/raid1/www/Hosts/bankrupt/TCRLA_Public/140808.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
Friday, August 8, 2014, Vol. 15, No. 156
Headlines
A R G E N T I N A
ARGENTINA: Moody's Outlook on Banks' Deposit Ratings Now Negative
ARGENTINA: Bank of New York-Managed Fund Loses 51% on Default
B E R M U D A
XL GROUP: Fitch Ups Unit's Rating on Series D & E Shares to 'BBB-'
B O L I V I A
BANCO DE LA NACION: Moody's Deposit Ratings Outlook Now Negative
B R A Z I L
HYPERMARCAS SA: Sees No M&A Opportunities For Now, CEO Says
JBS SA: Tyson to Sell Mexico, Brazil Poultry Businesses to Firm
C A Y M A N I S L A N D S
B6 HOLDING: Creditors' Proofs of Debt Due Aug. 18
C+E DIRECT: Placed Under Voluntary Wind-Up
DYNAMIC OPPORTUNITY: Shareholder to Hear Wind-Up Report on Aug. 19
HOLIDAY PARTNERS: Shareholders' Final Meeting Set for Aug. 19
MACVEAGH (CAYMAN): Shareholders' Final Meeting Set for Sept. 11
MAYA INTERNATIONAL: Creditors' Proofs of Debt Due Aug. 15
SUERTE LIMITED: Shareholders' Final Meeting Set for Aug. 28
TERAMO FUND: Shareholders' Final Meeting Set for Aug. 19
D O M I N I C A N R E P U B L I C
* DOMINICAN REPUBLIC: Storm's Rains Didn't Ease Crunch in Dams
M E X I C O
BIO-PAPPEL: Fitch Affirms 'B' IDR & Revises Outlook to Positive
GRUPO PAPELERO: S&P Revises Outlook to Neg. & Affirms 'B+' CCR
MEXICHEM S.A.B.: Vestolit Deal No Impact on Moody's B1 Rating
P U E R T O R I C O
PUERTO RICO: Chapter 9 Extension Will be Positive, Fitch Says
T R I N I D A D & T O B A G O
CARIBBEAN AIRLINES: TTALPA Optimistic About Talks With Airline
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Moody's Outlook on Banks' Deposit Ratings Now Negative
-----------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo has
affirmed the deposit, debt, issuer and corporate family ratings on
Argentina's banks and financial institutions, both on the global
and national scales. The outlook on these ratings has been changed
to negative from stable. At the same time, the rating agency has
affirmed the banks' Caa2 foreign-currency deposit ratings and Not-
Prime short-term ratings. The banks' standalone E financial
strength ratings corresponding to caa1 baseline credit assessments
(BCA) have also been affirmed.
The rating actions follow Moody's decision on 31 July to affirm
Argentina's Caa1 issuer rating and change the outlook on the
sovereign rating to negative from stable
The bank rating actions take into account the high underlying
inter-linkages between the banks' standalone credit risk profiles
and that of the sovereign.
Moody's has taken the following actions:
(1) affirmed the bank financial strength ratings (BFSR) of 25
Argentine banks, with stable outlook
(2) affirmed the long- and short-term, global and national scale
local and foreign currency deposit ratings of 27 banks and changed
the outlook to negative from stable
(3) affirmed the global and national scale issuer ratings of 3
financial institutions and the corporate family ratings of 3
finance companies and changed the outlook to negative from stable
(4) affirmed the global and national scale local and foreign-
currency senior and subordinated debt ratings of 21 Argentine
banks, and changed the outlook to negative from stable
Ratings Rationale
In assigning a negative outlook on the ratings of the Argentine
banks and financial institutions, Moody's notes the deteriorating
operating environment prompted by Argentina's default, which will
negatively affect the banks' business prospects, asset quality and
earnings generation amid continued economic deceleration and high
inflation.
Moody's also notes that even before Argentina's default, Argentine
financial institutions had already been having to deal with
accelerating inflation and government regulations that were
hurting their profitability, as credit demand softened, and banks
reduced their appetite for lending as they built up liquidity in
the face of growing economic uncertainty.
Financial institutions will also continue to face the risk that
the government will increase pressure on them to provide more
credit in order to stoke economic activity, which risks
compromising lenders' underwriting standards. The government thus
far has imposed caps on lending rates, implemented lending quotas,
restricted banks' dividend payments and limited their dollar
holdings.
Despite the complex operating environment, the country's banks are
relatively well prepared to weather the economic downturn and
remain solvent. Capitalization is strong and deposits have
remained relatively stable thus far despite a currency devaluation
and rising anxiety about a sovereign default. Argentine banks'
direct exposure to the government is limited, with less than 4% of
their total assets invested in government securities as of 1Q2014.
Most of the banks' liquidity is invested in local currency Central
Bank's bills and notes.
