/raid1/www/Hosts/bankrupt/TCRLA_Public/160610.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, June 10, 2016, Vol. 17, No. 114
Headlines
A R G E N T I N A
ARGENTINA: Sees $90 Billion Boost in Public-Private Bill
CABLEVISION SA: Fitch Assigns 'B' IDR; Outlook Stable
B A R B A D O S
SAGICOR FINANCIAL: Seeks Home Move to Bermuda
B R A Z I L
BRAZIL: April Primary Budget Surplus Exceeds Forecast on Revenue
CAIXA ECONOMICA: Seen Needing $7 Billion Rescue Plan
CAIXA ECONOMICA: Moody's Says Capital Needs Rise Amid Recession
ODEBRECHT ENGENHARIA: S&P Affirms 'B+' CCR; Outlook Negative
C A Y M A N I S L A N D S
A VOCE TB I: Members' Final Meeting Set for June 15
AGHF OS: Shareholders' Final Meeting Set for June 27
ATLANTIC BLUE: Members' Final Meeting Set for June 24
BLUE HILL: Members' Final Meeting Set for June 15
COMMINGLED ASSET: Shareholders' Meeting Set for July 8
COMMINGLED ASSET MASTER: Shareholders' Meeting Set for July 8
DCP TB IV: Members' Final Meeting Set for June 15
ICONS LTD: A.M. Best Affirms ccc+ Rating on Cl. D Notes Due 2034
INTRA-COMMERCE HOLDINGS: Shareholders' Meeting Set for June 13
LIMEROCK II: Members' Final Meeting Set for June 15
LIMEROCK III: Members' Final Meeting Set for June 15
MAREA TB I: Members' Final Meeting Set for June 15
NOMAD TB I: Members' Final Meeting Set for June 15
NORTH END TB I: Members' Final Meeting Set for June 15
E L S A L V A D O R
BANCO AGRICOLA: S&P Affirms 'B+/B' ICRs; Outlook Remains Stable
M E X I C O
CEMEX SAB: Fitch Assigns BB- Rating to Proposed EUR400MM Notes
CEMEX SAB: Fitch Puts BB-(EXP) Rating to Proposed EUR400MM Notes
MUNICIPALITY OF ZITACUARO: Moody's Cuts Issuer Ratings to B1
ZACATECAS: Moody's Assigns Ba1/A1.Mx Debt Ratings to Loans
P U E R T O R I C O
COOPERATIVA DE SEGUROS: A.M. Best Affirms C+ FSR, Off Review
S U R I N A M E
SURINAME: Gets $70MM IDB Loan to Improve Governance, Energy Sector
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Sees $90 Billion Boost in Public-Private Bill
--------------------------------------------------------
Charlie Devereux at Bloomberg News reports that Argentina's
President Mauricio Macri will send a public private partnership
bill to Congress in the coming weeks that will increase the
country's financing capacity by as much as $90 billion, according
to his top adviser on foreign investment.
The bill will allow the government to speed up its investment in
infrastructure, Horacio Reyser, Macri's adviser on foreign
investment, said in an interview, according to Bloomberg News. It
will also provide guarantees to investors and facilitate access to
multilateral lenders and capital markets, Bloomberg News notes.
"If the state had to build all the works with its own financing
and its own technical capacities it would take a lot longer than
if one opens up the possibility of construction and finance to
other players," Mr. Reyser said from the presidential palace in
Buenos Aires, Bloomberg News relays. "This needs to be seen as an
additional source of financing that can generate efficiency and
transparency in infrastructure projects."
Bloomberg News recalls that Mr. Macri assumed power in December
vowing to open up Argentina's economy by unwinding controls and
regulations that had driven away investment. In six months, he's
lifted currency controls, cut subsidies and brought the country
out of a 15-year default by settling with holdout creditors,
Bloomberg News notes. Now, he needs foreign investment to
compensate for the decline in weaker consumer demand and kick
start a flagging economy, Bloomberg News relays.
According to Mr. Reyser, financing through the public-private
partnership project could be used for infrastructure, schools and
hospitals, including projects by local governments, Bloomberg News
notes.
Long-term Objective
Mr. Macri has announced plans to spend as much as $26 billion to
upgrade Argentina's road and railway network and modernize
airports, ports and urban transport systems over the next four
years, Bloomberg News relays.
Argentina Reforms Likely to Provide 2016 FDI Boost: BI Basics
The bill was designed in consultation with local business chambers
and multilateral lenders such as the World Bank's International
Finance Corporation, the Corporacion Andina de Fomento and the
Inter-American Development Bank, Reyser said, Bloomberg News
notes. While those lenders would probably be the initial
creditors, the long-term objective is to open up credit lines with
other lenders by providing additional protection from risk, he
said, the report relays.
The PPP law would not only distribute risks evenly between the
state and its private partners but also provide legal protection
for lenders by technical arbiters, he said, Bloomberg News notes.
The bill will be sent for approval to Congress by early July.
"The aim is to get to where one can issue bonds in capital markets
to finance an infrastructure project," Bloomberg News quoted Mr.
Reyser as saying. "The security and knowledge the PPP law brings
to this ecosystem will allow for this kind of financing."
Mr. Reyser, 46, was tapped by Mr. Macri to advise him on foreign
investment shortly after he assumed office last December. A
holder of an Advanced Management Program diploma from Harvard
Business School, Reyser worked at Techint Group, Tenaris SA, and
Ternium SA before becoming a partner at the private equity firm
Southern Cross Group.
Poor Performance
Foreign direct investment in Argentina fell 42 percent in 2014 to
$6.6 billion, according to the United Nations' Economic Commission
for Latin America and the Caribbean, or CEPAL, Bloomberg News
notes. That compares with investment of $62.5 billion in
neighboring Brazil and $22 billion in Chile, Bloomberg News
relates. Mr. Reyser said that even that number is misleading
since many companies were forced to reinvest their profits due to
capital controls, Bloomberg News notes.
Argentina's objective is to attract foreign direct investment of
about $25 billion a year, Reyser said. Macri has already received
pledges of about $15 billion since taking office, although some of
those are over several years, Bloomberg News discloses.
According to the report, the reforms Mr. Macri has implemented,
which included devaluing the peso by about 30 percent and removing
subsidies on utility bills, have caused inflation to accelerate to
about 40 percent and the economy to stall as consumption falls.
Mr. Reyser said that while that has deterred some investors, many
are already pledging their money knowing that the macroeconomic
situation will improve by the end of the year, says Bloomberg
News.
"It's true that some are waiting but there's also some that
aren't," Bloomberg News quotes Mr. Reyser as saying. "It's
natural that the flow of capital begins with financing but ends up
converting into direct investment."
* * *
On April 19, 2016, the Troubled Company Reporter-Latin America
reported that Moody's Investors Service upgraded on April 15,
2016, Argentina's government bond rating to B3 from Caa1, with the
outlook changed to stable from positive. The key drivers for the
upgrade are (i) Moody's expectation that Argentina will settle
holdout creditor claims which will result in a lifting of court
injunctions and clear the way for Argentina to access
international capital markets, as well as the likelihood that
Argentina will make payments to restructured bondholders increased
significantly following an April 13, US circuit court ruling in
favor of Argentina, and (ii) the economic policy improvements
since Mauricio Macri's administration took office last December.
