/raid1/www/Hosts/bankrupt/TCRLA_Public/140707.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, July 7, 2014, Vol. 15, No. 132
Headlines
A N T I G U A & B A R B U D A
STANFORD INT'L: Supreme Court Won't Hear Receiver's Appeal
A R G E N T I N A
ARGENTINA: Hedge Funds Blast Bid for Stay in $1.5BB Debt Row
ARGENTINA: Moody's Puts (P)Caa2-Rated Debt Under Review
BST ASSET: Moody's Assigns B-bf Global Scale Fund Bond Rating
GPAT COMPANIA: Moody's Assigns B2 Global Currency Debt Rating
B O L I V I A
BANCO SOLIDARIO: Moody's Affirms 'D-' Bank Fin'l. Strength Rating
EMPRESA NACIONAL: Moody's Assigns Ba3 Corporate Family Rating
B R A Z I L
BANCO DO BRASIL: Fitch Affirms 'bb+' Viability Rating
BANCO MERCANTIL: Moody's Lowers LT Currency Deposit Ratings to B1
TUPY OVERSEAS: Fitch Expects to Rate $350MM Senior Notes 'BB(EXP)'
* BRAZIL: Sugar Prospects Dim as Rain Misses Cane Heartland
C A Y M A N I S L A N D S
CENTRIX IX FUND: Shareholders' Final Meeting Set for July 29
EUCLID MASTER: Shareholder to Hear Wind-Up Report on July 23
EUCLID OFFSHORE: Shareholder to Hear Wind-Up Report on July 23
GE CAPITAL: Creditors' Proofs of Debt Due July 21
OPHEDGE FUND: Shareholders' Final Meeting Set for July 9
SERENGETI RAPAX: Commences Liquidation Proceedings
SUTHERLAND HOLDINGS: Shareholders' Final Meeting Set for July 9
WESTERN ASSET: Shareholders' Final Meeting Set for July 8
WESTERN ASSET MASTER: Shareholders' Final Meeting Set for July 8
WESTERN ASSET US: Shareholders' Final Meeting Set for July 8
D O M I N I C A N R E P U B L I C
DOMINICAN REP.: Half of Workers Can't Get Pension, Official Warns
J A M A I C A
JAMAICA: Fitch Gives 'B-' Rating to $800MM Global Bond Issuance
M E X I C O
BENITO JUAREZ: Moody's Upgrades Global Scale Issuer Rating to B1
P E R U
CORPORACION PESQUERA: Moody's Affirms B2 CFR; Outlook Stable
INKIA ENERGY: Fitch Affirms 'BB' Issuer Default Ratings
P U E R T O R I C O
BANCO SANTANDER: Moody's Affirms 'D' Standalone BFSR
PUERTO RICO INDUSTRIAL: Moody's Cuts Rating on $194MM Bond to B3
PUERTO RICO: Debt Law May Be Decided in Boston
T R I N I D A D & T O B A G O
CL FIN'L: CLICO Board to Negotiate VSEP Packages, Bank Says
X X X X X X X X X
* BOND PRICING: For the Week From June 30 to July 6, 2014
- - - - -
===============================
A N T I G U A & B A R B U D A
===============================
STANFORD INT'L: Supreme Court Won't Hear Receiver's Appeal
----------------------------------------------------------
Bill Lodge at The Advocate reports that court-appointed receivers
searching for billions of dollars stolen from investors by
convicted fraud artists Robert Allen Stanford, of Houston, and
Bernard Madoff, of New York, were denied consideration of similar
appeals Monday by the U.S. Supreme Court.
Both receivers had been told by federal appellate courts that they
did not have authority to represent certain bilked investors in
specific types of litigation, according to The Advocate.
Dallas attorney Ralph S. Janvey is in charge of the five-year-old
receivership searching for between $5 billion and $7 billion
Stanford stole from victims in Louisiana and places as distant as
Venezuela, the report relates. Mr. Janvey, the report notes, was
notified by the Supreme Court that justices will not consider his
bid for authority to represent any of the more than 20,000 victims
in civil suits against former Stanford employees alleged to have
assisted Stanford in his crimes.
The 5th U.S. Circuit Court of Appeals had ruled Aug. 30 that Mr.
Janvey could not represent Stanford victims in lawsuits against
former Stanford employees, who wanted claims against them decided
in arbitration, the report relates.
Kevin Sadler, lead attorney for Mr. Janvey, said Monday his client
"is disappointed that the Supreme Court declined to review this
appeal," the report discloses.
The report notes that Mr. Sadler said that appeal "raised a very
important question about the scope of a court-appointed receiver's
powers to recover funds to compensate victims of frauds like the
Stanford Ponzi scheme."
"Whether the receiver must arbitrate his claims against Stanford
insiders is still a matter under consideration by the (U.S.
District Court in Dallas), and the issue likely will be reviewed
by the 5th U.S. Circuit Court of Appeals, for the third time, in
2015," the report quoted Mr. Sadler as saying.
Meanwhile, the report notes that Mr. Sadler said, Mr. Janvey "will
continue to pursue his claims in court against those (others) who
profited from, aided and abetted or enabled the Stanford Ponzi
scheme."
Thus far, Mr. Janvey has recovered less than $300 million for the
receivership estate. He has paid himself and his team of
attorneys, accountants and investigators more than $60 million,
while distributing $30 million to victims and using more than $50
million for team expenses.
In a related matter in February, the Supreme Court upheld a 2012
ruling by the 5th Circuit that Stanford victims have the right to
file class-action civil suits in state courts against people and
firms alleged to have aided Stanford in his fraudulent schemes.
Scores of Stanford victims have filed such suits in Baton Rouge.
Phillip W. Preis, an attorney for many of the Baton Rouge-area
victims, said the Supreme Court's action does not affect his
clients' lawsuits in the 19th Judicial District Court, the report
discloses.
Mr. Madoff's case, like Mr. Stanford's, involved a Ponzi scheme.
Such schemes involve few, if any actual investments, the report
relates. Instead, criminals like Mr. Madoff and Mr. Stanford,
pocket and spend much of the money they receive from their
customers, the report notes.
The report relates that early investors are paid dividends that
actually are small amounts of later investors' money. Word of
those fake profits draws in even more investors, and the Ponzi
criminals pocket even more cash, the report notes.
Mr. Madoff pleaded guilty to felony charges in 2008 and is serving
a prison sentence of 150 years, the report relates. Mr. Stanford
was convicted at trial in Houston and is serving a term of 110
years. Mr. Stanford maintains he is innocent of all charges on
which he was convicted, the report relates.
Irving H. Picard, the court-appointed trustee in the liquidation
of Madoff's assets, was denied permission by lower courts to
represent Madoff victims in suits against banks alleged to have
assisted Madoff's Ponzi scheme, the report discloses.
The Supreme Court declined to consider Mr. Picard's appeal of that
decision.
Mr. Picard has estimated that Madoff's customers were swindled out
of $17.5 billion, the report notes. His team has recovered more
than $9.8 billion for victims. But Mr. Picard's team fees and
expenses are much larger than Mr. Janvey's -- about $850 million,
the report adds.
About Stanford International Bank
Domiciled in Antigua, Stanford International Bank Limited --
http://www.stanfordinternationalbank.com/-- is a member of
Stanford Private Wealth Management, a global financial services
network with US$51 billion in deposits and assets under
management or advisement. Stanford Private Wealth Management
serves more than 70,000 clients in 140 countries.
On Feb. 16, 2009, the United States District Court for the
Northern District of Texas, Dallas Division, signed an order
appointing Ralph Janvey as receiver for all the assets and
records of Stanford International Bank, Ltd., Stanford Group
Company, Stanford Capital Management, LLC, Robert Allen Stanford,
James M. Davis and Laura Pendergest-Holt and of all entities they
own or control. The February 16 order, as amended March 12,
2009, directs the Receiver to, among other things, take control
and possession of and to operate the Receivership Estate, and to
perform all acts necessary to conserve, hold, manage and preserve
the value of the Receivership Estate.
The U.S. Securities and Exchange Commission, on Feb. 17, charged
before the U.S. District Court in Dallas, Texas, Mr. Stanford and
three of his companies for orchestrating a fraudulent, multi-
billion dollar investment scheme centering on an US$8 billion
Certificate of Deposit program.
A criminal case was pursued against him in June before the U.S.
District Court in Houston, Texas. Mr. Stanford pleaded not
guilty to 21 charges of multi-billion dollar fraud, money-
laundering and obstruction of justice. Assistant Attorney
General Lanny Breuer, as cited by Agence France-Presse News, said
in a 57-page indictment that Mr. Stanford could face up to 250
years in prison if convicted on all charges. Mr. Stanford
surrendered to U.S. authorities after a warrant was issued for
his arrest on the criminal charges.
=================
A R G E N T I N A
=================
ARGENTINA: Hedge Funds Blast Bid for Stay in $1.5BB Debt Row
------------------------------------------------------------
Law360 reported that hedge funds owed $1.5 billion over defaulted
bonds pushed back against the Argentine government's request for
additional time to negotiate a deal, saying a delay would only
give the country more time to launch an evasion plan.
According to the report, the investment firms wrote in response to
a plea by Argentina to U.S. District Judge Thomas P. Griesa for a
stay of rulings that direct the country to make payments to the
hedge funds when the country makes interest payments to some 92
percent of bondholders that agreed to debt restructurings. The
hedge funds, including NML Capital Ltd. and affiliates of Aurelius
Capital Management LP, say there's no legal basis for staying
injunctions that have already been upheld on appeal, and
questioned Argentina's sincerity in seeking a negotiated
settlement, in light of a recent speech by Argentine Economic
Minister Axel Kicillof in which he said the country would seek to
restructure the bonds outside of U.S. jurisdiction, the report
related.
ARGENTINA: Moody's Puts (P)Caa2-Rated Debt Under Review
-------------------------------------------------------
Moody's has placed Argentina's (P)Caa2-rated foreign legislation
debt under review, direction uncertain. The review will focus on
the Argentine government's response to US legal rulings requiring
it to pay certain "holdout" bondholders who have sued the
government in US courts concurrently with any payments it makes to
holders of its restructured debt.
