Brazilian Structured Operations Certification (COE): is it worth it?

The  Brazilian Structured Operations Certificate (COE) is more than just a financial product. It serves as a strategic solution for companies seeking to diversify their sources of capital. By combining elements of fixed income and variable assets, the COE offers an innovative alternative for financing corporate operations, expanding businesses, or investing in new projects.

What Is a COE?

In the business context, a COE is a financing tool that allows companies to access capital through a structure that balances risk and return. When issuing a COE, the company creates a security that reflects its capital-raising needs, tied to a combination of assets that may include stocks, indices, foreign currencies, or commodities.

How Does It Work?

The issuance of a COE by a company involves creating a debt security structured based on gain and loss scenarios aligned with the company’s risk profile. This allows the company to attract investors by offering a stake in the future results of the underlying assets while maintaining a safety base provided by fixed income.

Types of Corporate COEs:

1. Guaranteed Capital COE:
   • Provides security to investors, ensuring a minimum return corresponding to the raised amount, regardless of the performance of the underlying assets.
2. Risk Capital COE:
   • Does not guarantee the capital but offers the possibility of significant returns if the assets perform well.

Each corporate COE is unique, with customized terms, remuneration, and asset diversification strategies to meet the specific needs of the company.

Is It Worth It?

For companies seeking financing, the COE represents an opportunity to access resources in a structured manner aligned with their growth objectives. Asset diversification helps mitigate risks and enhance returns, making the COE an attractive option compared to other forms of financing.

However, it’s essential to consider the complexity of structuring a COE, associated costs, and the liquidity of the security. Not all COEs are easily tradable in the secondary market, which can impact the company’s financial flexibility.

The Structured Operations Certificate can be a valuable solution for companies looking to innovate in their capital-raising strategies. As with any financial decision, seeking specialized advisory services is recommended to ensure that the COE’s structure aligns with the company’s goals and capabilities.