/raid1/www/Hosts/bankrupt/TCRLA_Public/150522.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, May 22, 2015, Vol. 16, No. 100
Headlines
A R G E N T I N A
LIAT: CEO Evans Shoots Down Aviation "Super Body"
B O L I V I A
BOLIVIA: S&P Affirms 'BB' LT Foreign and Local Currency Ratings
B R A Z I L
DIAGNOSTICOS DA AMERICA: S&P Affirms Then Withdraws 'BB' Rating
JBS USA: S&P Assigns 'BB+' Rating on $600MM Sr. Unsecured Notes
JBS USA: S&P Retains Bonds' 'BB+' Rating After Additional Issue
C A Y M A N I S L A N D S
BLUESKY CLOUDS: Creditors' Proofs of Debt Due June 23
COMMON WELL: Commences Liquidation Proceedings
FOREST CAYCO: Commences Liquidation Proceedings
HEBER HOLDINGS: Commences Liquidation Proceedings
MARICOT LTD: Placed Under Voluntary Wind-Up
NEW LIFE 50: Commences Liquidation Proceedings
ODEBRECHT DRILLING: Moody's Confirms 2021 Notes Ratings at B2
P H W HOLDINGS: Placed Under Voluntary Wind-Up
TM BRAZIL: Placed Under Voluntary Wind-Up
YSPOLIN INVESTMENT: Creditors' Proofs of Debt Due June 2
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Wage Raise Talks Fizzle, Unions Warn of Strike
DOMINICAN REPUBLIC: S&P Raises Sovereign Credit Rating to 'BB-'
J A M A I C A
* JAMAICA: Downturn in Housing Market
* JAMAICA: Aluminum Prices Declining Again
M E X I C O
MEXICO: Net FDI Up 30.1% in First Quarter
MEXICO: Central Bank Cuts 2015 Growth Forecast
P U E R T O R I C O
COOPERATIVA DE SEGUROS: A.M. Best Cuts Fin'l Strength Rating to C+
PUERTO RICO: Sliding Towards a Possible Default, Says Bloomberg
- - - - -
=================
A R G E N T I N A
=================
LIAT: CEO Evans Shoots Down Aviation "Super Body"
-------------------------------------------------
The Daily Observer reports that Chief Executive Officer of LIAT,
operating as Leeward Islands Air Transport, David Evans has poured
cold water on the latest recommendation to invigorate intra-
regional travel by forming two new entities.
A study commissioned by the Caribbean Development Bank (CDB) has
recommended the creation of an Air Transport Reform Authority to
address longer-term strategic issues at the regional level,
according to The Daily Observer.
Speaking at the CDB's 45th Annual Board of Governors' Meeting in
St Kitts & Nevis yesterday, Mr. Evans sounded less than optimistic
about the authority, which will consist of 15 members, the report
notes.
According to The Daily Observer, Mr. Evans said, "If there are 15
experts out there in the Caricom region, can I please have their
names so I could employ them?"
Mr. Evans told the discussion on "Making Air Transport Work Better
in the Caribbean" that while airlines needed to improve their
corporate governance "that is not something that needs to be
overseen by some sort of super body."
"I am not convinced," Mr. Evans said, adding that while the
concept of an air transport reform authority was not a bad one,
"I'm not sure how you would convert that into practice," the
report relays.
Mr. Evans said several similar structures already existed in the
Caribbean and it may just be a case of re-energizing them, the
report discloses.
"I think that's where you need expertise in terms of resources and
that's where you need funding as well. Let's not re-invent the
wheel; we have the basic structures. I just don't think they work
very well for us at the moment," Mr. Evans told the gathering, the
report relays.
According to the study conducted during the last quarter of 2014
and March 2015, The Air Transport Reform Authority is envisaged as
an aviation "super-body" within Caricom, and supported by the
Caricom Secretariat, but deriving its powers from the Heads to
whom they report directly, the report relays.
The overarching recommendation is for greater co-operation among
regional governments and carriers and with other foreign airlines
and a harmonizing of administrative and regulatory policy and
operations, the report notes.
The study looked at the history and present make-up of the
regional air transportation industry and, in particular, the
performance of the state-owned airlines: Caribbean Airlines; Air
Jamaica; LIAT; Surinam Airways; Bahamasair; and Cayman Airways,
notes the report.
Other recommendations include, reforming the governance structure
of airlines, greater use of hubbing to lower unit costs and
increase connectivity and consideration of unbundling ticket
prices to provide passengers with greater choice, among other
items, the report adds.
About LIAT
LIAT, operating as Leeward Islands Air Transport, is an airline
headquartered on the grounds of V. C. Bird International Airport
in Antigua. It operates high-frequency inter-island scheduled
services serving 21 destinations in the Caribbean. The airline's
main base is VC Bird International Airport, Antigua and Barbuda,
with bases at Grantley Adams International Airport, Barbados and
Piarco International Airport, Trinidad and Tobago.
* * *
As reported in the Troubled Company Reporter-Latin America on
Dec. 2, 2014, Caribbean360.com said that chairman of the
shareholder governments of the financially troubled regional
airline, LIAT, operating as Leeward Islands Air Transport, Dr.
Ralph Gonsalves said while he is unaware of the details regarding
any possible retrenchment of employees, the airline needs to deal
with its high cost of operations.
The TCR-LA on March 10, 2014, citing Caribbean360.com, reported
that LIAT said it will take "decisive action" to deal with
unprofitable routes as the Antigua-based airline seeks to make its
operations financially viable.
On Sept. 23, 2013, the TCRLA, citing Trinidad and Tobago Newsday,
reported that there's much upheaval at the highest levels of LIAT
-- the Board and the Executive. Following the sudden resignation
of Chief Executive Officer Captain Ian Brunton, David Evans
replaced Mr. Brunton as chief executive officer
=============
B O L I V I A
=============
BOLIVIA: S&P Affirms 'BB' LT Foreign and Local Currency Ratings
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its long-term foreign
and local currency ratings on the Plurinational State of Bolivia
at 'BB'. The outlook remains stable. S&P also affirmed the
short-term foreign and local currency ratings at 'B' and its
transfer and convertibility (T&C) assessment at 'BB'.
RATIONALE
The ratings on Bolivia reflect Standard & Poor's view that the
economy will continue to grow between 3%-4% in the next three
years while remaining vulnerable to commodity price cycles.
