/raid1/www/Hosts/bankrupt/TCRLA_Public/140630.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Monday, June 30, 2014, Vol. 15, No. 127
Headlines
A R G E N T I N A
ARGENTINA: Action Seems to Defy Judge's Order on Bond Payments
TMF TRUST: Moody's Assigns Ba2.ar Rating on ARS17.5MM Certs.
B R A Z I L
AMPLA ENERGIA: S&P Affirms 'BB+' Rating; Outlook Stable
BANCO FORD: Moody's Assigns D- Bank Financial Strength Rating
DANICA TERMOINDUSTRIAL: Moody's Withdraws Caa1 Global Scale CFR
GRUPO BANDEIRANTES: S&P Preliminary Rates $200MM Notes 'BB-'
MARFRIG ALIMENTOS: Gains as BTG Says Buy on Debt Reduction
RADIO E TELEVISAO: Fitch to Rate $200M Sr. Unsec. Notes 'BB-(EXP)'
TUPY S.A.: Fitch Assigns 'BB' LT Currency IDR; Outlook Stable
C A Y M A N I S L A N D S
AMREA LIMITED: Shareholders' Final Meeting Set for July 17
CENTRIX IX: Creditors' Proofs of Debt Due July 17
DENTON INTERNATIONAL: Member to Receive Wind-Up Report on July 15
EDMONTON HOLDING: Commences Liquidation Proceedings
JAPAN REALTY: Commences Liquidation Proceedings
OAKRIDGE LTD: Shareholder to Receive Wind-Up Report on July 23
PENN REINSURANCE: Shareholder to Receive Wind-Up Report on July 9
WESTERN ASSET: Commences Liquidation Proceedings
WESTERN ASSET LEVERED: Commences Liquidation Proceedings
WESTERN ASSET US: Commences Liquidation Proceedings
C H I L E
MASISA S.A.: Fitch Affirms Issuer Default Ratings (IDRs) at 'BB'
D O M I N I C A N R E P U B L I C
* DOMINICAN REPUBLIC: Conep Slams Ruling Party Over Informal Jobs
XSTRATA PLC: Planned Mine Lacks 'Social Licence' says Senator
M E X I C O
CREDIPYME: Fitch Affirms Counterparty Risk Rating at 'BB-(mex)'
P A R A G U A Y
BANCO CONTINENTAL: S&P Upgrades Rating to 'BB'
P U E R T O R I C O
M.A.R. REALTY: Plan Outline OK'd; Confirmation Hearing on July 9
PUERTO RICO: Governor Files Debt Enforcement & Recovery Bill
PUERTO RICO ELECTRIC: Fitch Cuts $8.7BB Revenue Bond Rating to CC
PUERTO RICO ELECTRIC: Moody's Cuts Rating on $8.8BB Bond to Ba3
T R I N I D A D & T O B A G O
TRINIDAD & TOBAGO: 75-80% Drop in Global Travel to Country
X X X X X X X X X
LATAM: Leveraged Finance Stable Despite Challenging Environment
* BOND PRICING: For the Week From June 23 to June 27, 2014
- - - - -
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A R G E N T I N A
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ARGENTINA: Action Seems to Defy Judge's Order on Bond Payments
--------------------------------------------------------------
Peter Eavis, writing for The New York Times' DealBook, reported
that Argentina made a puzzling and potentially provocative move on
Thursday in its landmark legal battle with New York hedge funds,
which are suing the country over bonds that it defaulted on over
10 years ago.
According to the report, Judge Thomas P. Griesa of the Federal
District Court in Manhattan has ruled that Argentina cannot make
payments to its main class of bondholders without also paying the
hedge funds what they say they are owed. But Argentina has
announced that it had deposited $539 million with the Bank of New
York Mellon, for the purpose of paying its main bondholders. A
payment is due on their bonds today, June 30, the report noted.
TMF TRUST: Moody's Assigns Ba2.ar Rating on ARS17.5MM Certs.
------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo rates the
new structure of Fideicomiso Financiero Supervielle Creditos 80, a
transaction that will be issued by TMF Trust Company (Argentina)
S.A. - acting solely in its capacity as Issuer and Trustee.
The securities for this transaction have not yet been placed in
the market. The transaction is pending approval from the Comision
Nacional de Valores. If any assumption or factor Moody's
considered when assigning the ratings change before closing, the
ratings may also change.
Moody's has withdrawn the national scale ratings of the
Certificates because the structure of the transaction and the
expenses have changed before issuance and as a result the rating
of the Certificates will change. Moody's has assigned new ratings
to this tranche as follows.
ARS 232,500,000 in Floating Rate Debt Securities of "Fideicomiso
Financiero Supervielle Creditos 80", rated Aaa.ar (sf) (Argentine
National Scale) and B1 (sf) (Global Scale, Local Currency)
ARS 17,500,000 in Certificates of "Fideicomiso Financiero
Supervielle Creditos 80", rated Ba2.ar (sf) (Argentine National
Scale) and Caa2 (sf) (Global Scale, Local Currency)
Ratings Rationale
The rated securities are payable from the cash flow coming from
the assets of the trust, which is an amortizing pool of
approximately 26,978 eligible personal loans denominated in
Argentine pesos, with a fixed interest rate, originated by Banco
Supervielle, in an aggregate amount of ARS 250,016,425.88.
These personal loans are granted to pensioners that receive their
monthly pensions from ANSES (Argentina's National Governmental
Agency of Social Security - Administracion Nacional de la
Seguridad Social). The pool is also constituted by loans granted
to government employees of the Province of San Luis. Banco
Supervielle is the payment agent entity and automatically deducts
the monthly loan installment directly from the employee's paycheck
and pensioner's payment.
Overall credit enhancement is comprised of 7% of subordination for
the Class A Floating Rate Debt Securities. In addition the
transaction has various reserve funds and excess spread.
Factors that would lead to an upgrade or downgrade of the rating:
Factors that may lead to a downgrade of the ratings include an
increase in delinquency levels beyond the level Moody's assumed
when rating this transaction, and a disruption in the flow of
payments from ANSES or the Government of San Luis to pensioners
and employees respectively.
Factors that may lead to an upgrade of the ratings include the
building of credit enhancement over time due to the turbo
sequential payment structure, when compared with the level of
projected losses in the securitized pool.
Loss and Cash Flow Analysis:
Moody's considered the credit enhancement provided in this
transaction through the initial subordination levels for each
rated class, as well as the historical performance of
Supervielle's portfolio. In addition, Moody's considered factors
common to consumer loans securitizations such as delinquencies,
prepayments and losses; as well as specific factors related to the
Argentine market, such as the probability of an increase in losses
if there are changes in the macroeconomic scenario in Argentina.
These factors were incorporated in a cash flow model in order to
determine the expected loss for the rated securities. Finally,
Moody's also evaluated the back-up servicing arrangements in the
transaction.
In assigning the rating to this transaction, Moody's assumed a
lognormal distribution for defaults on the main pool with a mean
of 2.5% and a coefficient of variation of 50%. Also, Moody's
assumed a lognormal distribution for prepayments with a mean of
25% and a coefficient of variation of 70%. These assumptions are
derived from the historical performance to date of the
Supervielle's pools. Servicer default was modeled by simulating
the default of the Banco Supervielle as the servicer consistent
with its current rating of Caa1/Baa1.ar. In the scenarios where
the servicer defaults, Moody's assumed that the defaults on the
pool would increase by 20 percentage points.
The model results showed 2.16% expected loss for the Floating Rate
Debt Securities and 17.68% for the Certificates.
Finally, Moody's also evaluated the back-up servicing arrangements
in the transaction. If Banco Supervielle is removed as servicer,
TMF Trust Company (Argentina) S.A. will be appointed as the back-
up servicer.
Stress Scenarios:
Moody's ran several stress scenarios, including increases in the
default rate assumptions. If default rates were increased 6% from
the base case scenario for the pool (i.e., mean of 8.5% and a
coefficient of variation of 50%), the ratings of the Floating Rate
debt securities and of the Certificates would likely be downgraded
to B2 (sf) and Ca (sf) respectively.
The principal methodology used in this rating was "Moody's
Approach to Rating Consumer Loan ABS Transactions" published in
May 2013.
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B R A Z I L
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AMPLA ENERGIA: S&P Affirms 'BB+' Rating; Outlook Stable
-------------------------------------------------------
Standards & Poor's Ratings Services affirmed its 'BB+' global
scale and 'brAA' national scale corporate credit ratings on Ampla
Energia e Servicos S.A. (Ampla). The outlook on the ratings is
stable. At the same time, S&P assigned its national scale 'brAA'
rating to Ampla's proposed R$300 million five-year amortizing
debentures due in three equal installments in years three, four
and five.
The ratings affirmation reflects Ampla's "fair" business risk
profile, "intermediate" financial risk profile, "less than
adequate" liquidity and its moderate strategic importance for its
Chile-based controlling shareholder Enersis S.A.
S&P assess Ampla's business risk profile as "fair," supported by
its fair competitive position mainly reflecting its challenging
concession area, which leads to relatively high electricity losses
and weaker than average service quality indicators. These factors
are partially offset by Brazil's favorable regulatory framework
for the electric sector and the growing local demand for power.
"Ampla has a natural monopoly to distribute electricity in part of
the state of Rio de Janeiro through 2026, and serves stable and
sizable residential and commercial customer bases. However,
Ampla's concession area includes a high concentration of low
income neighborhoods resulting in very high nontechnical
electricity losses that require significant investments to
maintain efficient operations," said Standard & Poor's credit
analyst Sergio Fuentes. Electricity losses reached 19.96% in the
last twelve months as of March 31, 2014, and the company has weak
service quality indicators that describe the duration of outages
per customer ratio, and which peaked at 22.4 hours in the last
twelve months as of March 31, 2014.
BANCO FORD: Moody's Assigns D- Bank Financial Strength Rating
-------------------------------------------------------------
Moody's Investors Service has assigned a standalone bank financial
strength rating of D-, which is equivalent to a baseline credit
assessment (BCA) of ba3, to Banco Ford S.A. At the same time,
Moody's assigned long- and short-term global local- and foreign-
currency deposit ratings of Ba2 and Not-Prime, respectively, as
well as long- and short-term national scale ratings of Aa2.br and
BR-1, respectively, to Banco Ford. The outlook on all ratings is
stable.
