says that the institution has more than R$ 1 billion in precatório in its portfolio, but with the risk spread across several securities and a low average value, which makes it easier to enter the priority list of payments.

For him, the change may affect the profitability of investments already made, but it will not generate losses, since the postponed amounts will be corrected by the basic Selic rate.

Moratelli recalls that these investments are restricted to a specialized public, made through Non-Standard Credit Rights Investment Funds, the FIDC-NP, an option restricted to professional investors – people with investments in excess of R$ 10 million or specialists authorized by the CVM (Securities Commission).

The eventual approval of the PEC will lead to a review of investment strategies, for example, with more operations in which the risk is shared between the two parties (“profit sharing”).

“Once again they are putting the bill for the inefficiency of the public machine in someone’s pocket, who are the holders of the precatório, without affecting the costs of the public machine”, he says. “It wasn’t this precatory market that had to be attacked.”