Bolivia's external position is likely to weaken moderately in the
next three years as a result of the current account deficits,
after several years of surpluses. However, S&P expects the
country's external position to remain relatively robust thanks to
ample external assets and low external debt.
Strong imports derived from high levels of public investment in
infrastructure and the petrochemical sector, along with decreasing
hydrocarbon exports, were the main drivers for 2014's lower
current account surplus of $10 million, or 0% of GDP in 2014.
After increasing almost 13% in 2013, hydrocarbon exports declined
0.8% in 2014. Bolivia is likely to incur a current account
deficit between 3% to 4% of GDP in 2015 based on lower hydrocarbon
exports and higher levels of imports related to planned public
investments.
Economic growth contributed to a decline in net general government
debt, which S&P projects will fall to 14% of GDP in 2015 from 31%
in 2007. Foreign exchange reserves, excluding central bank assets
held for future financing of public-sector enterprises, slightly
declined, to 44% of GDP in 2014 from 47% in 2013, but remain
adequate. S&P projects Bolivia's gross external financing
requirements will equal a modest 17% of current account receipts
(CAR) and usable reserves in 2015. S&P estimates the country has
a net external creditor position of 7.7% of CAR this year.
GDP has grown at an average of 5% per year since 2006 and expanded
5.4% in 2014. S&P projects that per capita GDP will exceed
US$3,300 in 2015, more than double the level in 2007. Per capita
GDP growth averaged 3.9% in the past four years, and S&P projects
it will average 2% in the next four years.
Greater economic stability, as well as regulatory measures and
higher reserve requirements, has contributed to declining levels
of dollar-denominated assets and liabilities in the financial
system in recent years, improving the effectiveness of monetary
policy. Dollar-denominated deposits fell to 19% of total deposits
by the end of 2014 from 94% in 2002, and dollar-denominated loans
fell to 8% of total loans from 97% during the same period.
S&P's ratings on Bolivia reflect its strong fiscal and external
balance sheet, ample external liquidity, and long-term growth
prospects. They also reflect Bolivia's weak public institutions,
as well as its fiscal and export dependence on commodities, which
can be subject to volatile prices. The hydrocarbons (mainly
natural gas) and minerals sectors accounted for the bulk of
exports last year. About one-third of public-sector revenues come
directly or indirectly from hydrocarbons.
Bolivia had its first public-sector deficit in 2014 after eight
years of surpluses that were supported by favorable commodity
prices. The nonfinancial public sector registered a deficit of
3.2% in fiscal 2014. This global deficit was produced largely by
public-sector enterprises (about 70%) and the acceleration of
spending by subnational governments prior to local elections
(about 30%), while the central government ended with a near
balanced budget. S&P expects the public-sector deficit to be 4%
of GDP in 2015 due to lower expected revenues coming from the
hydrocarbon sector given low energy prices and the government's
decision to maintain a high level of investment spending.
Even though political uncertainty and fragmentation have
diminished in recent years, Bolivia's public institutions are weak
and susceptible to politicization. President Evo Morales, the
country's predominant political figure in recent years, enjoys
high popularity. Morales' political party, Movimiento al
Socialismo (MAS) holds a two-thirds majority in Congress, which
helps the government implement its policy agenda. However, MAS
includes many well-organized social groups, making it potentially
difficult for the government to adjust fiscal and other policies
in the event of a prolonged period of low commodity prices.
The effectiveness of Bolivia's long-term economic development
strategy, which relies considerably on energy-sector revenues,
will be tested if energy prices remain low, potentially resulting
in persistent fiscal and current account deficits. The government
has chosen to maintain high public-sector investment in 2015 and
run a deficit at the level of the consolidated public sector in
order to sustain GDP growth. It has also taken initial steps to
encourage private-sector investment, especially in the agro-
industry and hydrocarbon sectors. Additional steps to encourage
private-sector investments would boost Bolivia's ability to
sustain GDP growth over the medium term and give the government
more scope to tighten fiscal policy to avoid a potential erosion
of its fiscal profile and its debt burden.
OUTLOOK
The stable outlook is based on S&P's expectation of political
stability and continuity in economic policies over the next three
years. S&P expects the government will attempt to sustain GDP
growth, and its ambitious economic modernization plans rely
heavily on public-sector investment in 2015. S&P also assumes
that current efforts to boost reserves of natural gas and to
ensure the long-term sustainability of energy exports, as well as
domestic industrialization, will slowly begin to show results.
A prolonged period of low prices for commodity exports, combined
with inadequate fiscal adjustment, could result in persistent
fiscal and current account deficits. In addition, failure to
encourage more private-sector investment would increase the
dependence of GDP growth on public-sector investments, tightening
the link between fiscal policy and economic growth. The resulting
erosion of Bolivia's fiscal and external profile could result in a
downgrade.
Total lending by financial institutions increased to 43% of GDP in
2014 from 35% in 2013 and may expand by 16% in 2015. Rapid credit
growth raises the importance of cautious application of regulatory
policies. S&P expects that the government will pragmatically
apply financial legislation that was passed in late 2013--giving
it added powers to set interest rates and to direct lending to
specific sectors--in order to contain the risk of future
contingent liabilities that could weaken the rating.
Sustained higher investment in the energy sector could result in
greater-than-expected capacity for both production and exports
over the next three years. Steps to encourage more private
investment would give the government more scope to adjust public-
sector investment to contain fiscal deficits without affecting the
country's long-term growth prospects. The combination of
continued GDP growth, higher hydrocarbon production, and a gradual
diversification of the economy would strengthen Bolivia's ability
to withstand a potentially sharp fall in commodity prices, leading
to a higher credit rating.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee by
the primary analyst had been distributed in a timely manner and
was sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee agreed that all key rating factors were unchanged.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
RATINGS LIST
Ratings Affirmed
Bolivia (Plurinational State of)
Sovereign Credit Rating BB/Stable/B
Transfer & Convertibility Assessment BB
Senior Unsecured BB
===========
B R A Z I L
===========
DIAGNOSTICOS DA AMERICA: S&P Affirms Then Withdraws 'BB' Rating
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB' global scale
rating on Diagnosticos da America S.A. with a stable outlook. S&P
subsequently withdrew this rating following company's request.
JBS USA: S&P Assigns 'BB+' Rating on $600MM Sr. Unsecured Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+' issue-level
rating to JBS USA LLC's (JBS USA) and its subsidiary, JBS USA
Finance Inc.'s, proposed $600 million senior unsecured notes due
2025. The rating reflects the credit quality of JBS USA
(BB+/Positive/--) and its parent company, Brazil-based JBS S.A.