The new government lifted capital controls and allowed the peso to
float more freely, reduced energy and transportation subsidies and
has begun to address longstanding macroeconomic imbalances.
As previously reported by the TCR-LA, Argentina defaulted on some
of its debt late July 30, 2014, after expiration of a 30-day grace
period on a US$539 million interest payment. Earlier that day,
talks with a court-appointed mediator ended without resolving a
standoff between the country and a group of hedge funds seeking
full payment on bonds that the country had defaulted on in 2001.
A U.S. judge had ruled that the interest payment couldn't be made
unless the hedge funds led by Elliott Management Corp., got the
US$1.5 billion they claimed. The country hasn't been able to
access international credit markets since its US$95 billion
default 13 years ago.
On March 30, 2016, after more than 12 hours of debate in the
Senate, Argentina's Congress passed a bill that will allow the
government to repay holders of debt that the South American
country defaulted on in 2001, including a group of litigating
hedge funds that won judgments in a New York court. The bill
passed by a vote of 54-16.
On March 24, 2016, Fitch Ratings has upgraded Argentina's Long-
term local-currency Issuer Default Rating (LT LC IDR) to 'B' from
'CCC', with a Stable Outlook. Fitch has affirmed Argentina's Long-
term foreign-currency (FC) IDR at 'RD' and the short-term FC IDR
at 'RD'. In addition, Fitch has upgraded the Country Ceiling to
'B' from 'CCC'.
CABLEVISION SA: Fitch Assigns 'B' IDR; Outlook Stable
-----------------------------------------------------
Fitch Ratings has assigned Long-Term Foreign and Local-Currency
Issuer Default Ratings of 'B' and 'BB-', respectively, to
Cablevision S.A.
The Rating Outlook is Stable. Fitch has simultaneously assigned
an expected rating of 'B+(EXP)/RR3' to Cablevision's proposed
senior unsecured bond issuance of up to USD500 million. The
proceeds of the notes will be used to refinance the company's
existing debt and for general corporate purposes.
Cablevision's Long-Tem Foreign-Currency IDR is constrained by the
'B' country ceiling of the Republic of Argentina. Country
Ceilings are designed to reflect the risks associated with
sovereigns placing restrictions upon private sector corporates,
which may prevent them from converting local currency to any
foreign currency under a stress scenario, and/or may not allow the
transfer of foreign currency abroad to service foreign currency
debt obligations. Since taking power in December 2015, the
Mauricio Macri administration removed FX controls introduced in
2011 and increased the flexibility of the Argentine peso, which
should contribute towards improving the capacity of the economy to
absorb external shocks and relieve pressure on international
reserves.
Fitch expects to assign an 'RR3' Recovery Rating to Cablevision's
proposed issuance, which reflects good recovery prospects in the
event of default given the company's solid balance sheet and cash
flow generation. Fitch believes that the company's default,
should it occur, would be most likely driven by transfer and
convertibility restrictions imposed upon the payment of foreign
debt, not a material deterioration of the company's business or
financial profile.
KEY RATING DRIVERS
Cablevision's ratings reflect the company's strong business
position as the leading Pay-TV and broadband provider in
Argentina, its solid financial profile underpinned by its
consistent and robust free cash flow generation and conservative
capital structure. Negatively, the company's ratings are tempered
by Argentina's mature Pay-TV market amid intense competition, and
subdued macro-economic environment, including high inflation and
steep currency devaluation.
Strong Business Position
Cablevision is the leading Pay-TV and broadband provider in
Argentina with subscriber market shares of 39% and 29%, in each
segment respectively. Cablevision's operation is mainly
concentrated in the AMBA Region, which includes the City of Buenos
Aires, where approximately 53% of its customers are located.
Fitch expects the company's market leadership to remain intact
over the medium term given its solid network quality and coverage,
with one of the most technologically advanced network in main
markets, and strong brand recognition. Negatively, the competitive
landscape in Argentina could become more intense over the long
term due to the regulatory changes, which will allow other telecom
operators to enter the Pay-TV market potentially as early as 2018.
Solid Performance
Cablevision has a solid operational track record, with consistent
revenues and EBITDA growth in recent years, supported by continued
expansion of its subscriber base and average revenue per user
(ARPU).
While the company's cable subscriber number has remained
relatively flat at around 3.5 million during the five-year period
from 2011 to 2015, its broadband subscriber base has grown by 51%
to 2 million from just 1.3 million during the period. In
addition, the company has exhibited its ability to consistently
raise prices to mitigate pressures from high inflation and local
currency devaluation. ARPU improved to ARS518 during the first
quarter of 2016 compared to ARS199 in the first quarter of 2013,
which resulted in a stable ARPU in US dollar terms of USD36 during
the first quarter of 2016 compared to USD40 during the 1Q13.
Based on this, Cablevision's revenues and EBITDA increased to
USD1.7 billion and USD640 million, respectively, during the LTM
ending March 31, 2016, which were 13% and 32% improvement from the
levels in 2011.
Robust Financial Profile
Cablevision's financial profile is among the strongest compared to
its regional Fitch-rated telecom peers across rating categories.
The company has historically maintained a conservative capital
structure to cope with any operational/ regulatory risks and Fitch
forecasts its net leverage, measured by total adjusted net debt to
EBITDAR, to remain low at around 0.5x in the short to medium term
backed by its stable cash flow generation. During the last 12
months (LTM) ended March 31, 2016, the company's gross and net
leverage were 0.9x and 0.3x, respectively. Although the company's
capital intensity, measured as capex-to-sales, is expected to
increase toward 30% in the short to medium term due to continued
network upgrades, potentially including mobile network following
the Nextel acquisition, this should be largely covered by its
solid cash flow from operations resulting in stable leverage.
Improving Regulatory Environment
Regulatory stance of the new administration is favorable for
Cablevision. The newly appointed regulatory body has eased
regulatory pressures to promote market-driven competition, with
measures including lifting restrictions on market share and
licenses. Historically, the company was faced with high
regulatory risk and aggressive political interference that was
linked to the previous administration's efforts to dismantle
Cablevision's parent, Grupo Clarin. Fitch believes that the
moderate regulatory framework is unlikely to change given the
already intense competitive landscape and high level of
penetration in the cable industry. The delayed entry of
other telecom operators into the Pay-TV market for another two
years would also help mitigate the competitive pressures to an
extent in the short to medium term.
Mature Pay-TV Market
Argentina has among the highest Pay-TV penetration in Latin
America with 9.1 million subscribers representing a penetration
rate of 79%. Its high penetration rate and increasing
competition, especially over the long-term with new entrants, will
offer limited growth headroom going forward. Although Cablevision
is well positioned to cope with the increasing competition given
its entrenched business position, high competitive pressures amid
market maturity would negatively affect its operating margins in
the long term. Fitch believes that Cablevision's growth will come
mainly from its broadband segment as the company has room to
penetrate into its Pay-TV customer base, with the penetration rate
reaching just 35% of the home passed as of Dec. 31, 2015.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for Cablevision
include:
-- Double-digit annual revenue growth with stable EBITDA
margins of 38% - 39% over the medium term;
-- The company's Pay-TV & Broadband market shares to remain
stable over the medium term;
-- Increased capex intensity to 28% - 30% in the short to
medium term;
-- Bond issuance during 2016 to refinance most of the company's
existing debt; and
-- Net leverage to remain stable at around 0.5x over the medium
term.
