/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/140709.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 Wednesday, July 9, 2014, Vol. 15, No. 134 Headlines B E R M U D A FLOATEL INTERNATIONAL: S&P Assigns 'B' CCR; Outlook Stable B R A Z I L DESENVOLVE SP: Moody's Affirms Ba1 Long-Term Issuer Rating * BRAZIL: Top Five Economists Pare Forecast for Real's Decline C A Y M A N I S L A N D S AGILITY HOLDINGS: Members' Final Meeting Set for July 17 GIT PRE-IPO: Creditors' Proofs of Debt Due July 21 LILY POND: Creditors' Proofs of Debt Due July 28 MAN INVESTMENT: Creditors' Proofs of Debt Due July 28 MAPLERIDGE CAYMAN: Creditors' Proofs of Debt Due July 28 RP MAC: Creditors' Proofs of Debt Due July 28 RWC SAMSARA: Creditors' Proofs of Debt Due July 28 SECOND ET: Creditors' Proofs of Debt Due July 28 VECTOR CAYMAN: Creditors' Proofs of Debt Due July 28 ZIR INTERNATIONAL: Creditors' Proofs of Debt Due July 24 C H I L E * CHILE: Economy Grew Less-Than-Expected 2.3% in May From Year Ago D O M I N I C A N R E P U B L I C XSTRATA PLC: Gov't 'Steadfast' Against Glencore's Planned Mine G U A T E M A L A * GUATEMALA: Concluding Statement of the 2014 Article IV Mission M E X I C O ALESTRA S: Moody's Withdraws Ba3 Corporate Family Rating SATELITES MEXICANOS: Moody's Withdraws Ba1 Corp. Family Rating P E R U LOS PORTALES: Fitch Withdraws 'B+/RR4(EXP)' Rating on $200MM Bond P U E R T O R I C O PUERTO RICO: Electric Power Authority Given More Time to Pay Debt V E N E Z U E L A VENEZUELA: Delta Air Joins AA in Cutting Flights to Country - - - - - ============= B E R M U D A ============= FLOATEL INTERNATIONAL: S&P Assigns 'B' CCR; Outlook Stable ---------------------------------------------------------- Standard & Poor's Ratings Services said that it assigned its 'B' long-term corporate credit rating to Bermuda-based accommodation rig owner Floatel International Ltd. The outlook is stable. At the same time, S&P assigned a 'B' issue rating to Floatel's $650 million term loan B. The recovery rating is '3', indicating S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default. The ratings on Floatel reflect S&P's assessment of the group's "weak" business risk profile and "highly leveraged" financial risk profile, under S&P's criteria. S&P's assessment of Floatel's business risk profile as "weak" reflects Floatel's participation in the highly competitive and cyclical offshore oilfield services industry, limited diversification due to the low--albeit expanding--number of rigs in operation (three with an additional two rigs on order), and relatively aggressive and largely debt-funded growth strategy. Geographic and customer diversification is limited due to the low number of vessels, but customers are largely blue-chip exploration and production companies. Relative strengths include Floatel's young, competitive, high- quality fleet--all rigs were delivered from 2010 onward--and strong contract backlog of about $1.2 billion (including $428 million of options). This leads to good earnings and cash flow visibility and reflects high demand for capacity. Low operating costs and an experienced management team also support Floatel's adjusted EBITDA margins of about 50% in each of the last three years. In S&P's view, operational risk is somewhat lower than that of other offshore operators, as once the accommodation rig is hooked up to the operating facility, there appears to be limited risk of downtime. Conversely, Floatel's accommodation vessels do not add as much value as other offshore operators (for example, contract drillers). S&P's assessment of Floatel's financial risk profile as "highly leveraged" reflects its view of the group's highly debt-leveraged capital structure, and aggressive financial policies as a result of part-private-equity ownership. It also reflects S&P's forecasts that material investment in new rigs will result in negative free operating cash flows (FOCF) and an increase in debt over the medium term. Maintenance capital expenditure (capex) is low, so Floatel could generate substantial cash flow once the new rigs are operational, although the company will likely continue to expand over the long term. S&P assess the company's management and governance as "fair," reflecting its experienced management team. S&P's base-case scenario incorporates the following assumptions: -- All rigs are currently under long-term contracts; hence S&P's forecast predominantly reflects the agreed day rates and mobilization fees. S&P assumes 97.5% utilization in contracted periods, but less in uncontracted periods to reflect uncertainty. -- S&P expects the new "Endurance" and "Triumph" rigs to be fully operational in 2015 and 2016, respectively. -- Private equity joint owner Oaktree has confirmed no intention to pay dividends, but any change in this policy would represent a downside to S&P's forecasts. -- Maintenance capex requirements are less than $4 million-$6 million per vessel per year. S&P expects capex on the two rigs on order to be about $62 million in 2014 and $589 million in 2015. -- Management completed a rights issue in 2012 to raise $42 million (to finance the initial payment on Endurance) and forecasts a further $80 million issue in 2015. S&P do not include the latter