In line with those rulings, the US courts stopped Argentina from
making a scheduled bond payment on restructured debt due on June
30. The nonpayment constitutes only a technical default, since the
restructured bonds' documentation still gives Argentina a 30-day
grace period to make the payment. During this time, if sufficient
progress is made in negotiations with litigating bondholders, the
court injunction against servicing the restructured debt could be
lifted. An agreement with the litigating bondholders may therefore
reduce the legal risks for Argentina's foreign legislation
obligations. Alternatively, Argentina's failure to reach an
agreement with the litigating bondholders would make it illegal
for it to pay its restructured debt, leading to an actual default.
Moody's notes that Argentina's debt in default, representing
government bonds that were not tendered in the 2005 and 2010 debt
restructurings, is rated Ca and is not subject to the rating
review.
Ratings Rationale
Moody's rates Argentina's debt issued under foreign legislation
(P)Caa2, one notch below the government's issuer rating that
applies to its domestic legislation debt. The (P)Caa2 rating
reflects the higher default risk Moody's ascribes to foreign law
bonds because they are subject to ongoing legal proceedings in US
courts. Specifically, the New York court decided in March 2013
that Argentina must comply with the pari passu or equal treatment
clause in its bond contracts and cannot discriminate against the
holdout bonds in favor of the bonds issued in the 2005 and 2010
sovereign debt restructurings. Furthermore, the Argentine
government must pay litigating bondholders concurrently with any
payments to holders of its restructured debt and in full (i.e.,
100% of accelerated principal and accrued interest). The paying
agent on the restructured bonds, The Bank of New York, is subject
to the injunction, meaning that funds remitted to The Bank of New
York for payment on the restructured bonds are instead potentially
available for payment to the holdout creditors.
Moody's says that Argentina has the financial means to meet its
legal obligation to litigating bondholders, which the creditors
put at roughly $1.5 billion when past due interest is included.
However, the government has repeatedly stated that it would not
pay litigating bondholders in full, which puts the portion of its
bonds restructured under foreign law at heightened risk of default
because of the US court rulings.
Rationale For Rating Review, Direction Uncertain
Moody's review of Argentina's P(Caa2)-rated government debt was
triggered when the US Supreme Court refused to hear Argentina's
appeal against the lower court's rulings. The Argentine government
has expressed conflicting reactions to the US Supreme Court
decision, but has now said that they will send an official
delegation to negotiate with the litigating bondholders on July 7.
The negotiations have a firm deadline -- the end of the 30-day
grace period for the June 30 payment due on the restructured bonds
-- if default is to be avoided.
What Could Move The Ratings Up/Down
Should Argentina refuse to abide by the legal rulings, or fail to
reach an agreement with litigating bondholders before the
expiration of the 30-day grace period on restructured bonds, the
restructured bonds would go into default. In this scenario, the
(P)Caa2 rating could be downgraded.
The alternative scenario, in which the government reaches a
settlement with litigating bondholders without interruption of
payments to restructured bondholders, would be credit positive for
the restructured debt , and Moody's would re-assess the need to
have a distinction between the creditworthiness of foreign law vs.
domestic law debt. Such an outcome would also build on the
government's recent efforts to normalize relations with foreign
creditors.
GDP per capita (PPP basis, US$): 18,749 (2013 Actual) (also known
as Per Capita Income)
Real GDP growth (% change): 3% (2013 Actual) (also known as GDP
Growth)
Inflation Rate (CPI, % change Dec/Dec): 10.9% (2013 Actual)
Gen. Gov. Financial Balance/GDP: -1.9% (2013 Actual) (also known
as Fiscal Balance)
Current Account Balance/GDP: -0.7% (2013 Actual) (also known as
External Balance)
External debt/GDP: 22.4% (2013 Actual)
Level of economic development: Low level of economic resilience
Default history: At least one default event (on bonds and/or
loans) has been recorded since 1983.
On 30 June 2014, a rating committee was called to discuss the
rating of the Argentina, Government of. The main points raised
during the discussion were: The issuer's institutional
strength/framework, have decreased. The issuer's governance and/or
management, have not materially changed. The issuer has become
increasingly susceptible to event risks. The issuer's legal risks
have increased.
The principal methodology used in this rating was Sovereign Bond
Ratings published in September 2013.
The weighting of all rating factors is described in the
methodology used in this rating action, if applicable.
BST ASSET: Moody's Assigns B-bf Global Scale Fund Bond Rating
-------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo has
assigned bond fund ratings to fST Pesos (the Fund), a new short-
term bond fund domiciled in Argentina that will be managed by bST
Asset Management SGFCI SA.
The ratings assigned are as follows:
- Global scale bond fund rating: B-bf
- National scale bond fund rating: Aa-bf.ar
Ratings Rationale
The fund ratings are based on Moody's expectation that fST Pesos,
a local time deposit fund, will invest mainly in time deposits and
callable time deposits in local currency, with the balance held in
a central bank account and sight deposits in relatively strong
local financial entities with an average portfolio duration not
exceeding 90 days.
Moody's noted that this is a new fund and hence has no track
record. The fund analysis is based on a pro-forma portfolio
received from the fund manager. The Fund is expected to be
launched within the next two weeks.
"Based on the Fund's pro-forma portfolio, the Fund's credit
quality profile is comparable to those of similarly rated peers",
said Moody's lead analyst Carlos de Nevares.
This Fund's objective is to serve as a cash fund for institutional
investors, and the custodian entity will be bST bank.
The principal methodology used in this rating was the "Moody's
Bond Fund Rating Methodology" published in May 2013.
bST Asset management SGFCI SA is a medium size asset manager in
the Argentinean mutual fund Industry, with a market share of
approximately 1.5% of industry wide assets under management as of
June 30th, 2014. As of June 2014, bST SA SGFCI, managed
approximately AR$1.37 billion in Assets under Management (AUM).
Moody's National Scale Credit Ratings (NSRs) are intended as
relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global
scale credit ratings in that they are not globally comparable with
the full universe of Moody's rated entities, but only with NSRs
for other rated debt issues and issuers within the same country.
NSRs are designated by a ".nn" country modifier signifying the
relevant country, as in ".mx" for Mexico. For further information
on Moody's approach to national scale credit ratings, please refer
to Moody's Credit rating Methodology published in June 2014
entitled "Mapping Moody's National Scale Ratings to Global Scale
Ratings".
GPAT COMPANIA: Moody's Assigns B2 Global Currency Debt Rating
-------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo has
assigned a B2 global local currency debt rating to the expected
issuance of GPAT Compania Financiera (GPAT) Class A, up to the
amount of Ar$250 million which will be due in 9 months, and Class
B, up to the amount of Ar$250 million which will be due in 18
months. The total amount of both classes must not exceed Ar$250
million. At the same time, Moody's Latin America assigned a Aa2.ar
national scale local currency debt rating to GPAT's expected
issuances. The issuances are under GPAT's debt program up to the
amount of Ar$1500 million.
The outlook for all ratings is stable.
The following ratings were assigned to GPAT Compania Financiera
S.A.'s issuances:
Class A: Ar$250 million senior unsecured debt issuance:
B2 Global Local Currency Debt Rating, with stable outlook
Aa2.ar Argentina National Scale Local Currency Debt Rating
Class B: Ar$250 million senior unsecured debt issuance:
B2 Global Local Currency Debt Rating; with stable outlook
Aa2.ar Argentina National Scale Local Currency Debt Rating
Ratings Rationale
Moody's explained that the local currency senior unsecured debt
rating derives from GPAT's B2 global local currency corporate
family rating (CFR), which is mainly based on the entity's key
role as the financial agent for General Motors and its strong
commercial and strategic importance to the corporation, as well as
its profitability and funding structure. The rating also takes
into account the company's monoline business orientation. On June
2014, new regulations capping interest rates on car loans went
into effect. This new regulation will add additional pressure on
GPAT's margins, following a drop in consumer confidence and the
resulting decline in demand that has hit car sales.
GPAT is 99% owned by Banco Patagonia (rated E, B1). Moody's said
that the one-notch differential between the B1 local currency
deposit rating for Banco Patagonia and the B2 debt rating reflects
the structural subordination of GPAT's bondholders to all
liability holders of Banco Patagonia.
GPAT Compania Financiera S.A. is headquartered in Buenos Aires,
Argentina, and reported Ar$2,047 million of total assets and
Ar$450 million of shareholders' equity as of March 2014.
The principal methodology used in this rating was Finance Company
Global Rating Methodology published in March 2012.
=============
B O L I V I A
=============
BANCO SOLIDARIO: Moody's Affirms 'D-' Bank Fin'l. Strength Rating
-----------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo affirmed
the bank financial strength rating for Banco Solidario S.A.
(Solidario) and Banco Los Andes Procredit (Los Andes), and changed
the outlook on the rating to negative, from stable. Moody's
affirmed the bank financial strength rating for Banco Fie
S.A.(Fie), with stable outlook. At the same time, Moody's affirmed
the global and national scale local currency deposit ratings for
Solidario, Los Andes and Fie and changed the outlook on these
ratings to negative from stable.
In addition, Moody's affirmed Solidario's and Fie's global and
national scale senior unsecured debt and subordinated debt ratings
with a negative outlook. Also, Moody's affirmed Solidario's, Fie's
and Los Andes' foreign currency deposit ratings at B1/Aa2.bo in
global and national scale respectively, with stable outlook, as
well as their short-term deposit ratings at Not Prime/BO-1 in the
global and national scale respectively.
The following ratings were affirmed with a negative outlook:
Banco Solidario S.A.
- Bank Financial Strength Rating: D-
- Global Local Currency Deposit Rating: Ba2
- Global Local Currency Senior Unsecured MTN Rating: (P)Ba2
- Global Local Currency Senior Debt Rating: Ba2
- Global Local Currency Subordinated Debt Rating: B1
- National Scale Local Currency Deposit Rating: Aaa.bo
- National Scale Local Currency Senior Unsecured MTN Rating:
Aaa.bo
- National Scale Local Currency Senior Debt Rating: Aaa.bo
- National Scale Local Currency Subordinated Debt Rating: Aa2.bo
Banco Fie S.A.
- Global Local Currency Deposit Rating: Ba3
- Global Local Currency Senior Unsecured MTN Rating: (P)Ba3
- Global Local Currency Senior Debt Rating: Ba3
- Global Local Currency Subordinated Debt Rating: B2
- National Scale Local Currency Deposit Rating: Aa1.bo
- National Scale Local Currency Senior Unsecured MTN Rating:
Aa1.bo
- National Scale Local Currency Senior Debt Rating: Aa1.bo
- National Scale Local Currency Subordinated Debt Rating: Aa3.bo
Banco Los Andes Procredit S.A.