Moody's assigned the following ratings to Banco Ford S.A.:
Bank financial strength rating: D- (equivalent to a BCA of ba3),
stable outlook
Long-term global local-currency deposit rating: Ba2, stable
outlook
Short-term global local-currency deposit rating: Not-Prime
Long-term foreign-currency deposit rating: Ba2, stable outlook
Short-term foreign-currency deposit rating: Not-Prime
Long-term Brazilian national scale deposit rating: Aa2.br
Short-term Brazilian national scale deposit rating: BR-1
Ratings Rationale
The ba3 BCA reflects Banco Ford's franchise as a captive finance
operation of Ford Motor Company in Brazil, primarily engaged in
financing the acquisition of new cars and trucks by Ford's
distribution network. In addition, up to 10% of the bank's loan
portfolio consists of credit lines for the acquisition of used
cars and financing dealers' working capital requirements. The
bank's monoline operation yields undiversified revenues
intrinsically tied to Ford's vehicle production and sales
performance in Brazil. This reliance on a single product
constrains Banco Ford's BCA at ba3.
The unsupported rating also considers the adequate asset quality
as evidenced by very low delinquency ratios that have remained
under 0.5% during the past five years. The bank's captive
operation and its close risk monitoring, frequent oversight of
dealers' financial health, and use of collaterals mitigate
dealers' credit risk, resulting in asset quality indicators that
are better than peers'. However, the bank's business model leads
to high borrower concentration which exposes earnings and asset
quality to volatility in case of stress, although Moody's
acknowledge the adequate level of reserves for losses. Banco Ford
also maintains consistent capital ratios and a disciplined
dividend payout policy.
A large part of Banco Ford's funding structure derives from time
deposits with financial institutions and dealers as well as debt
issued in the local market (letras financeiras). The bank's
dependence on these limited funding sources also constrains the
standalone rating.
Upward pressure on the unsupported rating could result from long-
term consistency in the bank's earnings generation while the bank
pursues growth in a scenario of slow economic activity; however,
profitability ratios have been declining gradually in recent
years. Conversely, downward pressure on the standalone rating
could arise from deterioration in asset quality resulting from
credit concentration issues or a prolonged inability to access
low-cost funding that could weaken profitability metrics. The
bank's supported ratings could also suffer from worsening of its
parent's creditworthiness.
Banco Ford's global local-currency deposit rating of Ba2 is one
notch above the bank's BCA; therefore, the rating incorporates
Moody's assumption of high support from its parent, Ford Motor
Credit Company, LLC (ba2/Baa3 stable). The assumption of high
support stems from the bank's and its parent's shared business
focus.
The principal methodology used in this rating was Moody's Global
Banks methodology published on 31 May 2013.
Banco Ford S.A. is headquartered in Sao Paulo, Brazil. As of 31
December 2013, Banco Ford had total assets of BRL1.67 billion
($707 million) and shareholders' equity of BRL264 million ($112
million).
DANICA TERMOINDUSTRIAL: Moody's Withdraws Caa1 Global Scale CFR
---------------------------------------------------------------
Moody's America Latina has withdrawn the Corporate Family Ratings
assigned to Danica Termoindustrial Brasil Ltda (Danica) of Caa1 on
the global scale and B2.br on the Brazilian national scale for
business reasons. At the same time, Moody's withdraw the
Caa1/B2.br ratings assigned to the company's proposed BRL70
million senior secured debentures that has not been completed for
business reasons.
Ratings Rationale
Moody's has withdrawn Danica's corporate family ratings for its
own business reasons.
Moody's last rating action on Danica was on July 29, 2013, when
Moody's assigned first-time Danica's corporate family ratings at
Caa1 on the global scale and B2.br on the Brazilian national scale
and Caa1/B2.br to its proposed BRL70 million senior secured
debentures; at the same time, the outlook for the ratings was set
as stable.
Danica Termoindustrial Brasil Ltda (Danica) is subsidiary of
Danica Corporation A/S, a privately owned company that operates
primarily in Latin America, with Brazil representing most of the
group's consolidated revenues.
Headquartered in Joinville, SC, Danica manufactures and
distributes insulation and related products to the industrial,
residential, commercial, and marine end-markets. The company
reported net revenues of BRL288 million (USD132 million) in 2013.
GRUPO BANDEIRANTES: S&P Preliminary Rates $200MM Notes 'BB-'
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary 'BB-'
ratings to Grupo Bandeirantes de Comunicacao (Grupo Bandeirantes)
and to its proposed $200 million notes issuance. The outlook on
the corporate credit rating is stable.
The final ratings will depend on the debt issuance's meeting all
the terms and conditions S&P has assumed. The preliminary ratings
should not serve as evidence of the final ratings. If Standard &
Poor's does not receive the final documentation within a
reasonable time frame, or if the final documentation departs from
materials reviewed, it reserves the right to withdraw or revise
its ratings.
The preliminary ratings reflect S&P's view of Grupo Bandeirantes'
"fair" business risk profile and "aggressive" financial risk
profile. S&P's analysis considers the successful issuance of the
group's proposed $200 million notes. S&P analyzes the combined
audited financials of Radio e Televisao Bandeirantes Ltda (RTB;
issuer of the notes) and its guarantor companies (some RTB
affiliates). These financials include the group's most relevant
companies in terms of revenues, cash flow generation, and debt.
Relevant companies include TV and radio broadcasters in large
Brazilian states and their subsidiaries mainly in the 'out of
home' segment, which mostly comprises media outlets in buses, bus
terminals, subways, and airports.
Grupo Bandeirantes' "fair" business risk profile reflects S&P's
assessment of its important scale and diversity with operations in
most of the media platforms in Brazil.
Grupo Bandeirantes' "aggressive" financial risk profile reflects
its relatively high debt levels compared to its EBITDA and cash
flow generation.
MARFRIG ALIMENTOS: Gains as BTG Says Buy on Debt Reduction
----------------------------------------------------------
Denyse Godoy at Bloomberg News reports that Marfrig Global Foods
SA, formerly Marfrig Alimentos SA, rallied after Grupo BTG Pactual
(BBTG11) recommended buying the stock as the company reduces debt
and plans to take two units public.
BTG raised its recommendation on the stock from the equivalent of
hold, saying Marfrig's efforts to better manage its debt burden
and the potential IPO of its international units could "kick-start
a much needed balance sheet deleveraging," according to a research
note from analysts Thiago Duarte and Enrico Grimaldi, Bloomberg
News notes.
"Given Marfrig's high leverage, we believe these initiatives could
have a major impact on its equity story from a risk-reward
perspective," the analysts wrote, Bloomberg News relates.
Marfrig trades at 7.3 times its enterprise value over estimated
2014 earnings before interest, taxes, depreciation and
amortization, while international peers are trading at ratios of
at least 10 times, according to BTG's report, Bloomberg News says.
The company's debt-to-assets ratio is at 58 percent, compared with
the average of 23 percent among its global peers, data compiled by
Bloomberg show.
The Brazilian meatpacker in May raised GBP200 million ($340
million) selling seven-year notes at 6.25 percent through its Moy
Park Ltda. Unit, Bloomberg News discloses. That measure will help
the parent company reduce financial costs, according to BTG's
analysts, Bloomberg News relays.
Marfrig also announced in March a plan to sell shares equivalent
to 25 percent to 30 percent stakes in U.S. unit Keystone Foods Llc
and the Ireland-based Moy Park as part of a plan to cut key debt
ratios by a third and accelerate expansion, Bloomberg News
recalls.
About Marfrig Global
Marfrig Global Foods SA, formerly Marfrig Alimentos SA, is a
Brazil-based company engaged in the processing and distribution of
meat and poultry products. Its products include cooked beef,
bacon, sausages, beef cubes, minced knuckles, steaks and other
food items including pre-cooked and frozen potato, frozen
vegetables, canned meat, fish and ready meals. The Company
operates in 13 countries, and exports its products to more than
100 destinations worldwide.
* * *
As reported in the Troubled Company Reporter - Latin America on
May 13, 2013, Standard & Poor's Ratings Services lowered its
global scale corporate credit rating to 'B' from 'B+' and its
national scale rating to 'brBBB-' from 'brBBB+' on Marfrig
Alimentos S.A. The outlook is negative.
RADIO E TELEVISAO: Fitch to Rate $200M Sr. Unsec. Notes 'BB-(EXP)'
------------------------------------------------------------------
Fitch Ratings expects to rate Radio e Televisao Bandeirantes
Ltda's (BAND) proposed USD200 million senior unsecured notes 'BB-
(EXP)'. Fitch has also assigned long-term foreign currency and
local currency Issuer Default Ratings (IDRs) of 'BB-' and national
long-term rating of 'A(bra)' to BAND. The Rating Outlook on the
IDRs and the national long-term rating is Stable.
BAND is a part of Grupo Bandeirantes de Comunicacao (Grupo
Banderiantes), a diversified media group in Brazil, and is one of
the group's major free-to-air (FTA) TV and radio broadcasters. The
ratings are based on the combined credit profile of Grupo
Bandeirantes given the centralized group cash management, and a
strong operational linkage among the group companies under the
common executives and the control by the major shareholder.
The proposed notes will be guaranteed by only five other major TV
and radio group entities, on a joint and several basis, and as
such, noteholders' access to non-guarantors' cash generation could
be potentially limited due to a lack of legal support. The issuer
and the guarantors together represented 78% and 60% of the
consolidated group revenues and EBITDA, respectively, in 2013.
The proceeds of the notes will be primarily used for refinancing
of the short-term debt, amounted to BRL457 million at end-2013,
and for general corporate purposes, including improving liquidity.
Therefore, the impact on BAND's net debt from the proposed issue
will not be material.
Key Rating Drivers:
BAND's ratings reflect Grupo Bandeirantes' diversified media
portfolio with a nationwide presence in Brazil, the company's
stable growth outlook above the national GDP rates, and Fitch's
expectation of the company's margin improvement. The analysis also
factored in the company's moderate leverage for the rating
category, as well as the extended debt maturities post the note
issuance.
Ratings are tempered by the company's weak market position in its
main TV business and a small scale of operations compared to
regional peers, a highly competitive operating environment, and
increasing competition from other media platforms. Grupo
Bandeirantes' corporate governance was also considered below the
average for the rating category.