RATING SENSITIVITIES
Negative: Fitch does not foresee any negative rating pressures for
Cablevision that would stem from operational difficulties in the
short to medium term given its solid market position and strong
financial profile.
Ratings would be downgraded in case of a downgrade of Argentina's
sovereign rating, introduction of adverse regulatory or government
measures that would materially affect the company's market share
and credit profile.
Positive: An upgrade is unlikely as the ratings are constrained by
the country ceiling.
LIQUIDITY
The company has a strong liquidity position, supported by its high
balance of readily available cash, low leverage, and robust cash
flow generation. As of the LTM ended March 31, 2016, the company
held ARS4,611 million (USD315 million) of cash and marketable
securities versus short-term debt of ARS4,086 million (USD279
million). During the same period, the company's free cash flow
(FCF) generation remained solid at ARS22 million (USD 1.7 million)
after covering capex of ARS5,190 million (USD400 million) and
dividends of ARS436 million (USD34 million).
FULL LIST OF RATING ACTIONS
Fitch rates these:
Cablevision S.A.
-- Long-Term Foreign-Currency IDR 'B';
-- Long-Term Local-Currency IDR 'BB-';
-- Senior Unsecured proposed issuance 'B+(EXP)/RR3'
===============
B A R B A D O S
===============
SAGICOR FINANCIAL: Seeks Home Move to Bermuda
---------------------------------------------
Verne Burnett at Trinidad and Tobago Newsday reports that the
Sagicor Financial Corporation will ask its shareholders at their
annual general meeting (AGM) in Barbados to approve the company's
move of its headquarters from Barbados to Bermuda. The company
has been searching for a new home base since its current base,
Barbados, was downgraded by the rating agency Standard and Poor's.
It considered relocating to the United Kingdom, here to TT or to
Bermuda, eventually choosing Bermuda as its new home, according to
Trinidad and Tobago Newsday.
In a letter to shareholders in advance of the AGM, the company's
management said if the move is approved the company "could
reasonably expect to receive a Standard and Poor's rating lift to
BB+ unhindered by the restrictions of the current Barbados rating,
the report relays. Improvement in the company's rating would
result in reduced cost of capital, increased attractiveness to
regional and international investors and all the attendant
ancillary benefits flowing therefrom," the letter added.
Questioned about these benefits following a news conference, Ravi
Rambarran, chief executive officer of Sagicor International, said
"we will have the ability to have improved access to capital,
secondly improved cost of capital and those two will allow us to
fund in a more effective manner our opportunities for growth," the
report relays.
The report notes that regarding the downgrade, Mr. Rambarran said
"Standard and Poor's rating methodology says that under normal
circumstances a company cannot be rated above its country of
domicile. In exceptional circumstances it will allow a company to
be rated two notches above its country of domicile," Mr. Rambarran
added.
Mr. Rambarran said Sagicor had been in that exceptional basket for
quite some time "and they have indicated that Sagicor is likely to
receive an upgrade if it successfully executes its plans for
redomiciliation in an investment grade country," the report notes.
The Sagicor annual general meeting will be held at the Lloyd
Erskine Sandiford Centre at Two Mile Hill, St Michael, Barbados.
The company is currently domiciled in Barbados and its credit
rating is limited by the rating of Barbados which is not
investment grade.
According to notes to shareholders contained in the notice of the
AGM, "This is after a series of downgrades (of Barbados) in the
period from 2009 to 2014. In order to improve the company's
ratings (both corporate and securities), the company is seeking
approval to redomicile into Bermuda, which is an investment grade-
rated country. This would be achieved via a corporate migration,
or continuance, of the company to Bermuda and the discontinuance
of the company in Barbados," the report adds.
As reported in the Troubled Company Reporter-Latin America on
March 14, 2016, Fitch Ratings has affirmed Sagicor Financial
Corporation's (SFC) Long-term Issuer Default Rating at 'B'. The
Rating Outlook has been revised to Stable from Positive.
===========
B R A Z I L
===========
BRAZIL: April Primary Budget Surplus Exceeds Forecast on Revenue
----------------------------------------------------------------
Mario Sergio Lima at Bloomberg News reports that Brazil recorded
in April a wider-than-expected budget surplus before interest
payments due to seasonally high tax revenue that won't change the
trend of fiscal deterioration in Latin America's largest economy,
the central bank said.
The surplus that includes results of states, municipalities and
state-owned companies was BRL10.2 billion ($2.84 billion),
compared with a median forecast for a BRL1.9 billion surplus by
analysts in a Bloomberg survey. The nominal deficit reached
BRL13.2 billion in the month, versus the 23.6 billion gap
projected by analysts.
While the so-called primary surplus came in better than forecast
by analysts, it was still the lowest for the month of April since
2004, according to Bloomberg News. On a 12-month basis, the
primary budget deficit expanded to a record 2.33 percent of gross
domestic product and is expected to further deteriorate in coming
months, according to Tulio Maciel, head of the central bank's
economic research department, Bloomberg News notes.
"The drop in the surplus for the year reflects falling revenue,"
Mr. Maciel told reporters in Brasilia, Bloomberg News relays.
Brazil's budget prospects are one of the main challenges for
Acting President Michel Temer, who has chosen former central bank
chief Henrique Meirelles as Finance minister to help restore
business and consumer confidence, Bloomberg News notes. Mr.
Meirelles announced measures to mend what is forecast to become
the worst budget gap in history this year, Bloomberg News says.
Congress approved a proposal for the public sector to deliver a
163.9 billion primary budget deficit by the end of the year. The
lawmakers' green light prevented a government shutdown, Bloomberg
News relays.
A political crisis that led President Dilma Rousseff to
temporarily stand down while she faces an impeachment trial has
exacerbated the worst two-year slump in over a century, Bloomberg
News notes. Investors and credit rating companies use the primary
budget balance to gauge Brazil's fiscal health, Bloomberg News
adds.
CAIXA ECONOMICA: Seen Needing $7 Billion Rescue Plan
----------------------------------------------------
Francisco Marcelino and Cristiane Lucchesi at Bloomberg News
report that in his first month as Brazil's acting president,
Michel Temer has wrestled with a record budget deficit, rising
debt, corruption scandals and the Zika virus. He may want to
pencil in some time for a multibillion-dollar rescue of the
nation's second-biggest bank, according to Bloomberg News.
Caixa Economica Federal, the state-owned lender Brazil leans on to
help stimulate the economy, will require an injection of funds
from the government in the next 12 to 18 months, analysts who've
studied its balance sheet say, Bloomberg News notes. The worst
recession in a century has savaged the Brasilia-based company's
loan portfolio, with delinquency and default rates rising just as
new regulatory rules push capital requirements higher, Bloomberg
News relays.
The bank may need as much as BRL25 billion ($7 billion), or about
2 percent of the government's 2015 revenue, according to one
private-sector banking analyst, Bloomberg News relays. Expect
that bill to come due in the next year and a half, the analyst
said, asking not to be identified discussing estimates that
haven't been made public, Bloomberg News discloses.
"Capital is the main concern at this point," Arjun Bowry, an
analyst at Bloomberg Intelligence, said in an interview. "Over
the past year, Caixa's common equity Tier 1 ratio has declined by
130 basis points. It's not sustainable."