in its forecasts as it is currently uncertain, but S&P could take a positive view of the rights issue if Floatel uses the proceeds to pay off debt. Based on these assumptions, S&P arrives at the following credit measures at year-end 2014: -- Standard & Poor's-adjusted debt to EBITDA of above 6x; -- Funds from operations (FFO) to debt of about 10%; and -- Negative FOCF as a result of the major capex program. The stable outlook reflects S&P's view that Floatel's credit metrics will remain commensurate with a "highly leveraged" financial risk profile. S&P's base-case scenario assumes that the company's EBITDA margins will remain broadly stable over the next 12 months, supported by Floatel's strong contract backlog. S&P anticipates that liquidity will remain adequate over the next 12 months. S&P could lower the rating if any unexpected operational issues occur on one of Floatel's three operational rigs, which lead to a materially worse performance than in S&P's base-case forecasts. S&P might also consider a downgrade if any liquidity issues arise, for example if the company orders further rigs without adequate financing in place, or if S&P's assessment of the company's liquidity weakens. S&P sees an upgrade as relatively remote for the time being, given Floatel's debt-funded, aggressive growth strategy. Sustained deleveraging and stronger credit metrics than S&P currently anticipates could prompt it to raise the ratings if Floatel significantly reduces its debt and generates positive FOCF. In S&P's view, an improvement in Floatel's financial risk profile would be the most likely cause of an upgrade. =========== B R A Z I L =========== DESENVOLVE SP: Moody's Affirms Ba1 Long-Term Issuer Rating ---------------------------------------------------------- Moody's America Latina has affirmed all ratings assigned to Desenvolve SP -- Agencia de Fomento do Estado de Sao Paulo S.A. (Desenvolve SP), including the long and short-term issuer ratings of Ba1 and Not Prime, respectively, and the Brazilian national scale issuer ratings of Aa2.br and BR-1, long and short-term, respectively. The outlook on these ratings is stable. At the same time, Moody's raised Desenvolve SP's standalone baseline credit assessment (BCA) to ba3 from b1. At this time, Moody's withdraws the Not Prime short-term foreign currency rating due to clerical error. The following ratings have been affirmed: Long-term local currency issuer rating of Ba1, stable outlook Short-term local currency issuer rating of Not Prime Long-term Brazilian national scale issuer rating of Aa2.br , stable outlook Short-term Brazilian national scale issuer rating of BR-1 Rating Rationale In raising Desenvolve SP's standalone baseline credit assessment to ba3 from b1, Moody's acknowledges the consistent evolution of its local franchise, in line with the social and economic development policies defined by its controlling shareholder, the State government of Sao Paulo. In the four years of operations, Desenvolve SP has grown its loan book particularly by granting project and equipment financing to small businesses located in the state of Sao Paulo. As its core business, this portfolio accounted for about 90% of the entity's total loans at the end of 2013, consisting of granular and well collateralized loans, which have ensured adequate earnings generation. The standalone rating, however, reflects the entity's still limited funding structure, basically made of equity and long-term on-lendings from the federal development bank BNDES (Baa2, stable). The affirmation of the Ba1 supported issuer rating also reflects the challenging macroeconomic environment that should continue to affect Desenvolve SP's assets quality indicators and constrain its expansion prospects. Asset quality has been volatile since the agency's inception, reflecting the unseasoned credit risk associated with the long-term nature of its small business loan portfolio, as well as the developing target market and risk management. Despite the moderation in loan growth in 2013 and 2014, Desenvolve SP's robust expansion in 2012 continues to affect delinquency rates, which reached 4.23% as of December 2013. Moody's notes that high levels of capitalization and adequate reserves would be sufficient to absorb unexpected credit losses arising from a seasoning portfolio, were the economy to remain sluggish. Management is focused on enhancing the risk tools and increasing the granularity of the loan book as it limits loan size and diversifies into different economic sectors, leveraging from its relationship with the local government and its strategic direction. The principal methodology used in rating Government Related Issuers in Brazil is Moody's "Government-Related Issuers: Methodology Update," published July 2010. The last rating action on Desenvolve SP was on 13 September 2012, when Moody's upgraded the supported global and national scale local currency issuer ratings, following the upgrade of the state of Sao Paulo to Ba1 from Ba2. Desenvolve SP is a development agency owned by the State of Sao Paulo (Baa2; stable), reporting total assets of BRL 1,334.4 million (USD 564.7 million) and equity of BRL 1,035 million (USD 438 million) as of December 31 2013. * BRAZIL: Top Five