Diversified Media Portfolio:
Grupo Bandeirantes is one of the largest and most diversified
media groups with a national presence in Brazil. The group's main
businesses are FTA television and radio broadcasting which
combined represented close to 90% of the group's net revenues in
2013. The group also produces newspapers, pay TV programming,
media solution in public transportation in its 'out-of-home (OOH)'
segment, as well as internet portal website.
Grupo Bandeirantes boasts a strong operational integration across
its various media platforms due to the sharing of production
infrastructure and talents, as well as the distribution of
contents under the common management. This helps the group
maintain the quality of contents across the segments with an
efficient cost structure.
Weak Market Position in TV:
Fitch expects the competitive landscape in Brazil to remain
intense which could limit any significant market share improvement
of the company on its FTA TV business. Grupo Bandeirantes is the
fourth largest TV operator in a highly competitive industry in
Brazil, where the market is dominated by Globo with an over 40%
market share. The company accounted for a revenue market share of
about 6% in 2013, which improved from 4% in 2007. For its radio
operation, the company is the largest broadcaster with over 20%
market share in Sao Paulo.
Positive Industry Outlook:
Fitch believes that the advertising market in Brazil will continue
a stable growth over the medium term in line with the increased
disposable income level, despite a slowdown in the country's GDP
growth. In 2013, the media market grew by about 7% to BRL32.2
billion in 2013 from BRL30.2 billion in 2012, and the FTA TV
segment accounted for 67% of the industry revenue, which was an
increase from 65% in 2012. Fitch expects the FTA TV will remain
the dominant advertisement platform, despite the increasing
internet market share, given its position as the main media in
Brazil and advertisers' strong preference for TV over the others.
In addition, revenue contributions from other segments, mainly the
OOH segment, are likely to gradually increase given the still low
penetration of this service in Brazil. Fitch forecasts this
segment's revenue proportion will rise above 10% in the medium
term from only about 5% in 2013. Also, revenues from Rede 21,
Grupo Bandeirantes's other FTA channel in Sao Paulo, will increase
in 2014 given the new sales contracts to a third party last year.
Negative FCF in 2014; Moderate Leverage:
Fitch forecasts the group to generate negative free cash flow
(FCF) in 2014 mainly due to capex of near BRL100 million, mainly
including expansion of the OOH segment. FCF is likely to turn
positive in the medium term as Fitch expects its EBITDA generation
to improve well above BRL250 million while the expansionary capex
falls towards BRL60 million from 2016, leading to a decline in the
net leverage ratio towards 2x from 3x at end-2013. Any material
debt reduction is unlikely over the medium term given the long
debt maturities.
BAND holds most of the group debt as it had access to the capital
market on behalf of the group historically and redistributed a
portion of the debt, in the form of intercompany loans, to support
other group companies' business. BAND held BRL680 million debt at
end-2013 and its net leverage ratio on a standalone basis was
4.7x. Fitch believes that BAND's leverage is likely to improve and
remain below 4x over the medium term as EBITDA improves, as
already shown in the company's first quarter of 2014 result. In
addition, the company will gradually collect the intercompany
loans from the affiliates while any further intercompany loans
will be largely restricted by the covenant of the notes going
forward. Fitch does not believe the other group companies will
need any significant external financing to support their
operation.
Extended Debt Maturities:
Grupo Bandeirantes's liquidity profile is weak as almost 60% of
its total debt, about BRL457 million, will mature in 2014 and the
group held only BRL160 million cash and short-term investments at
end-2013. Fitch expects the company to significantly extend the
debt maturities profile with the proceeds from the proposed note
of USD200 million. Post the note issuance, the company will not
face any significant maturity until 2021.
Rating Sensitivities
Negative rating action can be considered if the financial net
leverage of Grupo Bandeirantes, including BAND, substantially
increases due to competitive pressures. In addition, an increase
in the debt level of non-guarantors resulting in weaker access of
BAND to non-guarantors' cash generation could pressure the
ratings.
The ratings reflect the extended debt maturities with the proceeds
from the notes issue. Failure to improve the liquidity profile can
also lead to a negative rating action.
Positive rating action can be considered in case of the improved
legal support from the non-guarantors of Grupo Bandeirantes for
the proposed note. Also, a significant improvement in cash
generation at both BAND and the group level resulting in improved
net leverage on a sustained basis could be positive for the
ratings.
TUPY S.A.: Fitch Assigns 'BB' LT Currency IDR; Outlook Stable
-------------------------------------------------------------
Fitch Ratings has assigned long-term foreign and local currency
Issuer Default Ratings (IDRs) of 'BB' and a long-term national
rating of 'AA(bra)' to Tupy S.A. (Tupy). The Rating Outlook is
Stable.
The ratings reflect the sustainable way that Tupy has been
increasing its cash flow from operations, with relatively stable
margins, combined with a conservative capital structure and
healthy liquidity policy. The ratings also factor in the high
exposure of Tupy's business to the North American market and to
large automakers, as well as the competitive environment,
cyclicality and capital intensive characteristics of the
automotive industry. The ratings also take into account the
company's small scale when compared to the largest auto-parts
players worldwide.
The ratings further contemplate Tupy's leading position in the
casted engine blocks and cylinder heads markets in the Americas
and its increasing geographic diversification during the last
years, as well as the strong commercial ties maintained with its
major global clients. Despite increasing geographic footprint,
Tupy still maintains approximately 68% of its revenues deriving
from assets based in Brazil, of which 65% focused on the local
market and 35% on the international market through exports. From
the total sales in 2013, approximately 33% were destined to the
local market, 30% to the US and 18% to Mexico, which were Tupy's
main end-markets.
Fitch believes that in the next few years Tupy will continue to
preserve conservative leverage, as measured by the net debt/EBITDA
ratio below 2.0x. The company's business growth and profitability
should remain sufficiently strong to preserve its current credit
profile. The Stable Outlook contemplates the absence of relevant
debt-financed acquisitions, which could materially impact Tupy's
major credit indicators.
Key Rating Drivers
Increasing Cash Generation Sustained by Highly Added Value
Products
In the recent years, Tupy has shown satisfactory capacity to
increase its cash flow from operations (CFFO). The company's CFFO
generation has benefited from a combination of increasing volumes,
stable costs and focus on higher added value products. During the
last 12 month-period (LTM) ended in March 2014, the company's
EBITDA generation was strengthened, reaching BRL493 million,
against BRL464 million in 2013 and BRL337 million in 2012. Its
EBITDA margin was 15.3% in March (LTM), against an average of
14.4% between 2010 and 2013, presenting limited volatility during
this period.
Tupy's CFFO generation has benefited from moderate working capital
needs in recent years. As of March (LTM), the company reported
CFFO of BRL446 million, positively compared to BRL298 million in
2013 and BRL384 million in 2012. Despite higher investment, BRL230
million, against the BRL197 million in 2013, the company was able
to increase its free cash flow generation (FCF) to BRL188 million,
from BRL73 million in 2012.
Fitch believes that Tupy's FCF will be moderately pressured in
2014, on the back of high investments in modernization and
automation, estimated at BRL250 million. The agency projects
positive and increasing FCF which should lead to a gradual and
consistent net leverage reduction to levels below 1.0x, from 2016
on.
Conservative Capital Structure
Tupy has historically reported conservative capital structure. The
company has prudently managed low leverage, adequate balance
between short and long-term funds and relatively lengthened debt
amortization profile. In March 2014 (LTM), the company recorded
net leverage of 1.3x, below the 1.5x in 2013 and the average of
1.8x between 2010 and 2013. Fitch projections map to the
maintenance of low net leverage with a gradual and consistent
reduction to levels below 1.0x from 2016 on, benefited from the
expectation of positive and increasing FCF during this period.
Debt structure is compatible with the company's business profile
and cash generation. At the end of March 2014, Tupy reported total
debt of BRL1.8 billion, which included BRL10 million in tax
financing as part of Fitch's methodology. Approximately 85% of the
total adjusted debt was tied to export financing, while the
remainder corresponded to low financial cost loans contracted with
the Brazilian Development Bank (BNDES) and tax financing. In the
same period, approximately 84% of debt maturities were long-term.
Total debts maturing until 2017 amounted to BRL1.7 billion.
Robust Liquidity Supports Industry Volatilities
Tupy's liquidity is robust. The company has a well-defined
strategy to keep hefty cash position over its short-term debt
obligations, prudently managing the exposure of its cash
generation to the volatility inherent to the cyclical automotive
industry and to the fluctuations of raw material costs
characteristic of this sector. The company's cash reserves totaled
BRL1.1 billion as of March 31, 2014. Short-term debt coverage
indicators were robust when measured by cash/short-term debt, of
3.0x, and cash plus CFFO/short-term debt, of 5.5x. Such indicators
compare to 5.1x and 6.4x in 2013 and 1.2x and 1.9x in 2012,
respectively.
Higher Diversification Stemming from Acquisitions
During the last years, Tupy has demonstrated good capacity to
reduce its exposure to local market, which growth perspectives for
the next years remains under pressure. The company accelerated its
internationalization in the end of 2012, when it acquired major
operations in Mexico and consolidated itself as an exporting
platform to the Nafta market, which encompasses the North-
American, Mexican and Canadian markets. On top of the larger
geographic diversification, these acquisitions resulted in a
leaner cost structure, thus contributing for the company's margins
expansion.
Fitch believes that Tupy will continue to pursue higher geographic
diversification and scale gains in the next few years, with the
aim of strengthening its presence in the global casted engine
blocks and cylinder heads markets. Despite Tupy's acquisitive
track record, Fitch does not expect the company to make relevant
acquisitions exclusively financed with debt which could materially
change its main credit indicators.
Strong Competitive Position Despite the Low Operating Scale
Tupy is currently one of the main global suppliers of casted
engine blocks and cylinder heads. The company has a market
participation of 43% in Americas and 24% in the Western
Hemisphere. Despite the strong competitive position in its main
operating sector, the company has small to medium scale within the
sector. With net revenues of some BRL3.2 billion in March 2014
(LTM) and moderate geographic footprint, considering its high
exposure to the American continent, Tupy has as its main challenge
to compete with larger companies with higher geographic reach
worldwide.
The company also has high revenue concentration in a few strategic
clients, including large global OEMs (Original Equipment
Manufacturers), through which it has being able to leverage its
revenues in recent years due to the supply of multiple products
categories in different regions. As the global supply needs of
these OEMs become more complex and migrate to other regions, Tupy
will have the challenge to keep its competitive position in the
sector without damage its cost structure and margins.