(JBS; BB+/Positive/--). All of JBS USA's current and future U.S.
restricted subsidiaries (except for JBS USA Finance and JBS US
Holding LLC) and their parents--JBS, JBS USA Holdings Inc., JBS
Global Luxembourg S.a r.l., JBS Holding Luxembourg S.a. r.l., and
Burcher Pty Ltd.--guarantee the notes on an unsecured senior
basis.
JBS USA will use the proceeds to repay JBS's existing senior
unsecured notes due 2018, which will improve its capital structure
by extending debt maturities and reducing the cost of debt. This
issuance won't raise leverage.
RATINGS LIST
JBS USA LLC
Corporate credit rating BB+/Positive/--
JBS S.A.
Corporate credit rating BB+/Positive/--
Rating Assigned
JBS USA LLC
JBS S.A.
$600M sr. unsec. notes due 2025 BB+
JBS USA: S&P Retains Bonds' 'BB+' Rating After Additional Issue
---------------------------------------------------------------
Standard & Poor's Ratings Services said that its 'BB+' issue-level
rating on JBS USA LLC's (JBS USA) and its subsidiary's, JBS USA
Finance Inc.'s, bond remains unchanged on additional amount
issued. The company increased the amount to $900 million from
S&P's original expectation of $600 million. S&P don't expect JBS
to increase its debt because it believes the company will use the
proceeds to fully repay the 2018 bonds.
JBS USA LLC
Corporate credit rating BB+/Positive/--
JBS USA LLC
JBS USA Finance Inc.
Sr. unsec. notes due 2025 BB+
==========================
C A Y M A N I S L A N D S
==========================
BLUESKY CLOUDS: Creditors' Proofs of Debt Due June 23
-----------------------------------------------------
The creditors of Bluesky Clouds Ltd. are required to file their
proofs of debt by June 23, 2015, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on April 28, 2015.
The company's liquidator is:
Lion International Management Limited
Craigmuir Chambers Road Town
Tortola VG 1110
British Virgin Islands
c/o Mr. Philip C Pedro
HSBC International Trustee Limited
Compass Point 9 Bermudiana Road
Hamilton HM 11
Bermuda
Telephone: (441) 299-6482
Facsimile: (441) 299-6526
COMMON WELL: Commences Liquidation Proceedings
----------------------------------------------
On March 3, 2015, the shareholders of Common Well Management Inc.
resolved to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Delta FS Limited
c/o Andrew Edgington
Telephone: (345) 743 6630
Harbour Place, 5th Floor
103 South Church Street
P.O. Box 11820 Grand Cayman KY1-1009
Cayman Islands
FOREST CAYCO: Commences Liquidation Proceedings
-----------------------------------------------
On April 27, 2015, the sole shareholder of Forest Cayco Topco
resolved to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Anthony Beovich
The Blackstone Group
345 Park Avenue, 31st Floor
New York
New York 10154
United States of America
Telephone: +1 (212) 583 5877
HEBER HOLDINGS: Commences Liquidation Proceedings
-------------------------------------------------
On April 27, 2015, the sole shareholder of Heber Holdings Inc.
resolved to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Luiz Alves Paes De Barros
Telephone: 949-8344
Harbour Place, 4th Floor
103 South Church Street
P.O. Box 10240 Grand Cayman KY1-1002
Cayman Islands
MARICOT LTD: Placed Under Voluntary Wind-Up
-------------------------------------------
At an extraordinary general meeting held on April 30, 2015, the
sole shareholder of Maricot Ltd 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:
Commerce Corporate Services Limited
P.O. Box 694 Grand Cayman
Cayman Islands
Telephone: 949 8666
Facsimile: 949 0626
NEW LIFE 50: Commences Liquidation Proceedings
----------------------------------------------
On April 9, 2015, the shareholders of New Life 50 Ltd resolved to
voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Delta FS Limited
c/o Andrew Edgington
Telephone: (345) 743 6630
Harbour Place, 5th Floor
103 South Church Street
P.O. Box 11820 Grand Cayman KY1-1009
Cayman Islands
ODEBRECHT DRILLING: Moody's Confirms 2021 Notes Ratings at B2
-------------------------------------------------------------
Moody's Investors Service confirmed the ratings of the senior
secured notes of the following issuers:
QGOG Atlantic/Alaskan Rigs Limited
-- Senior secured global notes due July 2018 confirmed at B1
-- Approximately US$ 372 million of debt affected
Odebrecht Drilling Norbe VIII/IX Ltd.
-- Senior secured global notes due June 2021 confirmed at B2
-- Approximately US$ 1.275 billion of debt affected
Odebrecht Offshore Drilling Finance Limited
-- 6.75% and 6.625% senior secured global notes due in October
2022 confirmed at B2
-- Approximately US$ 2.122 billion of debt affected
All ratings outlooks are stable.
This rating action concludes the review for downgrade of the above
mentioned notes. The rating actions reflect the vessels' recent
operational and economic performance. Furthermore, the action
reflects the stabilization of the rating of Petroleo Brasileiro
S.A. ('Petrobras') at Ba2, with a stable outlook, on April 27,
2015. Petrobras is the sole contractual off-taker and revenue
source to service the outstanding debt issued by the above
referenced entities. On February 24, 2015 Moody's downgraded all
ratings for Petrobras (including debts rated based on Petrobras'
guarantee), including a downgrade of the company's senior
unsecured debt to Ba2 from Baa3, and assigned a Ba2 Corporate
Family Rating (CFR) to the company. Moody's also lowered the
company's Baseline Credit Assessment (BCA) to b2 from ba2. At the
time, Petrobras' ratings remained on review for downgrade.
The stable outlook on the notes also take into account, on a
relative basis, the vessels' recent operating performance in 2013
and 2014 as measured by average uptime, the age and value of the
vessels, chartered daily rates as compared to current market daily
rates, maturity of the outstanding debt, re-contracting risk,
liquidity arrangements as measured by the level of reserve
accounts, and the potential impact on the issuers as a result of
the corruption investigations at the off taker's level.