Economists Pare Forecast for Real's Decline -------------------------------------------------------------- Filipe Pacheco at Bloomberg News reports that the five most- accurate economists surveyed by Brazil's central bank pared their expectation for the real's decline by year-end even as the median outlook of about 100 analysts was unchanged. The central bank said in a survey published July 8, that the median forecast for the currency at year-end from its top five economists was 2.25 per U.S. dollar, compared with 2.30 a week earlier, according to Bloomberg News. The median forecast from about 100 economists surveyed by the central bank stayed at 2.40 percent, Bloomberg News notes. The real dropped 0.3 percent at 2.2213 on July 8 at 2:48 p.m. in Sao Paulo, the biggest decline among 16 major currencies tracked by Bloomberg, on concern gross domestic product growth will slow further, notes the report. Brazil announced June 24 that it was extending until Dec. 31 its daily offer of $200 million of foreign-exchange swaps each business day, Bloomberg News notes. The program supporting the currency and limiting import price increases had been scheduled to finish at the end of June, Bloomberg News relates. "The central bank has demonstrated it is interested in having the dollar close to 2.20," Silvio Campos Neto, an economist at Tendencias Consultoria Integrada in Sao Paulo, said in a telephone interview with Bloomberg News. "The intervention program keeps the currency at this level," Bloomberg News quoted Mr. Neto as saying. The firm was one of the five most-accurate in May, according to the central bank, the report adds. ========================== C A Y M A N I S L A N D S ========================== AGILITY HOLDINGS: Members' Final Meeting Set for July 17 -------------------------------------------------------- The members of Agility Holdings Limited will hold their final meeting on July 17, 2014, to receive the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Buchanan Limited P.O. Box 1170, George Town Grand Cayman KY1-1102 Cayman Islands GIT PRE-IPO: Creditors' Proofs of Debt Due July 21 -------------------------------------------------- The creditors of GIT PRE-IPO Private Equity Fund SPC are required to file their proofs of debt by July 21, 2014, to be included in the company's dividend distribution. The company commenced wind-up proceedings on June 17, 2014. The company's liquidator is: Richard Fear c/o Daniel Woolston Telephone: (345) 814 7782 Facsimile: (345) 945 3902 P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands LILY POND: Creditors' Proofs of Debt Due July 28 ------------------------------------------------ The creditors of Lily Pond MAC Limited are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 MAN INVESTMENT: Creditors' Proofs of Debt Due July 28 ----------------------------------------------------- The creditors of Man Investment Strategies Holding Ltd. are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 MAPLERIDGE CAYMAN: Creditors' Proofs of Debt Due July 28 -------------------------------------------------------- The creditors of Mapleridge Cayman Fund Limited are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 RP MAC: Creditors' Proofs of Debt Due July 28 --------------------------------------------- The creditors of RP Mac Cayman Fund Limited are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 RWC SAMSARA: Creditors' Proofs of Debt Due July 28 -------------------------------------------------- The creditors of RWC Samsara Cayman Fund Limited are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 SECOND ET: Creditors' Proofs of Debt Due July 28 ------------------------------------------------ The creditors of Second ET Main Cayman Fund Limited are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 VECTOR CAYMAN: Creditors' Proofs of Debt Due July 28 ---------------------------------------------------- The creditors of Vector Cayman Fund Limited are required to file their proofs of debt by July 28, 2014, to be included in the company's dividend distribution. The company commenced liquidation proceedings on June 13, 2014. The company's liquidators are: Keiran Hutchison Robin Lee Mcmahon c/o Barry MacManus Ernst & Young Ltd 62 Forum Lane, Camana Bay P.O. Box 510 Grand Cayman KY1-1106 Cayman Islands Telephone: (345) 814 8997 Facsimile: (345) 814 8529 ZIR INTERNATIONAL: Creditors' Proofs of Debt Due July 24 -------------------------------------------------------- The creditors of Zir International Ltd. are required to file their proofs of debt by July 24, 2014, to be included in the company's dividend distribution. The company commenced wind-up proceedings on June 17, 2014. The company's liquidator is: Buchanan Limited c/o Allison Kelly Telephone: (345) 949-0355 Facsimile: (345)949-0360 ========= C H I L E ========= * CHILE: Economy Grew Less-Than-Expected 2.3% in May From Year Ago ------------------------------------------------------------------ Javiera Quiroga at Bloomberg News reports that Chile's economy grew less than analysts expected in May, fueling expectations of a steep drop in interest rates. The Imacec (CLIMYOYN) index, a proxy for gross domestic product, expanded 2.3 percent from a year earlier, the central