Bloomberg News notes that Mr. Bowry said an expected rate cut by
the central bank is likely to crimp growth in net interest income
this year, while fee income is coming in below full-year guidance.
Asset sales won't make a significant dent in the bank's capital
needs, he said, Bloomberg News relays.
One option under review would be to transfer some of Caixa's
businesses to the country's other state-owned lender, Banco do
Brasil SA, according to a person with knowledge of the
deliberations who said the proposals are still very preliminary,
notes the report. Under one plan, Caixa would continue offering
several of its current lines of businesses, including mortgages,
and transfer to Banco do Brasil operations such as corporate
lending, the person said, asking not to be identified discussing
proposals that haven't been made public, Bloomberg News says.
Exame magazine last week reported that a plan to shift some assets
to Banco do Brasil was being considered, Bloomberg News discloses.
Caixa Chief Executive Officer Gilberto Occhi, who took over June
1, said after his swearing-in ceremony that he sees no need for a
capital injection in the short or medium term, Bloomberg News
relays. Mr. Occhi said he plans to find new funding sources for
the bank, such as securitizations.
An official at the company declined to comment on analysts'
projections on the need for a rescue or on the proposal to shift
some businesses to Banco do Brasil, notes the report.
Many of Caixa's borrowers are late on payments as they grapple
with rising unemployment and high interest rates, Bloomberg News
notes. Debt not earmarked for a specific purpose that's more than
90 days overdue rose in April to 5.7 percent of the total
outstanding in the Brazil financial system, the highest level
since records began five years ago, according to the central bank,
Bloomberg News relays. A two-year economic downturn, falling
commodity prices and a weaker currency have hurt corporate profits
and revenue, forcing job cuts, Bloomberg News says.
Adding to financial pressure on Caixa caused by the recession is
the nation's implementation of Basel III capital-adequacy rules
for the banking industry, Bloomberg News notes. They require more
Tier 1 capital for a "conservation buffer," a "counter-cyclical
buffer" and another increase for systemically important financial
institutions such as Caixa, Bloomberg News relays.
Earnings Potential
"Caixa will have trouble expanding its capital because it has low
potential to generate earnings," Natalia Corfield, head of Latin
America corporate credit research for JPMorgan Chase & Co., said
in an interview, Bloomberg News relays. "Being part of many
social government programs, it charges less than other banks and
at the same time has a heavier cost structure," Ms. Cornfield
added.
Bloomberg News notes that Ms. Corfield estimates Caixa needs to
raise BRL10.6 billion in 2018 to have a Tier 1 capital ratio of 9
percent by 2018.
President Dilma Rousseff, suspended last month amid an impeachment
inquiry, pressured Caixa and Banco do Brasil, the nation's biggest
bank by assets, to help stimulate the economy by offering lower
interest rates on loans, Bloomberg News notes. The push to expand
lending helped contribute to a decline in Banco do Brasil's common
equity Tier 1 ratio, which dropped to 8.3 percent in the first
quarter from 8.7 percent a year earlier, according to its earnings
statement, Bloomberg News relays. In February, the bank cut its
dividend payout to 25 percent from 40 percent to help boost
capital, Bloomberg News notes.
Capital Needs
Analysts at Deutsche Bank AG estimate Banco do Brasil will need to
raise BRL8.8 billion in additional capital to achieve a 9.5
percent Tier 1 ratio by 2019, according to a February report to
clients, Bloomberg News notes.
"They both face the same issues in terms of declining capital
ratios and lower profitability," Mr. Bowry said of the two banks,
Bloomberg News notes.
A Banco do Brasil press official declined to comment about capital
needs or proposals to absorb some of Caixa's businesses, Bloomberg
News relays.
Caixa's non-performing loan ratio rose to 3.55 percent in the
first three months of 2016 from 2.85 percent a year earlier,
according to its earnings statement, Bloomberg News discloses.
The first-quarter ratio was 3.81 percent when adjusted for a 2
billion-real sale of distressed loans, according to calculations
by Corfield, Bloomberg News notes.
The bank has options beyond just government handouts to deal with
capital requirements, Mr. Corfield said, pointing to proposals for
an initial public equity offering of the firm's insurance business
as well as a sale of its concession for the national lottery,
Bloomberg News relays.
Bank Deleveraging
"There is no imminent need," she said. "The new government is
giving positive signs as it's talking about public banks
deleveraging, and that's positive for them," she added, notes the
report.
Bloomberg News says Caixa's loan portfolio rose 9 percent to
BRL684.2 billion at the end of the first quarter from a year
earlier as it complied with government pressure to boost lending.
Its market share increased to 21.5 percent, up 1.2 percentage
points, according to the bank's financial statements.
"This 9 percent represents a credit-growth deceleration from
previous quarters but still remains above the system's average as
of March 2016, of 3.3 percent," the report quoted Mr. Corfield as
saying.
Caixa's guidance for loan growth of 7 percent to 11 percent this
year is still high given prospects for the economy, according to
Corfield, Bloomberg News notes.
Less Diversified
Real estate loans continued to show the most growth, expanding 9.8
percent in 12 months to 388.9 billion reais outstanding, or 67
percent of the total market, according to the bank's financial
statements, notes Bloomberg. For analysts, that means Caixa has a
less diversified portfolio, which makes it harder to generate
profits. About 56 percent of the total credit portfolio is
mortgages.
Other capital needs loom, adds the report. Caixa guaranteed the
FGTS retirement fund's 2.5 billion-real investment in Sete Brasil
Participacoes SA, which filed for bankruptcy protection in April.
If that doesn't get repaid, the government will have to inject
funds into Caixa to support the company, Mansueto Almeida, an
economic consultant who specializes in public finance, said April
28 at an event in Rio de Janeiro, before he joined the government
as secretary for economic monitoring last month, Bloomberg News
relays.
"If you take 100 market analysts, 99 are betting that a capital
injection for Caixa Economica will be necessary," Almeida said at
the time, notes the report. "The only one who isn't making that
bet is on vacation."
Reached a week after taking his new government job, Almeida
declined to say if he stands by that prediction, reports Bloomberg
News.
CAIXA ECONOMICA: Moody's Says Capital Needs Rise Amid Recession
---------------------------------------------------------------
As Brazil's recession deepens, government savings bank Caixa
Economica Federal S.A. (Caixa, Ba2/(P)Ba2 Negative, b1) has faced
declining profitability and mounting asset risks, and therefore,
could face challenges in setting aside sufficient provisions to
cover its rising credit losses, said Moody's Investors Service.
In a new report, Moody's said that Caixa's slowing business
volumes and rising delinquencies have resulted in provisioning
expenses that have fully consumed the bank's pre-provision income
since 2015 as funding costs have increased. These structural
pressures have reduced the bank's capital replenishment capacity
and -- combined with gradual phase-in of Basel III requirements
and capital buffers over the next years -- will continue to drag
down its capitalization. The ratings agency said the risks drove
its lowering of Caixa's baseline credit assessment to b1 from ba3
on June 6th 2016.
In Moody's view, Caixa is more sensitive to the country's economic
downturn than other large Brazilian banks because it focuses on
lending to segments whose repayment capacity are highly correlated
to climbing unemployment and persistent inflation.
