| 17. | Debt |
The carrying value of the Company’s outstanding debt consists of the following:
| Year ended December 31, | ||||||||||||
| 2016 | 2017 | 2017 | ||||||||||
| BRL | BRL | USD | ||||||||||
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Secured borrowings |
R$ | 255,471 | R$ | 199,320 | US$ | 60,254 | ||||||
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Nonconvertible notes - Debentures |
122,284 | 84,202 | 25,454 | |||||||||
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Bank loans |
5,161 | 2,449 | 740 | |||||||||
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Transfer of financial assets with recourse |
4,466 | — | — | |||||||||
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Total long-term debt |
387,382 | 285,971 | 86,448 | |||||||||
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Current portion of long-term debt |
75,956 | 106,577 | 32,218 | |||||||||
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Long-term debt, net of current portion |
R$ | 311,426 | R$ | 179,394 | US$ | 54,230 | ||||||
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The terms and conditions for loans and borrowings as of December 31, 2016 and 2017 are as follows:
| At December 31, 2016 |
At December 31, 2017 |
At December 31, 2017 |
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| Currency |
Nominal interest rate p.a. |
Year of maturity |
Carrying amount | Carrying amount | Carrying amount | |||||||||||||||||
| BRL | BRL | USD | ||||||||||||||||||||
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Secured borrowing - FINAME/BNDES |
RS | 5.5% | 2018 | 506 | 200 | 60 | ||||||||||||||||
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Secured borrowing - FINAME/BNDES |
RS | 3.0% | 2018 | 926 | 338 | 102 | ||||||||||||||||
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Nonconvertible notes - Debentures |
RS | 100% of CDI + 3.2% | 2020 | 122,284 | 84,202 | 25,454 | ||||||||||||||||
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Secured borrowing - Working capital |
RS | 138.5% of CDI | 2020 | 130,001 | 115,783 | 35,002 | ||||||||||||||||
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Secured borrowing - Working capital |
RS | 100% of CDI + 4.74% | 2020 | 64,819 | — | — | ||||||||||||||||
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Secured borrowing - Working capital |
RS | 100% of CDI + 3.65% | 2020 | 59,219 | 56,811 | 17,174 | ||||||||||||||||
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Secured borrowing - Working capital |
RS | TJLP +3% | 2026 | — | 26,188 | 7,916 | ||||||||||||||||
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Transfer of financial assets with recourse |
RS | 129.5% of CDI | 2017 | 4,466 | — | — | ||||||||||||||||
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Bank Loan |
MXN | TIIE + 1.6% | 2017 | 5,161 | — | — | ||||||||||||||||
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Bank Loan |
MXN | TIIE + 1.6% | 2018 | — | 2,449 | 740 | ||||||||||||||||
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Total |
387,382 | 285,971 | 86,448 | |||||||||||||||||||
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CDI: Interbank Deposit Certificate rate.
TIIE: Interbank Equilibrium Interest Rate
FINAME/BNDES: Special Agency for Industrial Financing/ National Bank of Economic and Social Development
The Company’s subsidiary NS2 entered into secured borrowing and bank loan arrangements for working capital and acquisition of property and equipment. Additionally, the subsidiary NS2 issued nonconvertible debentures to settle previous debt and for working capital purposes. The secured borrowings and debentures are secured by the fiduciary assignment of the trade accounts receivable originated by credit card sales with a carrying amount of R$117,365 and R$87,418 (US$26,426) on December 31, 2016 and 2017, respectively. Certain items of property and equipment were given as collateral for FINAME/BNDES loans, with the carrying amount of R$5,007 and R$4,547 (US$1,375) at December 31, 2016 and 2017, respectively.
As a consequence of obtaining secured borrowings for working capital purposes, NS2 assumed the covenant of maintaining the ratio between financial debt and accounts receivable from credit card operators lower or equal to 3 (three).
For the nonconvertible debentures issuance, NS2 assumed contractual commitments that may accelerate the maturity of obligations in their entirety if the following situations occur, mainly related to: i) non-payment by the issuer, on maturity date, of the contracted obligations to debenture holders; ii) non-compliance by the Company, while there are outstanding debentures, with the ratio of financial indebtedness and accounts receivable from credit cards lower or equal to 3 (three) to be calculated semi-annually based on the financial statements.