bank said, according to Bloomberg News. The median forecast of 15 economists surveyed by Bloomberg was for growth of 2.9 percent. Economic activity rose 0.6 percent from the previous month, Bloomberg News notes. "The outlook for consumer spending in the next few months doesn't look good," Ruben Catalan, an economist at Banco de Credito e Inversiones in Santiago, said in an e-mailed message to Bloomberg. The slowdown "will eventually force the central bank to resume its cycle of rate cuts" to a low of 3 percent or 3.25 percent in the first half of next year, Mr. Catalan said, Bloomberg News relates. Bloomberg News notes that the central bank left its key rate unchanged at 4 percent for the third consecutive month in June in its first split decision since April 2008. The newest member of the board, Pablo Garcia, voted for a quarter-point reduction, citing slowing economic growth and the need for further economic stimulus, Bloomberg News relates. The central bank has cut the benchmark rate four times since October as investment fell and consumer spending growth began to ease, Bloomberg News discloses. Chile's economy grew 2.6 percent in the first quarter from a year earlier, the slowest pace in four years, and down from 4.1 percent last year and 5.4 percent in 2012, reports Bloomberg News. The jobless rate rose to 6.3 percent in the three months through May, from 6.1 percent in the previous three months, Bloomberg News says. Slower Growth Bloomberg News relates that manufacturing rose 1.2 percent in May from the year earlier, after contracting in eight of the past 12 months on an annual basis. Retail sales grew to 4.9 percent over the same period, after rising 1.6 percent in April, the least since 2009, Bloomberg News notes. According to the report, policy makers cut their growth forecast for this year on July 16 for the third consecutive quarter to 2.5 percent to 3.5 percent from a previous estimate of 3 percent to 4 percent. They cited a continued slowdown in activity, weaker consumer demand and a drop in investment, which a cyclical decline in the mining industry didn't fully explain, Bloomberg News says. Bloomberg News relays that consumer prices rose 4.7 percent in May from a year earlier, exceeding the central bank's 2 percent to 4 percent target range for a second straight month. Central bank President Rodrigo Vergara said on June 20 that inflation probably will stay above 4 percent until November before it starts slowing toward 3 percent in the first half of 2015, Bloomberg News adds. =================================== D O M I N I C A N R E P U B L I C =================================== XSTRATA PLC: Gov't 'Steadfast' Against Glencore's Planned Mine -------------------------------------------------------------- Dominican Today reports that while Congress plays ping pong with the bill to declare Loma Miranda National Park and awaits the next legislature in the Senate, Environment Minister Bautista Rojas said the government is still steadfast against Glencore Falcondo's planned mine. Mr. Rojas said that has been the official position for more than one year, after receiving the study by the UN Development Program, which found no conditions for such exploitation, according to Dominican Today. "Those conditions haven't changed thus far," the report quoted Minister Rojas as saying. Interviewed on Telesistema Channel 11, the official said he doubts that those conditions could change, the report relates. As to the bill now in Congress, Minister Rojas said his agency has only been to providing information requested by lawmakers, the report notes. Minister Rojas discarded that President Danilo Medina would exert his influence for the planned mine and praised the environmental organizations that defend Loma Miranda, the report notes. As reported in the Troubled Company Reporter-Latin America on Jan. 22, 2014, Dominican Today said that Chief Executive Officer of Xstrata PLC's Falcondo reiterated that the company's presence in the country depends on a long term mining, with cheap electricity available, to produce and compete in world markets. David Soares said they pin their hopes of extracting nickel at the controversial site of Loma Miranda, between La Vega and Bonao (central), for which they expect to get the mining permit, according to Dominican Today. But environmental and civil society groups could keep them from carrying out the project, after the Chamber of Deputies agreed with the protesters and passed a bill which declares Loma Miranda a protected area, arguing that much of the Cibao region's (north) water depends on it, the report related. Xstrata PLC is the operator of Falconbridge Dominicana, C. por A. ("Falcondo") with an 85.26% ownership. Falcondo is a ferronickel surface mining operation located in the Dominican Republic with operations dating since 1971. Headquartered in Zug, Switzerland, Xstrata PLC is a major producer of coal, copper, nickel, primary vanadium and zinc and the largest producer of ferrochrome ================= G U A T E M A L A ================= * GUATEMALA: Concluding Statement of the 2014 Article IV Mission ---------------------------------------------------------------- The International Monetary Fund summarizes preliminary findings and recommendations of the mission that visited Guatemala during June 24-July 7 to conduct the 2014 Article IV consultation. Recent Developments, Outlook, and Risks 1. The Guatemalan economy continues its solid expansion. Emerging from the 2008-09 global financial crisis, activity rebounded quickly. Strong domestic demand, rising export prices, and counter-cyclical policies supported the recovery. Growth has now eased back to potential and the output gap is closed. Prudent macroeconomic policies have helped maintain relatively low inflation and a strong foreign reserve position. The financial system appears robust, the current account deficit is stable, and the macro outlook is broadly positive. 