Rating Sensitivities
Although not expected in the short to medium term, positive rating
actions should occur if case Tupy strengthens its FCF generation,
resulting in net adjusted debt/EBITDA ratio below 1.0x on a
sustainable basis, with the maintenance of robust liquidity. An
increase in Tupy's scale, combined with higher geographic and
product diversification will also be positive, in Fitch's view.
Negative rating actions could occur in case of a relevant
deterioration in Tupy's FCF generation, resulting in a
deterioration of its main credit indicators, with adjusted net
debt/EBITDA ratio above 2.5x, without expectation of improvement,
and cash/short-term debt below 1.5x.
==========================
C A Y M A N I S L A N D S
==========================
AMREA LIMITED: Shareholders' Final Meeting Set for July 17
----------------------------------------------------------
The shareholders of Amrea Limited will hold their final meeting on
July 17, 2014, at 10:00 a.m., to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Fides Limited
P.O. Box 10338 Grand Cayman KY1-1003
Cayman Islands
Telephone: (345) 949-7232
CENTRIX IX: Creditors' Proofs of Debt Due July 17
-------------------------------------------------
The creditors of Centrix IX Fund Limited are required to file
their proofs of debt by July 17, 2014, to be included in the
company's dividend distribution.
The company commenced liquidation proceedings on June 3, 2014.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman KY1-9005
Cayman Islands
c/o Kim Charaman/Jennifer Chailler
Telephone: (345) 943-3100
DENTON INTERNATIONAL: Member to Receive Wind-Up Report on July 15
-----------------------------------------------------------------
The sole member of Denton International Holdings will receive on
July 15, 2014, at 10:00 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
HSBC House
68 West Bay Road
Grand Cayman KY1-1106
Cayman Islands
EDMONTON HOLDING: Commences Liquidation Proceedings
---------------------------------------------------
On June 5, 2014, the sole shareholder of Edmonton Holding Limited
resolved to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Stephen Nelson
Telephone: (345) 949.4544
Facsimile: (345) 949.8460
Charles Adams Ritchie & Duckworth
P.O. Box 709, 122 Mary Street
Grand Cayman KY1-1107
Cayman Islands
JAPAN REALTY: Commences Liquidation Proceedings
-----------------------------------------------
On June 5, 2014, the sole shareholder of Japan Realty Holding
Company II resolved to voluntarily liquidate the company's
business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Stephen Nelson
Telephone: (345) 949.4544
Facsimile: (345) 949.8460
Charles Adams Ritchie & Duckworth
P.O. Box 709, 122 Mary Street
Grand Cayman KY1-1107
Cayman Islands
OAKRIDGE LTD: Shareholder to Receive Wind-Up Report on July 23
--------------------------------------------------------------
The sole shareholder of Oakridge Ltd. will receive on July 23,
2014, at 11:00 a.m., the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Justin Savage
Telephone: (345) 815-1816
Facsimile: (345) 949-9877
PENN REINSURANCE: Shareholder to Receive Wind-Up Report on July 9
-----------------------------------------------------------------
The sole shareholder of Penn Reinsurance Ltd. will receive on
July 9, 2014, at 10:00 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Stuart Jessop
Regatta Office Park, 5th Floor
PO Box 2185, Grand Cayman KY1-1105
Cayman Islands
WESTERN ASSET: Commences Liquidation Proceedings
------------------------------------------------
On June 6, 2014, the sole shareholder of Western Asset Levered
Loan Opportunity Fund, Ltd. resolved to voluntarily liquidate the
company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Gavin L. James
Walkers
190 Elgin Avenue, George Town
Grand Cayman KY1-9001
Cayman Islands
Telephone: (345) 914 6386
WESTERN ASSET LEVERED: Commences Liquidation Proceedings
--------------------------------------------------------
On June 6, 2014, the sole shareholder of Western Asset Levered
Loan Opportunity Master Fund, Ltd. resolved to voluntarily
liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Gavin L. James
Walkers
190 Elgin Avenue, George Town
Grand Cayman KY1-9001
Cayman Islands
Telephone: (345) 914 6386
WESTERN ASSET US: Commences Liquidation Proceedings
---------------------------------------------------
On June 6, 2014, the sole shareholder of Western Asset US Enhanced
Cash Portfolio, Ltd. resolved to voluntarily liquidate the
company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Gavin L. James
Walkers
190 Elgin Avenue, George Town
Grand Cayman KY1-9001
Cayman Islands
Telephone: (345) 914 6386
=========
C H I L E
=========
MASISA S.A.: Fitch Affirms Issuer Default Ratings (IDRs) at 'BB'
----------------------------------------------------------------
Fitch Ratings has affirmed the ratings of Masisa S.A. (Masisa) as
follows:
-- Foreign and local currency Issuer Default Ratings (IDRs) at
'BB';
-- USD300 million senior unsecured 9.5% notes due 2019. The notes
are unconditionally guaranteed by Forestal Tornagaleones and
Masisa Forestal;
-- National scale rating of Bond Line No. 356, No. 439, No. 440,
No. 560, No. 724 and No. 725 at 'A-(cl)';
--Long term National Scale rating at 'A- (cl)';
--Equity rating at 'Primera Clase Nivel 3(cl)'.
--National short term rating at 'N1(cl)'.
The Rating Outlook is Stable.
Key Rating Drivers
High Exposure To Argentina And Venezuela's Economies
Masisa's ratings are constrained by the company's large exposure
to Venezuela and Argentina. Combined these markets represented 53%
of Masisa's consolidated EBITDA as of the last 12 months (LTM) to
March 31, 2014. Challenges in these markets include non-stable
currencies, political interference, as well as foreign currency
transfer restrictions. Masisa's net debt-to-EBITDA ratio of 3.6x
as of March 31, 2014 is above the 3.4x the company averaged during
the past five years. Net leverage excluding operations in
Venezuela and Argentina was 7.4x.
Sound Business Position
The ratings of Masisa incorporate its sound business position
within Latin America as a leading producer of wood boards with 3.4
million cubic meters of installed capacity. The company's
operations are concentrated in Chile, Brazil, Argentina,
Venezuela, and Mexico. Masisa has Placentro retail stores
throughout the region and commercial offices in Peru, Colombia and
Ecuador, and exports to countries outside the region such as North
America. An additional credit consideration is the company's
continued use of equity to partially fund growth. Increases of
equity have occurred in 2003, 2005, 2009 and 2013.
Forestry Assets Are Important Credit Consideration
The ratings further incorporate Masisa's ownership of 193,000
hectares of plantations in South America, which along with its
forestry land, had a book value of USD608 million as of June 2014.
This value is on a pro forma basis, after the sale of 32,500
hectares of plantations in Chile to an 80/20 joint venture between
Hancock Natural Resource Group (Hancock) and Masisa. Masisa
received USD205 million during April 2014 and partially used to
prepay debt. This sale reduced the company's net debt as of March
31 2014 to USD562 million, from USD767 million. As a result, net
leverage ratios should decrease to 2.6x and 5.5x (excluding EBITDA
generated by Venezuela and Argentina).
Through this transaction, Masisa transferred the forestry assets
in question to a joint venture company based in Chile, with
Hancock owning 80% of the shares and Masisa owning the remaining
20%. Masisa and Hancock entered into a long-term fiber supply
agreement which gives Masisa the option to purchase wood fiber.
During 2013 Masisa sourced 3% of its Chilean industrial fiber
needs from these forests.
Ebitda Generation Resilient Despite Devaluation In Venezuela
Masisa generated EBITDA of USD36.8 million during the first
quarter of 2014 (1Q'14), down from USD51.5 million during 1Q'13
(applying the exchange rate of 11.3 Bol/USD for 1Q'13 and 1Q'14).
EBITDA in Venezuela sharply decreased as a result of 14% lower
volume and a weakening of the product mix toward less value-added
products, as a result of restrictions on the import of melamine.
The fundamentals of Masisa's Chilean operations remain favorable,
despite the absence of the USD5 million sale of forestry assets in
1Q'14 compared to 1Q'13. Competitive pressures continue, and a
port strike in Chile during January caused a 15% volume decline.
EBITDA in this market decreased 32% overall quarter-on-quarter.
Brazil also faces competitive pressures due to additional capacity
coming in, which has affected prices in the MDF segment, but
volumes have increased. Mexico has shown sound performance as a
result of the addition of the Rexcel assets, while Argentina
remains vulnerable, but with a stable performance.
Fitch's Base Case indicates Masisa's EBITDA in the range of USD220
million for 2014, similar to 2012. This corresponds to expected
total debt-to-EBITDA of around 3.8x and net debt-to-EBITDA of
around 3.0x for the year. Masisa generated EBITDA of USD241
million during 2013, an increase from USD224 million during 2012
mainly driven by favorable performance in Brazil and Mexico. The
company's performance in Argentina has remained vulnerable, while
its EBITDA in Venezuela increased to USD76 million from USD70
million during 2012, despite the company's decision to present its
2013 financial statements with the 160% devaluation of the bolivar
against the dollar during January 2014.
Masisa's Brazilian operations benefited from lower energy costs,
which offset a 2.7% volume decrease due to a fire at the
Montenegro MDP plant during September 2012. Its Chilean operations
benefited from a turnaround in the U.S. housing market, which
increased demand for MDF moldings by 76%. During the LTM to March
31, 2014, Masisa generated USD215 million of EBITDA.
Large Capex Program Significantly Prefunded
Masisa plans to invest approximately USD600 million to expand its
operations commencing 2013 through 2015. Key investments include
the acquisition of Rexcel and Arclin's assets (concluded);
increased coating capacity in Chile and Brazil (concluded); and
constructing a new MDF plant in Mexico with annual capacity of
220,000 cubic meters. This mill includes a 100,000 cubic meter
melamine facility. Financing for these investments includes the
USD100 million capital increase (of which USD80 million has been
placed), USD300 million of cash flow from operations over the
period (ex-Venezuela and Argentina), and USD205 million of
proceeds from the divestiture of non-strategic forestry assets
(concluded). Masisa has significantly prefunded its capex
requirements for the next few years and exhibits a sound liquidity
profile in Fitch's base case over the course of the large
investment period. Fitch expects that during the high capex
period, Masisa will exhibit negative free cash flow (FCF) from
operations, returning to positive FCF by 2018 when the investments
are mostly concluded.