The negative outlook on Argentina's Caa1 issuer rating reflects
Moody's views that the recent default on its foreign law bonds
(rated (P) Caa2 by Moody's ) could increase pressure on
Argentina's official foreign exchange reserves amid continued
economic stagnation. Argentina is mired in stagflation with a GDP
that declined 0.2% year-over-year during the first quarter and
high inflation of over 30%, driven in good part by continued
currency depreciation. The default is likely to exacerbate the
economic contraction, increase pressure on the exchange rate, and
push inflation even higher.
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".
ARGENTINA: Bank of New York-Managed Fund Loses 51% on Default
-------------------------------------------------------------
Paula Sambo, Francisco Marcelino and Filipe Pacheco at Bloomberg
News report that Bank of New York Mellon Corp. said one of its
Brazil-based investment funds wrote down more than half the value
of its assets after recording losses on investments linked to
Argentine government debt.
The Brasil Sovereign II Fundo de Investimento de Divida Externa
FIDEX took a loss of BRL197.9 million ($87.2 million) on Aug. 1
after booking a provision on credit-linked notes tied to Argentine
bonds, according to a regulatory filing by BNY Mellon DTVM, the
bank's Brazilian fund manager, according to Bloomberg News. The
fund has just one investor and the identity is not public
information, according to securities regulators.
Bloomberg News notes that Argentina failed to make a $539 million
interest payment on its bonds, prompting Standard & Poor's and
Fitch Ratings to declare the country in default for the second
time since 2001. The country has about $29 billion of overseas
foreign-currency notes outstanding, and the International Swaps &
Derivatives Association ruled last week that the failure to pay
interest will trigger $1 billion of credit-default swaps,
Bloomberg News discloses.
"Due to the suspension of payment on foreign debt notes issued by
Argentina backing the referred notes, and to the necessity to
change its evaluation methodology of some credit-linked notes,
provisions for losses have been made in its portfolio," Bloomberg
News quoted BNY Mellon DTVM as saying.
The fund that held the notes had BRL384.4 million worth of assets
as of July 31, according to data available at the website of the
Brazilian securities regulator, reports Bloomberg News. The value
dropped about 52 percent to BRL185.5 million as of Aug. 1,
Bloomberg News notes.
Court Case
The investment linked to Argentina's sovereign debt was made in
December 2011, when the fund was managed by Atlantica
Administracao de Recursos Ltda., according to the filing,
Bloomberg News relays. BNY's Brazilian fund unit took over
management in March 2012.
In August of that year, the U.S. Securities and Exchange
Commission charged Fabrizio Neves, Atlantica's owner at the time,
with fraud for overcharging customers $36 million by using hidden
fees on structured notes transactions, notes the report.
Mr. Neves and the SEC agreed to settle the dispute in February of
this year, according to a statement from the U.S. regulator
obtained by Bloomberg News.
While Argentina deposited the interest due on overseas bonds with
the trustee, which is also Bank of New York Mellon, the payment
was blocked because of a legal dispute with creditors who refused
to participate in earlier restructurings, Bloomberg News notes.
U.S. District Judge Thomas Griesa prohibited Argentina from making
the payment until it settles unpaid debts owed to the so-called
holdouts, led by billionaire hedge fund manager Paul Singer's
Elliott Management Corp., Bloomberg News discloses.
Unlike current overseas bondholders, who agreed to provide debt
relief to Argentina after its record $95 billion default in 2001,
the holdouts sued in court for full repayment and won a $1.33
billion judgment from Judge Griesa, Bloomberg News relays. The
U.S. Supreme Court declined to hear Argentina's appeal in the case
in June, leaving that order intact.
After last-minute negotiations between Argentina and the holdouts
failed to avert default on July 30, Judge Griesa at an Aug. 1
hearing ordered the parties to continue talking, Bloomberg News
adds.
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B E R M U D A
=============
XL GROUP: Fitch Ups Unit's Rating on Series D & E Shares to 'BBB-'
------------------------------------------------------------------
Fitch Ratings has upgraded its ratings on XLIT Ltd. (a Cayman
Islands subsidiary of XL Group plc) and its property/casualty
(re)insurance subsidiaries (collectively XL) as follows:
-- Issuer Default Rating (IDR) to 'A-' from 'BBB+';
-- Senior unsecured notes to 'BBB+' from 'BBB';
-- Series D and E preference ordinary shares to 'BBB-' from
'BB+';
-- Insurer Financial Strength (IFS) to 'A+' from 'A'.
The Rating Outlook on the IDR is Positive. The Rating Outlook on
the IFS is Stable.
KEY RATING DRIVERS
Fitch's rating rationale for the one-notch upgrade of XL's ratings
reflects favorable recent underlying net earnings from improving
calendar year and run-rate accident year underwriting results,
particularly in the company's insurance segment, as well as
improving operating earnings-based interest and preferred dividend
coverage. The ratings also continue to reflect the company's
solid capitalization, reasonable financial leverage and large
diversified market position in both insurance and reinsurance
lines, as well as anticipated challenges in the overall
competitive property/casualty market rate environment.
The Positive Outlook on the IDR reflects XL's improved operating
earnings-based interest and preferred dividend coverage that could
potentially result in a return to standard notching for the
moderate Bermuda regulatory environment that reflects the
existence of limited payment restrictions to the holding company.
