Step-In Rights And The Assumption Of Post Default Projects By Financers

Article 27-A of the Law of Concessions (Law No. 13,097, of January 19, 2015) allows lenders and guarantors to take control or temporary administration of the concessionaire of infrastructure projects to promote financial restructuring and to ensure continuity of services. This “step in right”, as it is called, has not been used much in Brazil until now.¹

Step-in rights are relevant to projects requiring large upfront capital expenditure, such as infrastructure projects. In these cases, the continuity of the enterprise is more advantageous to the creditor than foreclosing the collateral involved in the transaction. The reason is that, typically, the company’s assets by themselves are worth less than the debt incurred to acquire them.²