- Bank Financial Strength Rating: D-
- Global Local Currency Deposit Rating: Ba3
- National Scale Local Currency Deposit Rating: Aa1.bo
Ratings Rationale
In assigning a negative outlook on Solidario, Fie and Los Andes'
ratings Moody's noted the effects that the Financial Services Law,
enacted in Bolivia in August 2013, may have on these banks'
profitability and growth strategy. Although parts of the new law
are yet to be fully regulated, Moody's anticipate that caps on
lending rates and floors for deposit rates, as introduced by the
new law, will have negative credit implications on these banks'
performance.
The limits on lending rates, combined with mandated lending to
productive and social housing sectors, will pressure net interest
margins, ultimately reducing capital generation by cutting into
the banks' retained earnings.
By virtue of their business strategy, all three banks have sizable
exposures to the microfinance sector, which account for 60% to 75%
of their total loan books. Because of the risk profile of their
targeted microfinance clients, lending rates are high to also
compensate for the high operating costs of servicing these
borrowers. As a result, Moody's expects new regulations to have
the most impact on margins in this segment, because the expected
rate caps would likely be lower than current lending rates.
At the same time, the minimum deposits rates to be introduced by
the new Law may also affect banks' cost of funding and hurt
margins. Deposits rates will be imposed on accounts with
outstanding balances lower than $10,000, which represent between
12% and 18% of these banks' funding mix.
On the other hand, in affirming these banks' ratings, Moody's
notes expectations that favorable economic conditions will support
banks' financial performance. Strong economic growth will likely
help offset some of the negative effects of government financial
regulations. Asset quality will remain strong, supported by
increasing purchasing power among low and middle-income consumers,
which will improve borrowers' repayment capacity. In addition,
reserve buffers are sufficient to absorb losses, limiting credit
risks. However, banks' portfolio may shift towards higher-risk
segments in response to new regulations and to maintain their
margins, a move that could well hurt asset quality.
Banco Solidario S.A. is headquartered in La Paz, Bolivia, and had
$1,119 million in assets, $783 million in deposits, and $93
million in shareholders' equity as of March 2014.
Banco FIE S.A. is headquartered in La Paz, Bolivia, and had $1,163
million in assets, $750 million in deposits, and $86 million in
shareholders' equity as of March 2014.
Banco Los Andes Procredit S.A. is headquartered in Santa Cruz de
la Sierra, Bolivia, and had $738 million in assets, $532 million
in deposits, and $76 million in shareholders' equity as of March
2014.
The principal methodology used in this rating was Global Banks
published in May 2013.
EMPRESA NACIONAL: Moody's Assigns Ba3 Corporate Family Rating
-------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo SA has
assigned a first-time Corporate Family Rating of Ba3 on its Global
Scale and Aaa.bo on its Bolivia National Scale to Empresa Nacional
de Telecomunicaciones S.A. (ENTEL S.A.). The rating outlook is
stable.
Ratings Rationale
ENTEL S.A.'s Ba3/Aaa.bo rating is supported by its leading market
position in the mobile business, strong liquidity and steady cash
flow generation. Despite operating in a capital intensive
industry, ENTEL S.A. has only minimal debt-like obligations while
maintaining sufficient cash on hand. ENTEL S.A.'s rating is
restrained by its modest scale when compared to global peers, a
product portfolio largely constrained to the prepaid mobile
business, and revenue growth pressured by Bolivia's highly
competitive telecom operating environment. Over the next three
years, ENTEL S.A. also plans to carry out significant capital
investments which would generate sustained negative free cash
flow.
ENTEL S.A.'s rating reflects the application of Moody's joint
default rating methodology for government-related issuers (GRIs).
ENTEL S.A.'s rating combines: (i) ENTEL S.A.'s underlying baseline
credit assessment (BCA) of ba, and (ii) the willingness and
ability of the government of Bolivia to provide credit support to
ENTEL S.A. in a distress situation. The Bolivian government's
ability to provide support to ENTEL S.A. is measured by its Ba3
rating and stable outlook, weakened somewhat by the moderate
dependence of the government and the company on credit factors
that could cause stress on both simultaneously. Moody's considers
the government's willingness to support the company in the event
of financial distress as high.
Moody's assumes a moderate level of dependence of ENTEL S.A. on
the Government of Bolivia, considering that sales to government
entities contribute to around 6% of total revenues, in addition to
a reliance of the government on at least 50% of the same
geographical revenue base as ENTEL S.A.. Moody's also considers
that, despite the lack of an explicit guarantee of support, the
Government of Bolivia would provide a high level of support to
ENTEL S.A. in the instance of financial distress, given that the
telecommunication industry is regarded as strategic for the
country.
Since nationalization in 2008, ENTEL S.A. has aggressively
expanded its network throughout Bolivia while generating positive
free cash flow. Nonetheless, ENTEL S.A. plans to significantly
increase capital expenditures to expand and improve its network
during the next three years, which would generate sustained
negative free cash flow. In the long term, the network expansion
could also pressure margins as guarantees expire and maintenance
expenses increase moving forward.
The stable rating outlook incorporates the estimates of operating
stability of ENTEL S.A. over the next 18 to 24 months and that
metrics will remain in line with historical results, even as large
capex investments are carried out. The outlook also takes into
account that, in a scenario where ENTEL S.A. might finance future
needs with debt, it could do so to a certain extent without
negatively impacting its financial metrics.
The rating could be downgraded if ENTEL S.A.'s overall credit
metrics significantly deteriorate, such as that adjusted
debt/EBITDA is sustained above 2.3 times or adjusted EBITDA margin
falls below 35% on a sustained basis. In addition, ENTEL S.A.'s
rating could fall under pressure in case of negative regulatory
developments, a loss of government support, or if funds from the
PRONTIS rural community development programs are restricted. A
large debt-funded acquisition would also put negative pressure on
the rating.
Given the majority participation of the Government of Bolivia in
ENTEL S.A., a rating upgrade would be dependent on a positive
rating action on the sovereign rating, which is currently at Ba3
with a stable outlook.
Moody's use the Global Telecommunications Industry Methodology to
assist in the assessment of ENTEL S.A.'s credit quality. The
methodology suggested rating outcome for ENTEL S.A. is based on
the company's LTM financials as of March 31, 2014. All financial
metrics incorporate Moody's standard adjustments. Application of
this Methodology suggests a global scale rating of Baa1 for ENTEL
S.A.. The difference between the methodology-indicated rating and
ENTEL S.A.'s assigned rating is based on Moody's view of the
company's future business and credit profile, taking into
consideration the sovereign rating and the expectation of
pressured margins and negative free cash flow over the next 12 to
18 months.
Empresa Nacional de Telecomunicaciones (ENTEL S.A.) is Bolivia's
incumbent telecommunications service provider. Initially, the
company was a public entity under the Ministry of Civil
Transportation, Communications and Aeronautics until it became a
subsidiary of Telecom Italia (Ba1, Stable) in 1995. In 2008, the
Government of Bolivia (Ba3, stable) carried out the
nationalization of ENTEL S.A. and now holds 97.5% of the company
shares through the Ministry of Public Works, Utilities and
Housing. The remaining 2.5% is held by a group of minority
shareholders. ENTEL S.A. derives over 80% of its revenue from the
mobile voice and internet segment, where it has approximately 43%
of market share with full national coverage through 2G and 4G
networks. In addition, the company offers fixed landline and
broadband, wireless data, corporate and satellite television
services. During the last twelve months as of March 31, 2014,
ENTEL S.A. reported revenues totaling just over USD 560 million
and EBITDA of USD 208.7 million.
The principal methodology used in this rating was the Global
Telecommunications Industry published in December 2010.
Moody's National Scale Credit Ratings (NSRs) are intended as
relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global
scale credit ratings in that they are not globally comparable with
the full universe of Moody's rated entities, but only with NSRs
for other rated debt issues and issuers within the same country.
NSRs are designated by a ".nn" country modifier signifying the
relevant country, as in ".mx" for Mexico. For further information
on Moody's approach to national scale credit ratings, please refer
to Moody's Credit rating Methodology published in June 2014
entitled "Mapping Moody's National Scale Ratings to Global Scale
Ratings".
===========
B R A Z I L
===========
BANCO DO BRASIL: Fitch Affirms 'bb+' Viability Rating
------------------------------------------------------
Fitch Ratings has affirmed the long-term foreign and local
currency Issuer Defaults Ratings (IDRs), Support Ratings and
National Ratings of Banco do Brasil S.A. (BdB), Banco Votorantim
S.A. (BV) and Caixa Economica Federal (Caixa), and the National
Ratings of BV Leasing Arrendamento Mercantil S.A's (BV Leasing)
debentures. Fitch also affirmed BdB's and BV's Viability Ratings
(VR) at 'bb+' and at 'bb-', respectively.
A full list of rating actions is provided at the end of this
release.
The international ratings of BdB and Caixa, which are systemically
important banks in Brazil, are equalized and linked to Brazil's
sovereign ratings. This reflects Fitch's view that probability of
government support to these two banks, in case of need, is high.
This explains their Support Ratings of '2' and Support Rating
Floors of 'BBB'.
BdB and Caixa are the two largest government-owned retail banks in
Brazil. Their strategies are highly linked to the government's
economic and social policies. BdB is 58.6% owned by the government
and Caixa is fully government owned. BdB has a relatively more
commercial scope than Caixa, but both banks fulfill an important
policy role and increasingly compete for public funds. BdB is the
largest lender for agribusiness (68.5% market share in 1Q'14) and
payroll deductible loans (27.1% market share), while Caixa is the
largest lender in mortgage lending (67.6% market share).
In addition, they are both significant players in commercial loans
(to individuals, SMEs and corporates) and are expanding their
infrastructure loan portfolios. They are also financial agents for
a number of public institutions, such as the social security
system, and manage various public programs and funds.
In the first quarter of 2014, with assets of BRL1.370 billion and
deposits of BRL455 billion, BdB was the largest bank in the
country in terms of assets and deposits (20% and 26% market share,
respectively, in March 2014). In the same period, Caixa's assets
and deposits were BRL910 billion and BRL371 billion, ranking as
the fourth and second, respectively (14% and 21% market share,
respectively, in March 2014).