"Historically, Caixa's focus on secured loan classes such as
mortgages and payroll loans has helped keep its delinquencies
below the industry average, but the bank's strong expansion into
non-core businesses in the past decade have exposed it to riskier
asset classes," said Moody's Senior Vice President Ceres Lisboa.
"We expect that the ongoing recession will drive the bank's
provisions higher."
These difficulties faced by Caixa will raise pressure for the bank
to take steps to strengthen its capital ratios. Under Moody's
scenario analysis, the size of Caixa's capital shortfall would
depend much more on how quickly its asset quality deteriorates
than on the growth of the portfolio. The deterioration in the
bank's credit fundamentals will raise pressure on the bank to take
steps to bolster its core capital ratios, possibly by selling
assets or reducing dividends further. If these measures are
unsuccessful or insufficient, the bank may need to seek support
from the government.
Moody's said that while it expects government support would be
forthcoming given the systemic importance of Caixa, it will most
likely be in the form of regulatory forbearance rather than a
capital injection, given the Brazilian government's large fiscal
deficit and high and rising debt levels. Should a capital
injection prove necessary, however, Moody's analysts said the
required amount is not likely to exceed 0.3% of GDP or 1% of
government revenues, which the government should be able to afford
despite its fiscal straights.
ODEBRECHT ENGENHARIA: S&P Affirms 'B+' CCR; Outlook Negative
------------------------------------------------------------
S&P Global Ratings affirmed its 'B+' global scale and 'brBBB-/brA-
3' national scale corporate credit ratings on Odebrecht Engenharia
e Construcao S.A. (OEC). S&P also affirmed its 'B+' issue-level
ratings on sister company, Odebrecht Finance Ltd. (OFL), with a
recovery rating of '4', indicating S&P's expectation that lenders
would receive average (30%-50%; the lower half of the band)
recovery of their principal in the event of a payment default.
S&P also removed all ratings from CreditWatch negative. The
outlook on the corporate credit ratings is negative.
The CreditWatch resolution follows the company's publication of
its audited financial statements for the fiscal year ended
Dec. 31, 2015, and S&P's understanding that the release, although
it has a qualified opinion from the auditors, ends the risk of
payment acceleration of the bulk of OEC's debt. The 'B+' rating,
however, continues to reflect OEC's rising financial constraints
amid the exacerbating reputational risks that will weaken cash
flow generation in 2016 and expose the company to significant
working-capital swings.
These factors could weaken the company's credit quality:
-- The slowing cash collection cycle that has resulted in a
cash shortfall of around R$7 billion in 2015. This is
related to worsening counterparty credit risk and increased
scrutiny of the payment process from some clients that now
demand more formal steps before making the payment to OEC.
Potential cash erosion due to transfers to weaker companies
in the Odebrecht group, including the holding company,
Odebrecht S.A., as seen in OEC's 2015 $300 million
intercompany loan to the latter. The litigation arising
from the corruption investigations at OEC. S&P excludes
likely fines stemming from the corruption probe in its debt
adjustment for the company because their final amount is
still unknown. Nevertheless, S&P believes fines could
result in OEC's net debt to EBITDA to be 3.0x-3.5x. On the
other hand, S&P believes a completion of the probe could
stabilize the company's working-capital management and
reduce the uncertainties over its business continuity and
sustainability. Reputational risks that may hurt OEC's
ability to replenish backlog and to fund future capital
needs, even though its execution capacity remains unchanged.
In addition, the overall backlog is exposed to clients with
a weaker credit quality, including 22% of the backlog to
those in Venezuela, Angola (19%), and Odebrecht subsidiaries
(about 19%).
==========================
C A Y M A N I S L A N D S
==========================
A VOCE TB I: Members' Final Meeting Set for June 15
---------------------------------------------------
The members of A Voce TB I, Ltd. will hold their final meeting on
June 15, 2016, at 9:00 a.m., to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
AGHF OS: Shareholders' Final Meeting Set for June 27
----------------------------------------------------
The shareholders of AGHF OS SLP, Ltd. will hold their final
meeting on June 27, 2016, at 10:10 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Alden Global Capital LLC
c/o Tim Cone
Telephone: +1 (345) 949 9876
Facsimile: +1 (345) 949 9877
ATLANTIC BLUE: Members' Final Meeting Set for June 24
-----------------------------------------------------
The members of Atlantic Blue Ltd. will hold their final meeting on
June 24, 2016, to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
CDL Company Ltd.
P.O. Box 31106 Grand Cayman KY1-1205
Cayman Islands
BLUE HILL: Members' Final Meeting Set for June 15
-------------------------------------------------
The members of Blue Hill TB I, Ltd. will hold their final meeting
on June 15, 2016, at 9:00 a.m., to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
COMMINGLED ASSET: Shareholders' Meeting Set for July 8
------------------------------------------------------
The shareholders of Commingled Asset Short Term Fund (Cast), Ltd.
will hold their final meeting on July 8, 2016, 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:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman, KY1-9005
Cayman Islands
c/o Kim Charaman
Telephone: (345) 943-3100
COMMINGLED ASSET MASTER: Shareholders' Meeting Set for July 8
-------------------------------------------------------------
The shareholders of Commingled Asset Short Term Fund (Cast) Master
SPC, Ltd. will hold their final meeting on July 8, 2016, at
10:15 a.m., to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue George Town
Grand Cayman KY1-9005
Cayman Islands
c/o Kim Charaman
Telephone: (345) 943-3100
DCP TB IV: Members' Final Meeting Set for June 15
-------------------------------------------------
The members of DCP TB IV, Ltd. will hold their final meeting on
June 15, 2016, at 9:00 a.m., to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
ICONS LTD: A.M. Best Affirms ccc+ Rating on Cl. D Notes Due 2034
----------------------------------------------------------------
A.M. Best has affirmed the issue ratings on the multi-tranche
collateralized debt obligation co-issued by two bankruptcy remote
special purpose vehicles: ICONS, Ltd. (Cayman Islands) and ICONS
CDO Corp. (Delaware) (collectively known as ICONS or the issuers).
The outlook for each rating is stable.
The principal balance of the rated notes is collateralized by a
pool of trust preferred securities, surplus notes and secondary
market securities (collectively, the capital securities),
primarily issued by small- to medium-size insurance companies. The
capital securities are pledged as security to the notes. Interest
paid by the issuers of the capital securities are the primary
source of funds to pay operating expenses of the issuers and the
interest on the notes. Repayment of principal of the notes is
primarily funded from the redemption of the capital securities.
This rating action primarily reflects: the current issuer credit
ratings (ICRs) of the remaining issuers of the capital securities;
a stress of up to 250% on the assumed marginal default rates of
insurers (derived from Best's Idealized Default Rates of
Insurers); the amount of capital securities considered to be in
distress; and recoveries of 0% after the defaults of the capital
securities. Also considered are qualitative factors such as the
effect of interest rate spikes; subordination levels associated
with each rated tranche; the adjacency of very high investment
grade ratings to very low non-investment grade ratings in the
transaction's capital structure and the possibility that
additional redemptions of highly rated entities will leave lower-
rated companies in the collateral pool.
The ratings could be upgraded or downgraded or the outlook revised
if there are material changes in the ICRs of the remaining
insurance carriers, an increase in the number of defaulted capital
securities or additional capital security redemptions.