Currently, the holding company IDR reflects nonstandard wider
notching due to unfavorable fixed-charge coverage.
XL posted a net loss of $24 million through the first six months
of 2014, as favorable underwriting results were offset by a $621
million net loss on the sale of its life reinsurance subsidiary to
GreyCastle Holdings Ltd. in June 2014. Fitch views this
transaction as overall neutral to the rating as the immediate
accounting write-off charge is manageable (about 5% of XL's total
shareholders' equity) and is offset by reduced future volatility,
with the investment market risk passed on to the buyer through a
funds withheld liability. As such, this should help XL to
increase focus on its core property/casualty business. Net
earnings totaled $1.1 billion in 2013 and $651 million in 2012,
years which included modest catastrophe losses.
XL's core property/casualty operations posted a very favorable
six-month 2014 GAAP combined ratio of 89.0%, which included
minimal catastrophe losses (1.9 points). This is improved from
92.5% and 96.3% for full years 2013 and 2012, respectively, which
included 5.3 points and 8.0 points (6.2 points from Hurricane
Sandy) for catastrophe losses.
Excluding the impact of catastrophes and favorable reserve
development, XL's underlying accident year combined ratio has
exhibited considerable improvement in recent periods to 91.5% in
the first half of 2014 (1H:14), 92.0% in full-year 2013 and 93.7%
in 2012. This is down from 98.5% for 2011, primarily driven by
reduced large non-catastrophe property loss activity and business
mix changes. XL's insurance segment, in particular, has
demonstrated meaningful improvement, with an accident year
combined ratio excluding catastrophes of 95.3% in 1H'14, compared
with 96.7% in full-year 2013, 98.5% in 2012 and a sizable 104.2%
in 2011. This favorable result is due in part to underwriting
actions taken by the company over the last several years to
improve margins in its poorer performing challenged insurance
businesses.
XL's operating earnings-based interest and preferred dividend
coverage has been weak in recent years, averaging a low 4.4x from
2009-2013. However, earnings coverage improved to more historical
levels at 6.0x both through the first six months of 2014 and in
2013, with more manageable catastrophe losses and overall reduced
interest costs. This follows 4.3x in 2012 and 1.6x in 2011, years
with higher catastrophe losses.
XL continues to maintain a reasonable financial leverage ratio
(adjusted for equity credit and excluding unrealized net
gains/losses on fixed maturities) of 17.7% at June 30, 2014 and
16.9% at Dec. 31, 2013, with debt plus preferred equity-to-total
capital of 26.4% at June 30, 2014, compared with 26.5% at Dec. 31,
2013. XL's capital position has remained stable, with
shareholders' equity of $11.4 billion at June 30, 2014, up
slightly from $11.3 billion at Dec. 31, 2013, as the net loss and
share buybacks were offset by net unrealized investment gains.
RATING SENSITIVITIES
The key rating triggers that could result in a near-term upgrade
to XL's IDR and debt ratings includes operating-earnings-based
interest and preferred dividend coverage maintained at 6.0x or
higher. Key rating triggers that could lead to an upgrade in XL's
ratings over time include favorable earnings with low volatility,
including a combined ratio in the low 90s. In addition, continued
strong capitalization of the insurance subsidiaries, with a net
premiums written-to-equity ratio of 0.8x or lower, a financial
leverage ratio maintained at or below 20% and operating-earnings-
based interest and preferred dividend coverage of at least 10x
could generate positive rating pressure.
Key rating triggers that could result in a downgrade include
significant charges for reserves that affect equity and the
capitalization of the insurance subsidiaries, financial leverage
ratio maintained above 20% or debt plus preferred equity to total
capital above 30%, operating-earnings-based interest and preferred
dividend coverage below 6.0x-7.0x, increases in underwriting
leverage above 1.0x net premiums written-to-equity ratio, earnings
below industry levels and failure to maintain consistent
underwriting profitability.
Fitch has upgraded the following ratings:
XLIT Ltd.
-- IDR to 'A-' from 'BBB+';
-- $600 million 5.25% senior notes due 2014 to 'BBB+' from
'BBB';
-- $300 million 2.30% senior notes due 2018 to 'BBB+' from
'BBB';
-- $400 million 5.75% senior notes due 2021 to 'BBB+' from
'BBB';
-- $350 million 6.375% senior notes due 2024 to 'BBB+' from
'BBB';
-- $325 million 6.25% senior notes due 2027 to 'BBB+' from
'BBB';
-- $300 million 5.25% senior notes due 2043 to 'BBB+' from
'BBB';
-- $345 million series D preference ordinary shares to 'BBB-'
from 'BB+';
-- $999.5 million series E preference ordinary shares to 'BBB-'
from 'BB+'.
The IDR Rating Outlook is Positive.