Loan growth at both banks was well above the sector average in the
recent years, and was mainly induced by the anti-cyclical measures
of the government. Between 2011 and 2013, average annual loan
growth was 20% and 41% for BdB and Caixa, respectively, while the
system average - excluding BdB and Caixa - was 11%. Both banks
project a decline in loan growth in 2014, but it remains sizable
considering the meager economic activity expectations for the year
(BdB to 14-18% and Caixa to 22-25%).
Fitch believes that such fast loan growth, particularly in the
case of Caixa, might be masking a possible asset quality
deterioration of the more seasoned part of their respective loan
portfolios. It may also have a negative impact on their asset
quality ratios going forward, given the continuation of modest
economic growth and inflationary pressures, as well as higher
interest rates.
Both banks' asset quality indicators remained adequate in 2013 and
1Q'14, and continue to be slightly better than the sector average.
BdB's asset quality is better than Caixa's and benefits from its
large payroll deductible loan portfolio (10% of total loans in
March 2014), which has relatively low risk. Improvements in new
auto vintages and other factors, such as the significant usage of
insurance in the agribusiness segment, protection schemes in SMEs
and lower restructured loans have benefited BdB's credit quality
metrics. In turn, Caixa's indicators are supported by its secured
loans portfolio (mortgages and payroll deductible loans, which
made up 65% of total in December 2013).
As of March 2014, BdB's nonperforming loans (NPLs, past due loans
over 90 days) remained stable at approximately 2% of gross loans,
while Caixa's NPLs rose slightly to 2.6% from 2.3% in March 2013.
In the same period, sector NPL/gross loan ratio improved to 3%
(3.6% in March 2013). The moderate deterioration in Caixa's NPLs
was mainly driven by the commercial loans to individuals, while
they remained stable at 1.9% in the mortgage book.
BdB and Caixa's capitalization ratios have historically been lower
than the average for large private banks. Recent rapid loan growth
and high dividends have also pressured both banks' capital ratios.
In the case of Caixa, the conversion of the Additional Tier 1
(AT1) securities subscribed by the National Treasury to Common
Equity Tier 1 (CET1) capital, currently pending the Central Bank
of Brazil's approval, will alleviate potential pressures on its
capitalization. It will also lead to a meaningful improvement in
the capital structure and the Fitch Core Capital (FCC) ratio, as
Fitch considers these securities as part of shareholder's equity
and FCC. Caixa's FCC ratio (FCC/risk weighted assets) should rise
to approximately 11% following the conversion (5.74% in March
2014). BdB's capitalization will benefit more immediately by its
recent market issue of AT1 securities, which should maintain its
Fitch Eligible Capital (FEC) ratio above 7% (7.09% in March 2014),
as Fitch assigns 50% equity credit to these securities.
BV is 50% owned by BdB and its participation will remain unchanged
in the near term, although its willingness to support the bank
will remain strong if necessary. BdB grants BV an interbank credit
line of BRL 7 billion (never used) and funding through recurring
acquisitions of its credit portfolio. There is no extraordinary
capital injection need projected for the near term, considering
that BV should resume growth and profitability until 2015. Hybrids
instruments eligible as Tier 1 (T1) and Tier 2 (T2) capital have
been studied as part of its funding and capital plan as
alternatives to provide the bank with a cushion if necessary.
In recent years, BV has grown and expanded its scope of action,
amplifying revenues from a better product mix in the wholesale,
wealth management and consumer finance areas - in the latter,
mainly in the auto loans segment. With a strong relationship with
multi brand dealers (new and used vehicles), BV is one of the
local leaders in car financing with around 17% market share as of
March 2014.
Fitch's projections for the state owned banks do not take into
consideration a potentially negative decision by the Brazilian
Supreme Court regarding the constitutionality of the monetary
correction indices applied to certain savings deposits in the past
decades. An unfavorable decision would likely pressure BdB and
Caixa's capital and, possibly, their liquidity, depending on the
specifics of the ruling's outcome. Under this scenario, Fitch
believes that the government would provide the necessary support.
Key Rating Drivers
BdB:
BdB's IDRs and National Ratings are linked to the sovereign
ratings of Brazil, reflecting the federal government control and
influence over its strategies, as well as its systemic importance.
The federal government has influence over the strategies of the
bank, as evidenced by its role during the 2008 crisis, in the
governmental economic policies promoting the agribusiness
development, and in the widespread reduction in the domestic
interest rates, as well as its recent engagement in managing
federal government's infrastructure programs.
BdB's VR considers its strong franchise, wide branch network,
diversified client and earnings base, high liquidity and
satisfactory performance through the economic cycles, while its
capitalization remains low compared to other banks with VRs
'bb+/bbb-' and to local private peers. Some improvements are
expected in its capital base, which will preserve a minimum
cushion during the phase-in period of the new Basel III capital
rules implemented in Brazil in October 2013. Management has
indicated their desire to run the bank with a buffer on top of
those requirements, although, in Fitch's opinion based on its own
capital adequacy calculations, such improvement may be modest.
The ratings of BdB's senior unsecured notes correspond to its
Long-Term IDR.
BV:
BV's IDRs, Support Rating and National ratings are based on the
support that Fitch believes that the bank receives from BdB. Fitch
considers that BV is strategically important to BdB, since BV
performs important complementary activities to BdB's operations
and strategies outside its network of agencies, especially in the
consumer finance business line (auto and payroll deductible
loans).
BV's VR reflects its adequate market position within its niche
markets and the benefits provided by the ordinary support of its
shareholders in terms of liquidity and funding. The VR also
incorporates BV's still weak profitability which was affected by
asset quality issues between 2011 and 2013. Its capital base is
considered sufficient given its low profitability, and has been
enhanced by its shareholders. The recent improvements in asset
quality and ongoing adjustments to operating costs have been
positive for its performance. The capital ratios benefited from
the reduction in the pace of expansion (FCC: 8.8%, T1: 9.5% and
total regulatory capital: 14.5%, as of 1Q'14) and compares well
with banks at the same rating category.
The rating of BV's senior unsecured notes due May 2016 corresponds
to its long-term IDR.
The rating of BV Leasing's subordinated issuances, which are
notched down by one from the supported long-term National Rating
of BV, reflect the loss severity of the instrument due to its
subordination to senior creditors in case of liquidation of the
entity. Fitch considers that support to those issuances will be
available from its parent BV. Hence, the current notching
incorporates only the loss severity in case of liquidation.
Caixa:
Caixa's ratings are linked to Brazil's sovereign ratings and
reflect the high probability of support, as evidenced by the
capital injections by the National Treasury funding loan growth
over the years, full ownership by the federal government, its
systemic importance, and the crucial role it plays in the
implementation of government economic programs and extension of
credit to lower income population segments. Fitch considers Caixa
a 'public-mission bank', therefore does not assign a VR.
Caixa is one of the main agents financing and/or managing
politically high profile federal government development programs
such as Programa de Aceleracao do Crescimento (the Accelerated
Growth Program focusing on large infrastructure projects),
Programa Minha Casa Minha Vida (a program for affordable mortgage
lending), and Bolsa Familia (an assistance grant made to low-
income families). It also manages a number of large public funds
and the collection of federal lottery proceeds.
Caixa's capital base is sustained by the National Treasury, which
subscribed all of its CET1 and AT1 securities as of March 2014.
Caixa's T2 securities are subscribed by the Workers' Severity and
Indemnity Fund (Fundo de Garantia do Tempo de Servico, FGTS).
These will be phased out gradually (20% per year starting five
years prior to the maturity of each contract) and may be replaced
by Basel III-compliant T2 securities mainly provided by FGTS.
Caixa could also tap the international markets for hybrid debt
issuances.
Rating Sensitivities
BdB:
BdB's IDRs would be affected by potential changes in the sovereign
ratings of Brazil and/or in its shareholders' willingness to
provide support. Fitch does not expect a change in the
government's willingness to provide support over the rating
horizon.
BdB's VR would be affected negatively if asset quality
deteriorates or profitability weakens, undermining its capital
base measured by a FEC ratio lower than 6.5-7% in a sustained
manner. Positive BdB VR action depends on a sustained improvement
of that ratio and ability to preserve good asset quality ratios
and profitability levels.
BV:
Although unlikely in the short term, any change in BdB's ratings,
or in its willingness or capacity to provide support to BV, could
result in changes in BV's IDRs and National Ratings and the rating
of its senior notes.
A consistent recovery of its profitability on a sustained basis
and aligned with peer averages, the maintenance of the adequate
capital structure and moderate risk appetite could be positive for
BV's VR. The VR could be downgraded if there is further
deterioration in credit portfolio, performance that lead to a
reduction in capitalization.
The national long-term rating of the 1st and 2nd debenture
issuances of BV Leasing could be reviewed in the case of changes
in BV's rating.
Caixa:
Caixa's IDRs would be affected by potential changes in the
sovereign ratings of Brazil and/or in its shareholder's
willingness to provide support. Fitch does not expect a change in
its evaluation of the government's willingness to provide support
over the rating horizon.
Fitch has taken the following rating actions:
Banco do Brasil:
--Long-term foreign and local currency IDRs affirmed at 'BBB',
Outlook Stable;
--Short-term foreign and local currency IDRs affirmed at 'F2';
-- Viability Rating affirmed at 'bb+';
-- Long-term national rating affirmed at 'AAA(bra)', Outlook
Stable;
-- Short-term national rating affirmed at 'F1+(bra)';
-- Support Rating affirmed at '2';
-- Support Rating Floor affirmed at 'BBB';
-- Senior unsecured CLF and EUR notes due 2018 and 2019, long-
term foreign currency rating affirmed at 'BBB'.
Banco Votorantim:
-- Long-term foreign and local currency IDRs affirmed at 'BBB-',
Outlook Stable;
-- Short-term foreign and local currency IDRs affirmed at 'F3';
-- Viability Rating affirmed at 'bb-';
-- Long-term national rating affirmed at 'AA+(bra)', Outlook
Stable;
-- Short-term national rating affirmed at 'F1+(bra)';
-- Support Rating affirmed at '2';
-- Senior unsecured BRL notes due May 2016, long-term foreign
currency rating affirmed at 'BBB-'.
BV Leasing Arrendamento Mercantil S.A.
--1st and 2nd debentures issuances, national long-term rating
affirmed at 'AA(bra)'.
