StoneCo. Announces $467.5 million credit facility from DFC to strengthen working capital of micro, small, and medium businesses

Rhea-AI Summary

StoneCo Ltd. (Nasdaq: STNE; B3: STOC31) has obtained a commitment of US$467.5 million in the form of a revolving securitization facility from the United States International Development Finance Corporation. The facility will strengthen Stone's ability to offer prepayment of receivables to micro, small, and medium-sized businesses, especially those led by women or with a majority of female workforce, in the North and Northeast regions of Brazil. The closing of the transaction is subject to customary conditions precedents.

Insights

Financial Analyst

The commitment of a $467.5 million revolving securitization facility by StoneCo Ltd. represents a significant strategic financial maneuver. The facility's purpose to acquire accounts receivables on a non-recourse basis from credit card issuers can be seen as a liquidity enhancement and risk mitigation move. By focusing on micro, small and medium-sized businesses (MSMBs), StoneCo taps into a vital segment that often faces challenges in accessing traditional credit facilities.

From an investor's perspective, the deal signals StoneCo's proactive approach to capital management and expansion of services. The seven-year maturity term provides a long-term horizon for capital deployment, which could improve the company's financial stability. However, the concentration on Brazilian financial institutions and regional businesses introduces geopolitical and economic risks that investors should monitor.

Moreover, the facility's focus on women-led businesses and those with a majority female workforce aligns with global sustainability and diversity trends, which may enhance StoneCo's brand reputation and open up avenues for impact investing. The commitment to the 2X Global Challenge and KPI reporting on workforce and leadership diversity could attract socially responsible investors, potentially affecting the stock's appeal.

Sustainable Business Expert

StoneCo's alignment with the 2X Global Challenge underscores its commitment to gender equality and women's economic empowerment. The initiative's aim to support women-led businesses in Brazil's North and Northeast regions suggests a strategic focus on inclusive growth and community development. This could foster goodwill and brand loyalty among consumers and businesses, potentially leading to a competitive advantage in those markets.

The emphasis on socioeconomic development through support for MSMBs indicates that StoneCo is not only looking to expand its market share but also to contribute to the broader economic fabric. This could lead to a virtuous cycle of increased business activity, job creation and higher demand for StoneCo's services. While the direct financial impact may be gradual, the long-term benefits of such an ecosystem approach could be substantial.

Investors should consider the potential for these initiatives to create a stronger customer base and enhance the company's social license to operate, which can be critical in emerging markets. However, the success of such programs depends on effective implementation and the broader economic climate, which can be unpredictable in developing regions.

Risk Management Expert

The use of a revolving securitization facility to acquire accounts receivables from a diversified pool of non-systemic important Brazilian financial institutions mitigates StoneCo's risk exposure. The non-recourse nature of the facility means that the company is not liable to repay if the underlying receivables default, transferring the credit risk to the facility provider. This could improve StoneCo's balance sheet and credit profile.

However, the facility's regional focus on Brazil's North and Northeast introduces specific risks related to regional economic stability and market concentration. These areas may have different economic dynamics compared to the rest of the country and investors should be aware of local economic indicators and regulatory changes.

Furthermore, the commitment to reporting on certain KPIs related to workforce and leadership diversity introduces a layer of accountability and transparency that can be seen as a risk mitigation strategy in itself. It can potentially reduce reputational risk and align StoneCo with global standards for corporate governance, which may be favorable in the eyes of risk-averse investors.

GEORGE TOWN, Grand Cayman, Dec. 18, 2023 (GLOBE NEWSWIRE) -- StoneCo Ltd. (Nasdaq: STNE; B3: STOC31) (“Stone” or “the Company”) announced that it has obtained a commitment of US$467.5 million in the form of a revolving securitization facility from the United States International Development Finance Corporation (DFC), an agency of the United States government. The facility, which has a final maturity of seven years, and a six-month availability period, acquires accounts receivables due by over twenty different non-systemic important Brazilian financial institutions that are credit card issuers, on a non-recourse basis. It will further strengthen Stone's ability to offer prepayment of receivables to micro, small, and medium-sized businesses (MSMBs), which use the solution to optimize cash flow, financial flexibility and improve management. The closing of the transaction is subject to customary conditions precedents.

Stone's prepayment of receivables, including with the proceeds from the new DFC facility, supports retailers by enabling installment sales in a simple, agile way and with immediate liquidity. The focus of the facility is to support businesses that are women-led or have the majority of the workforce composed of women. The intention is that the resource will mainly impact entrepreneurs in the North and Northeast regions of Brazil.

“Micro, small and medium-sized entrepreneurs account for a significant part of GDP. Aligned with our purpose, DFC’s credit facility allows us to offer better products and services to our customers and contribute to the socioeconomic development of our country”, says Pedro Zinner, CEO of StoneCo. “With the resources obtained, we will be able to further leverage our solutions to support entrepreneurs seeking to scale their businesses. At the same time, we generate a strong positive impact on society, boosting local commerce, creating job opportunities, and leveraging economic activity."

“With this deal, Stone is also pledging to become part of the 2X Global Challenge, not only because of the focus on supporting businesses with women ownership or with the majority of their workforce being women but committing to certain KPI reports in our workforce and leadership”, says Carol da Costa, Chief Impact & Sustainability Officer. This new transaction reinforces the company's commitment to strengthening the entrepreneurship ecosystem in the country, focusing on supporting developing communities.    

About StoneCo

StoneCo is a leading provider of financial technology and software solutions that empower merchants to conduct commerce seamlessly across multiple channels and help them grow their businesses.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. These statements identify prospective information and may include words such as “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast,” “plan,” “predict,” “project,” “potential,” “aspiration,” “objectives,” “should,” “purpose,” “belief,” and similar, or variations of, or the negative of such words and expressions, although not all forward-looking statements contain these identifying words.

Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Stone’s control.

Stone’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to: more intense competition than expected, lower addition of new clients, regulatory measures, more investments in our business than expected, and our inability to execute successfully upon our strategic initiatives, among other factors.

Contact:

Investor Relations

investors@stone.co

FAQ

What is the recent announcement from StoneCo Ltd. (STNE)?

StoneCo Ltd. (Nasdaq: STNE; B3: STOC31) has obtained a commitment of US$467.5 million in the form of a revolving securitization facility from the United States International Development Finance Corporation.

How will the facility benefit micro, small, and medium-sized businesses?

The facility will strengthen Stone's ability to offer prepayment of receivables to micro, small, and medium-sized businesses, especially those led by women or with a majority of female workforce, in the North and Northeast regions of Brazil.

What is the focus of the facility provided by the United States International Development Finance Corporation?

The focus of the facility is to support businesses that are women-led or have the majority of the workforce composed of women, mainly impacting entrepreneurs in the North and Northeast regions of Brazil.

Who are the key executives mentioned in the announcement?

Pedro Zinner, CEO of StoneCo, and Carol da Costa, Chief Impact & Sustainability Officer, are mentioned in the announcement.

What is the intention behind the commitment to become part of the 2X Global Challenge?

The commitment is not only focused on supporting businesses with women ownership or with the majority of their workforce being women but also committing to certain KPI reports in their workforce and leadership.