Fitch has also upgraded to 'A+' from 'A' the IFS ratings of the
following XL (re)insurance subsidiaries:
-- XL Insurance (Bermuda) Ltd;
-- XL Re Ltd;
-- XL Insurance Switzerland Ltd;
-- XL Re Latin America Ltd;
-- XL Insurance Company SE;
-- XL Insurance America, Inc.;
-- XL Reinsurance America Inc.;
-- XL Re Europe SE;
-- XL Insurance Company of New York, Inc.;
-- XL Specialty Insurance Company;
-- Indian Harbor Insurance Company;
-- Greenwich Insurance Company;
-- XL Select Insurance Company.
The IFS Rating Outlook is Stable.
=============
B O L I V I A
=============
BANCO DE LA NACION: Moody's Deposit Ratings Outlook Now Negative
----------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo has
affirmed the long and short-term local and foreign currency
deposit ratings of Banco de la Nacion Argentina (Bolivia), both on
the global and national scales. The outlook on these ratings has
been changed to negative from stable.
Ratings Rationale
The change in the ratings' outlook reflects Moody's assessment of
the alignment between the branches of the Argentine government-
owned Banco de la Nacion Argentina's ratings, and the Argentina's
foreign currency government bond rating of Caa1, negative outlook.
Banco de la Nacion Argentina's operation in Bolivia is 100%
guaranteed by the government, and as such, its ratings are aligned
with the Argentine government's foreign currency bond rating.
The rating action follows Moody's decision on July 31 to affirm
Argentina's Caa1 issuer rating and change the outlook on the
sovereign rating to negative from stable
The negative outlook on Argentina's Caa1 issuer rating reflects
Moody's views that the recent default on its foreign law bonds
(rated (P) Caa2 by Moody's) could increase pressure on Argentina's
official foreign exchange reserves amid continued economic
stagnation. Argentina is mired in stagflation with a GDP that
declined 0.2% year-over-year during the first quarter and high
inflation of over 30%, driven in good part by continued currency
depreciation. The default is likely to exacerbate the economic
contraction, increase pressure on the exchange rate, and push
inflation even higher.
Banco de la Nacion Argentina (Bolivia) is headquartered in Santa
Cruz de la Sierra, Bolivia, with assets of $26.4 million and
shareholders' equity of $13.8 million as of June 2014.
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B R A Z I L
===========
HYPERMARCAS SA: Sees No M&A Opportunities For Now, CEO Says
-----------------------------------------------------------
Brad Haynes and Marcela Ayres at Reuters report that Hypermarcas
SA does not see any opportunities for mergers and acquisitions at
the moment, Chief Executive Officer Claudio Bergamo told analysts.
Hypermarcas SA remains focused on "organic growth," increasing
cash flow and reducing debt levels, Mr. Bergamo said, according to
Reuters.
Hypermarcas SA is a maker of consumer products from diapers to
generic drugs.
* * *
As reported in the Troubled Company Reporter-Latin America on May
15, 2014, Standard & Poor's Ratings Services raised its global
scale corporate credit and debt ratings on Hypermarcas S.A. to
'BB' from 'BB-' and its national scale corporate credit and debt
ratings to 'brAA-' from 'brA'. The outlook on both scales is
stable.
JBS SA: Tyson to Sell Mexico, Brazil Poultry Businesses to Firm
---------------------------------------------------------------
Lisa Baertlein and Shailaja Sharma at Reuters report that Tyson
Foods Inc said it would sell its Mexican and Brazilian poultry
businesses to JBS SA for $575 million and use the proceeds to pay
down debt from its pending $7.7 billion purchase of Hillshire
Brands Co.
Tyson in June outbid JBS' Pilgrim's Pride with a $63 per share
offer for Hillshire, according to Reuters.
The report notes that Tyson has been laying out plans to quickly
pay off debt from the planned Hillshire purchase after some
critics said its offer price was too high. Pilgrim's Pride
declined to raise its bid from $55, saying that paying more was
not in the best interest of shareholders, the report relays.
Tyson's purchase of Hillshire is expected to close before
September 27.
The Mexico and Brazil poultry operations being sold were good
businesses for Tyson but lacked "the necessary scale to gain
leading share positions," Chief Executive Donnie Smith said on a
conference call with analysts, reports Reuters.
Pilgrim's Pride is buying Tyson's Mexico business. Pilgrim's is
majority owned by a subsidiary of JBS SA, which also owns JBS
Foods, the buyer of Tyson's Brazil business.
Tyson Foods forecast 2015 net sales of $42 billion, above the
average analyst estimate of $38.75 billion, according to Thomson
Reuters.
The report discloses that Tyson Foods said it was shuttering three
of its U.S. factories that make processed meat products such as
sausages and hot dogs. The closures were due to changing product
needs, an aging Cherokee, Iowa factory and the distance of the
Buffalo, New York and Santa Teresa, New Mexico plants from their
raw material supply base, the company said, the report adds.
About JBS SA
JBS SA is a multinational food processing company, producing
factory processed beef, chicken and pork, and also selling by-
products from the processing of these meats. It is headquartered
in Sao Paulo. It was founded in 1953 in Anapolis, Goias. The
company has 150 industrial plants around the world.