Caixa Economica Federal:
-- Long-term foreign and local currency IDRs affirmed at 'BBB',
Outlook Stable;
-- Short-term foreign and local currency IDR affirmed 'F2';
-- Long-term national rating affirmed at 'AAA(bra)', Outlook
Stable;
-- Short-term national rating affirmed at 'F1+(bra)';
-- Support Rating affirmed at '2';
-- Support Rating Floor affirmed at 'BBB';
-- Senior unsecured USD notes due 2017, 2018, 2019 and 2022,
long-term foreign currency rating affirmed at 'BBB'.
BANCO MERCANTIL: Moody's Lowers LT Currency Deposit Ratings to B1
-----------------------------------------------------------------
Moody's Investors Service has downgraded Banco Mercantil do Brasil
S.A.'s (BMB) bank financial strength rating to E+, from D, and
lowered its standalone baseline credit assessment (BCA) to b1,
from ba2. At the same time, Moody's also downgraded the long-term
local and foreign currency deposit ratings to B1, from Ba2, the
foreign currency senior unsecured rating to B1, from Ba2, the
foreign currency subordinated debt rating to B2, from Ba3, and the
Brazilian national scale deposit ratings to Baa3.br and BR-3, from
Aa3.br and BR-1, long- and short-term, respectively. The short-
term global local and foreign currency deposit ratings of Not
Prime were not affected. Moody's changed to negative, from stable,
the outlook on all ratings.
The following ratings of Banco Mercantil do Brasil were
downgraded:
Bank financial strength rating: to E+, from D, with negative
outlook
Long-term global local currency deposit rating: to B1, from Ba2,
with negative outlook
Long-term foreign currency deposit rating: to B1, from Ba2, with
negative outlook
Long-term foreign currency senior unsecured debt rating: to B1,
from Ba2, with negative outlook
Long-term foreign currency subordinated debt rating: to B2, from
Ba3, with negative outlook
Brazilian national scale deposit ratings: to Baa3.br and BR-3,
from Aa3.br and BR-1, with negative outlook
The following ratings of Banco Mercantil do Brasil were affirmed:
Short-term global local-currency deposit rating of Not Prime
Short-term foreign-currency deposit rating of Not Prime
Ratings Rationale
The downgrade of the standalone rating reflects the sharp
deterioration of BMB's asset quality in recent quarters, said
Moody's. The increase in non-performing loans to 8% of total loans
as of 1Q2014 compressed the bank's profitability as management
brought loan loss provisions up to 128% of pre-provision income in
the first quarter of 2014, reaching a historically high level. As
of March 2014, the bank's capital ratio fell 100 basis points, to
12.4%, as a result of first quarter net losses. In addition,
capital was hurt by a 10% reduction in the amount of subordinated
debt allowed to constitute tier 2 capital under the Basel III
framework. The capital ratio would have been lower should BMB's
shareholders had not injected BRL40 million of additional capital
in November 2013. Moody's noted that the persistence of net losses
in future quarters implies additional erosion of BMB's capital
position.
The increase in non-performing loans derived mostly from high
delinquency in loans underwritten to small and medium sized
companies. Moody's highlighted that the presence of low risk,
granular payroll loan operations in BMB's loan book has not offset
losses from its wholesale portfolio.
In addition, BMB's profitability has declined also as a result of
the current sluggish economic activity, which curbed loan demand,
and the intense competition from large banks in BMB's niche
markets. Amidst intrinsic drivers compressing BMB's profitability
are high operating costs, associated with the bank's broad
distribution network, and funding costs, which remain pressured by
government's tightening monetary policy. Moody's expects these
drivers to continue challenging the bank's operation in the short-
term, which translates into the negative outlook on BMB's
standalone ratings.
At this moment, upward pressure on ratings is highly unlikely in
light of the current negative outlook. However, a reduction in
non-performing loans and loan loss provision could benefit BMB's
capacity to retain earnings and capital, which could improve the
bank's creditworthiness. Conversely, downward pressure on ratings
could derive from ongoing deterioration of asset quality,
maintenance of provision expenses at a high level, further
difficulty in originating sufficient earnings to face potential
higher credit and operating costs and persistent reduction of the
bank's capital cushion.
The last rating action on BMB was on 20 January 2012, when Moody's
affirmed all ratings assigned to the bank. The outlook on all
ratings remained stable.
The principal methodology used in this rating was Moody's Global
Banks methodology published on 31 May 2013.
Banco Mercantil do Brasil S.A. is headquartered in Belo Horizonte,
Brazil and reported consolidated assets of BRL13.6 billion ($6
billion) and equity of BRL859 million ($381 million) as of 31
March 2014.
TUPY OVERSEAS: Fitch Expects to Rate $350MM Senior Notes 'BB(EXP)'
------------------------------------------------------------------
Fitch Ratings expects to assign a 'BB(EXP)' rating to Tupy
Overseas S.A.'s proposed USD350 million senior unsecured notes due
2021, which will be unconditionally and irrevocably guaranteed by
Tupy S.A. (Tupy). Net proceeds from this issuance will be used to
refinance part of existing debt.
Fitch currently rates Tupy with foreign and local currency Issuer
Default Ratings (IDRs) of 'BB' with a national long-term rating of
'AA(bra)'. The Outlook for the corporate ratings 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. 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.
The proposed notes aim at refinancing part of existing debt, which
should strengthen even further Tupy's liquidity profile. On a pro-
forma basis, Fitch estimates that Tupy's debt duration will
improve to approximately 3.4 years, from 1.8 year currently.
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.
* BRAZIL: Sugar Prospects Dim as Rain Misses Cane Heartland
-----------------------------------------------------------
Gerson Freitas Jr. at Bloomberg News report that El Nino rains are
the least of Brazilian sugar producers' worries as a dry spell in
the world's cane-growing heartland threatens to further shrink
harvests.
Drenching rains from El Nino, which have caused flooding in some
states, are forecast to remain south of the area that produces
most of Brazil's sugar cane, according to Bloomberg News. While
dryness in the Center-South region increases sucrose
concentration, it also means some of the crop may not reach the
right size for harvesting, according to analysts at Banco Pine and
Canaplan, Bloomberg News relates.
If the lingering effects of the worst drought in decades persist,
sugar mills could leave as much as 20 million metric tons of cane
standing, Luiz Carlos Correa Carvalho, director of consultancy
Canaplan, said in a telephone interview with Bloomberg News. The
top of Canaplan's April output forecast, which ranged as high as
555 million tons, is "getting more distant," Bloomberg News quoted
Mr. Carvalho as saying. Industry group Unica said low rainfall in
Sao Paulo state means output will come in below an estimate made
in April, Bloomberg News notes.
"Normally cane producers don't want rain during harvest as it
would reduce the sugar content," Bloomberg News quoted Mr.
Carvalho as saying. "Now, some rain would be welcomed by most of
producers," Mr. Carvalho said, Bloomberg News notes.
Banco Pine is considering cutting its cane production forecast to
565 million tons from 579 million tons as rains remained below
average, according to Lucas Brunetti, an analyst at the Sao Paulo-
based investment bank, Bloomberg News relates.
Bloomberg News discloses that the Center-South harvest will be
smaller than the 580 million projected by Unica in April, the
group's director, Antonio de Padua Rodrigues, said by telephone.
Unica will release a revised forecast by the end of this month.
Quality Compromised
Dryness led crop forecaster Datagro to lower its cane outlook to
560.5 million tons from 574 million tons, Bloomberg News relates.
"Lack of rain is compromising the quality of the crop that will be
harvested in the final third of the season," Bloomberg News quoted
Plinio Nastari, head of Datagro, as saying.
El Nino rains aren't forecast to reach sugar-cane areas in Sao
Paulo state before mid-September, when most of crop will have been
harvested. Low temperatures in the Atlantic Ocean are preventing
the rains from moving, Marco Antonio dos Santos, a weather
forecaster for Somar Meteorologia, said by phone, Bloomberg News
notes.
"Rains expected for July and August probably won't be enough to
restore soil moisture and improve the plant developing
conditions," Mr. Santos said, relates Bloomberg News. El Nino
effects should be "short-lived," ending as soon as by December,
Mr. Santos added, notes the report.
==========================
C A Y M A N I S L A N D S
==========================
CENTRIX IX FUND: Shareholders' Final Meeting Set for July 29
------------------------------------------------------------
The shareholders of Centrix IX Fund Limited will hold their final
meeting on July 29, 2014, at 8:45 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
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
EUCLID MASTER: Shareholder to Hear Wind-Up Report on July 23
------------------------------------------------------------
The shareholder of Euclid Master Fund Ltd. will hear on July 23,
2014, at 2:00 p.m., the liquidator's report on the company's wind-
up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Jonathan Turnham
Telephone: (345) 815 1839
Facsimile: (345) 949-9877
EUCLID OFFSHORE: Shareholder to Hear Wind-Up Report on July 23
--------------------------------------------------------------
The shareholder of Euclid Offshore Feeder Fund Ltd will hear on
July 23, 2014, at 2:00 p.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Jonathan Turnham
Telephone: (345) 815 1839
Facsimile: (345) 949-9877
GE CAPITAL: Creditors' Proofs of Debt Due July 21
-------------------------------------------------
The creditors of GE Capital Nobu Holdings Ltd. are required to
file their proofs of debt by July 21, 2014, to be included in the
company's dividend distribution.
The company's liquidator is:
Richard Fear
c/o Daniel Woolston
P.O. Box. 2681 Grand Cayman KYI-1111
Cayman Islands
Telephone: (345) 814 7782
Facsimile: (345) 945 3902
OPHEDGE FUND: Shareholders' Final Meeting Set for July 9
--------------------------------------------------------
The shareholders of Ophedge Fund Services (Cayman) Ltd will hold
their final meeting on July 9, 2014, at 9:00 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Robert Harris
7 Deerfield Lane, Scarsdale
New York 10583
SERENGETI RAPAX: Commences Liquidation Proceedings
--------------------------------------------------
On June 10, 2014, the sole shareholder of Serengeti Rapax Fund
Ltd. passed a resolution 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:
Marc Baum
Serengeti Asset Management LP
632 Broadway, 12th Floor
New York, NY 10012
United States of America
Telephone: (212) 466 2331
e-mail: mbaum@serengeti-am.com
SUTHERLAND HOLDINGS: Shareholders' Final Meeting Set for July 9
---------------------------------------------------------------
The shareholders of Sutherland Holdings Limited will hold their
final meeting on July 9, 2014, at 3:00 p.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidators are:
Jamey Henry Dwyer
Katrina Helen Tannahill
Barclays Wealth Directors (Jersey) Limited
39-41 Broad Street
St Helier Jersey, JE4 5PS
WESTERN ASSET: Shareholders' Final Meeting Set for July 8
---------------------------------------------------------
The shareholders of Western Asset Levered Loan Opportunity Fund,
Ltd. will hold their final meeting on July 8, 2014, at 10:30 a.m.,
to receive the liquidator's report on the company's wind-up
proceedings and property disposal.