The following issue ratings have been affirmed:
ICONS, Ltd. and ICONS CDO Corp.
-- "aaa" on $172 million Class A Senior Notes Due 2034
-- "a+" on $40 million Class B Senior Notes Due 2034
-- "b+" on $8 million Class C-1 Deferrable Mezzanine Notes Due
2034
-- "b+" on $20 million Class C-2 Deferrable Mezzanine Notes Due
2034
-- "b+" on $6 million Class C-3 Deferrable Mezzanine Notes Due
2034
-- "ccc+" on $20 million Class D Deferrable Mezzanine Notes Due
2034
This is a structured finance rating.
INTRA-COMMERCE HOLDINGS: Shareholders' Meeting Set for June 13
--------------------------------------------------------------
The shareholders of Intra-Commerce Holdings Ltd. will hold their
final meeting on June 13, 2016, 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:
Hugh Dickson
c/o Prudence Pryce
10 Market Street
P.O. Box 765 Camana Bay Grand Cayman KY1-9006
Cayman Islands
Telephone: +1 (345) 949 7100
Facsimile: +1 (345) 949 7120
e-mail: prudence.pryce@uk.gt.com
LIMEROCK II: Members' Final Meeting Set for June 15
---------------------------------------------------
The members of Limerock II TB I, Ltd. will hold their final
meeting on June 15, 2016, at 9:00 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
LIMEROCK III: Members' Final Meeting Set for June 15
----------------------------------------------------
The members of Limerock III TB I, Ltd. will hold their final
meeting on June 15, 2016, at 9:00 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
MAREA TB I: Members' Final Meeting Set for June 15
--------------------------------------------------
The members of Marea TB I, Ltd. will hold their final meeting on
June 15, 2016, at 9:00 a.m., to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
NOMAD TB I: Members' Final Meeting Set for June 15
--------------------------------------------------
The members of Nomad TB I, Ltd. will hold their final meeting on
June 15, 2016, at 9:00 a.m., to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
NORTH END TB I: Members' Final Meeting Set for June 15
------------------------------------------------------
The members of North End TB I, Ltd. will hold their final meeting
on June 15, 2016, at 9:00 a.m., to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
PO Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
=====================
E L S A L V A D O R
=====================
BANCO AGRICOLA: S&P Affirms 'B+/B' ICRs; Outlook Remains Stable
---------------------------------------------------------------
S&P Global Ratings affirmed its 'B+/B' issuer credit ratings on
Banco Agricola. The outlook remains stable.
S&P continues assessing Banco Agricola's business position as
strong, reflecting the bank's leading position in El Salvador.
The bank is the largest financial institution in the country with
a 27% share of total deposits and 26% of total loans as of
December 2015. The growth in its consumer loans has held the
bank's profitability above that of the industry. S&P believes
that the bank will continue expanding its retail lending to
improve its margins for the next 12-18 months.
S&P's assessment of Banco Agricola's capital and earnings remains
adequate based on S&P's forecasted RAC ratio of about 8% for the
next 12-18 months. The ratio reflects Banco Agricola's modest
loan portfolio growth, which is mostly in line with the
industry's, and internal capital generation limited by the
weakening profitability. Over the past two years, the gap between
the passive and the active rates in the country has considerably
narrowed as a result of higher funding costs. Therefore, Banco
Agricola's net interest margin dropped. New taxes on IT equipment
and on banks' net income will increase pressure on Banco
Agricola's earnings, which had been decreasing since 2014.
"We continue assessing Banco Agricola's risk position as adequate
based on its stable asset quality metrics, which are in line with
the industry's average. We view Banco Agricola's funding as
average given the stable and solid deposit base, which represented
77% of the bank's funding base as of March 2016. Around 71% of
the total deposit base consists of retail depositors, which we
consider as more stable than other funding sources during economic
downturns. The rest of the funding structure consists of credit
facilities from development and commercial banks, locally issued
debt, and structured funding from Bank of America. Although we
view Banco Agricola as systemically important to El Salvador's
financial system, we assess the government as having uncertain
support towards private financial institutions," S&P said.
===========
M E X I C O
===========
CEMEX SAB: Fitch Assigns BB- Rating to Proposed EUR400MM Notes
--------------------------------------------------------------
Fitch Ratings has assigned an expected rating of 'BB-(EXP)' to
CEMEX S.A.B. de C.V.'s proposed EUR400 million secured notes
issued through its subsidiary CEMEX Finance LLC. Proceeds from
the notes will be used for general corporate purposes, including
liability management.
The guarantors for the notes will be CEMEX, S.A.B. de C.V., CEMEX
Mexico, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas
Tolteca deMexico, S.A. de C.V., New Sunward Holding B.V., CEMEX
Espana, S.A., Cemex Asia B.V., CEMEX Corp., Cemex
Egyptian Investments B.V., Cemex Egyptian Investments II B.V.,
CEMEX France Gestion (S.A.S.), Cemex Research Group AG, Cemex
Shipping B.V., and CEMEX UK. The notes will enjoy the same
collateral package as the creditors under CEMEX's Credit
Agreement.
KEY RATING DRIVERS
Leverage to Remain High
Fitch projects CEMEX's net leverage will remain unchanged in 2016
at around 5x, absent asset sales and new equity from conversion of
convertibles and CEMEX's planned Philippines public offering.
Challenges to organic deleveraging include low single digit volume
growth in many markets and the weak performance of CEMEX's equity
preventing the anticipated debt to equity conversion. Targeted
asset sales of approximately USD1.0 - 1.5 billion over the next 18
to 24 months coupled with the IPO of its Philippines operations
would lower leverage by around 0.7x.
Weak Stock Performance
The poor performance of CEMEX's stock price has lowered the
probability that the company will be convert more than USD1
billion of debt to equity. CEMEX has USD690 million of
convertible debt due in 2018 and USD521 million due in 2020. The
strike prices for these conversions are USD8.92/ADS for the 2018
convertibles and $11.45/ADS for the 2020 convertibles, which
compares with a current stock price of USD6.61.
Continued Free Cash Flow Generation:
Fitch expects CEMEX's free cash flow generation growth to remain
above USD600 million in 2016. Keys to positive FCF in 2016
include strong price increases in key markets, continued cost
reduction measures, reduced working capital cycle, lower interest
expense, and lower cash taxes. Sluggish volume growth in Mexico,
Colombia, and Europe will partially offset some of the strong
positive free cash flow generation.
Strong Business Position:
CEMEX's 'BB-' IDRs continue to reflect its strong and diversified
business position. The company is one of the largest producers of
cement, ready-mix and aggregates in the world. Key markets
include the U.S., Mexico, Colombia, Panama, Spain, Egypt, Germany,
France, Poland, the U.K., and the Philippines. The company's
product and geographic diversification offset some of the
volatility associated with the cyclical cement industry.
Growth in EBITDA Margins:
CEMEX's EBITDA margins were 18.2% during 1Q16, which was a 120
basis point (bps) improvement compared to 1Q15. Fitch projects
CEMEX's EBITDA margins will remain above 18% in 2016 as continued
EBITDA growth in the U.S. coupled with continued companywide cost
reductions will result in sustained profitability for the year.