* * *
As reported in the Troubled Company Reporter-Latin America on
Aug. 6, 2014, Moody's Investors Service affirmed JBS's Ba3 ratings
(global scale) and revised the ratings outlook to stable from
negative. The stabilization of the outlook reflects the
improvements in credit metrics given the rapid and efficient
integration of Seara, the maintenance of an adequate liquidity
position and their expectations that metrics will converge to pre-
acquisition levels by year-end.
==========================
C A Y M A N I S L A N D S
==========================
B6 HOLDING: Creditors' Proofs of Debt Due Aug. 18
-------------------------------------------------
The creditors of B6 Holding are required to file their proofs of
debt by Aug. 18, 2014, to be included in the company's dividend
distribution.
The company commenced wind-up proceedings on July 18, 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
C+E DIRECT: Placed Under Voluntary Wind-Up
------------------------------------------
On July 17, 2014, the shareholders of C+E Direct Finance resolved
to voluntarily wind up the company's operations.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Trident Liquidators (Cayman) Ltd
c/o Eva Moore
Telephone: (345) 949 0880
Facsimile: (345) 949 0881
One Capital Place, 4th Floor
P.O. Box 847, George Town Grand Cayman KY1-1103
Cayman Islands
DYNAMIC OPPORTUNITY: Shareholder to Hear Wind-Up Report on Aug. 19
------------------------------------------------------------------
The shareholder of Dynamic Opportunity Fund, Ltd. will hear on
Aug. 19, 2014, at 10:00 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Joanne Huckle
Telephone: (345) 949 9876
Facsimile: (345) 949-9877
HOLIDAY PARTNERS: Shareholders' Final Meeting Set for Aug. 19
-------------------------------------------------------------
The shareholders of Holiday Partners Limited will hold their final
meeting on Aug. 19, 2014, at 8:00 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Appleby Trust (Cayman) Ltd
c/o Richard Gordon
Telephone: +1 (345) 949 4900
75 Fort Street, PO Box 1350
Grand Cayman KY1-1108
Cayman Islands
MACVEAGH (CAYMAN): Shareholders' Final Meeting Set for Sept. 11
---------------------------------------------------------------
The shareholders of Macveagh (Cayman) Limited will hold their
final meeting on Sept. 11, 2014, at 4:00 p.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
DMS Corporate Services Ltd.
c/o Nicola Cowan
Telephone: (345) 946 7665
Facsimile: (345) 949 2877
dms House, 2nd Floor
P.O. Box 1344 Grand Cayman KY1-1108
Cayman Islands
MAYA INTERNATIONAL: Creditors' Proofs of Debt Due Aug. 15
---------------------------------------------------------
The creditors of Maya International Ltd. are required to file
their proofs of debt by Aug. 15, 2014, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on July 16, 2014.
The company's liquidator is:
MBT Trustees Ltd.
Telephone: 945-8859
Facsimile: 949-9793/4
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
SUERTE LIMITED: Shareholders' Final Meeting Set for Aug. 28
-----------------------------------------------------------
The shareholders of Suerte Limited will hold their final meeting
on Aug. 28, 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:
Edward Martin-Du Pan
c/o Wardour Management Services Limited
Telephone: (345) 945-3301
Facsimile: (345) 945-3302
P O Box 10147 Grand Cayman KY1-1002
Cayman Islands
TERAMO FUND: Shareholders' Final Meeting Set for Aug. 19
--------------------------------------------------------
The shareholders of Teramo Fund will hold their final meeting on
Aug. 19, 2014, at 8:00 a.m., to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Appleby Trust (Cayman) Ltd.
c/o Richard Gordon
75 Fort Street, PO Box 1350
Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
===================================
D O M I N I C A N R E P U B L I C
===================================
* DOMINICAN REPUBLIC: Storm's Rains Didn't Ease Crunch in Dams
--------------------------------------------------------------
Dominican Today reports that the lack of heavy rains from Tropical
Storm Bertha failed to quell the drought affecting Santiago and
north region towns, which lowered the water level of dam Tavera to
315.50 (40 centimeters below average).
The lack of rains has reduced the service to a trickle in the
cities of Santiago and Moca, and in 19 other communities close to
the hydroelectric, some lasting up to a week without potable
water, according to Dominican Today.
The report notes that officials of Santiago's and Moca's water
utilities (Coraasan and Coramoca) called the rainfall
insignificant and won't raise the levels of the reservoirs.
Coraasan cautioned that as the result of the drought, the level of
Tavera dam drops 20 centimeters daily, while nearby towns like
Baitoa demand construction of a new aqueduct to regularize the
service, the report adds.
===========
M E X I C O
===========
BIO-PAPPEL: Fitch Affirms 'B' IDR & Revises Outlook to Positive
---------------------------------------------------------------
Fitch Ratings has affirmed the foreign and local currency Issuer
Default Ratings (IDRs) of Bio-PAPPEL, S.A.B. de C.V. (Bio-Pappel)
at 'B'. Fitch has also affirmed the company's USD200 million
senior notes due 2016 at 'B/RR4'.
The Rating Outlook has been revised to Positive from Stable.