The stable outlook of the issuers' ratings will continue to focus
on a number of credit factors including: (i) recent financial and
operational performance, including uptime and economic metrics,
(ii) Petrobras' production and exploration strategy amid weakening
sector fundamentals due to falling oil prices and other
developments, and the role of the vessels in Petrobras' strategy,
(iii) any consequences as a result of potential involvement of the
issuers, its operators or sponsors in the 'Lava-Jato'
investigations;
QGOG Atlantic / Alaskan Rigs Limited:
QGOG Atlantic / Alaskan Rigs Limited, ("QGOG A/A" or the "Issuer")
is a special purpose vehicle organized under the laws of the
British Virgin Islands. The Issuer is jointly owned in equal parts
by Alaskan Star Ltd (BVI) and Star International Drilling Ltd
(Cayman Islands), both of which are wholly owned by Hopelake
Services Limited (BVI).
The Alaskan Star and the Atlantic Star are mid-water drilling
moored rigs. Both rigs are currently operating in Brazil under
charter with Petrobras, with the charter agreement for the Alaskan
Star ending November 2016, while the charter agreement for the
Atlantic Star will end in July 2018. The US$700 million senior
secured notes were issued by QGOG A/A in July 2011, and are due in
July 2018, with a relatively small gross balloon payment of
US$49.3 million, which Moody's expect that at maturity will be
fully covered with funds captured through the retention mechanisms
and letters of credit.
Both Alaskan Star and Atlantic Star have demonstrated strong
operating performance above Moody's original base case projections
for these type of vessels (drilling rigs). Historical performance
measured by uptime and efficiency availability reached 96.2% and
107.3%, respectively, for the past 12 months ended March 2015.
Notwithstanding, despite the relatively small gross balloon
payment at maturity to be covered by retention sums, re-
contracting risk is exacerbated by charter daily rates that are
only marginally below current market daily rates.
Odebrecht Drilling Norbe VIII/IX Ltd.:
Odebrecht Drilling Norbe VIII/IX Limited is a wholly-owned
subsidiary of Odebrecht Oil and Gas S.A. ("OOG" or the "Company",
not rated), organized as a limited liability company under the
laws of the Cayman Islands. The activities of Odebrecht Drilling
Norbe VIII/IX Limited are limited to the issuance of the Notes and
making the corresponding loan to each of the Project Companies,
Odebrecht Drilling Norbe Eight Gmbh and Odebrecht Drilling Norbe
Nine Gmbh, domiciled in Austria which own, respectively, the
vessels Norbe VIII and Norbe IX.
Each of the Project companies has a 10-year Charter Agreement with
Petrobras, which began at the start of operation of each drilling
vessel (2011) under which Petrobras pays a contracted daily rate
for the use of each vessel. Both the Charter and the Services
Agreements signed with Petrobras are extendable, upon mutual
agreement between OOG and Petrobras, for additional 10 years at
the end of the original expiration. The transaction has been
structured to include a gross balloon payment of approximately
US$450 million at maturity (June 2021), which is reduced to a
still relatively large net balloon of US$225 million when
considering the cash trapping mechanism in the three years prior
to debt maturity embedded in the transaction structure.
The ratings reflect that both vessels have shown signs of recent
performance improvement, presenting economic uptime of 101.1% on
average for both vessels (Norbe VIII: 95.2% and Norbe IX: 107%) in
the first quarter of 2015, in contrast with Norbe VIII average
uptime performance below Moody's original base case projections in
the period 2013/2014. Moody's will continue monitoring the
performance stabilization of both vessels during 2015.
Odebrecht Offshore Drilling Finance Limited:
Odebrecht Offshore Drilling Finance Limited ("OODFL" or "Issuer")
is an exempted company organized under the laws of the Cayman
Islands, indirectly owned by Odebrecht Oil and Gas (not rated).
The transaction consists of the securitization of future flows of
the Charter and Services Agreements between Petrobras and ODN I
GmbH and ODN Six GmbH, which solely own OODFL, associated with a
state-of--the-art, brand new 3-asset portfolio: two drillships ODN
I and ODN II, and one semisubmersible rig, Norbe VI.
On February 14, 2014 OODFL completed a $580 million note offering,
which added ODN Tay IV, a semisubmersible rig to the collateral
package. ODN Tay IV is a fifth generation ultra-deepwater,
purchased by OOG in 2011, at which time it was operating in
Nigeria for Total SA by Stena Drilling.
The ratings of OODFL are constrained by the differing uptime
performance in the 2013-2014 period, among its 4-asset portfolio
with ODN I and ODN Tay IV lagging behind, posing pressure on the
issuer's ability to service debt. Nevertheless, Moody's see
performance among its 4 assets ramping up in the first quarter
2015, with an average economic uptime of 93.1%. The ratings are
further constrained by a relatively large net balloon payment at
debt maturity, which is somewhat offset by a relatively low re-
contracting risk given average chartered daily rates significantly
below market daily rates.
The principal methodology used in these ratings was Generic
Project Finance Methodology published in December 2010.
P H W HOLDINGS: Placed Under Voluntary Wind-Up
----------------------------------------------
At an extraordinary general meeting held on April 27, 2015, the
sole shareholder of P H W Holdings Ltd 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:
Commerce Corporate Services Limited
P.O. Box 694 Grand Cayman
Cayman Islands
Telephone: 949 8666
Facsimile: 949 0626
TM BRAZIL: Placed Under Voluntary Wind-Up
-----------------------------------------
On May 1, 2015, the sole shareholder of TM Brazil Inc. 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:
Tractmanager Cayman GP Inc.
c/o Jonathan Turnham
Telephone: +1 (345) 949 9876
Facsimile: +1 (345) 949-9877
89 Nexus Way, Camana Bay
Grand Cayman KY1-9007
Cayman Islands
YSPOLIN INVESTMENT: Creditors' Proofs of Debt Due June 2
--------------------------------------------------------
The creditors of Yspolin Investment Fund, L.P. are required to
file their proofs of debt by June 2, 2015, to be included in the
company's dividend distribution.
The company commenced liquidation proceedings on April 16, 2015.
The company's liquidator is:
TCSL Directors Limited
Unit No: 3O-01-1659 Jewellery & Gemplex
3 Plot No: DMCC-PH2-J&GPlexS Jewellery & Gemplex
Dubai, United Arab Emirates
c/o Vladimir Kharitonov
Telephone: +971 55 868 06 98
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Wage Raise Talks Fizzle, Unions Warn of Strike
------------------------------------------------------------------
Dominican Today reports that just one hour after an apparent
breakthrough in the tree-way talks to agree on a wage increase on
May 20, union (CNTD) leader Jacobo Ramos warned that "labor peace
is broken in the country" and disclosed protests beginning May 22.
