- The warning: Bruno Di Giacomo, CEO of Nero Capital, emphasized on the Touros e Ursos podcast that high interest rates make corporate debt heavier, increasing the risk of default on private-label instruments.
- The common mistake: Focusing solely on elevated yields (such as CDI + 3% or IPCA + 8%) without understanding who is borrowing the money.
- The prevention: Requires evaluating hard collateral, balance-sheet structure, and the intended use of the raised funds before allocating capital.
High return rates do not guarantee absolute investment safety. During an appearance on the Touros e Ursos podcast, hosted by the financial portal Seu Dinheiro, Bruno Di Giacomo, CEO of Nero Capital, explained why Brazil’s high-interest-rate environment demands heightened caution from retail investors allocating capital to private debt instruments such as debentures, CRIs (real estate receivables certificates), and CRAs (agribusiness receivables certificates).
Why High Interest Rates Can Pose a Risk in Fixed Income
Elevated interest rates drive up borrowing costs for issuing companies. As Di Giacomo pointed out, when the benchmark interest rate remains at elevated levels, the cost of refinancing corporate debt grows significantly. This means companies that have issued debentures or debt instruments must allocate an increasingly large share of their operating revenue simply to cover financial expenses.
“High yields can conceal significant credit risks. It is essential to analyze collateral, the company's financial health, and the use of proceeds before getting drawn in by nominal returns.” Bruno Di Giacomo, CEO of Nero Capital, on the Touros e Ursos podcast (Seu Dinheiro)
The yield displayed at the top of the screen hides true repayment capacity. In the Nero Capital executive's view, eye-catching nominal rates often reflect precisely the higher default risk perceived by the market. If a corporate fixed-income instrument offers a spread well above the benchmark rate, that premium exists because the issuing company exhibits greater financial fragility or limited access to traditional credit lines.
What to Analyze on the Balance Sheet Before Buying Private Debt
The issuing company's financial health must come before the promised yield. According to Di Giacomo's diagnosis, investors need to examine the relationship between net debt and the company's operating cash generation, as measured by EBITDA. When this metric is strained by high interest rates, the company's ability to honor contractual payments becomes compromised.
The use of the raised capital reveals the sustainability of the operation. Bruno Di Giacomo emphasized during the podcast that there is a crucial difference between a company taking on debt to expand its operations and one issuing instruments merely to roll over old debt at higher rates. Successive rollovers under high interest rates tend to strangle the issuer's capital structure over the medium term.
- Productive use: Fundraisings directed toward expansion projects with an operating return higher than the cost of debt.
- Hard collateral: Instruments structured with fiduciary alienation or high-quality, liquid receivables.
- Chronic rollover: Issuances executed solely to pay off maturing debt under higher interest rates.
- Unsecured guarantees: Instruments that rely solely on the issuer's general promise to pay, with no tied assets.
What Is the Role of Collateral in Protecting Against Defaults?
Well-structured collateral minimizes capital losses in stress scenarios. The Nero Capital CEO stressed on Touros e Ursos that in episodes of debt restructuring or default, the creditor priority ranking and the robustness of the collateral tied to the instrument determine how much of the invested capital is effectively recovered.
Issuers without firm collateral present greater vulnerability during monetary tightening cycles. Unsecured or subordinated instruments leave investors at the back of the recovery line in the event of bankruptcy protection. Therefore, according to Di Giacomo's warning, slightly higher yields on instruments without real backing usually fail to offset the risk assumed when the economy operates under prolonged monetary tightening.
How Should Retail Investors Navigate the Current Fixed-Income Market?
The stance recommended by specialists is selectivity and premise checking. Rather than blindly chasing the highest yield on a brokerage app, the guidance shared by Bruno Di Giacomo involves setting up a rigorous checklist before every allocation in corporate debt.
Evaluate contractual collateral — Verify in the prospectus whether the instrument has hard collateral (such as real estate or segregated receivables) or is unsecured.
Analyze the leverage indicator — Check whether the company has adequate interest coverage and sufficient cash to honor short-term maturities.
Examine the use of proceeds — Confirm whether the fundraising will finance cash-generating investments or merely cover an operational deficit.
Diversify across issuers and sectors — Avoid concentrating a significant share of your private credit portfolio in a single company or economic group.
If you hold private credit instruments in your portfolio, such as tax-advantaged debentures or CRIs, Nero Capital's warning reinforces that high returns require continuous monitoring of the health of the underlying companies. High nominal yields lose their meaning if there are delays or forced renegotiations of the invested principal.
Conclusion and Outlook
The warning issued by Bruno Di Giacomo, CEO of Nero Capital, on the Touros e Ursos podcast serves as an essential reminder for fixed-income investors: high interest rates are not synonymous with risk-free, easy gains. When choosing private credit instruments, prioritizing the issuer's balance sheet quality and the solidity of the provided collateral is the only way to ensure that the contracted return turns into cash in your pocket on the maturity date.