The Outlook revision reflects Bio-Pappel's low leverage and
improved cash balance due to favorable market conditions that have
resulted in strong cash flow from operations. In Fitch's opinion,
operational efficiencies have also bolstered profitability and
have somewhat diminished the company's sensitivity to raw material
and energy cost increases. The revised Outlook also reflects the
company's USD50 million prepayment of its USD250 million notes due
2016.
KEY RATING DRIVERS
Bio-Pappel's ratings incorporate its leading market position in
the paper and packaging sector in Mexico, geographical
diversification of revenues, low level of environmental/political
risks, and improved EBITDA generation due to operational
efficiencies, more cogeneration of energy, and a favorable
operating environment. The ratings are constrained by Bio-
Pappel's leverage relative to the stress upon its cash flow when
raw material and energy costs increase. Concerns about the
company's weak debt repayment record and past corporate governance
continue to result in a lower rating than peer companies with
similar credit metrics. Additional concerns include the company's
small scale when compared to international players and the tough
competitive environment in Mexico.
Positively, Bio-Pappel has improved its cost structure and better
positioned itself to withstand future cyclical downturns through
its increased use of recycled fiber and cogeneration. These
initiatives, in addition to favorable market conditions, have
expanded the spread between its average sales price and the cost
of its main inputs, namely recycled paper products such as old
corrugated containers (OCC), old newspaper (ONP), and energy.
Prices for the company's products have remained broadly stable,
and volumes have kept mostly flat as a result of a stalled
economic activity in Mexico, particularly in the first half of
2014. The spread has averaged USD138 per ton for the Last 12
Months (LTM) ended in 2Q'14. During this period, Bio-Pappel has
generated about USD135 million of EBITDA. These results are lower
than those registered during the same period in 2013 when the
spread averaged USD143 per ton and EBITDA was about USD141
million, due to a non-recurring, non-cash charge to EBITDA of
USD10.5 million in 2Q'14. EBITDA for 2Q'14 LTM would have been USD
146 million otherwise.
The volatility in Bio-Pappel's operational performance over the
past 10 years has reflected the company's limited ability to pass
through cost increases. Prices for OCC and ONP have increased in
Mexico and the U.S. due to purchases by Chinese manufacturers.
Energy is Bio-Pappel's second most important input cost after
recycled fiber, and management has undertaken several initiatives
seeking to mitigate its exposure to it, including investments in
cogeneration. The ratings factor in this continued vulnerability
to rising raw material and energy costs.
Going forward, Fitch expects that leverage ratios should fluctuate
as EBITDA generation is still sensitive to the industry's
cyclicality and the price and cost spread. Total debt to EBITDA
for the LTM ended June 30, 2014 was 1.6 times (x), while net debt
to EBITDA was 0.9x. Bio-Pappel's EBITDA to interest expense ratio
was solid at 5.4x.
Near-term liquidity risk is low however refinancing risk in 2016
is a concern. The company currently pays 10% of interest on the
2016 notes (approximately USD20 million per year) a step-up from
2013's 7% rate. Currently, Bio-Pappel has close to USD104 million
in cash and marketable securities, which supports short-term
liquidity.
RATING SENSITIVITIES
A factor that could lead to an upgrade of the company's rating
would be the successful refinancing of its 2016 maturity.
Improved EBITDA margins through all parts of the cycle (including
when OCC and ONP prices are elevated) would also be viewed
favorably as that would demonstrate a sustained lower cost
structure.
Factors that would negatively affect creditworthiness include
inability to refinance its senior notes by the end of 2015, a
consistent weakening of the spread between price and cost per ton,
resulting in lower cash generation below USD 50 million, as well
as sustained gross leverage (Total Debt/EBITDA) above 4.0x.
GRUPO PAPELERO: S&P Revises Outlook to Neg. & Affirms 'B+' CCR
--------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Grupo
Papelero Scribe S.A. de C.V. (Scribe) to negative from stable. At
the same time, S&P affirmed its 'B+' corporate credit and issue-
level ratings on Scribe. The recovery rating of '4', indicating
S&P's expectation of average (30%-50%) recovery, remains
unchanged.
"The outlook revision reflects Scribe's weaker-than-expected
credit metrics mainly due to slow government spending, increased
pulp and energy prices, and delays in the implementation of cost-
reduction projects, which all together reduced operating margins,"
said Standard & Poor's credit analyst Luis Manuel Martinez. S&P
originally expected debt to EBITDA below 5.0x for the past 18
months. However, this scenario has not materialized and given the
continuing challenging market conditions, we believe Scribe could
struggle to achieve this estimate. Consequently, S&P expects that
Scribe will continue to post weak credit metrics in the short to
medium term. Although the company's core credit metrics are now
consistent with a weaker financial risk profile, S&P is not
downgrading Scribe at this time in view of its financial
flexibility related to its long-term debt maturities.
The rating affirmation reflects S&P's assessment of Scribe's
"weak" business risk profile, "aggressive" financial risk profile,
and "adequate" liquidity position.