At the meeting on May 20 of the Salary Committee, employers agreed
to shelve their demand to reclassify companies until 2017 and
again asked that union leaders cut back on their demand of a 25
percent increase on the minimum wage, according to Dominican
Today.
The report relates that both sides are currently holding interim
meetings (outside the formal setting) while the union leaders
bowed to management's request and softened their demand from 25
percent to 20%.
Management meanwhile had ratcheted its pay raise offer from last
week's 8% to May 20's 10 percent, the report says.
DOMINICAN REPUBLIC: S&P Raises Sovereign Credit Rating to 'BB-'
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its long-term sovereign
credit ratings on the Dominican Republic (DR) to 'BB-' from 'B+'.
The outlook is stable. At the same time, S&P affirmed the 'B'
short-term rating. S&P also raised its transfer and
convertibility (T&C) assessment to 'BB+' from 'BB'.
RATIONALE
The upgrade stems from S&P's improved assessment of monetary
policy in the DR. In 2012, the central bank became operationally
independent and moved to an inflation-targeting regime, improving
its policy track record. Inflation has averaged 3.1% since then,
near the central bank's target. The central bank has allowed the
DR peso to float more freely, although like many central banks, it
intervenes in the market to smooth volatility. That said, ongoing
quasi-deficits of the central bank and the low level of private-
sector domestic credit (25% of GDP in 2014) dull the monetary
transmission mechanism.
An improved fiscal stance is another reason for S&P's upgrade.
The DR's fiscal deficit has declined during the past several
years, the increase in debt has slowed, and debt management
continues to strengthen. The general government deficit fell to
4.5% of GDP in 2014 from 8% in 2012, which had reflected a run-up
in preelection spending. The administration of President Danilo
Medina has been able to reduce the deficit while increasing social
expenditure following a tax rate hike in 2013 and higher mining
royalties (owing in part to renegotiating its contract with
Barrick Gold), as well as cuts in capital expenditure. Increased
social spending has focused on its "4% of GDP for education
program."
In 2015, S&P expects the general government deficit to decline
toward 4% of GDP given lower oil prices and steady electricity
tariffs, which will benefit the electricity sector. In the past,
fiscal results have deteriorated during election periods. S&P
expects some modest election-related spending in 2016 to generate
a somewhat higher deficit next year, but S&P's upgrade is premised
on an assumption that it will be significantly lower than in 2012.
Nearly 4% of GDP of S&P's figures for DR's general government
fiscal deficit pertains to transfers to the broader public sector
or its imputed losses. These include 1.5% of GDP of losses at the
central bank (a legacy of bank bailouts in 2003), 0.7% of GDP of
interest costs on recapitalization bonds injected into the central
bank to reduce these losses, 1.4% of GDP of transfers to the
electricity sector, and 0.4% of GDP of losses at nonfinancial
public enterprises.
"We expect net general government debt to average 43% of GDP
during 2015-2016 and the interest burden to remain at 16% of
government revenues, of which almost one-third accrues on the
recapitalization bonds. Cash- and debt-management practices
continue to improve. The recently implemented "cuenta unica"
centralizes government accounts at the Treasury and serves to
manage cash and control expenditures more efficiently. In
addition, for the first time, as part of the 2015 budget, congress
approved an overall debt issuance limit facilitating more agile
debt management, instead of separate limits on external versus
domestic financing, and approving individual external bond
issuances. It was under this authority that in January and May
2015 the government issued US$3.5 billion in global bonds due in
2025 and 2045. The government used the proceeds to meet part of
its 2015 borrowing requirement. It also used US$1.9 billion of
the proceeds to buy back, at a 52% discount from par, US$4 billion
of 11.4-year debt owed to PetroCaribe, a bilateral lending vehicle
of the Venezuelan government. The buyback provided a small net
present value savings to the fiscal and cut the headline net
general government debt-to-GDP ratio to 41.7% in 2015 from 44% in
2014," S&P said.
S&P expects that the government will turn to its domestic markets
for at least a quarter of its financing requirement in 2015 and
2016. S&P considers the DR's contingent liabilities to be
limited, as S&P's criteria define the term. This takes into
account Banco de la Reservas' one-third market share of the DR's
financial system, its relatively small size (gross assets of the
banking sector were about 38% of GDP in 2014), and the debt of
government-related entities at about 6% of GDP.
The rest of the DR's sovereign credit profile reflects various
institutional weaknesses that are somewhat offset by a diversified
economic structure and a track record of solid growth. The DR's
institutions have not consistently supported policy predictability
across administrations. The current debate about changing the
constitution to permit consecutive presidential terms, which was
driven by President Medina's high popularity, is an example.
While a second term for President Medina could reinforce policy
continuity, the debate exemplifies the changing nature of
institutions in the DR. The constitution was only changed to
abolish consecutive reelection in 2010. In addition, policymakers
remain unable to resolve long-standing deficiencies in the
electricity sector despite their pressure on the government's
budget. That said, the economy has grown briskly without
imbalances, and policymakers have improved monetary and fiscal
policy execution during the past several years, underpinning the
upgrade.
Standard & Poor's estimates per capita GDP around US$6,400 in
2015. Real per capita GDP growth averaged 4% over the past five
years. S&P projects real GDP to expand by 5% in 2015-2016
following growth of 7.3% in 2014, which was the highest in the
region. As in 2014, S&P expects tourism, mining (with gold
production reaching peak output), and construction of social
housing to drive growth. Lower oil prices will also boost
consumption. S&P do not see the DR's tourism offering being
materially hurt in the forecast horizon by the greater opening of
the Cuban market to American arrivals, given the diversity of
origin of the DR's tourists, the strength of the DR hospitality
sector (which is also active in Cuba), and the competitiveness of
its tourism.
Assuming that imported oil volume remains stable, oil imports
receipts should be reduced by almost 30%. Therefore, S&P
estimates the current account deficit (CAD) closer to 2.4% of GDP
in 2015 and 2016, which confirms the improving trend since the CAD
peak of 7.5% of GDP in 2011. Growing tourism receipts and gold
export volumes also contribute to the lower CAD. An improving CAD
and steady foreign direct investment should set gross external
financing needs closer to an average 105% of current account
receipts (CAR) and usable reserves in 2015-2016. S&P estimates
that external debt net of liquid assets was 84% of CAR in 2014;
S&P expects it to average 81% of CAR in 2015-2016.