Extended Debt Maturities
Masisa exhibits sound liquidity and low refinancing risk. The
company refinanced USD226 million of short-term debt as of March
31, 2014 with USD300 million in 9.5% senior unsecured notes due
2019 issued in May 2014. The sale of non-strategic forestry assets
has further bolstered the company's liquidity by USD205 million.
Masisa has a comfortable debt amortization profile with USD12
million in maturities during 2014, USD22 million during 2015,
USD34 million during 2016, USD57 million during 2017, USD14
million during 2018 and USD594 million thereafter. Masisa is
expected to proactively refinance impending maturities well in
advance.
Rating Sensitivities
Negative rating actions could occur if there is a sustained
increase in net debt-to EBITDA above 4,0x, operating cash flow
fundamentally weakens, or the political environment in Argentina
or Venezuela deteriorates further.
Absent significant debt reduction, positive rating actions are not
likely in the short term due to Masisa's reliance upon Venezuela
and Argentina which together comprise around 50% of its EBITDA.
===================================
D O M I N I C A N R E P U B L I C
===================================
* DOMINICAN REPUBLIC: Conep Slams Ruling Party Over Informal Jobs
-----------------------------------------------------------------
Dominican Today reports that the National Business Council (Conep)
blamed the ruling PLD party for Dominican Republic's skyrocketing
percentage of informal jobs, reportedly as high as 65%.
Conep President Manuel Diez said the PLD's administrations over
the last 10 years have been more concerned with creating
government jobs than on structural reforms he affirms the private
sector needs to generate the employment the population requires,
according to Dominican Today.
Speaking at the American Chamber of Commerce's (AmchamDR), monthly
luncheon, the business leader noted that since 2004 for each
formal job created, the country gives rise to 14 informal ones,
the report notes.
The report notes that Mr. Diez said the government itself created
70% of the formal jobs in the same period.
Mr. Diez said that's the reason the country needs a pact for
formal employment that includes several core reforms instead of
increasing government jobs, subsidies and welfare programs, the
report relates. "Those official decision-makers have been more
expeditious in creating new government agencies than promoting
changes to public policies to oversee our economy's most sensitive
areas," the report quoted Mr. Diez as saying.
XSTRATA PLC: Planned Mine Lacks 'Social Licence' says Senator
-------------------------------------------------------------
Dominican Today reports that La Vega province (central) Senator
Euclides Sanchez said he's totally convinced that the deputies
will pass the bill that would create Loma Miranda National Park,
but denied getting pressure from Glencore's local operation,
Falcondo.
Mr. Sanchez said the miner's effort to extract nickel ore from
part of Loma Miranda faces the lack of a "social license," in his
view, the most difficult obstacle, according to Dominican Today.
"I don't know what these people think of us, they not only don't
have an environmental license, they don't have a social license
either, which is much heavier," the report quoted Mr. Sanchez as
saying.
Interviewed on SIN Channel 9, the lawmaker said President Danilo
Medina hasn't voiced his opinion on the topic of converting Loma
Miranda into a national park because "Danilo is very respectful of
Congress, only a knucklehead politician would voice an opinion
while the bill is being debated," the report notes.
Mr. Sanchez said the country can be calm because the lawmakers
will pass the bill just as the Senate has done, the report
relates.
"How can a foreign company have so much power to impede a project
which means so much for a nation," Mr. Sanchez said, referring to
Falcondo, the report adds.
As reported in the Troubled Company Reporter-Latin America on
Jan. 22, 2014, Dominican Today said that Chief Executive Officer
of Xstrata PLC's Falcondo reiterated that the company's presence
in the country depends on a long term mining, with cheap
electricity available, to produce and compete in world markets.
David Soares said they pin their hopes of extracting nickel at the
controversial site of Loma Miranda, between La Vega and Bonao
(central), for which they expect to get the mining permit,
according to Dominican Today. But environmental and civil society
groups could keep them from carrying out the project, after the
Chamber of Deputies agreed with the protesters and passed a bill
which declares Loma Miranda a protected area, arguing that much of
the Cibao region's (north) water depends on it, the report
related.
Xstrata PLC is the operator of Falconbridge Dominicana, C. por A.
("Falcondo") with an 85.26% ownership. Falcondo is a ferronickel
surface mining operation located in the Dominican Republic with
operations dating since 1971.
Headquartered in Zug, Switzerland, Xstrata PLC is a major producer
of coal, copper, nickel, primary vanadium and zinc and the largest
producer of ferrochrome
===========
M E X I C O
===========
CREDIPYME: Fitch Affirms Counterparty Risk Rating at 'BB-(mex)'
---------------------------------------------------------------
Fitch Ratings has affirmed the ratings of counterparty risk and
short-term Credipyme Credit Union, SA de CV (Credipyme) at 'BB-
(mex)' and 'B (mex)', respectively. Seen in the long-term rating
remains Negative.
Ratings Key Factors
According to Fitch, the ratings reflect a very limited Credipyme
business scale and a high credit concentration, particularly with
related parties, although attached to a weak current regulations
also generate operating income is observed as a result of meager
growth of its portfolio credit lines due to the lack of funding at
a reasonable cost and relatively high administrative costs. The
ratings also contemplate the changes of the workforce, including
the addition of staff at management level, with experience in the
financial sector. Additionally, the Negative Outlook considers the
challenges facing the company to improve its financial
performance.
Sensitivity Ratings
In Fitch's view, the negative outlook could be exercised if
observed volatilities in their funding, as well as higher levels
of credit concentration, including related parties. Meanwhile, the
outlook could be changed to stable submitted a recovery in
operating profitability.
Profile
The June 12, 2013, made Credipyme total assignment of its loan
portfolio with direct payroll deduction, as discussed in the last
rating action in 2013. This operation was agreed in MXN127.1
million. Later, he entered into a contract to provide services to
the entity receiving the transferred portfolio for administration,
installation and collection. As consideration, Credipyme receives
1.5% of the principal balance of the portfolio of the end of the
previous month, recognizing that income as commissions charged.
According to executives Credipyme, this percentage was provided
following an internal review of costs, it currently being
validated for tax purposes by an external transfer pricing report.
According to figures dictated accounting year 2013, Credipyme
recorded a total portfolio of MXN61.3 million and a cumulative net
loss of MXN69.8 million, of which MXN58.2 million related to the
cancellation against results early amortization expenses related
to the portfolio mentioned in the previous paragraph, thus
affecting its financial position. To remedy this situation,
Credipyme conducted a capital increase MXN58.2 million
As of March 2014 has assets Credipyme MXN142.9 million and a total
portfolio of MXN65.9 million, consisting of 23 accredited. Among
these are three related together with a balance equal to 54.0% of
the portfolio companies. This proportion Credipyme includes loans
granted by the company to which he gave in the first instance, the
portfolio discount on payroll. In addition, there MXN19.7 million
in accounts receivable, an amount about half concerns the company
in question.
At the date mentioned, past due loans is at MXN0.7 million are
covered by 100.0% for the allowance. However, foreclosed assets
totaled MXN16.8 million. Of this amount, MXN12.0 million
corresponds to an assignment of receivables by way of
nonperforming loans from the sale of automobiles. This happened in
September 2013 as a payment in kind, mostly of a related credit.
So far, the company has failed to exert favorable actions on those
rights.
As of March 2014, the balance of the funding sources used MXN78.1
million recorded, of which 94.8% are loans (deposits) of 39
members and the rest to a commercial banking institution. Among
the loans out its main partners in the amount of depositor MXN14.5
million, followed by others with amounts below MXN5.0 million. The
weighted average term of shareholder loans is 2.7 months, 6.5
months in contrast to the total portfolio.
Based on the latest information provided by Credipyme,
corresponding to the end of April 2014, the company reported a
level of efficiency [administrative expenses / (net interest
margin + commissions)] of 82.6%, while 71.1% is in line with the
deduct depreciation expense and amortization. Furthermore, the
accumulated net income amounted to MXN5.0 million, of which 64.4%
were deferred taxes associated with the loss recorded during the
accounting period of the previous year.
It should be noted that the accumulated net income could be
affected by future provision charges related to foreclosed assets,
or by the recovery rate thereof. Fitch Ratings
===============
P A R A G U A Y
===============
BANCO CONTINENTAL: S&P Upgrades Rating to 'BB'
----------------------------------------------
Standard & Poor's Ratings Services upgraded Banco Continental
SAECA to 'BB' from 'BB-' and Banco Bilbao Vizcaya Argentaria
Paraguay S.A. (BBVA Paraguay) to 'BB/B' from 'BB-/B'. At the same
time, S&P affirmed its 'BB-' issuer credit ratings (ICRs) on Banco
Regional S.A.E.C.A and Vision Banco S.A.E.C.A. S&P also removed
all ratings from CreditWatch with positive implications, where it
placed them on June 11, 2014. The outlook on all of them is now
stable.
The revision of the BICRA and the rating actions follow S&P's
upgrade of Paraguay. S&P views economic risks in Paraguay as
gradually diminishing, because it expects the government to make
progress in implementing recent legislation designed to boost
investment, while it maintains cautious macroeconomic policies.
The government has an ambitious plan to spur investment,
especially in the country's physical infrastructure, to bolster
long-term GDP growth. S&P expects that such growth strategy will
set the stage for gradual economic diversification and reduced
economic volatility.
As a result, S&P considers that economic resilience in Paraguay
has improved and economic risks for the banking sector have
lessened. Nevertheless, S&P still believes that Paraguay's low-
income levels limit the private sector's leverage capacity and
that the financial system's high dollarization increases credit
risk in the economy. Rising real estate prices and rapid credit
growth--mostly due to higher consumer and agribusiness lending -
increase the risks of economic imbalances of the country. Credit
has been growing at an average rate of 20% in the past five years,
which is a concern. S&P expects credit growth to slow down to
about 15% in the next two years.
"Our assessment of the banking sector's industry risk is
unchanged. We view Paraguay's regulatory framework, although
improving, as still lagging international standards. The
government doesn't have a track record of effective support to the
banking sector. In terms of competitive dynamics, we believe that
high profitability and rapid credit and asset growth in past few
years are consistent with an aggressive risk appetite.
Furthermore, we consider that the presence of relatively large
cooperativas, which the central bank doesn't regulate, introduces
market distortions. The banks mostly rely on deposits for
funding, but they're increasingly tapping external funding sources
due to the rising demand for export-oriented loans and the need to
match balance sheets. These factors increase the banking sector's
vulnerability to a potential global liquidity squeeze," S&P noted.