2. Economic developments since the 2013 Article IV Consultation have been positive. Growth has returned to trend. After decelerating somewhat in 2012 following the powerful bounce back from the global crisis in earlier years, real GDP expanded by 3 3/4 percent in 2013, slightly higher than the estimated long-run rate, thus lifting supply to capacity. Growth was supported by buoyant private consumption and credit, despite less favorable external conditions and the roya coffee disease. Inflation stayed within the target range and has declined in early 2014. Headline inflation edged up in 2013 owing to fast rising food prices, but remained within the target range of 3-5 percent. Once these temporary pressures subsided, inflation (including core measures) decelerated markedly in the first half of 2014, driven mainly by declining commodity prices and a positive domestic food supply shock. The balance of payments was stable in 2013 and competitiveness continues to be broadly adequate. The current account deficit was virtually unchanged in 2013 and remains comfortably financed by steady FDI and public sector borrowing. In contrast to other countries in the region, Guatemala did not experience pressures in the foreign exchange market since the Fed's announcement of tapering. Quantitative indicators point to comfortable levels of international reserves. The mission also assesses competitiveness to be broadly adequate, though with some signs of erosion, including a loss of world market share by exports over the last decade. The fiscal deficit declined in 2013, amid revenue and financing shortfalls. Revenue underperformance induced by the disappointing results of the 2012 tax reform were more than offset by expenditure cuts driven by delays in Congressional approval of external loans. As result, the overall deficit of the central government, slightly above 2 percent of GDP, fell below the budget target of 2 1/2 percent of GDP. 3. The economic outlook remains benign. The mission expects growth to remain broadly in line with its trend rate of 3 1/2 percent, supported by buoyant domestic demand, while inflation converges toward the center of the target range. The external current account deficit, largely financed by FDI, is expected to stay at about 2 1/2 percent of GDP over the medium term, underpinned by relatively stable trade balance and remittances. Modest fiscal expansion through the 2015 election cycle is projected to be followed by measured consolidation, with the central government deficit stabilizing at 2 percent of GDP by 2019 and public debt rising slowly to about 27 percent of GDP. 4. However, risks are tilted to the downside, owing both to global uncertainties and domestic policy constraints. The mission views external risks related to the normalization of U.S. monetary policy as balanced. If exit is orderly, the net impact of faster U.S. growth and tighter global financial conditions should be positive in the short term. At the same time, extreme bouts of volatility in world financial markets could still inflict serious damage on Guatemala. Other external risks to growth include a deeper-than-anticipated slowdown in emerging markets, less favorable than expected developments in Europe, and disruptions in commodity markets due to geopolitical tensions. On the domestic front, lasting difficulties in implementing the tax reform and a continuation of the political impasse on the budget may endanger much needed government programs. Conversely, if further possible revenue shortfalls were not met with spending cuts, the hard-won fiscal consolidation could be derailed, lowering Guatemala's resilience to shocks. In the longer term, persistent problems in revenue mobilization and entrenchment of the serious security situation could deter growth and threaten social cohesion. Policies Near-term Policy Mix 5. Fiscal policy is broadly adequate, but consolidation of the tax reform, timely approval of multilateral loans, and adoption of a budget for 2015 are critical. With the output gap essentially closed, a broadly neutral fiscal stance, as envisioned in the "continuing resolution" 2014 budget currently in force, is appropriate. However, efforts to address implementation setbacks to the 2012 tax reform are urgently needed, notably by strengthening taxpayer compliance, particularly in customs. Timely approval of multilateral loans will also be important to support effective spending execution. Passing the 2015 budget in a timely manner will facilitate adequate targeting of outlays. In thier view, this would help safeguard priority social programs and investment in the event of continued revenue shortfalls. Eliminating the stock of domestic spending arrears (not legally recognized) will require a reliable and audited estimate of their outstanding amount and a transparent strategy for their clearance. While important steps have already been undertaken, further improvements in public financial management are also called for to avoid incurrence of new arrears. 