S&P's 'BB-' local currency rating reflects the country's still
limited monetary policy transmission mechanism and small capital
markets. The T&C assessment of 'BB+' is based on the outward
orientation of the Dominican economy, with CAR at 33% of GDP, as
well as the fairly unrestrictive nature of the DR's foreign-
exchange regime.
OUTLOOK
The stable outlook is premised on S&P's assumption that over the
next year, the government will contain any preelection fiscal
slippage and the debate about the immediate presidential
reelection will not disrupt the economy.
A more substantial rise in the general government deficit and debt
burden than in S&P's base-case scenario would likely exacerbate
the DR's external vulnerability and could lead S&P to lower the
rating, especially if the political willingness to reverse the
slippage is lacking. Negative electoral dynamics that weigh on
growth prospects could also put downward pressure on the rating.
S&P could raise the ratings in the coming years following a
reduction in the government's debt burden and improvements in the
country's external liquidity. Addressing the structural
deficiencies in the electricity sector would also help improve the
country's fiscal position, supporting creditworthiness as well.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee by
the primary analyst had been distributed in a timely manner and
was sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee agreed that "fiscal assessment: flexibility and
performance" and "monetary assessment" had both improved. All
other key rating factors were unchanged.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
RATINGS LIST
Upgraded; Ratings Affirmed
To From
Dominican Republic
Sovereign Credit Rating BB-/Stable/B B+/Stable/B
Upgraded
To From
Dominican Republic
Transfer & Convertibility Assessment BB+ BB
Senior Unsecured BB- B+
=============
J A M A I C A
=============
* JAMAICA: Downturn in Housing Market
-------------------------------------
RJR News reports that there has been a decline in the number of
persons borrowing funds to purchase real estate in Jamaica.
According to the 2014 Economic & Social Survey of Jamaica, tabled
in the House of Representatives, the number of mortgages disbursed
during the year fell 22 per cent to 13,428, the report notes.
All mortgage lenders, except life insurance companies, recorded
declines in loans, according to RJR News.
The largest decline was recorded by credit unions, which issued
5,525 loans, a 28 per cent slippage from the previous year, the
report relates.
The survey also shows a decline in residential construction last
year, the report notes.
Housing starts during the year fell 29.8 percent to a little over
two thousand units, the report discloses.
This was primarily associated with a reduction in the number of
starts by the Housing Association of Jamaica, from 938 to 99
units, the report says.
There was also an 8% decline in the number of starts by the
National Housing Trust, which totaled 1,548 units, the report
adds.
* * *
As reported in the Troubled Company Reporter-Latin America on
Feb. 23, 2015, Fitch Ratings has affirmed Jamaica's long-term
foreign and local currency Issuer Default Ratings (IDRs) at 'B-'.
The issue ratings on Jamaica's senior unsecured foreign and local
currency bonds are also affirmed at 'B-'. The Rating Outlooks on
the long-term IDRs are revised to Positive from Stable. The
Country Ceiling is affirmed at 'B' and the short-term foreign
currency IDR at 'B'.
* JAMAICA: Aluminum Prices Declining Again
------------------------------------------
RJR News report that there could be implications for Jamaica's
mining sector with the price for aluminum starting to decline.
Since hitting a 12-month high on May 5, at US$1,886 US a ton,
prices for the benchmark three-month aluminum futures have slipped
4.7 per cent, the report notes.
The fall in prices is rattling producers such as Russia's UC
Rusal, which warned of a new turn in the global market for the
metal, the report relays.
One factor troubling Rusal, which has mining operations in
Jamaica, is the rising tide of Chinese aluminum exports, the
report discloses. That could gather pace after China this month
removed a 15 per cent export tax on aluminum products, the report
says.
Rising supplies are in turn reducing the premiums producers can
charge for immediate delivery of aluminum to consumers of the
metal, the report notes. That has come just as changes to the
London Metal Exchange's rules, aimed at easing bottlenecks at
warehouses that store aluminum, are starting to have an impact,
the report adds.
===========
M E X I C O
===========
MEXICO: Net FDI Up 30.1% in First Quarter
-----------------------------------------
EFE News reports that Mexico received $7.57 billion in net foreign
direct investment in the first quarter, up 30.1 percent from the
$5.82 billion reported in the same period of 2014, the Economy
Secretariat said.
That marks Mexico's highest-ever preliminary first-quarter FDI
figure since that indicator began to be monitored, the secretariat
said in a statement obtained by EFE News.
The net figure is the result of FDI inflows totaling $9.19 billion
minus FDI outflows amounting to $1.62 billion, according to EFE
News.
The report notes that of the total, reinvested earnings
represented 61.8 percent of the total, while new investments and
equity and intercompany accounts accounted for 37 percent and 1.2
percent, respectively.
By destination, 34 percent of the total was invested in
manufacturing, 29 percent in the mass media, 20.4 percent in
financial services, 8.2 percent in trade, 6.9 percent in
construction and 1.5 percent in other sectors, the report relates.
By country of origin, 59 percent of FDI inflows came from the
United States, 14.3 percent from Spain, 8.2 percent from Japan,
4.8 percent from South Korea, 2.9 percent from France, 2.3 percent
from the Netherlands and the remaining 8 percent from 48 other
nations, the report discloses.
Those inflows from 1,357 companies with foreign capital
participation were highlighted by U.S. telecommunications giant
AT&T's $2.5 billion acquisition of wireless carrier Iusacell, a
transaction that closed in mid-January, the report says.
FDI inflows since President Enrique Pena Nieto took office in
December 2012 total $75 billion, up 44.5 percent from the $51.9
billion reported in the first two years and four months of the
administration of his predecessor, Felipe Calderon, the report
relays.
The figures released are preliminary and likely will be revised
upward in subsequent quarters, the secretariat said, notes the
report.
That is because the authorities thus far have only taken into
account investments formally notified to the National Registry of
Foreign Investments, the report adds.
MEXICO: Central Bank Cuts 2015 Growth Forecast
----------------------------------------------
EFE News reports that Mexico's central bank has lowered the
country's 2015 growth forecast from a range of between 2.5 percent
and 3.5 percent to a range of between 2 percent and 3 percent,
citing a lack of economic dynamism.
Some of the risks facing Mexico's economy have materialized,
including a drop in oil production and uncertainty about future
prospects for crude output, Bank of Mexico Gov. Agustin Carstens
said in presenting the bank's report on the first quarter,
according to EFE News.