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 MASTER: Shareholders' Final Meeting Set for July 8
----------------------------------------------------------------
The shareholders of Western Asset Levered Loan Opportunity Master
Fund, Ltd. will hold their final meeting on July 8, 2014, at
11:00 a.m., to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
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: Shareholders' Final Meeting Set for July 8
------------------------------------------------------------
The shareholders of Western Asset US Enhanced Cash Portfolio, Ltd.
will hold their final meeting on July 8, 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:
Gavin L. James
Walkers
190 Elgin Avenue, George Town
Grand Cayman KY1-9001
Cayman Islands
Telephone: (345) 914 6386
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REP.: Half of Workers Can't Get Pension, Official Warns
-----------------------------------------------------------------
Dominican Today reports that pensions superintendent Joaquin
Geronimo warned that according to current projections, 50% of
those affiliated to the pension regime cannot receive a pension,
because they do not reach 200 quotas stated in the legislation
requires at least 300.
"The fact is that they go in and out. It will not be enough money
and the law requires a minimum of 300 quotas to gain access to the
social solidarity fund. We're trying to get that to 240, because
it withstands 240," Mr. Geronimo said in a luncheon with the
media, according to Dominican Today.
The official also revealed that around 99% of the affiliates who
registered late into the Social Security System cannot opt for
retirement, because they wouldn't have the funds to seek the
minimum pension stipulated in the regime, the report notes.
"There are 420,000 latecomers affiliated, and that total for 95,
97 or 99% won't be enough, and it should be returned as it's being
given back to them, because if you follow the proportion, of
48,000 it's been refunded to 47,988 and the pension has been given
to 12," Mr. Geronimo said, the report notes. Mr. Geronimo
referred to the number of people who have been refunded their
money accumulated in the system, the report discloses.
Mr. Geronimo, the report relays, added that the system was created
in a way that the pension that members will receive would be
depleted until there is no more left of the funds accumulated
during their lifetime, and then the persons in question would have
to request another solidarity pension from the State.
=============
J A M A I C A
=============
JAMAICA: Fitch Gives 'B-' Rating to $800MM Global Bond Issuance
---------------------------------------------------------------
Fitch Ratings has assigned Jamaica's USD800 million global bond
issuance due 2025 a rating of 'B-'. The bonds have a coupon rate
of 7.625%. The rating is in line with Jamaica's long-term foreign
currency Issuer Default Rating (IDR) of 'B-'/Outlook Stable.
The proceeds will be used to meet external financing needs for the
2014/2015 fiscal year, including the repayment of a USD150 million
bond maturing in October 2014, and prefund 2015/2016 fiscal year
maturities.
Key Rating Drivers
Jamaica's ratings balance reduced external and fiscal financing
risks, continued compliance with the International Monetary Fund
(IMF) Extended Fund Facility (EFF), the preservation of broad
macroeconomic and financial stability despite the 2013 NDX and
continued depreciation of the Jamaican dollar against a high
public debt/GDP burden, relatively low external liquidity position
and chronic growth underperformance.
Rating Sensitivities
The rating would be sensitive to any changes in Jamaica's long-
term foreign currency IDR. Fitch upgraded Jamaica's ratings to 'B-
' with a Stable Outlook on Feb. 25 2014.
===========
M E X I C O
===========
BENITO JUAREZ: Moody's Upgrades Global Scale Issuer Rating to B1
----------------------------------------------------------------
Moody's de Mexico upgraded the issuer ratings of the municipality
of Benito Juarez (Cancum) to Baa1.mx (Mexican National Scale) and
B1 (Global Scale, local currency) from Baa3.mx and B2,
respectively. At the same time, Moody's changed the ratings'
outlook to positive from stable.
Ratings Rationale
The upgrade of Benito Juarez's ratings to Baa1.mx (Mexican
National Scale) from Baa3.mx and to B1 (Global Scale, local
currency) from B2 reflects Moody's view that Benito Juarez's
credit profile improved against its national peers as evidenced by
1) strong own-source revenues generated by the municipality's
wealthy economic base, 2) positive gross operating and financial
results during the last three years, and 3) declining debt levels.
Benito Juarez registers one of the highest levels of own-source
revenues among rated Mexican municipalities supported by its solid
economy based on tourism. During 2013, the municipality's own-
source revenues were equivalent to 58.7% of operating revenues,
compared to a median of 32% for Mexican municipalities.
This level of own-source revenues has supported its positive gross
operating balances. Benito Juarez registered gross operating
balances equivalent to 5.2% of operating revenues during the 2011-
2013 period, generating financing for its capital projects. In
2013, gross operating balances were equivalent to 0.1% of
operating revenues despite facing an electoral year.
As a result, Benito Juarez's consolidated cash financing results
were positive over 2011-13 averaging 4.7% of total revenues and
debt levels, although high, have had a declining trend. Net direct
and indirect debt represented 61.5% of operating revenues at the
end of 2013. Moody's expects debt levels to continue declining as
the municipality does not have plans to acquire additional loans.
The positive outlook reflects Moody's expectation that Benito
Juarez will continue to register positive operating and financial
results in the next 12-18 months, which should help debt ratios
further decline and improve liquidity.
What Could Change The Ratings Up/Down
Higher positive operating results, allowing the municipality to
finance its capital projects with available revenues, declining
further debt levels and improving its liquidity position, could
place upward pressure on the ratings. Deteriorating operating
results that lead to higher debt levels or a deterioration of
liquidity levels could exert downward pressure on the ratings.
The principal methodology used in this rating was Regional and
Local Governments published on January 2013.
The period of time covered in the financial information used to
determine municipality of Benito Juarez's rating is between 1
January 2009 and 31 December 2013.
=======
P E R U
=======
CORPORACION PESQUERA: Moody's Affirms B2 CFR; Outlook Stable
------------------------------------------------------------
Moody's Investors Service has revised the rating outlook for
Corporacion Pesquera Inca, S.A.C. (Copeinca) to stable from
positive and affirmed Copeinca's corporate family and senior
unsecured B2 ratings.
The outlook change reflects Copeinca's weaker than expected
operating performance and liquidity coupled with our expectation
of negative free cash flow generation in several quarters over the
next 18 months.
Outlook Actions:
Issuer: Corporacion Pesquera Inca S.A.C.
Outlook, Changed To Stable From Positive
Affirmations:
Issuer: Corporacion Pesquera Inca S.A.C.
Corporate Family Rating, Affirmed B2
Senior Unsecured Regular Bond/Debenture Feb 10, 2017, Affirmed B2
Ratings Rationale
Copeinca's B2 ratings are driven by the company's weak liquidity,
limited operating scale and modest business diversification
compared to protein-industry and regional peers; its exposure to
potentially volatile volume and price trends of the commoditized
global fishmeal and fish oil markets; the sensitivity of cash
flows to climatic conditions and regulation; and pronounced cash
flow seasonality. The rating also considers execution risk arising
from merging Copeinca and China Fishery's operations in Peru.
These credit negatives are to some extent offset by Copeinca's
position as the second largest fishmeal producer in Peru, the
world's leading fishmeal nation and a successful operating history
in its current business configuration.
Copeinca's sales volume and cash flows critically depend on the
level of the Peruvian catch of anchovies, the company's main raw
material, which varies with the total allowable catch set prior to
each fishing season by the Peruvian Ministry of Production (MoP)
or by changing climatic conditions, in particular the El Nino
effect, and unfavorable biomass migrations to locations outside
the reach of fishing vessels. Although the quota for the 1st.
fishing season of this year was set at 2.5 million tons, catch has
been weak as a result of low levels of biomass in the center north
region combined with temporary fishing bans imposed by the
government due to high presence of juveniles. In addition,
according to the Peruvian committee that studies El Nino (ENFEN or
Estudio Nacional del Fenomeno del Nino) a mild to moderate El Nino
is expected, which could hurt Copeinca's cash flow, as its fixed
10.7% quota implies that production is a function of the total
allowable catch set by the MoP.
Copeinca's liquidity is weak. As of March 31, 2014, cash on hand
of USD7.9 million reached the lowest point in the last couple of
years , which negatively compares to USD106 million in short-term
debt related to working capital facilities. In 2013 and over the
last twelve months ended March 31, 2014, Copeinca's free cash flow
(defined as cash from operations minus dividends minus capital
expenditures) has been negative as a result of weak cash from
operations. Under a El Nino scenario later in 2014 Moody's would
expect its negative effects to affect cash flow generation in the
1st. quarter of 2015 when the stocks from the 2nd. fishing season
are typically sold.
Cash flow seasonality is caused by the working capital build-up
that tends to occur during Peru's two anchovy fishing seasons in
the second and fourth calendar quarters and the subsequent cash
inflow when inventories are shipped in the first and third
quarters. Copeinca typically funds these working capital needs
with uncommitted inventory-based short-term bank facilities with
local banks.
The stable ratings outlook reflects Moody's expectation that
Copeinca will improve its liquidity position and that the merger
of China Fishery and Copeinca's operations will not have a
negative impact on the company's credit profile. The outlook also
incorporates our expectation that the company will continue to
operate successfully under the ITQ system.
At this time Moody's don't anticipate an upgrade for Copeinca's
ratings. Longer term, upward ratings pressure could emerge if the
company is able to maintain adequate liquidity with positive free
cash flow generation and strong credit metrics on a sustainable
basis. Quantitatively, it would require debt/EBITDA below 2.5
times and cash flow/net debt above 15%.
Downward pressure to the ratings could occur if Copeinca proves
unable to improve its current liquidity position or if leverage
increases above 5 times on a sustained basis. For example due to a
prolonged period of negative free cash flow generation with
material additional external funding needs.
The principal methodology used in this rating was the Global
Protein and Agriculture Industry published in May 2013.