6. Monetary policy is slightly accommodative after the recent policy rate cuts, calling for heightened vigilance for any incipient inflationary pressures. Headline inflation is currently close to the bottom of the target range, inflation expectations have lately declined close to the mid-point of the target range, and core inflation remains low. After the cumulative cuts of 75 basis points in the last nine months which have brought the policy rate to 41/2 percent, the mission assesses the monetary stance to be somewhat supportive, though still generally appropriate. With the domestic output gap closed, food prices starting to rise in the region, and increasing risks of an upturn in import prices, the mission considers that under current conditions there is no room for additional cuts to the policy rate. Moreover, the authorities should stand ready to increase the rate promptly to anchor better expectations, if signs of an inflation upswing emerge. Increasing Resilience to Shocks 7. The 2013 budget outcome was generally consistent with long-term sustainability but is unlikely to be maintained once financing constraints are resolved. After rising steadily since the 2008 crisis, the debt-to-GDP ratio nearly stabilized in 2013 at a relatively low level by international standards. This was the result of a lower-than-expected deficit driven not by structural fiscal consolidation, but rather by the political impasse in Congress that delayed loan approval and thus forced spending cuts. Unless revenues pickup more than anticipated, deficits will once again expand and debt ratios resume their steady ascent once these artificial funding problems are resolved. 8. The mission stresses that continued increases in the burden of public debt are a source of vulnerability. In thier view, Guatemala could not comfortably rely on borrowing to support prolonged expansionary counter-cyclical policies. Funding risks could rapidly escalate, especially given the country's low government revenues and high debt-to-revenue ratios. An increase in risk aversion in international capital markets may render government and bank funding more expensive. A shallow domestic financial market and political rigidities that curtail access to multilateral lending provide thin coverage against spikes in global risk aversion. 9. Hence, fiscal sustainability should be gradually bolstered over the medium term. Stabilizing the debt-to-GDP ratio at its current level would require a permanent improvement in the primary balance of about 1/2 percent of GDP-the sustainability gap. This gap would be larger if the actuarial deficit of the social security system were taken into account. With no pressing cyclical need for tightening and risks to growth weighed to the downside, the mission recommends a moderately paced and modestly frontloaded adjustment beginning in 2015. This would strike the right balance between reducing the sustainability gap and limiting the negative impact on growth. 10. The mission urges additional efforts to mobilize revenue beyond budget consolidation needs in order to support social and growth objectives. Guatemala needs not only to achieve long-term fiscal sustainability, but also to maintain macro stability while addressing pressing social needs and enhancing growth potential. Meeting these objectives will depend upon raising the currently low level of government revenues to support priority public spending. In particular, we advocate improving tax administration, reducing tax expenditures, and realigning VAT rates with those prevailing in the region. Lowering the currently high degree of revenue earmarking will also be important to widen the fiscal adjustment toolbox. Regarding the draft competitiveness law (Ley de Inversion y Empleo), the mission is concerned that tax exemptions and other special treatments included in the current proposal could threaten fiscal revenue. More generally, developing a deeper social consensus on the urgency of critical spending needs will be critical to overcome strong political resistance to revenue increases. 11. In addition, it will be essential to reinforce budgetary management and improve the efficiency of public expenditure. Delays in Congressional endorsement of multilateral loans in 2013 highlighted the need to streamline such approvals to prevent expenditure under-execution and provide greater room for counter- cyclical policies, if needed in the future. The mission believes that a key element of this reform would be a requirement for Congress to approve all government financing - including external loans - as part of any overall budget package. The recently approved amendments to the Organic Budget Law, canenhance transparency and efficiency of public spending, and help reallocate resources toward high priority areas. In turn, this would strengthen the credibility of government policies and break the widespread culture of tax avoidance. 