The report notes that crude production fell 7.7 percent year-over-
year in the first quarter of 2015 to an average of 2.3 million
barrels per day, while the average price of Mexico's export blend
plunged 51.5 percent, from $92.41 in the first quarter of 2014 to
$44.84 between January and March of this year.
Mexico's export sector also is being hit by a drop in demand from
the United States, which was affected by transitory factors in the
first quarter, Mr. Carstens said, adding that Mexican domestic
spending is not showing clear signs of recovery, the report
relays.
The monetary authority also cut its forecast for gross domestic
product growth in 2016 from a range of between 2.9 percent and 3.9
percent to a 2.5 percent-3.5 percent range, the report discloses.
The central bank said it expects inflation to remain at around 3
percent in 2015, although it said a slightly lower rate is
possible in the coming months, the report adds.
=====================
P U E R T O R I C O
=====================
COOPERATIVA DE SEGUROS: A.M. Best Cuts Fin'l Strength Rating to C+
------------------------------------------------------------------
A.M. Best Co. has downgraded the financial strength rating to C+
(Marginal) from C++ (Marginal) and the issuer credit rating to "b-
" from "b" of Cooperativa de Seguros de Vida de Puerto Rico
(COSVI) (San Juan, PR). Additionally, A.M. Best has placed these
ratings under review with negative implications.
The rating actions reflect the sharp deterioration of COSVI's
risk-adjusted capital ratios reflective of the downgrading of
Puerto Rico debt in February 2015 and April 2015. The National
Association of Insurance Commissioners' (NAIC) Risk-Based Capital
Ratio has deteriorated to unacceptable levels due to the much
higher capital charges on certain Puerto Rico bond issues, which
were downgraded to NAIC class 5. In response, COSVI intends to
raise capital to more appropriate levels.
The under review with negative implications status reflects the
uncertainty relating to COSVI's ability to meet the timeline and
goals necessary to improve capital ratios as communicated. If
COSVI's capital ratios fail to improve, further rating action may
be taken by A.M. Best. Conversely, if COSVI improves its capital
ratios significantly, A.M. Best will remove the rating from under
review and re-evaluate the rating.
PUERTO RICO: Sliding Towards a Possible Default, Says Bloomberg
---------------------------------------------------------------
Peter Coy at Bloomberg News reports that there's a public rink in
Aguadilla that claims to be the only place to skate year-round in
the Caribbean. It takes a lot of energy to maintain a skating rink
in the tropics, but that's not a problem: The city of Aguadilla
isn't paying for its electricity. The Puerto Rico Electric Power
Authority provides power to Aguadilla and other municipalities in
lieu of paying taxes. It bills them when the value of the
electricity exceeds what it owes in lieu of taxes, as has happened
for the past several years. But the towns aren't paying. Starved
for revenue, Prepa is at risk of default on $9 billion in debt.
Unpaid power bills are only one reason to be pessimistic about the
future of Puerto Rico, notes the report. The self-governing U.S.
territory is poorer than the poorest state, Mississippi. It's
bleeding population and running budget deficits. Its economy has
been shrinking almost continuously since 2006, when a key U.S. tax
break called Section 936 expired. Labor force participation is
low. The government's general obligation bonds have been
downgraded to CCC+ (narrowly beating Prepa's CCC-). And the
population remains deeply split over the pivotal question of U.S.
statehood, with its nonvoting representative in Congress crusading
for it and the governor arguing for the status quo. At $72
billion, the debt of the island and its agencies exceeds that of
every state except California and New York. A $630 million debt
payment is due July 1. Friends are nowhere in sight. The
rectangular island has been abandoned by most of the municipal
bond funds that used to eat up its debt. Cut off from access to
the debt market by its bad credit ratings, Puerto Rico seems about
to founder on the high C's, says the report.
But according to Bloomberg News, los buitres, the vultures, sees
potential in Puerto Rico. American hedge funds that bought Puerto
Rican bonds after the price fell and are agitating for changes to
increase the value of their bonds and sell out for a profit. In
some countries -- Argentina, for example -- hedge funds are seen
as the worst of the worst. But in Puerto Rico, at least to date,
they are perceived in some circles as the last, best hope, note
the report. The mainlanders are offering their restructuring
expertise and potentially billions of dollars on the expectation
that a serious investment of time and money will pay off in a
healthier Puerto Rico that's able to pay everything it owes (and
make them richer).
"The ideal is that we don't let it degenerate into the kind of
tense relationship where everybody's yelling at each other.
We're taking every effort to avoid that," the report quotes
Stephen Spencer, a managing director in the financial
restructuring group of investment bank Houlihan Lokey, which
represents both hedge funds and big bond funds that owned Prepa
bonds before prices fell, as saying. "In any restructuring that
works well, you have creditors and debtors rowing in the same
direction."
Some Puerto Ricans agree, notes Bloomberg News. Ramon Luis
Nieves, a member of the Puerto Rican Senate, was interviewed on
May 15, the day after a 10-hour meeting of members of the majority
Popular Democratic Party in the House and Senate, who reached
agreement with Governor Alejandro Garc¡a Padilla, who is of the
same party, on a plan for spending cuts and a sales tax increase
to stave off default.
"I have had very positive experiences" talking to the hedge funds,
Mr. Nieves said, notes the report. "They're really here. The
ordinary sources of financing that the commonwealth had are gone.
I hope in the future we can reach agreement with them in a way
that they see themselves not as entities that try to make a quick
buck from Puerto Rico because we are in distress, but that we can
become partners, they can contribute to our economic recovery."
According to Bloomberg News, the Puerto Ricans don't have a lot of
choice in dance partners. They can't go to the International
Monetary Fund, which aids only sovereign nations. They can't make
like Greece and threaten to pull out of the common currency or
cozy up to the Russians. Unlike Detroit, Puerto Rico isn't
eligible to seek protection from creditors in U.S. Bankruptcy
Court. Because it uses the dollar, it can't lighten its foreign
debts by inflating its currency. And Treasury Secretary Jacob Lew
has made clear that the feds won't sweep in with big bucks even
though there's nothing that says they couldn't -- except Congress.
That leaves the hedge funds, along with die-hard bond-fund
managers, including Prepa investors OppenheimerFunds and Franklin
Resources.
The report relates that Puerto Ricans have had a complicated
relationship with the mainland since 1898, when the U.S. liberated
Puerto Rico and Cuba from Spain. The U.S. annexed Puerto Rico but
not Cuba. Of the two, Puerto Rico was the good son. Under the
Jones Act of 1917, its people became citizens of the U.S. just in
time to join the mainland's armed forces and fight in World War I.