MEXICHEM S.A.B.: Vestolit Deal No Impact on Moody's B1 Rating
-------------------------------------------------------------
Moody's Investors Service said that Mexichem, S.A.B. de C.V.'s
(Mexichem) announced acquisition of VESTOLIT GmbH (VESTOLIT) is
credit positive given its likely strategic value for the company's
operations in Europe. Moody's views this acquisition to be in line
with Mexichem's business strategy as it will increase its presence
in Europe and add new PVC (poly vinyl chloride) products to its
existing portfolio. Moody's does not anticipate any pressure on
the Ba1 senior unsecured ratings or positive outlook of Mexichem
as a result of the transaction given the modest expected impact on
its credit metrics.
Mexichem, S.A.B. de C.V. is a Mexican producer of PVC resins,
chlorine and caustic soda, fluid conduction pipes, and refrigerant
gases. The company reported revenues of USD5.5 billion over the
last twelve months ended June 30, 2014.
=====================
P U E R T O R I C O
=====================
PUERTO RICO: Chapter 9 Extension Will be Positive, Fitch Says
-------------------------------------------------------------
The extension of Chapter 9 provisions governing the adjustment of
municipal debt in Puerto Rico would be a positive and important
development for Puerto Rico and holders of debt of its public
utilities and public instrumentalities, according to Fitch
Ratings.
On July 31, 2014, Puerto Rico's Resident Commissioner and
Congressional representative introduced a proposed amendment to
the US Bankruptcy Code. The 'Puerto Rico Chapter 9 Uniformity Act
of 2014' would amend the US bankruptcy code and extend to Puerto
Rico the power to use Chapter 9 proceedings in federal bankruptcy
court to adjust debts of its municipalities and public
instrumentalities. Corporations in Puerto Rico have access to US
Bankruptcy proceedings under Chapters 7 and 11.
From a bankruptcy standpoint, the amendment would place Puerto
Rico on an equal footing with the 50 States, who can currently use
Chapter 9 to achieve debt adjustment for their municipalities.
The amendment, which will be considered by the House judiciary
committee, is supported by the National Bankruptcy Conference.
Fitch notes the Conference recommends that the amendment be
modified to include retroactive application.
The combination of fiscal challenge, weak economic performance and
limited market access has led the Commonwealth government to a
point where increasingly difficult choices are required. In June
the Commonwealth government enacted the Recovery Act. Given the
economic and fiscal pressures facing the Commonwealth itself and
its need to provide proper service levels for its citizens, its
ability to continue to provide meaningful ongoing financial
support to its public corporations going forward would be
challenging, in Fitch's view.
The Recovery Act is an effort to fill the void resulting from the
absence of a federal bankruptcy alternative. The Commonwealth has
attempted to forge its own framework for orderly debt
restructuring applicable to its public corporations, including the
Puerto Rico Electric Power Authority (PREPA; rated 'CC' and on
Rating Watch Negative by Fitch) and Puerto Rico Aqueduct and Sewer
Authority (PRASA; rated 'B+' and on Rating Watch Negative). While
the Recovery Act is intended to restore solvency over the long-
term, it entails debt restructuring that would trigger suspension
of debt payments and preclude the timely payment of principal and
interest during the pendency of the proceedings.
The Recovery Act specifically excluded the Commonwealth's general
obligation debt and certain instrumentalities of the Commonwealth,
including the Puerto Rico Sales Tax Financing Corporation
(COFINA). However, the adoption of the Recovery Act and the
absence of any preemptive federal bankruptcy alternative, in
Fitch's view suggest a degree of legal uncertainty regarding how
the Commonwealth might act at a time of more severe financial
stress to extend the same or a similar act to debt obligations of
COFINA. This led Fitch to eliminate any distinction between its
rating of COFINA debt and the general obligation debt of the
Commonwealth ('BB-', Negative Rating Outlook).
The enactment of the Recovery Act signaled a further level of
fiscal stress within the Commonwealth and resulted in Fitch rating
action on debt obligations of PREPA, PRASA, and COFINA. The
adoption of the Recovery Act also spawned litigation and market
volatility, potentially increasing the challenge to market access
for the Commonwealth and its public corporations. The litigation
challenging the Recovery Act will likely be costly to the
Commonwealth, a distraction from more important governance
activity and will continuously shroud the outcome of any
proceedings or agreements entered into under the terms of the
Recovery Act with uncertainty.
The Recovery Act has provisions that mimic to a degree those in
Chapter 9, but are also different in important ways. The
extension of Chapter 9 of the US Code would not of course
alleviate the immediate financial stress which PREPA currently
faces. However, clarifying the rules for restructuring and
aligning them to a federal standard with understandable precedent,
albeit limited, and providing a federal forum for the proceeding
would benefit bondholders. It would also protect the Commonwealth
from claims it is acting unjustly or arbitrarily and contrary to
accepted norms.