12. The mission calls for further strengthening of the monetary policy transmission mechanism, not least by continued progress towards exchange rate flexibility. Guatemala's annual inflation has been relatively low and within the central bank's target band for several years now. Nonetheless, the transmission channels of monetary policy remain feeble, while pass-through effects from commodity prices continue to influence inflation heavily. In order to reinforce inflation as the primary objective of monetary policy, the mission supports a gradual enhancement of exchange rate flexibility. This would also contribute to de-dollarizing credit by forcing agents to internalize FX risks. Development of public debt and private securities markets would also be helpful, not least to facilitate monetary operations. To this end, it is important to finalize the draft capital markets law in compliance with IOSCO best practices and enact it. In addition, the mission recommends that the central bank balance sheet be strengthened by refunding the bank's operational losses. 13. The fast rise of private credit, though it has now moderated, calls for greater vigilance. In particular, the slant of new loans toward foreign currency and consumer financing cause some concern. While credit expansion above that of nominal GDP is consistent with desirable financial deepening, continuation over a long period of very high rates of credit growth could eventually undermine financial stability. The mission stresses that macro- prudential measures, notably higher capital requirements for FX loans to non-exporters, should be considered to guard against these risks, if signs of deterioration in credit quality emerge. Extension of the loan register system to non-bank lenders would improve monitoring of household leverage. 14. Efforts to bolster regulation and supervision of the financial system should progress further. Guatemala's financial system is shallow and its deepening will require moderate but sustained growth of credit over that of nominal GDP, which in turn calls for upgrading the regulatory and supervisory framework. The mission appreciates that significant administrative and legislative reforms have been undertaken, but notes that additional improvements are still needed. Although capital levels seem adequate, there is a need to strengthen consolidated supervision and supervision of financial entities that pose material risks to conglomerates, as well as to tighten definitions of related parties, in order to mitigate risks of overestimating capital levels. Moreover, it would be desirable to step-up the ring-fencing of on-shore banks with respect to the operations of off-shore banks, (acting in Guatemala but incorporated in other countries). Preliminary estimates of core tier 1 capital in the banking system, its high profitability, and excess systemic and individual liquidity levels indicate that the time is ripe to require capital and liquidity buffers that could raise resilience to adverse shocks. In this regard, a phased move to Basel III standards appears the right course of action. Filling in data gaps and adopting robust methodologies for financial stability analysis should be a priority in the policy agenda. Ongoing financial integration among CAPDR countries can bring important economic benefits but also poses challenges for consolidated and transnational supervision. To capitalize on the opportunities, it is hence critical to implement regulation and supervision arrangements that minimize regulatory gaps, arbitrage, and cross-border contagion. 15. Enhanced social spending, structural reforms, and greater regional integration would pave the way toward high inclusive long-term growth. Notwithstanding the progress made toward meeting the Millennium Development Goals targets, poverty remains widespread and security concerns are very serious. In thier view, higher social spending would not only help reduce poverty but also build a skilled and productive labor force, thereby fostering competitiveness and sustaining growth. There is also scope to enhance productivity through structural reforms to improve the business climate, reduce anti-competitive practices, limit the influence of vested interests, and combat crime. Greater regional integration through the completion of the customs union, harmonization of trade rules, and further integration of services and factor markets would also boost Guatemala's growth potential. =========== M E X I C O =========== ALESTRA S: Moody's Withdraws Ba3 Corporate Family Rating -------------------------------------------------------- Moody's Investors Service withdrew the Ba3 corporate family rating on Alestra, S. de R.L. de C.V. due to business reasons. There were no ratings assigned to specific debt instruments. Ratings Rationale Moody's has withdrawn the rating for its own business reasons. Moody's last rating action on Alestra was on October 29, 2013 when the agency upgraded the corporate family rating to Ba3 from B1. Alestra, which started operations in 1996, is a Mexican information