The Company was in compliance as of December 31, 2017, with all financial covenants described above, as demonstrated below:
| Year ended December 31, | ||||||||||||
| 2016 | 2017 | 2017 | ||||||||||
| BRL | BRL | USD | ||||||||||
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Credit card operations – Gross(1) |
203,691 | 114,218 | 34,528 | |||||||||
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Long-term debt |
387,382 | 285,971 | 86,448 | |||||||||
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Coefficient ratio (lower or equal to 3) |
1.90 | 2.50 | 2.50 | |||||||||
| (1) | For covenants calculation purposes, the numerator used to calculate the ratio (credit card gross) represents the balance receivable from credit card operators as of December 31, 2017 considering the face value of the corresponding sales invoices (i.e. including interest over installment sales). |
On July 03, 2017, the Company entered into a financing agreement with Financiadora de Estudos e Projetos – FINEP (public institution linked to the Ministry of Science and Technology), in the amount of R$79,667. The funds from this financing will be part of a financing package aimed at supporting the strategic plan of innovation. The financing has a grace period of 24 months, which covers the period from the agreement signature date and to the date of maturity of the amortization installment, payable in 85 installments, with the first one falling due on July 15, 2019 and the last on July 15, 2026. The first tranche of R$25.8 million was received in October 2017.
The weighted average interest rate for debt was 17.99% and 9.87% for the years ended December 31, 2016 and 2017, respectively.
Reconciliation of movements of assets, liabilities and equity to cash flows arising from financing activities
| Assets or liabilities | ||||||||||||||||||||||||||||||||
| Long term debt | Reverse factoring | Trade accounts payable | Trade accounts receivable | |||||||||||||||||||||||||||||
| BRL | USD | BRL | USD | BRL | USD | BRL | USD | |||||||||||||||||||||||||
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As of January 1, 2017 |
R$ | 387,382 | US$ | 117,105 | R$ | 27,867 | US$ | 8,424 | R$ | 335,430 | US$ | 101,400 | R$ | 213,994 | US$ | 64,690 | ||||||||||||||||
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Changes from financing cash flows |
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Proceeds from debt |
159,984 | 48,363 | — | — | — | — | — | — | ||||||||||||||||||||||||
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Payments of debt |
(170,459 | ) | (51,529 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
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Payments of interest |
(46,613 | ) | (14,091 | ) | (916 | ) | (277 | ) | (55,936 | ) | (16,909 | ) | (7,166 | ) | (2,166 | ) | ||||||||||||||||
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Proceeds from issuance of common shares |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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Total from financing cash flows |
(57,088 | ) | (17,258 | ) | (916 | ) | (277 | ) | (55,936 | ) | (16,909 | ) | (7,166 | ) | (2,166 | ) | ||||||||||||||||
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Other changes |
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Adjustments to reconcile net loss to net cash used in operating activities |
50,277 | 15,199 | 916 | 277 | 53,981 | 16,318 | (18,277 | ) | (5,525 | ) | ||||||||||||||||||||||
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Changes in operating assets and liabilities |
— | — | 121,061 | 36,596 | 34,290 | 10,366 | (74,450 | ) | (22,506 | ) | ||||||||||||||||||||||
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Cash flows from investing activities |
— | — | — | — | — | — | (2,071 | ) | (626 | ) | ||||||||||||||||||||||
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Non-cash investing and financing activities |
(94,151 | ) | (28,462 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
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Effect of changes in foreign exchange rates |
(449 | ) | (136 | ) | — | — | (1,930 | ) | (583 | ) | 1,138 | 344 | ||||||||||||||||||||
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Total from other changes |
(44,323 | ) | (13,399 | ) | 121,977 | 36,873 | 86,341 | 26,101 | (93,660 | ) | (28,313 | ) | ||||||||||||||||||||
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As of December 31, 2017 |
R$ | 285,971 | US$ | 86,448 | R$ | 148,928 | US$ | 45,021 | R$ | 365,835 | US$ | 110,591 | R$ | 113,168 | US$ | 34,210 | ||||||||||||||||
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| Equity | ||||||||||||||||
| Share Capital | Additional-paid in capital | |||||||||||||||
| BRL | USD | BRL | USD | |||||||||||||
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As of January 1, 2017 |
R$ | 141 | US$ | 43 | R$ | 821,988 | US$ | 248,485 | ||||||||
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Changes from financing cash flows |
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Proceeds from debt |
— | — | — | — | ||||||||||||
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Payments of debt |
— | — | — | — | ||||||||||||
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Payments of interest |
— | — | — | — | ||||||||||||
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Proceeds from issuance of common shares |
84 | 25 | 423,082 | 127,897 | ||||||||||||
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Total from financing cash flows |
84 | 25 | 423,082 | 127,897 | ||||||||||||
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Other changes |
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Adjustments to reconcile net loss to net cash used in operating activities |
— | — | — | — | ||||||||||||
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Changes in operating assets and liabilities |
— | — | — | — | ||||||||||||
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Cash flows from investing activities |
— | — | — | — | ||||||||||||
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Non-cash investing and financing activities |
19 | 6 | 101,030 | 30,541 | ||||||||||||
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Effect of changes in foreign exchange rates |
— | — | (593 | ) | (179 | ) | ||||||||||
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Total from other changes |
19 | 6 | 100,437 | 30,362 | ||||||||||||
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As of December 31, 2017 |
R$ | 244 | US$ | 74 | R$ | 1,345,507 | US$ | 406,744 | ||||||||
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