"We view Paraguay's economic risk trend as stable. The
government's recently unveiled investments are planned to
stabilize the long-term GDP growth and reduce the economic
volatility. Nevertheless, GDP per capita is likely to remain low,
which is an additional challenge for a rapidly growing banking
sector due to the debtors' limited payment capacity. Industry
risk trend is also stable. In our view, the central bank needs to
strengthen banking regulation, but we expect it will take several
years to occur, given country's still weak political institutions.
In our view, rapid lending growth, especially to volatile sectors
such as agribusiness and real estate, is expected to pressure the
banking sector. Nonperforming loans have remained at manageable
levels and we expect them to remain so in the next two years. We
are concerned about the cooperatives' large market share due to
limited information about their operations. We expect domestic
banks to continue to use external sources of funding to support
growth in the next few years," S&P said.
The lower economic risk has resulted in a revised BICRA, and
anchor for banks operating in Paraguay to 'bb-' from 'b+'. These
factors have resulted in the upgrade of Banco Continental and BBVA
Paraguay and the rating affirmation of Banco Regional and Vision
Banco.
The upgrade of Banco Continental reflects the improvement of its
stand-alone credit profile (SACP) to 'bb' from 'bb-', as a result
of the revision of the anchor for banks operating in Paraguay and
the revision of the bank's capital position to "moderate" from
"weak." The ICR on the bank excludes notching from external
support (neither from group nor from the government).
The upgrade of BBVA Paraguay reflects the incorporation of
notching of support from its shareholder, Spain-based Banco Bilbao
Vizcaya Argentaria S.A. (BBVA; BBB/Stable/A-2), given the bank's
status as a "moderately strategic" subsidiary to the parent, which
owns 99.99% of the bank's equity. Under S&P's group methodology,
the long-term ICR on a "moderately strategic" subsidiary is
generally one notch above its SACP; however, it's subject to a cap
of one notch below the credit rating on the parent. BBVA
Paraguay's SACP remains at 'bb-', as its still "weak," although
improving, capital ratios (according to S&P's methodology) offset
the improved anchor.
The improved anchor also offsets Banco Regional's and Vision
Banco's still "weak," although improving, capital ratios. As a
result, the SACPs of these entities remain at 'bb-' and S&P
affirmed its ICRs on them. The ICRs on both entities exclude
notching from external support.
=====================
P U E R T O R I C O
=====================
M.A.R. REALTY: Plan Outline OK'd; Confirmation Hearing on July 9
----------------------------------------------------------------
The Hon. Mildred Caban Flores of the U.S. Bankruptcy Court for the
District of Puerto Rico has approved the disclosure statement
explaining M.A.R. Realty Inc.'s proposed Chapter 11 plan.
The hearing for the consideration of confirmation of the
Amended Chapter 11 Plan of Reorganization will be held on July 9,
2014, at 9:00 a.m.
As reported by the Troubled Company Reporter on May 2, 2014, the
Plan essentially contemplates the full payment to the secured
creditor, zero dividend for unsecured creditors and for current
management to remain post-bankruptcy. The secured claim of
creditor Banco Popular is unimpaired. The Amended Plan provides
that on agreement with Banco Popular on the Effective Date, the
Debtor will commence monthly payment of $5,000 as adequate
protection.
Copies of the Amended Plan and the court-approved Disclosure
Statement are available at:
http://bankrupt.com/misc/MARRealty_AmdPlan.PDF
http://bankrupt.com/misc/MARRealty_DSMar26.PDF
About M.A.R. Realty
M.A.R. Realty Corp. filed a Chapter 11 petition (Bankr. D.P.R.
Case No. 13-09752) on Nov. 25, 2013. Edwin Ramos signed the
petition as president. The Debtor disclosed $11.16 million in
total assets and $10.14 million in total liabilities. Isabel M.
Fullana, Esq., at Garcia Arregui & Fullana PSC, serves as the
Debtor's counsel. Hon. Mildred Caban Flores presides over the
case.
PUERTO RICO: Governor Files Debt Enforcement & Recovery Bill
------------------------------------------------------------
The governor of Puerto Rico, Alejandro Garcia Padilla, along with
the president of the Board of Directors of the Government
Development Bank for Puerto Rico ("GDB"), David H. Chafey, and
Treasury Secretary, Melba Acosta Febo, announced on June 25 the
filing before the Legislature of a bill entitled: The Puerto Rico
Public Corporations Debt Enforcement and Recovery Act whose main
purpose is to provide a clear legislative framework for certain
public corporations that are experiencing severe financial stress
to overcome their financial obstacles through an orderly,
statutory process that allows them to handle their debts fairly
and equitably, while ensuring the continuity of essential services
to citizens and infrastructure upgrades.
"United States law provides a framework for the nation's companies
and municipal entities to address their financial challenges while
continuing their services. However, Puerto Rico's public
corporations fall through the cracks of these laws. Therefore,
the Recovery Act is created to provide a clear legislative
framework that allows public corporations to address their
financial difficulties without compromising any essential services
provided by these corporations. It is worth noting that this law
excludes the Commonwealth's debt and other entities explicitly
excluded," said David Chafey.
Officials explained that the Recovery Act provides a controlled,
orderly process through which a public corporation can become
financially self-sufficient in order to ensure its continued
ability to provide critical services to the people of Puerto Rico
over the longer term. The Recovery Act includes two paths to a
successful financial adjustment of a corporation's debts -- both
of which are designed to ensure fair and equitable treatment for
all stakeholders as well as a consistent level of service for
consumers.
Treasury Secretary Melba Acosta stated that Chapter 2 of the
Recovery Act specifically encourages the corporation and certain
financial creditors to reach an agreement in a consensual manner.
It is designed to get to a negotiated solution with minimum
disruption to the business within a defined period of time. If an
agreement is not reached, Chapter 3 of the Recovery Act provides
for a process that is overseen by a Commonwealth court located in
Puerto Rico.
"The main purpose of the law is to protect the interests of the
people of Puerto Rico and to ensure that the gap in federal law
does not jeopardize essential public services. The Recovery Act
also protects Puerto Rico's GO debt by giving public corporations
the opportunity to address their financial challenges once and for
all and thereby no longer depend on the General Fund. Also, the
law protects the interests of bondholders and creditors, along
with other stakeholders, by giving corporations a way to negotiate
with their primary stakeholders toensure afair and equitable
allocation of resources and createa more promising future for
their finances and for all the people who depend on them," they
added.
As explained in the legislation, not all public corporations will
be eligible for the Recovery Act. Among the governmental entities
specifically excluded are: the Commonwealth, the seventy-eight
municipalities of the Commonwealth, GDB and its subsidiaries,
affiliates, and ascribed entities, the Children's Trust, the
Employees Retirement System, the Judiciary Requirement System, the
Municipal Finance Agency, the Municipal Finance Corporation, the
Puerto Rico Industrial Development Company, the Puerto Rico
Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, the Puerto Rico
Infrastructure Financing Authority, Puerto Rico Sales Tax
Financing Corporation, the Puerto Rico System of Annuities and
Pensions for Teachers, and the University of Puerto Rico.
"Over the past year, the GDB has reiterated that the public debt
of the Commonwealth should not be seen as a sum of debts to a
single debtor, but rather as individual loans supported by various
sources of revenues and income, with certain priorities
established by law or contract. Moreover, the GDB's message to
the market has been consistent in the sense that neither the
Commonwealth nor the GDB is in the position to subsidize or bail
out public corporations and that they need to become self-
sufficient."
"We will continue to support the efforts of public corporations to
become financially self-sufficient. However, taking into account
the current challenges, if public corporations defaulted on their
obligations in a way that would allow creditors to exercise their
remedies piecemeal or in a disorderly fashion, the absence of an
orderly process would threaten the Puerto Rico government's
capacity to safeguard the public and promote the general welfare
of the people. For these reasons, the Recovery Act is urgently
needed," said Mr. Chafey.
"Since January 2013, this Administration has implemented fast,
decisive and multiple unprecedented measures to stabilize the
fiscal situation of Puerto Rico, promote economic growth, and
safeguard and reinforce Puerto Rico's credit. We are close to
having a balanced budget for the fiscal year of 2014-2015, and we
have approved a comprehensive reform of the Retirement System of
the Employees Government and important measures to strengthen the
public corporations of Puerto Rico," the Governor said.
"This Administration continues to demonstrate that it is prepared
to make the difficult decisions that are needed to ensure the
long-term sustainability of the Government of Puerto Rico.
"The Recovery Act is not related to the Commonwealth's general
obligations to creditors. We will continue to honor our
obligations to the Commonwealth's creditors. We are focused on
assuring that Puerto Rico regains its economic growth, and we will
stand by this promise," the Governor concluded.
PUERTO RICO ELECTRIC: Fitch Cuts $8.7BB Revenue Bond Rating to CC
-----------------------------------------------------------------
Fitch Ratings has downgraded the rating on $8.7 billion of Puerto
Rico Electric Power Authority (PREPA) power revenue bonds to 'CC'
from 'BB'.
The downgrade reflects Fitch's view that, based on its reading of
newly proposed legislation, a debt restructuring or default by the
Authority is probable in light of the legislation, and given the
near-term liquidity demands brought on by maturing bank lines of
credit and the required repayment of outstanding loans due in July
and August 2014.
Fitch is maintaining the Rating Watch Negative.
Security
The power revenue bonds are secured by a senior lien on net
revenues of the electric system.
Key Rating Drivers
Increased Expectation Of Restructuring Or Default: The further
downgrade of PREPA reflects Fitch's view that bondholders now face
a probable financial restructuring or default by the Authority in
light of newly proposed legislation in Puerto Rico. The Puerto
Rico Public Corporation Debt Enforcement and Recovery Act (the
Act), expected to be signed into law imminently, would establish a
restructuring regime for public corporations that may become
insolvent. PREPA faces repayment obligations totaling $671 million
through August 2014, which it appears unable to meet.
Governmental Support Discounted: Statements within the Act
acknowledge that the Government Development Bank of Puerto Rico
(GDB) is no longer a viable alternative for interim financing and
is unable to provide necessary bridging liquidity support to avoid
a PREPA default. With market-based options for addressing
repayment of the pending maturities diminishing, Fitch believes
that PREPA will likely pursue restructuring alternatives offered
under the Act. Existing law would not have supported a debtor
controlled restructuring process.