technology and telecommunications company providing bundled products including voice, data, Internet and information technology services to enterprises within Mexico. The company is owned by Alfa , a large Mexican conglomerate. For the full year ended in 2013, Alestra's reported revenues were MXN 5,067 million (around USD 394 million). SATELITES MEXICANOS: Moody's Withdraws Ba1 Corp. Family Rating -------------------------------------------------------------- Moody's Investors Service withdrew the Ba1 corporate family rating on Satelites Mexicanos, S.A. de C.V. due to business reasons. There were no ratings assigned to specific debt instruments. Ratings Rationale Moody's has withdrawn the rating for its own business reasons. Moody's last rating action on Satmex was on February 10, 2014, when the agency upgraded the corporate family rating to Ba1 from Caa1 and changed the outlook to stable from rating under review for upgrade. Based in Mexico, Satmex is a satellite operator providing fixed satellite services (standard C- and Ku-band services) to local and international broadcasting and telecom firms as well as to government-related entities. Satmex operates three satellites in geo-synchronous orbital slots allocated to Mexico, covering the Americas. The company's satellite fleet includes Satmex 5, Satmex 6 and the recently launched Satmex 8. For the full year ended on December 31, 2013, the company reported revenues of USD 133 million, of which fixed satellite services represented around 90%. On May 15, 2014, Satmex repaid all its outstanding debt and starting January 2014, the company will fully consolidate within the accounts of Eutelsat Communications. ======= P E R U ======= LOS PORTALES: Fitch Withdraws 'B+/RR4(EXP)' Rating on $200MM Bond ----------------------------------------------------------------- Fitch Ratings has withdrawn the expected rating of 'B+/RR4(EXP)' of Los Portales's proposed bond issuance of up to USD200 million. The withdrawal of the rating follows unfavorable market conditions to sell the notes. As there is no set time frame for resuming the issuance process, no rating is required at this time. Fitch will provide investors with further information on the notes if and when the issuer resumes the sale process. Fitch continues to rate Los Portales S.A. follows: -- Foreign currency Issuer Default Rating (IDR) 'B+'; -- Local currency IDR 'B+'. ===================== P U E R T O R I C O ===================== PUERTO RICO: Electric Power Authority Given More Time to Pay Debt ----------------------------------------------------------------- Michael Corkery, writing for The New York Times' DealBook, reported that Puerto Rico's struggling electric power authority has reached a temporary deal with some of its lenders, buying the agency a little more time as it sorts out its troubled finances. According to the report, banks providing credit lines are allowing the Puerto Rico Electric Power Authority to delay certain payments for three more weeks, the agency said on July 7. * * * As reported by the Troubled Company Reporter Latin America on July 3, 2014, Michael Corkery of The New York Times' DealBook said Puerto Rico's electrical utility is running out of money and time to negotiate a deal with its lenders. The report said the Puerto Rico Electric Power Authority must repay $146 million to Citigroup over the next two months for a credit line used to buy oil to generate electricity. It is also uncertain whether the authority will be able to renew a $550 million credit line from Scotiabank for fuel purchases, the DealBook said, citing people briefed on the matter. ================= V E N E Z U E L A ================= VENEZUELA: Delta Air Joins AA in Cutting Flights to Country ----------------------------------------------------------- Mary Schlangenstein at Bloomberg News reports that Delta Air Lines Inc. joined American Airlines in cutting the number of flights between the U.S. and Venezuela because of a dispute over cash trapped in the country. Delta will go from once daily flights between Atlanta and Caracas to one weekly round trip starting Aug. 1, said Sarah Lora, a spokeswoman for the carrier, according to Bloomberg News. Atlanta- based Delta has provided uninterrupted service to Venezuela for 15 years, Mr. Lora said, Bloomberg News relates. Bloomberg News discloses that the change will further isolate Venezuela, where at least a dozen carriers have cut capacity, sales or service in protest over strict currency controls that prevent them from repatriating earnings from tickets sold there without government authorization. "Delta will remain in the market to serve valued customers, however, the debt created over the past several years due to currency issues made us take a business decision to minimize our risk," Ms. Lora said, declining to disclose how much money the airline has stuck in Venezuela, Bloomberg News relays. American Airlines Group Inc., the U.S. carrier with the most flights to Venezuela, reduced its weekly trips to 10 from 48 as of July 1, Bloomberg News notes. The Fort Worth, Texas-based airline had $750 million locked in Venezuela as of March 31, Bloomberg News adds. *********** 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 * * *