This is a translation of the press 'Fitch Atribui Rating a Proposta de Emissao de Cotas do FIDC Sumitomo' published on Aug. 25, 2022.

Fitch Ratings has assigned a National Long-Term Rating of 'AAA(EXP)sf(bra)' to the proposed issuance of senior quotas of Opea Agro Sumitomo Chemical Credit Rights Investment Fund (Opea Agro Sumitomo Chemical Fundo de Investimentos em Direitos Creditorios; FIDC Sumitomo). The senior series is expected to total BRL510 million.

Fitch also assigned a 'A-(EXP)sf(bra)' rating to the proposed issuance of mezzanine quotas, which should total BRL60 million. The Rating Outlook for both ratings is Stable.

The ratings reflect the expectation of full payment of principal and interest until the final maturity of the notes, in November 2027.

RATING ACTIONS

Entity / Debt

Rating

FIDC Sumitomo

Junior

Natl LT

NR(EXP)sf(bra)

Expected Rating

Mezzanine

Natl LT

A-(EXP)sf(bra)

Expected Rating

Senior

Natl LT

AAA(EXP)sf(bra)

Expected Rating

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Transaction Summary

FIDC Sumitomo is a securitization of trade receivables from the agribusiness sector originated by Sumitomo Chemical Brasil Industria Quimica S.A. (Sumitomo Chemical). The company manufactures agricultural products for crop protection and sells them to rural producers and resellers.

FIDC Sumitomo will have three classes of quotas-senior, mezzanine and junior. The senior will yield CDI plus a maximum rate of 2.5% per year. The mezzanine notes will have a CDI yield plus a maximum rate of 6.5% per year. The payment of principal will be a bullet payment at the expected maturity date, while interest will be paid semiannually. Both quotas will have an expected maturity in November 2026 and a final maturity in November 2027.

Junior subordinate series, which will total BRL30 million, will not be rated by Fitch. The junior series will be amortized, at maturity, after full repayment of senior and mezzanine series.

Minimum credit enhancement (CE) is provided by a minimum subordination of 15% for senior quotas and 5% for mezzanine quotas. In addition, the transaction has a put option on defaulted credit receivables on which Sumitomo Chemical must acquire the lower of (1) the amount issued by the mezzanine quotas plus the amounts established as remuneration targets for these quotas, less the amounts already paid to the mezzanine quota holders up to the exercise date; and (2) 50% of the issued value of the mezzanine class plus the amounts established as remuneration targets for the mezzanine quotas issued by the fund.

KEY RATING DRIVERS

Dynamic Reserve Supported by Minimum Overcollateralization: Stresses of the dynamic reserve are supported by minimum CEs of 15% to the senior quotas and 5% of mezzanine quotas. The dynamic reserve considers only losses, derived from the obligor concentration. Dilution is mitigated by the nature of the receivables and the repurchase obligation by Sumitomo Chemical. Interest Rate mismatch is mitigated by hedge (swaps and options).

Strong Reliance on Originator: Sumitomo Chemical will be the seller and servicer of the transaction. Also, Sumitomo will be responsible for covering dilutions and providing a guarantee that covers the first 5% of losses in the FIDC's portfolio. Thus, the ratings of the quotas are capped by Sumitomo Chemical's credit quality.

Structural Mechanisms Provide Adequate Protection: The transaction structure will have the main mechanisms for monitoring the performance of the assets. They are adequate for revolving transactions with fixed CE, as they minimize the risk of large performance deviations. The key structural features include eligibility criteria, performance triggers, evaluation events and liquidity reserve.

Interest Mismatch Mitigated by Hedge: Eligible receivables will be discounted at a fixed rate at the time of assignment, while the quotas will have a yield linked to CDI. Hedges (DI options or swap) will mitigate possible mismatches. These instruments will have counterparties with a minimum rating of 'AA+(bra)' and an expected replacement within 30 days upon becoming ineligible. This is in line with Fitch's criteria.

Counterparty Exposure in Line with Fitch's Criteria: Transaction will have collection and transaction bank accounts domiciled at Itau Unibanco S.A. (AAA(bra)/Stable) and held in the name of the issuer. This mitigates comingling and payment interruption risk. Amounts not invested in credit rights may be invested in financial assets, including Letras Financeiras (LF). LF issuers must be rated 'AAA(bra)' and have daily liquidity or maturity within 365 days. All counterparties must be rated 'AAA(bra)' and be replaced within 60 days upon becoming ineligible. This is stricter than Fitch's criteria for the rating level of the quotas.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Ratings would be downgraded if the CE is not able to support the largest obligors or if loss performance deteriorates;

The ratings are also sensitive to the credit quality of Sumitomo Chemical's, given its contractual obligation to cover fund dilutions and provide first loss guarantee for the mezzanine notes. Any negative change in the perception of Sumitomo Chemical's creditworthiness would negatively impact the rating of the quotas.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

A positive rating action for the senior notes is not possible as the notes are rated at the highest of Fitch's National Rating Scale;

A positive rating action for the mezzanine notes is not possible, as the CE available for this class is not sufficient to cover stresses consistent with a higher rating level.

Fitch has revised its Global Economic Outlook forecasts as a result of the war in Ukraine and related economic sanctions. Downside risks have increased; as such, Fitch has published an assessment of the potential rating and asset performance impact of a plausible, albeit worse than expected, adverse stagflation scenario on Fitch's major Structured Finance and Covered Bonds subsectors.

More information can be found in the report 'What a Stagflation Scenario Would Mean for Global Structured Finance', published April 4, 2022, and available at www.fitchratings.com. The agency expects that the securitization transactions of commercial receivables in Brazil, in the assumed adverse scenario, will suffer practically no impact, which indicates a low risk of changes in the ratings.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

The assigned ratings are capped at the credit quality of Sumitomo Chemical.

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

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