Two Paths For Restructuring: The Act contemplates two procedures
for addressing debt obligations. While they are intended to
restore solvency over the long-term, both procedures entail debt
restructuring that would trigger suspension of debt payments and
preclude the timely payment of principal and interest during the
pendency of the proceedings.
Rating Sensitivities
Request For Relief: Any request for relief through restructuring
by PREPA, or GDB upon the Governor's request, as contemplated in
the proposed legislation would result in a further downgrade to
'C'.
Negotiated Resolution To Liquidity Demand: Although unlikely, any
negotiated resolution to the near term liquidity demands facing
PREPA would be evaluated for commercial reasonableness and
sustainability, and could lead to consideration of a higher
rating.
Credit Profile
Restructuring Legislation Introduced
On June 25, 2014, the Governor of Puerto Rico introduced the
Puerto Rico Public Corporation Debt Enforcement and Recovery Act
in order to establish a debt enforcement, recovery and
restructuring regime for the public corporations and
instrumentalities of the Commonwealth of Puerto Rico during an
economic emergency. The bill is intended to introduce a
bankruptcy-like process and provide an orderly recovery regime for
public corporations that may become insolvent. The bill is
expected to be signed by June 30, 2014.
Heightened Financial And Liquidity Risk
PREPA has been plagued by weak financial performance in recent
years, including through fiscal 2014. For the ten months ended
April 30, 2014 PREPA reported earnings before depreciation of $645
million and a net loss of ($204 million). However, the authority
currently faces heightened liquidity and market access risk
stemming from the maturity of two short-term lines of credit
(LOCs) and the required repayment of outstanding borrowings
totaling $641 million in July and August 2014.
Liquidity Support Not Expected
Fitch noted in its June 10, 2014 release that PREPA's ability to
repay these outstanding loans was limited and that the prospects
for extending or replacing the LOCs was uncertain, but noted
further that the GDB could provide necessary bridging liquidity
support to prevent a PREPA default.
It now appears that support will not be forthcoming as the Act
states that the GDB 'lacks sufficient financial strength' .. to
satisfy the current financing needs of the Government of the
Commonwealth and, in particular, of its public corporations', and
that GDB's ability to provide interim financing is constrained. In
its preamble to the legislation the government states '[g]iven
that public corporations no longer can rely on GDB loans,
Commonwealth subsidies, or rate increases to cover their operating
deficits, they may be unable to pay their debts as they become
due'.
With market-based options for addressing repayment of the pending
maturities, as well as expectations for governmental assistance,
diminishing Fitch believes that PREPA will likely seek to address
its current fiscal emergency, and restore its solvency over the
long-term, through alternatives presented under the Act.
Alternatives For Restructuring Would Preclude Timely Payment
The Act contemplates two types of procedures to address a public
corporation's burdensome debt obligations, both of which include
debt restructuring and would preclude the timely payment of
principal and interest, and reduce recovery.
The first is a consensual debt modification procedure whereby the
corporation would adopt a recovery program and a market-led
solution for debt relief that binds all debt holders with the
consent of a supermajority of debt holders. Discussions with
stakeholders would be preceded by a suspension period when all
remedies would be suspended.
The second procedure would be court-supervised and would culminate
in an orderly debt enforcement plan. Qualifying public
corporations would be allowed to defer repayment and decrease
interest and principal to continue to fulfill vital public
functions. Any action for payment of claims would be stayed during
the procedure. Ultimately a debt enforcement plan would be
proposed by the petitioner or GDB and confirmed by the court and
creditors.
A public corporation could seek relief under either of these
alternatives at the same time or sequentially.
For additional information please see Fitch's releases dated Feb.
18, 2014 and June 11, 2014.
PUERTO RICO ELECTRIC: Moody's Cuts Rating on $8.8BB Bond to Ba3
---------------------------------------------------------------
Moody's Investors Service has downgraded to Ba3 from Ba2 the
rating on the Puerto Rico Electric Power Authority's (PREPA)
approximately $8.8 billion of outstanding Power Revenue Bonds. The
rating remains under review for possible further downgrade.
Summary Ratings Rationale
The rating action considers Moody's concerns about increasingly
tight liquidity. Even if PREPA is able to address its immediate
liquidity issues, the company faces continuing challenges over the
next several years. These challenges include negative free cash
flow, very high electricity rates accompanied by high rates of
non-payment and growing receivables balances, and perceived
constraints on raising revenues to fund a sizeable capital
spending program needed to convert electricity generation from
high cost oil to lower cost natural gas.
Immediate liquidity concerns include the near-term maturity of
large bank borrowings. Outstandings under the company's two
principal bank lines total about $671 million and mature in July
and August 2014. The rating action also reflects uncertainty
surrounding the Government Development Bank of Puerto Rico's (GDB;
Ba2 Neg) willingness and ability to support PREPA's liquidity, in
the event that the lines are not extended. The rating action
further considers the signing into law on May 27, 2014, of the
Energy Transformation and Relief Act, (the Relief Act). Among
other things, the Relief Act establishes an Energy Commission to
oversee PREPA and the electric rates it can charge customers,
introducing a further level of oversight that may lead to delays
if PREPA needs to raise rates.
Overall liquidity levels remain highly constrained, as the
enterprise runs operating deficits and in recent years has relied
on credit facilities and new borrowings to fund operations. The
line with Citibank for $250 million expired on January 10, 2014.
There is currently about $146 million in outstanding advances
under this facility that mature during July and August 2014. The
line with Scotia Bank for $550 million expires on August 14, 2014;
there is currently about $525 million outstanding. Moody's
understand that PREPA is currently in negotiations with the banks
to extend these lines, but the likelihood of extension and terms
for ongoing credit are uncertain at this stage.
There is also a $100 million line of credit with the GDB, which
matures on December 31, 2014, with about $41.3 million currently
outstanding. Although the line is intended primarily to provide
collateral for a basis swap, the line does reflect historical
liquidity support from the GDB. If the commercial banks do not
extend their lines, and they demand repayment, PREPA will not be
able to repay the advances from its own available funds. While
Moody's believes it is likely that the Commonwealth and/or GDB
will find a way to support PREPA, it is not certain that support
would be provided in a way that avoids an eventual debt
restructuring. There could be other demands on GDB's liquidity to
fund operations of the Commonwealth or from other public entities
in Puerto Rico that could limit GDB's ability to support PREPA
even if it is willing to do so, particularly given the continued
economic and demographic stress facing the island.
Moody's notes recent reports that the Governor of Puerto Rico has
introduced a bill to the legislature entitled Debt Enforcement and
Recovery of Public Corporations Act (Recovery Act). The proposed
Recovery Act has not yet been approved by the legislature and
signed into law and the full details are not known at this stage,
but Moody's understands that it will provide a legislative
framework for certain public corporations, which appear to include
PREPA, to overcome their financial obstacles through an orderly,
statutory process. This suggests the possibility of a
restructuring of some kind.
Moody's also understands that the formation of a new Energy
Commission under the Relief Act will review and approve PREPA's
rates, including the ability to change a fuel purchase adjustment.
PREPA is the monopoly provider of electricity on the island of
Puerto Rico, and PREPA's board has historically had full authority
to set electricity rates necessary to meet its bond covenant.
PREPA's debt covenants dictate that rates must be set so that they
will be sufficient to pay expenses and meet debt service by at
least 1.2x, according to the bond indenture calculation. However,
Moody's calculation of debt service coverage by net revenues
(after adjusting for Contributions in Lieu of Taxes) is below 1.0x
for fiscal 2013, indicating the enterprise runs operating deficits
and relies on external funds to pay for operations and debt
service. PREPA has also been able automatically to pass through to
customers higher fuel and energy costs, an important
consideration, given the utility's reliance on fuel oil generation
to meet native load. While the impact of this new Relief Act on
PREPA is not known at this stage, it does appear that the new
Energy Commission introduces a further level of oversight and
potential delay that could affect the level and timeliness of cost
recovery. Moody's views as negative to credit quality any actions
that would reduce PREPA's historical rate setting capability.
Moody's notes that the Ba3 rating on PREPA is now lower than the
Ba2 rating on the GDB and the Commonwealth's general obligation
bonds as well as other public corporations on the island. Moody's
believe this differentiation and de-linking is warranted given the
limited ability of GDB and the Commonwealth to support PREPA, its
significant debt burden, the level of capital spending
requirements for the fuel diversification plan and highly
constrained liquidity. At the Ba3 ratings level, Moody's
incorporates an expectation of support, although the ability
and/or willingness of GDB and the Commonwealth to provide that
support may have diminished.
During the review period, Moody's will focus on:
- Review of PREPA's proposed 2014-15 budget and multi-year
forecast, which is expected sometime in mid-July
- PREPA's ongoing liquidity position, including the likelihood of
renewal of the bank lines
- The ability and willingness of the GDB and/or the Commonwealth
to support PREPA's liquidity
- The potential impact to PREPA's credit quality from the
implementation of the new Relief Act on PREPA's independent rate
setting authority.
- Progress made on the execution of the long-term strategic plan
to convert high cost, oil-based power generation to lower cost
natural gas, which is PREPA's principal strategy to control rates
and to help spur economic growth on the island.
What Could Make The Rating Go Up
Given the fact that PREPA's rating is under review for possible
downgrade, it is unlikely that the rating would go up. However,
the rating could be confirmed at the Ba3 level if Moody's view the
potential outcome of the items listed above as being credit
neutral, especially as it relates to PREPA's liquidity, which
would include the renewal of the bank lines and likelihood of
continued support from the GDB.
What Could Make The Rating Go Down
A downgrade, including the possibility of a multi-notch downgrade,
would be increasingly likely if there were continuing weakening of
PREPA's liquidity, including a failure to renew or extend the bank
lines, or if the GDB failed to provide support. The ratings could
be downgraded if Moody's perceives a significant likelihood that
improving PREPA's liquidity, financial profile and long-term
sustainability involves some form of debt restructuring. This
could include the enactment of the proposed new Recovery Act,
especially if Moody's viewed it as a prelude to some form of
distressed restructuring. In addition, there could be downward
rating pressure if the new Relief Act resulted in a diminishment
of PREPA's rate setting authority, if PREPA failed to make
progress on the execution of its fuel diversification and cost
reduction strategy, or if there were a negative rating action on
the Commonwealth.