Corporacion Pesquera Inca S.A.C., headquartered in Lima, Peru, is
the second largest fishmeal and fish oil producer in Peru and the
third largest globally. For the last twelve months ended March 31,
2014, the company had revenues of USD263 million. Copeinca is
owned by China Fishery Group Ltd (B2 stable), headquartered in
Hong Kong and listed in Singapore. China Fishery Group Ltd is
engaged in three business segments: (1) the Contract Supply
Business of Alaska pollock -- a species of cod -- in Russia's
northern Pacific area, through agreements with suppliers; (2) the
production of Peruvian fishmeal and fish oil, and (3) fishing
fleet operations.
INKIA ENERGY: Fitch Affirms 'BB' Issuer Default Ratings
-------------------------------------------------------
Fitch Ratings has affirmed Inkia Energy's Ltd (Inkia) foreign and
local currency Issuer Default Ratings (IDRs) at 'BB'. Fitch has
also affirmed its long-term rating for the company's USD450
million senior unsecured notes due in 2021 at 'BB'. The Rating
Outlook was revised to Negative from Stable.
The Outlook revision to Negative reflects Inkia's decision to
repay USD 167 million intercompany loans to its parent Israel
Corporation (IC). These loans were subordinated to outstanding
notes. Fitch grants an equity credit for these loans and considers
that a repayment and/or other transfers to the shareholders have
the same effect of a dividend payment. Additionally, consolidated
leverage continued increasing as the result of the acquisition of
AEI Nicaragua. These transactions generated a credit position
weaker than previously anticipated.
Inkia' ratings are supported by the solid credit profile of its
most important subsidiary, Kallpa, a 1063 MW (megawatt) Peruvian
thermoelectric generation company. Kallpa's credit quality is
supported by its contractual position and competitive cost
structure; Inkia has a 75% participation in Kallpa. Inkia's
ratings also incorporate the geographic diversification of its
assets, large expansion projects, and expected improvements in its
financial profile following the completion of these projects.
Credit Profile Linked to Kallpa: Kallpa Generacion S.A.'s (Kallpa)
credit quality is supported by its competitive cost structure and
contracted position. Kallpa's power purchase agreements (PPAs)
represent approximately 87% of its firm energy for the period
2014-2021 (excluding Las Flores plant) and support cash flow
stability through fixed payments and fuel cost pass-through
clauses. The company has secured 100% of its natural gas needs
under long-term gas supply contracts through 2022. In 2013,
Kallpa's EBITDA represented 60% of Inkia's consolidated EBITDA.
In August 2012, Kallpa completed its expansion project, which
increased the plant's installed capacity to 870 MW from 581 MW and
improved its efficiency through the installation of a 289 MW
combined-cycle unit. The company has recently acquired Las Flores,
a 193MW simple-cycle gas power plant located 3Km from Kallpa's
plant. The transaction closed in April 2014 and will add USD108M
of new debt. By 2015 and after the acquisition is completed,
leverage at this subsidiary level should range between 2.5 times
(x) and 3.0x.
High Leverage driven by growth strategy: Inkia's stand-alone
financial profile has historically been weak for the rating
category and leverage is expected to remain high for the
foreseeable future. Between September 2013 and March 2014,
consolidated leverage increased from 4.2x to 6.3x as result of i)
debt related to CdA, ii) the acquisition and debt consolidation of
AEI Nicaragua Holdings and iii) a short-term credit facility
provided secured with the shares of Southern Cone Power Ltd and
Latin America Holding. Net leverage, measure as total net debt
with equity credit / EBITDA, was 4.2x at the end of the first
quarter of 2014.
In the short to medium term, leverage is expected to weaken as the
company issues between USD750 million and USD800 million of new
debt, mostly to finance its projects Cerro del Aguila (CdA) and
Samay I and the acquisition of Las Flores. Consolidated leverage
metrics could then return to approximately 3.5x to 4.0x, absent
additional investments that can perpetuate the company's high
consolidated leverage.
Adequate Liquidity Position: Inkia's ratings reflect the strong
liquidity profile it maintained during its expansion process.
Liquidity was supported on cash on hands, readily monetizable
assets and steady dividends from EDEGEL. As of March 2014, its
consolidated cash position amounted to USD494 million. This
compares with short-term debt of USD 411 million, including a USD
168 million intercompany loan. In the short to medium term,
Inkia's liquidity position may change as result of its divestiture
in EDEGEL, investments in projects with credit profiles different
from that of EDEGEL and changes in the dividend policy.
The company benefits from access to local and international
capital markets to finance investment projects at the subsidiary
level. Currently, the company has a syndicated bank facility for
USD591 million to finance the construction of the CdA
hydroelectric generation plant (project finance debt) and is
negotiating a facility for up to USD 304 million to finance Samay
I. Additionally, Kallpa has incurred in additional debt up to USD
108 million to finance the acquisition of Las Flores.
Debt Structurally Subordinated: Inkia's debt is structurally
subordinated to debt at the operating companies. Total debt at the
subsidiary level amounted to approximately USD1.041 billion, or
70% of total consolidated adjusted debt at 1Q2014. The bulk of
this debt is represented by notes issued by Kallpa to fund its
capacity expansion. This project finance-like debt has a standard
covenants package including dividend restrictions and limitations
on additional indebtedness.
On unconsolidated basis, Inkia's cash flow depends on dividends
received from subsidiaries and associated companies. In YE 2013,
the company received distributions for USD 109 million vs. USD 22
million in 2012. This significant increase is mainly explained as
Kallpa started paying dividends after completing its expansion
project (USD 67 million in 2013). Kallpa's project finance-like
debt has a standard covenant package including dividend
restrictions and limitations on additional indebtedness. Kallpa is
restricted from paying dividends if its debt service coverage
ratio (DSCR) falls below 1.2x. Fitch expects Kallpa's DSCR will be
approximately 1.6x in 2014.
In 2013, Inkia received dividends from Southern Cone Power
(EDEGEL) for USD 29 million vs. USD 9 million in 2012. Inkia is
entitled to receive dividends from EDEGEL until the divestiture is
completed. Going forward, the company expects to receive dividends
for more than USD 25 million yearly from its investments in
Central America (Nicaragua and El Salvador subsidiaries would
contribute USD 14 million). Fitch considers that the quality of
these proceeds is weaker than that of EDEGEL.
Portfolio of projects with stable cash generation profile: Cerro
del Aguila is a 510MW hydro plant with long-term PPAs for
approximately 402 MW starting in 2018. The project is estimated to
cost USD910 million and Inkia expects to fund this project with
approximately 65% debt and the balance with equity. The plant
would likely benefit from an existing reservoirs in the Mantaro
river basin; Inkia estimates a capacity factor over 70% for this
plant. Samay I is a 600MW dual-fuel power plant, which will
operate initially as a cold reserve plant. It will receive fixed
capacity payments for 20 years. The plant has the potential to
increase its cash generation when a gas pipeline recently awarded
by the Peruvian government is built. Inkia has approximately a 75%
participation in both projects. Fitch expects a significant
improvement in the financial profile of the issuer after these
projects start generating cash flows in 2016.
Asset Diversification: The ratings also take into consideration
the company's geographic diversification. Excluding its Peruvian
operations, Inkia generated approx. 28% of its consolidated EBITDA
(plus dividends) in 2013 from assets located in Bolivia (rated
'BB-' by Fitch), Chile ('A+'), the Dominican Republic ('B'), El
Salvador ('BB-') and Panama ('BBB'). Over the past few years, cash
flow from these assets was of strategic importance for Inkia.
After the completion of Kallpa's expansion, these assets represent
smaller portion of cash distributions to the holding company.
Rating Sensitivities
A negative rating action could be triggered by a combination of:
investments in projects with risk profiles different from that of
EDEGEL; deterioration of credit metrics as result of new
investments, dividend payments while leverage is high; failure to
decrease consolidated leverage below 4.0x after Cerro del Aguila
and Samay I commence operations; concentration of assets in
countries with high political and economic risk.
Although a positive rating action is not expected in the near
future, any combination of the following factors could be
considered: the Peruvian operation's cash flow contribution
increasing beyond current expectations and/or leverage declines
materially.
====================
P U E R T O R I C O
====================
BANCO SANTANDER: Moody's Affirms 'D' Standalone BFSR
----------------------------------------------------
Moody's Investors Service affirmed all the ratings of three Puerto
Rican banks, including Banco Santander Puerto Rico (BSPR; deposits
Baa1, standalone bank financial strength rating (BFSR) of D);
Popular, Inc. and its subsidiaries (Popular; lead bank deposits
Ba3, standalone BFSR of D-); and FirstBank Puerto Rico (FirstBank;
deposits B2, standalone BFSR of E+). The banks' standalone
baseline credit assessments (BSPR at ba2, Popular at ba3, and
FirstBank at b2) were maintained. Following the affirmations, the
rating outlooks on Popular and FirstBank remain negative, while
the outlook on BSPR remains stable.
The affirmations follow Moody's 1 July 2014 downgrade of the
general obligation (G.O.) rating of the Commonwealth of Puerto
Rico to B2 from Ba2 (see press release "Moody's downgrades Puerto
Rico GOs to B2 from Ba2, COFINA Senior-Sub to Ba3-B1; outlooks
negative," available on moodys.com). The downgrades of Puerto Rico
and its debt-issuing entities follow the commonwealth's enactment
of the Puerto Rico Public Corporation Debt Enforcement and
Recovery Act that will allow public sector corporations to defer
or reduce payments on outstanding bonds.
Ratings Rationale
Moody's said the three banks' current ratings incorporate Puerto
Rico's major economic and fiscal challenges, including the
escalating risk of a public sector default. Puerto Rico's new law
signals the government's depleted capacity for tax increases and
austerity measures. Although the law increases the credit risk for
holders of public sector debt, it could protect household and
corporate cash flows, supporting bank asset quality in the short-
term. However, application of the law may further limit the
commonwealth's capital market access, leaving it more vulnerable
to financial risk and unable to fund capital projects, which could
weaken long-term growth prospects and delay recovery of Puerto
Rico's weak economy and the banks' poor asset quality.
Regarding the banks' direct exposure to the public sector, Moody's
said the banks' capital positions provide a sizable buffer. At 31
March 2014, BSPR's, Popular's and FirstBank's consolidated Tier 1
capital ratios were a high 24.9%, 19.4% and 16.2%, respectively,
which are sufficient to absorb potential losses against their
sizable public sector exposure. Popular's and FirstBank's direct
public sector exposure (including outstanding loans and
securities) were 21% and 32% of Tier 1 capital, respectively
(BSPR's public sector exposure was not publicly disclosed).