Improvements in U.S. Market:
CEMEX's main markets during 2015, in terms of EBITDA, were Mexico
(39%), Central and South America (23%), the U.S. (19%), Europe
(9%), and Asia, Middle East, and Africa (18%) before others and
intercompany eliminations. CEMEX's U.S. EBITDA was USD109 million
in 1Q16, which represents a 71% increase from 1Q15.
KEY ASSUMPTIONS
-- U.S. cement sales volumes increase mid-single digits in
2016;
-- Mexico cement sales volumes increase low-single digits in
2016;
-- Consolidated sales volume growth of low-single digits in
2016;
-- Capital expenditures of approximately USD700 million in
2016;
-- Additional asset sales of approximately USD0.7-1.5 billion
over the next 18 months.
RATING SENSITIVITIES
Negative: Future developments that may, individually or
collectively, lead to a negative rating action include:
-- Rating downgrades are not likely during 2016 as CEMEX's
credit protections remain consistent with the category
despite underperformance by some key business units. CEMEX
received an unfavorable ruling by the Spanish tax
authorities during 2014 that could result in a payment of
EUR455 million. If the company is unsuccessful in its
appeal, this fine would hinder its ability to deleverage and
could lead to a negative rating action if the payment
coincides with sluggishness in other key markets.
-- A loss of the positive momentum in the U.S. market would
have a material impact upon the company's credit profile and
could pressure leverage to around 6.0x, which could result
in a negative rating action.
Positive: Future developments that may, individually or
collectively, lead to a positive rating action include:
-- Net leverage at or less than 4.0x could lead to an upgrade
of both the IDR and the company's notes to 'BB'.
-- Fitch projects that CEMEX's EBITDA in its U.S. operations
will grow to USD650 million by 2016 from USD565 million in
2015. This projection incorporates an expectation that
single-family and multi-family housing starts in the U.S.
will total 1.2 million in 2016. Growth beyond this figure
would be positive for the company's U.S. business and would
accelerate its deleveraging process.
-- Cement demand in Mexico has underperformed Fitch's
expectations since 2014, and this has offset improvements in
operating cash flow in the U.S. and in Asia. EBITDA
generated by CEMEX in Mexico declined approximately 3% to
USD966 million in 2015 compared to USD999 million in 2014.
Fitch currently projects EBITDA in this market to remain
relatively flat in 2016. A turnaround in the Mexican market
to EBITDA levels of around USD1 billion could also
accelerate debt reduction.
LIQUIDITY
CEMEX has a manageable amortization schedule as a result of its
aggressive refinancing efforts over the past few years. The
company had USD1.3 billion of cash and marketable securities
compared to zero short-term debt as of March 31, 2016. Most of
the company's marketable securities are held in U.S. and Mexican
government bonds. Approximately 83% of CEMEX's debt is
denominated in USD and 16% in euros. CEMEX also had full
availability under its USD735 million committed revolving credit
facility as of March 31, 2016.
Fitch currently rates CEMEX as:
CEMEX
-- Foreign and Local Currency Long-Term IDRs 'BB-';
-- Senior secured notes due 2018, 2019, 2021, 2022, 2023, 2025,
and 2026 'BB-';
-- National scale long-term rating 'A-(mex)';
-- Senior unsecured certificates due 2017 'A-(mex)';
-- National scale short-term rating 'F2(mex)'.
Fitch currently rates these guaranteed debt 'BB-':
CEMEX Materials LLC, a limited liability company incorporated in
the U.S.
-- Senior Notes due 2025.
CEMEX Finance LLC, a limited liability company incorporated in the
U.S.
-- Senior secured notes due 2021, 2022, and 2024.
C5 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes.
C8 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes.
C10 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes.
C-10 EUR Capital (SPV) Limited, a British Virgin Island
restricted purpose company
-- Senior secured perpetual notes.
SUMMARY OF FINANCIAL STATEMENT ADJUSTMENTS
Leases: Fitch has adjusted the debt by adding 7x of yearly
operating lease expense of $1.7 billion for 2015 and $419 million
for 1Q16.
CEMEX SAB: Fitch Puts BB-(EXP) Rating to Proposed EUR400MM Notes
----------------------------------------------------------------
Fitch Ratings has assigned an expected rating of 'BB-(EXP)' to
CEMEX S.A.B. de C.V.'s proposed EUR400 million secured notes
issued through its subsidiary CEMEX Finance LLC. Proceeds from
the notes will be used for general corporate purposes, including
liability management.
The guarantors for the notes will be CEMEX, S.A.B. de C.V., CEMEX
Mexico, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas
Tolteca deMexico, S.A. de C.V., New Sunward Holding B.V., CEMEX
Espana, S.A., Cemex Asia B.V., CEMEX Corp., Cemex
Egyptian Investments B.V., Cemex Egyptian Investments II B.V.,
CEMEX France Gestion (S.A.S.), Cemex Research Group AG, Cemex
Shipping B.V., and CEMEX UK. The notes will enjoy the same
collateral package as the creditors under CEMEX's Credit
Agreement.
KEY RATING DRIVERS
Leverage to Remain High
Fitch projects CEMEX's net leverage will remain unchanged in 2016
at around 5x, absent asset sales and new equity from conversion of
convertibles and CEMEX's planned Philippines public offering.
Challenges to organic deleveraging include low single digit volume
growth in many markets and the weak performance of CEMEX's equity
preventing the anticipated debt to equity conversion. Targeted
asset sales of approximately USD1.0 - 1.5 billion over the next 18
to 24 months coupled with the IPO of its Philippines operations
would lower leverage by around 0.7x.
Weak Stock Performance
The poor performance of CEMEX's stock price has lowered the
probability that the company will be convert more than USD1
billion of debt to equity. CEMEX has USD690 million of
convertible debt due in 2018 and USD521 million due in 2020. The
strike prices for these conversions are USD8.92/ADS for the 2018
convertibles and $11.45/ADS for the 2020 convertibles, which
compares with a current stock price of USD6.61.
Continued Free Cash Flow Generation:
Fitch expects CEMEX's free cash flow generation growth to remain
above USD600 million in 2016. Keys to positive FCF in 2016
include strong price increases in key markets, continued cost
reduction measures, reduced working capital cycle, lower interest
expense, and lower cash taxes. Sluggish volume growth in Mexico,
Colombia, and Europe will partially offset some of the strong
positive free cash flow generation.
Strong Business Position:
CEMEX's 'BB-' IDRs continue to reflect its strong and diversified
business position. The company is one of the largest producers of
cement, ready-mix and aggregates in the world. Key markets
include the U.S., Mexico, Colombia, Panama, Spain, Egypt, Germany,
France, Poland, the U.K., and the Philippines. The company's
product and geographic diversification offset some of the
volatility associated with the cyclical cement industry.
Growth in EBITDA Margins:
CEMEX's EBITDA margins were 18.2% during 1Q16, which was a 120
basis point (bps) improvement compared to 1Q15. Fitch projects
CEMEX's EBITDA margins will remain above 18% in 2016 as continued
EBITDA growth in the U.S. coupled with continued companywide cost
reductions will result in sustained profitability for the year.
Improvements in U.S. Market:
CEMEX's main markets during 2015, in terms of EBITDA, were Mexico
(39%), Central and South America (23%), the U.S. (19%), Europe
(9%), and Asia, Middle East, and Africa (18%) before others and
intercompany eliminations. CEMEX's U.S. EBITDA was USD109 million
in 1Q16, which represents a 71% increase from 1Q15.