Rating Methodology
The principal methodology used in this rating was U.S. Public
Power Electric Utilities with Generation Ownership Exposure
published in November 2011.
===============================
T R I N I D A D & T O B A G O
===============================
TRINIDAD & TOBAGO: 75-80% Drop in Global Travel to Country
----------------------------------------------------------
Elizabeth Williams at Trinidad Express reports that while there
has been an increase in domestic travel to Tobago, there has also
been a 75-80 per cent drop in international arrivals to the sister
island.
It has become a critical issue, according to president of the
Hotels and Tourism Association Christopher James, Trinidad Express
relates.
Mr. James told the Trinidad Express that this, coupled with the
low detection rate in relation to crime in Tobago, is a recipe for
a disaster.
"We have seen a 75 per cent or 80 per cent drop in international
arrivals. The other thing, the Government loan guarantee needs to
be rolled out quickly. The whole purpose of that was that it is
not a grant in any way. It's a loan and we need that confidence
of that to help us renovate the existing properties, but also to
get investors interested in new properties," the report quoted Mr.
James as saying.
Mr. James said the Government needs to be serious about Tobago's
tourism thrust, the report notes.
"We know that Virgin Atlantic pulled out for two reasons, the
airport and the other reason was the lack of choice of hotels, and
the lack of quality hotels. So we're emphasizing that we need
four-star and above hotels, and the only way we're going to get
that is with some guarantee from the government that we are
serious about tourism," the report quoted Mr. James as saying.
Mr. James said the low crime detection rate needs to be looked at,
in terms of the impact on the tourism industry, the report says.
"We need the crime protection rate to be increased. Crime has two
problems in Tobago-it has the social problem it has all over the
world, but it also has the economic," Mr. James said, the report
adds.
=================
X X X X X X X X X
=================
LATAM: Leveraged Finance Stable Despite Challenging Environment
---------------------------------------------------------------
Latin American leveraged finance activity is expected to remain
robust despite challenging market conditions for the weakest
credits, an increase in defaults, and other industry and country-
specific difficulties, according to a new Fitch Ratings report.
'Credit protection measures have stayed relatively unchanged for
Latin America high-yield corporates despite tepid economic growth
of 4% in the region,' said Joe Bormann, a Managing Director at
Fitch. 'Conditions will not turn around quickly. Fitch projects
GDP growth of only 3.9% in Latin America in 2014 and 4% in 2015.
Corporate are adjusting capex to account for slower growth. Many
'BB' credits and a select group of 'B' rated corporates have
accessed the market to lower refinancing risk.'
Capital markets have been challenging for Latin America 'B'
corporates since market conditions slowed for emerging market
corporates in June 2013. Since then, these credits have raised
only USD8.1 billion in the cross border market - excluding PDVSA
USD5 billion notes - representing a 32% decrease from the same
period in 2013. Investors remain concerned about the small size of
most 'B' issuances, which lowers liquidity in the secondary
market.
Default activity in the first half of 2014 consists of Sifco, a
Brazilian supplier to the automobile industry, and Aralco, a sugar
and ethanol producer located in Brazil. This pace is on par with
2013 when Fitch rated six Latin America high-yield corporates that
defaulted. Four of these companies -- Axtel, Corporacion GEO, Urbi
Desarrollos Urbanos, and Desarrolladora Homex -- were domiciled in
Mexico, while Sidetur was a Venezuela steel producer and OGX
Petroleo e Gas Participacoes S.A. was a Brazilian oil and gas
company.
Following Aralco's default, credit conditions remain difficult for
Brazilian sugar and ethanol producers. Operating cash flows are
weak, as record sugar levels have resulted in low global sugar
prices. Capital expenses are high and free cash flow is negative.
Companies that tapped the market recently such as Virgolino (GVO)
and Tonon had to settle for very high coupon levels.
In Argentina and Venezuela, inflation is very high, capital
markets access is limited, and governments continue to control
foreign exchange access. The Argentine peso and Venezuelan Bolivar
devalued sharply as the governments sought to lower the
differential between the formal and informal exchange rates and
curtail the outflow of U.S. dollars. Corporate defaults could
occur in 2014 if conditions deteriorate.
* BOND PRICING: For the Week From June 23 to June 27, 2014
----------------------------------------------------------
Issuer Coupon Maturity Currency Price
------ ------ -------- -------- -----
Aguas Andinas SA 4.15 12/1/2026 CLP 70.91
Almendral
Telecomunicaciones SA 3.5 12/15/2014 CLP 22.55
Argentina Bocon 2 1/3/2016 ARS 68.5
Argentina Boden Bonds 2 9/30/2014 ARS 31.5
Argentina Government
Int'l Bond 7.82 12/31/2033 EUR 75.5
Argentina Government
Int'l Bond 7.82 12/31/2033 EUR 74
Argentina Government
Int'l Bond 8.28 12/31/2033 USD 50
Argentina Government
Int'l Bond 8.28 12/31/2033 USD 55
Argentina Government
Int'l Bond 4.33 12/31/2033 JPY 36.5
Argentina Government
Int'l Bond 0.45 12/31/2038 JPY 15
Argentina Government
Int'l Bond 4.33 12/31/2033 JPY 36.5
Automotores
Gildemeister SA 8.25 5/24/2021 USD 69
Automotores
Gildemeister SA 6.75 1/15/2023 USD 65
Automotores
Gildemeister SA 8.25 5/24/2021 USD 68.4
Automotores
Gildemeister SA 6.75 1/15/2023 USD 64.02
Banco BPI SA/
Cayman Islands 4.15 11/14/2035 EUR 62.5
Banco Supervielle SA 7 8/20/2020 USD 74.12
Banif Finance Ltd 1.68 EUR 35
Bank Austria
Creditanstalt
Finance Cayman Ltd 2.16 EUR 74.8
BCP Finance Co Ltd 5.54 EUR 62.82
BCP Finance Co Ltd 4.24 EUR 60.37
Republic of Venezuela 7 3/31/2038 USD 65.59
Caixa Geral De
Depositos Finance 1.12 EUR 42.5
CAM Global Finance 6.08 12/22/2030 EUR 64.87
China Forestry
Holdings Co Ltd 10.3 11/17/2015 USD 37
China Forestry
Holdings Co Ltd 10.3 11/17/2015 USD 37
China Precious Metal
Resources Holdings Co Ltd 7.25 2/4/2018 HKD 65.97
Cia Cervecerias Unidas SA 4 12/1/2024 CLP 57.05
Transener SA 9.75 8/15/2021 USD 68
Transener SA 8.88 12/15/2016 USD 67.6
Transener SA 9.75 8/15/2021 USD 67.5
Cia Energetica de Sao Paulo 9.75 1/15/2015 BRL
Cia Sud Americana de
Vapores SA 6.4 10/1/2022 CLP 61.42
City of Buenos
Aires Argentina 1.95 1/28/2020 USD 70.125
City of Buenos Aires
Argentina 1.95 12/20/2019 USD 70.875
Daphne International
Holdings Ltd 3.13 6/11/2014 CNY 5.25
Decimo Primer
Fideicomiso 4.54 10/25/2041 USD 57.25
Decimo Primer Fideicomiso 6 10/25/2041 USD 69
Empresa Distribuidora
Y Comercializadora Norte 9.75 10/25/2022 USD 66.99
Empresa Distribuidora Y
Comercializadora Norte 9.75 10/25/2022 USD 66.125
ERB Hellas Cayman
Islands Ltd 9 3/8/2019 EUR 68.375
Glorious Property
Holdings Ltd 13.3 3/4/2018 USD 71.24
Hidili Industry
International
Development Ltd 8.63 11/4/2015 USD 53.25
Hidili Industry
International
Development Ltd 8.63 11/4/2015 USD 52.75
Inversiones Alsacia SA 8 8/18/2018 USD 65.25
Inversiones Alsacia SA 8 8/18/2018 USD
Inversora de Electrica
de Buenos Aires SA 6.5 9/26/2017 USD 43.25
MetroGas SA 8.88 12/31/2018 USD 71.875
Mongolian Mining Corp 8.88 3/29/2017 USD 66
Mongolian Mining Corp 8.88 3/29/2017 USD 64.75
Petroleos de Venezuela SA 6 11/15/2026 USD 60.75
Petroleos de Venezuela SA 5.38 4/12/2027 USD 58
Petroleos de Venezuela SA 5.5 4/12/2037 USD 55
Petroleos de Venezuela SA 6 11/15/2026 USD 59.41
Provincia del Chaco 4 11/4/2023 USD 75
Provincia del Chaco 4 12/4/2026 USD 51.125
Renhe Commercial
Holdings Co Ltd 13 3/10/2016 USD 68.5
Renhe Commercial
Holdings Co Ltd 13 3/10/2016 USD 69.5
Ruta del Bosque Sociedad
Concesionaria SA 6.3 3/15/2021 CLP 73.66
Sifco SA 11.5 6/06/2016 USD 29
SMU SA 7.7 2/8/2020 USD 71.5
SMU SA 7.75 2/8/2020 USD 69.21
Talca Chillan Sociedad
Concesionaria SA 2.75 12/15/2019 CLP 56.46
Uruguay Notas
del Tesoro 2.5 9/27/2022 UYU 72.08
Venezuela Government
International Bond 6 12/9/2020 USD 72.75
Venezuela Government
International Bond 7.65 4/21/2025 USD 73
Venezuela Government
International Bond 7 3/31/2038 USD 65.75
Virgolino de Oliveira
Finance Ltd 10.5 1/28/2018 USD 67.52
Virgolino de Oliveira
Finance Ltd 11.8 2/9/2022 USD 67.2
Virgolino de Oliveira
Finance Ltd 10.5 1/28/2018 USD 67.62
Virgolino de Oliveira
Finance Ltd 11.8 2/9/2022 USD 66.75
***********
Monday's edition of the TCR-LA delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-LA editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Monday
Bond Pricing table is compiled on the Friday prior to publication.
Prices reported are not intended to reflect actual trades. Prices
for actual trades are probably different. Our objective is to
share information, not make markets in publicly traded securities.
Nothing in the TCR-LA constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR-LA editor holds some position in the
issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
Submissions about insolvency-related conferences are encouraged.
Send announcements to conferences@bankrupt.com
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Valerie U. Pascual, Julie Anne L. Toledo, and Peter A.
Chapman, Editors.
Copyright 2014. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000 or Nina Novak at
202-241-8200.
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