Moody's said the negative rating outlooks for Popular and
FirstBank, in contrast to the stable outlook for BSPR, reflect
their greater vulnerability to further deterioration in Puerto
Rico's economy and the potential for higher-than-expected losses
on the banks' public sector exposure. Compared to BSPR, these two
banks' capital positions are less robust to absorb additional
stresses. The negative outlooks also reflect Popular's and
FirstBank's greater reliance on wholesale funding than BSPR.
FirstBank has the weakest funding profile of the three banks as it
is the most reliant on brokered deposits, which accounted for 31%
of the bank's total liabilities at 31 March 2014.
The principal methodology used in these ratings was Global Banks
published in May 2013.
PUERTO RICO INDUSTRIAL: Moody's Cuts Rating on $194MM Bond to B3
----------------------------------------------------------------
Moody's Investors Service downgraded the rating of approximately
$194 million of secured bonds issued by the Puerto Rico
Industrial, Tourist, Educational, Medical, and Environmental
Control Facilities Financing Authority on behalf of AES Puerto
Rico L.P (AES PR) to B3 from Ba2. The rating action follows
yesterday's downgrades of Puerto Rico Electric Power Authority
(PREPA) to Caa2, RUR-down) and the Commonwealth of Puerto Rico
(Commonwealth) to B2, negative. The outlook for AES PR is
negative.
Ratings Rationale
AES PR's revenues and cash flows are entirely dependent upon the
contractual sale of electricity to PREPA and the utility's
willingness and ability to pay for that energy. On June 26th and
subsequently on July 1st Moody's downgraded PREPA to Ba3 and then
to Caa2 and placed the rating under review for possible downgrade.
Both rating actions incorporated PREPA's immediate liquidity
strain along with ongoing operational challenges include negative
free cash flow, high electricity rates, high rates of non-payment,
growing receivables balances and the need to fund a sizeable
construction program. The July 1st rating action followed the
signing into law of the Puerto Rico Public Corporation Debt
Enforcement and Recovery Act (Recovery Act), which provides a
framework for public entities such as PREPA to restructure their
debts. The Recovery Act is intended to allow an orderly
restructuring process while ensuring the continuity of essential
services, such as the provision of electricity, without reliance
on financial support from the Commonwealth or the Government
Development Bank for Puerto Rico (B3 negative). PREPA's Caa2
rating reflects our view that, given its current cash strain and
the July and August maturities of its bank facilities, the utility
may seek to utilize the new law in the near term.
The two notch rating differential between AES PR and PREPA
recognizes the priority position of PREPA's contractual payments
to AES PR as an operating expense, and considers the strategic
importance of this low cost power supply to PREPA including its
relevant role in providing an essential service to the citizens of
Puerto Rico. While Moody's understand that the new legislation has
language which would allow parties to reject contracts, Moody's
believe that AES PR's unique position as a coal-fired plant on the
island and a cost-effective alternative for PREPA relative to fuel
oil generated power (cost is currently about $95 / MWh), positions
the asset well and reduces the probability that PREPA would seek
to reject the contract. The rating also considers the secured
position of the AES PR's project lenders and the additional
protections, such as debt service reserves, provided by the
project financing structure.
AES PR's own operational and financial performance continues to be
consistent with our expectations, and on the basis of earned
revenue, Moody's expect AES PR should be able to demonstrate
DSCR's that are above 1.30x. However, Moody's understand that
given PREPA's liquidity challenges the amount and timing of
payments from PREPA have been somewhat erratic, periodically
impacting cash flow metrics. It is possible payment delays may
widen with PREPA's continuing liquidity strain. For the twelve
months ending February 2014, AES PR calculated a cash based DSCR
of 1.42x; and for the twelve months ending February 2015, projects
cash based ratio of 1.30x.
The negative outlook reflects the potential for additional growth
in PREPA receivables and uncertainty with regards to the process
and timing surrounding the newly passed Recovery Act. Our rating
incorporates an expectation that should PREPA seek to restructure
under Chapter 3 of the Recovery Act, it would not seek to reject
the AES PR power purchase agreement. If however, PREPA were to
attempt to reject the contract with AES PR subsequent to a Chapter
3 filing under the Recovery Act, there would likely be downward
pressure on the rating. There is also uncertainty about how PREPA
might utilize the Recovery Act. There could be delays and
administrative costs associated with PREPA's petition for relief
under this act that could impact timeliness of payment under the
contract even if PREPA does not seek outright rejection of the
contract. Downward pressure on the rating could also develop if
payment delays, operating difficulties or if increases in
unrecovered operating and/or capital costs, cause debt service
coverage ratios to fall below 1.10x for an extended period.
In light of the negative outlook, the rating is not likely to be
revised upward over the near-to-medium term. In the event the
rating outlook at PREPA stabilized, the outlook for AES PR would
also likely be revised to stable. Longer term, upward pressure on
the rating could develop if the rating of PREPA were to be revised
upward and if the project is able to demonstrate debt service
coverage ratios above 1.3x on a sustainable basis.
The principal methodology used in this rating was Power Generation
Projects published in December 2012.
AES PR, an indirect wholly owned subsidiary of AES Corporation
(AES: Ba3 stable), owns and operates a 454 megawatt (MW) coal-
fired cogeneration facility located on the southeastern coast of
Puerto Rico. The project sells all of its firm energy and capacity
pursuant to a 25-year power purchase agreement to the PREPA, a
public corporation and governmental agency of the Commonwealth of
Puerto Rico. The project began operating in 2002.
PUERTO RICO: Debt Law May Be Decided in Boston
----------------------------------------------
Bill Rochelle, the bankruptcy columnist for Bloomberg News,
reports that the U.S. Court of Appeals in Boston probably will be
called on to decide whether Puerto Rico's new law on public-
company debt restructuring violates the U.S. Constitution.
According to the report, at the end of June, Puerto Rico adopted
the Public Corporation Debt Enforcement and Recovery Act, enabling
the commonwealth's public corporations to restructure their debt
in a manner akin to Chapter 11 reorganization. The Puerto Rico
Electric Power Authority, or Prepa, may be the first agency to
try to use the new law, the report said.
The report related that bond funds affiliated with Franklin
Resources Inc. and Oppenheimer Rochester Funds, owning more than
$1.7 billion in Prepa bonds, started a lawsuit on June 28 asking
the U.S. District Court in San Juan to declare that the new act
violates the U.S. Constitution and is void "in its entirety."
The funds' lawsuit is Franklin California Tax-Fee Trust v.
Commonwealth of Puerto Rico, 14-cv-01518, U.S. District Court,
District of Puerto Rico (San Juan).
===============================
T R I N I D A D & T O B A G O
===============================
CL FIN'L: CLICO Board to Negotiate VSEP Packages, Bank Says
-----------------------------------------------------------
Trinidad Express reports that the Central Bank has placed the
responsibility of voluntary separation package (VSEP) negotiations
for workers at insurance giant Colonial Life Insurance Company
Ltd. (CLICO) with the company's board, after which it will review
accordingly, the bank said in a statement.
The bank's statement follows protest action by CLICO workers,
supported by their union, the Banking, Insurance and General
Workers' Union (BIGWU), outside the Central Bank in Port of Spain,
according to Trinidad Express.
CLICO Agent Kerry Ramjag told Trinidad Express in a telephone
interview that the Central Bank and CLICO's management had not
committed anything in writing regarding the VSEP proposal; because
of the company's "hemming and hawing", the union has initiated the
protest action.
"As agents, for example, because they have not committed, we have
to fight for what we are entitled to as workers. We have our
expectations, but (the Central Bank) is of the view that the
company is insolvent so they cannot give us our benefits," the
report quoted Mr. Ramjag as saying.
The Central Bank said on June 13 it authorized the management of
CLICO to begin negotiations with BIGWU for VSEP for all CLICO
employees, the report discloses. "Central Bank wishes to inform
the public that it is not party to the VSEP negotiations between
CLICO and BIGWU. Central Bank will, however, review and approve
the final agreement on VSEP terms and conditions submitted by
CLICO's board," the bank said, the report notes. The next round
of negotiations is scheduled for July 9.
About CLICO International
Colonial Life Insurance Company Ltd. (CLICO) is a member of the CL
Financial Group.
About CL Financial
CL Financial Limited is a privately held conglomerate in Trinidad
and Tobago. Founded as an insurance company by Cyril Duprey,
Colonial Life Insurance Company was expanded into a diversified
company by his nephew, Lawrence Duprey. CL Financial is now one
of the largest local conglomerates in the region, encompassing
over 65 companies in 32 countries worldwide with total assets
standing at roughly US$100 billion.
* * *
As reported in the Troubled Company Reporter-Latin America on
Aug. 6, 2013, Caribbean360.com said that over TT$8 billion worth
of Colonial Life Insurance Company Limited's (CLICO) profitable
business will be transferred to Atruis, a new company that will be
owned by the state. CLICO is a subsidiary of CL Financial
Limited. The Trinidad Express said that the Cabinet approved the
transfer as the Finance and General Purposes Committee continues
to discuss a letter of intent hammered out by the Ministry of
Finance and CL Financial's 400 shareholders, which envisions
taxpayers will recover the more than TT$20 billion Government has
injected since 2009 to keep CL subsidiary CLICO and other
companies afloat, according to Caribbean360.com.
Caribbean360.com noted that CLICO financially caved in on itself
at the end of 2008 after the investment instruments of major
policyholders matured and they wanted hundreds of millions of
dollars they were owed.
Caribbean360.com related that at its annual general meeting in
Sept. 2013, CL Financial shareholders voted to extend the
agreement with Government until August 25, 2014, while Cabinet
decides on a new framework accord to recover the debt owed to
Government through divestment of CL subsidiaries, including
Methanol Holdings, Republic Bank, Angostura Holdings, CL World
Brands and Home Construction Ltd.
Proceeds from the divestment of these assets will go toward
Government's recovery of the billions it pumped into CLICO,
Caribbean360.com said.
=================
X X X X X X X X X
=================
* BOND PRICING: For the Week From June 30 to July 6, 2014
---------------------------------------------------------
Issuer Coupon Maturity Currency Price
------ ------ -------- -------- -----
Aguas Andinas SA 4.15 12/1/2026 CLP 70
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.
* * * End of Transmission * * *