The range of options available to the Commonwealth and its
municipalities and public instrumentalities would be the same as
those available in other states. Additionally, the administration
of the proceedings and the outcomes would have the same
underpinning as the outcomes for other Chapter 9 cases such as
Jefferson County in Alabama and Detroit in Michigan. The Recovery
Act itself would likely become unnecessary, its provisions for
debt restructuring in a Commonwealth court rendered ineffective by
the provisions of Chapter 9. Section 903 of the US Code makes any
outcome of a composition proceeding like that outlined in the
Recovery Act nonbinding on non-consenting creditors and prevents
judicial enforcement of the outcome of such proceedings against
such creditors. Fitch would expect the Recovery Act to be
withdrawn once Chapter 9 becomes available.
Fitch's recent action aligning the rating on obligations of COFINA
to the Commonwealth general obligation debt reflects the more
uncertain legal environment that exists in Puerto Rico as long as
Chapter 9 of the US Code is inapplicable in Puerto Rico. The
passage of the Recovery Act substantially increased Fitch's
assessment of the risk that the Commonwealth could take steps to
the detriment of COFINA bondholders if the Commonwealth considered
that a fiscal emergency and its need to provide essential services
required legislative action to allow adjustment of the debt of
COFINA to provide breathing space for the Commonwealth.
Fitch believes that the extension of Chapter 9 of the US Code to
Puerto Rico would reduce the risk of future actions harmful to
COFINA debt holders. As a separately constituted, independent
instrumentality of the Commonwealth, COFINA would constitute a
'municipality' under the US Code for purposes of Chapter 9. No
alternative proceeding under Commonwealth laws as noted above
could be effective to bind bondholders, thus removing the
incentive and the option for the Commonwealth to adopt special
legislation to adjust the debt of COFINA.
As a municipality COFINA could file under Chapter 9 only if
authorized by the Commonwealth and only if it could show that it
is "insolvent" and had made a good faith effort to negotiate with
its creditors or that such negotiation was not practical. General
fiscal distress in the Commonwealth would not support a filing by
COFINA. That the conditions for filing have been met
independently by COFINA would need to be demonstrated in a neutral
federal forum in a US Bankruptcy Court, and not before a
Commonwealth tribunal.
The consequent reduction of the legal risk and uncertainty
surrounding the Commonwealth's ability to adopt and apply a
similar restructuring act to COFINA debt in the event of
Commonwealth fiscal distress, and the limited ability of COFINA to
file under Chapter 9 would necessarily be factored into Fitch's
ratings of COFINA debt obligations. In Fitch's view, the
extension of Chapter 9 to the Commonwealth could support ratings
of COFINA debt at levels above the Commonwealth general obligation
debt. Fitch would need to review COFINA ratings at the time
Chapter 9 was amended and the rating outcome would depend upon the
credit specifics at that time, including the general health of the
Puerto Rican economy.
===============================
T R I N I D A D & T O B A G O
===============================
CARIBBEAN AIRLINES: TTALPA Optimistic About Talks With Airline
--------------------------------------------------------------
Sasha Harrinanan at Trinidad and Tobago Newsday reports that the
Trinidad and Tobago Pilot's Association's (TTALPA) is "guardedly
optimistic" about upcoming talks with State-owned Caribbean
Airlines Limited (CAL) about proposals covering the 2010 - 2013
collective bargaining period.
TTALPA's Industrial Relations Consultant, Gerard Pinard, provided
the update to Trinidad and Tobago Newsday.
"We are guardedly optimistic about bilateral talks on August 18
because CAL finally presented a draft Memorandum of Agreement to
us on July 30," the report quoted Mr. Pinard as saying. The
agreement is in respect of items previously agreed to during
negotiations back in 2012, the report notes.
Mr. Pinard, the report relays, said the airline also "submitted a
calculation of the total outstanding Variable Incentive Payments
owed to pilots from 2011 to present." CAL employs an estimated
130 pilots.
The report discloses that these developments occurred after TTALPA
reported a breakdown in negotiations to the Labor Ministry in June
2014.
Both parties subsequently held conciliation talks at the ministry
on July 18, at which time they agreed to a time extension until
July 31 "because we had a meeting scheduled for July 30 and there
is a 14-day deadline in which the minister must either intervene
or refer the matter to the Industrial Court," the report quoted
Mr. Pinard as saying.
It was that meeting, referred to earlier, when CAL presented the
MOA to TTALPA. However other documents were not ready then, so a
follow-up meeting was scheduled for August 18, the report adds.
Caribbean Airlines Limited -- http://www.caribbean-airlines.com/
-- provides passenger airline services in the Caribbean, South
America, and North America. The company also offers freighter
services for perishables, fish and seafood, live animals, human
remains, and dangerous goods. In addition, it operates a duty
free store in Trinidad. Caribbean Airlines Limited was founded in
2006 and is based in Piarco, Trinidad and Tobago.
As reported in the Troubled Company Reporter-Latin America on May
20, 2013, Caribbean360.com said Trinidad and Tobago Finance
Minister Larry Howai said Caribbean Airlines Limited recorded
losses estimated at US$70 million in 2012. In 2011, CAL had
recorded losses of US43.7 million.
***********
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
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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
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than a balance sheet solvency test.
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***********
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.
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