Puerto Ricans have fought for the U.S. in every war since. Cuba
was the prodigal son, especially after 1959, when Fidel and Raul
Castro overthrew the dictator Fulgencio Batista and established a
Communist state 90 miles from Key West, Fla., at the height of the
Cold War.
Puerto Rico outperformed Cuba economically, making the transition
from sugar cane plantations to manufacturing of pharmaceuticals
and other high-tech products with the help of federal tax
incentives, the report recalls. Puerto Ricans never got all the
way up to mainland living standards, though. They were never fully
integrated into the U.S. English remains very much a second
language. And they never got the vote. A Puerto Rican can be
elected president but can't cast a ballot for herself on Election
Day.
Now Cuba, the prodigal son, seems to be returning to the fold,
notes the report. The Minnesota Orchestra just played Havana, and
Raul Castro told Pope Francis he might return to Catholicism. As
in the Biblical parable, this is causing much rejoicing in
Washington and a bit of jealousy among Puerto Ricans, who have
been dutiful citizens for a century, Bloomberg News says.
This history casts a shadow over debt negotiations, adds the
report. Understandably touchy about being treated as second-class
citizens, a lot of Puerto Ricans aren't happy about the appearance
of New York sharpies demanding payment. "The debt is by and large
unpayable. This debt has to be renegotiated," Rafael Bernabe, the
2012 gubernatorial candidate of the small Working People's Party,
said in an interview. Bernabe, a literature professor at the
University of Puerto Rico, has a bachelor's degree in history from
Princeton and a master's and doctorate degree in sociology from
Binghamton University. "The basic, fundamental problem of the
Puerto Rican economy is that you have an economy that generates a
significant amount of wealth," he says, notes Bloomberg News, "but
most of it is taken out of the island."
The report recalls that last year, Puerto Rico passed a debt-
restructuring law that Bernabe liked: It would have made it easier
for Prepa and other public corporations to shed debt. Prepa
investors worried that Puerto Rico was getting ready to stiff
them. Those fears drove Puerto Rico's borrowing costs even higher,
essentially cutting off the island's access to fresh credit. This
February a federal judge declared the law unconstitutional. An
appeal is pending in Boston. The reason this disagreement hasn't
degenerated into greater recrimination is that key people on both
sides understand that Puerto Rico is eminently salvageable. The
tax burden is fairly light because Puerto Ricans don't pay federal
taxes and compliance with domestic taxation is low, meaning
there's plenty of room to raise more tax revenue to cover budget
deficits and payments on the debt, says Daniel Irvin, chief
executive officer of Capital Security Advisors in Boston. "I've
seen distressed sovereigns, and this is the most stress for the
least fundamental reasons," Charles Blitzer, principal at
BlitzerConsulting, told Bloomberg. Blitzer is a former official of
the IMF and the World Bank.
What's more, the island economy has a lot of unrealized potential,
notes the report. The World Economic Forum's 2014-15 Global
Competitiveness Report ranked it 32nd out of 144 countries and
territories, with high scores for business sophistication,
innovation, and financial market development. It finished higher
than any country in Latin America, edging out Chile. (The U.S.
overall finished third.)
According to Bloomberg News, Puerto Rico probably put too many of
its eggs in the basket of manufacturing, which accounts for almost
half of gross domestic product. Tourism, in contrast, is a grossly
underexploited opportunity. In addition to movie-set beaches and
historic Old San Juan, there are attractions such as El Yunque,
the only tropical forest in the National Forest System, and
bioluminescent bays, which glow at night. Yet only 9 percent of
Puerto Rican employment is in leisure and hospitality, vs. 11
percent for the U.S. as a whole, according to Bureau of Labor
Statistics data.
Logistics are another natural for Puerto Rico, says the report. It
sits on the Mona Passage, which ships traverse en route from the
Atlantic Ocean to the Caribbean Sea and the Panama Canal. A deep-
water port in Ponce can handle the big ships that will begin
moving through the expanded Panama Canal next year; a Singaporean
company has been hired to manage it. The aspiration is to make
Puerto Rico an international shipping hub. Hedge fund manager John
Paulson predicts that Puerto Rico will "develop into the Singapore
of the Caribbean," the report relates.
So there's hope -- but only if Puerto Rico can get past its
current financial squeeze, Bloomberg News says. Investors are in
no mood to buy new bonds without evidence that Puerto Rico is on a
path to balancing its budget, which has a $191 million gap for the
fiscal year ending June 30. The Government Development Bank for
Puerto Rico, which lends to the government as well as the private
sector, says it may run out of cash by Sept. 30 unless it can sell
$2.9 billion of bonds secured by (unpopular) oil taxes.
This is where the hedge funds come in, says the report. Last year
hedge funds, including Paulson's, bought almost all of a $3.5
billion bond issue that has kept Puerto Rico afloat. They've also
been active buyers of tax revenue anticipation notes, which are
IOUs backed by future tax receipts. An ad hoc committee of Prepa
bondholders has offered to provide $2 billion in financing for a
new generating plant fueled by natural gas instead of oil based on
the logic that it would lower electricity costs on the island
while enabling the utility to pay interest and principal on its
debt.
Bloomberg News points out that the mainlanders' money comes with
strings attached. Prepa bondholders want the electric utility to
start collecting on municipalities' bills. The power authority's
chief restructuring officer has criticized the investors' $2
billion power plant offer, arguing that it doesn't entail any
sacrifice by investors and wouldn't comply with environmental
rules.
The creditors aren't just tussling with the islanders, the report
relates. They don't even agree with each other in some cases.
Hedge funds holding general-obligation and tax revenue bonds want
Congress to permit arms of the government such as Prepa to seek
protection from creditors in bankruptcy court. Prepa bondholders
understandably disagree. They want debtors to follow the
procedures specified in the covenants of the bond issues.
Even as Puerto Rico's credit ratings have sunk, its bond prices
have recovered from their 2014 lows, notes Bloomberg News. Thomas
Wagner, co-founder of Knighthead Capital Management, a Prepa
bondholder, remains confident that a win-win is possible:
"Sometimes hedge funds with their money and their ideas help the
public good," he says, the report relates. "Sometimes we can look
out for our interests and improve the state of a public entity."
Then again, sometimes they don't, says Bloomberg News. Puerto
Ricans have little choice but to bet that this is one of the good
times, it 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.
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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 2015. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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* * * End of Transmission * * *