KEY ASSUMPTIONS
-- U.S. cement sales volumes increase mid-single digits in
2016;
-- Mexico cement sales volumes increase low-single digits in
2016;
-- Consolidated sales volume growth of low-single digits in
2016;
-- Capital expenditures of approximately USD700 million in
2016;
-- Additional asset sales of approximately USD0.7-1.5 billion
over the next 18 months.
RATING SENSITIVITIES
Negative: Future developments that may, individually or
collectively, lead to a negative rating action include:
-- Rating downgrades are not likely during 2016 as CEMEX's
credit protections remain consistent with the category
despite underperformance by some key business units. CEMEX
received an unfavorable ruling by the Spanish tax
authorities during 2014 that could result in a payment of
EUR455 million. If the company is unsuccessful in its
appeal, this fine would hinder its ability to deleverage and
could lead to a negative rating action if the payment
coincides with sluggishness in other key markets.
-- A loss of the positive momentum in the U.S. market would
have a material impact upon the company's credit profile and
could pressure leverage to around 6.0x, which could result
in a negative rating action.
Positive: Future developments that may, individually or
collectively, lead to a positive rating action include:
-- Net leverage at or less than 4.0x could lead to an upgrade
of both the IDR and the company's notes to 'BB'.
-- Fitch projects that CEMEX's EBITDA in its U.S. operations
will grow to USD650 million by 2016 from USD565 million in
2015. This projection incorporates an expectation that
single-family and multi-family housing starts in the U.S.
will total 1.2 million in 2016. Growth beyond this figure
would be positive for the company's U.S. business and would
accelerate its deleveraging process.
-- Cement demand in Mexico has underperformed Fitch's
expectations since 2014, and this has offset improvements in
operating cash flow in the U.S. and in Asia. EBITDA
generated by CEMEX in Mexico declined approximately 3% to
USD966 million in 2015 compared to USD999 million in 2014.
Fitch currently projects EBITDA in this market to remain
relatively flat in 2016. A turnaround in the Mexican market
to EBITDA levels of around USD1 billion could also
accelerate debt reduction.
LIQUIDITY
CEMEX has a manageable amortization schedule as a result of its
aggressive refinancing efforts over the past few years. The
company had USD1.3 billion of cash and marketable securities
compared to zero short-term debt as of March 31, 2016. Most of
the company's marketable securities are held in U.S. and Mexican
government bonds. Approximately 83% of CEMEX's debt is
denominated in USD and 16% in euros. CEMEX also had full
availability under its USD735 million committed revolving credit
facility as of March 31, 2016.
Fitch currently rates CEMEX as:
CEMEX
-- Foreign and Local Currency Long-Term IDRs 'BB-';
-- Senior secured notes due 2018, 2019, 2021, 2022, 2023, 2025,
and 2026 'BB-';
-- National scale long-term rating 'A-(mex)';
-- Senior unsecured certificates due 2017 'A-(mex)';
-- National scale short-term rating 'F2(mex)'.
Fitch currently rates these guaranteed debt 'BB-':
CEMEX Materials LLC, a limited liability company incorporated in
the U.S.
-- Senior Notes due 2025.
CEMEX Finance LLC, a limited liability company incorporated in the
U.S.
-- Senior secured notes due 2021, 2022, and 2024.
C5 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes.
C8 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes.
C10 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes.
C-10 EUR Capital (SPV) Limited, a British Virgin Island
restricted purpose company
-- Senior secured perpetual notes.
SUMMARY OF FINANCIAL STATEMENT ADJUSTMENTS
Leases: Fitch has adjusted the debt by adding 7x of yearly
operating lease expense of $1.7 billion for 2015 and $419 million
for 1Q16.
MUNICIPALITY OF ZITACUARO: Moody's Cuts Issuer Ratings to B1
------------------------------------------------------------
Moody's de Mexico downgraded the issuer ratings of the
Municipality of Zitacuaro to B1/Baa2.mx from Ba3/A3.mx. The
outlook remains negative.
RATINGS RATIONALE
The downgrade of the municipality of Zitacuaro reflects the
structural deterioration of the municipality's operating balances
as well as the rapid increase in projected debt levels.
Over the last three years, the operating balance of Zitacuaro has
shown a sharp deterioration reaching a deficit equivalent to 17.9%
of operating revenues in 2015. The municipality's main spending
pressures, in personnel and supplies and materials, increased by
11.6% and 28.7%%, respectively, in the last five years.
While historically, the municipality of Zitacuaro had maintained
very low debt levels, Moody's anticipates an abrupt increase in
the short term that will exert additional pressure on the
municipality's finances. As of 31 December 2015 net direct and
indirect debt amounted to MXN 4.7 million equivalent to a very low
1.9% of operating revenues. The current administration has plans
to contract additional debt for up to MXN 98.7 million in 2016
which would drive net direct and indirect debt to operating
revenues to 42.7%, a level no longer in line with Ba-
municipalities but more in line with B1 rated municipalities
(23.1%). Moody's anticipates that Zitacuaro's debt service to
total revenue will increase to a moderate 10.1% in 2016 from 0.1%
in 2015.
Moody's said, "the negative outlook reflects the major challenges
that the municipality faces to redress its operating balance.
Moody's notes that the municipality is currently implementing
measures to improve local revenue collection and contain operating
expenditures growth. However, we do not expect a significant
improvement in operating balances in the medium term."
WHAT COULD CHANGE THE RATING UP/DOWN
Given the negative outlook a rating upgrade is unlikely. However,
ratings could stabilize if Zitacuaro manages to improve operating
balances, as well as if debt levels stabilize.
A further deterioration of the gross operating balances or a
higher than expected increase of debt levels could lead to a
downgrade of Zitacuaro's ratings. Also a downgrade on the
sovereign rating could lead to a downgrade on the issuer rating.
ZACATECAS: Moody's Assigns Ba1/A1.Mx Debt Ratings to Loans
----------------------------------------------------------
Moody's de Mexico assigned debt ratings of Ba1 (Global Scale,
local currency) and A1.mx (Mexico National Scale) to the following
three enhanced loans of the State of Zacatecas:
-- MXN 1,050 million enhanced loan from Banorte (original face
value), with a maturity of 15 years and a 24 month grace
period, and paid through a master trust (Invex Grupo
Financiero (Mexico), trust number 2697)
-- MXN 500 million enhanced loan from HSBC (original face value),
with a maturity of 10 years, and paid through a master trust
(Invex Grupo Financiero (Mexico), trust number 2697)
-- MXN 500 million enhanced loan from Santander (original face
value), with a maturity of 15 years and a 12 month grace
period, and paid through a master trust (Invex Grupo
Financiero (Mexico), trust number 2697)
The three loans pay an interest rate composed of the 28-day
Mexican Interbank Interest Rate (TIIE in Spanish) plus a spread.
The State of Zacatecas have the obligation to contract an interest
rate coverage during the life of the loans.
RATINGS RATIONALE
The Ba1/A1.mx debt ratings assigned to the enhanced loans reflect
the underlying creditworthiness of the State of Zacatecas
(Ba3/Baa1.mx, negative outlook), supported by the following legal
and credit enhancements embedded in the loans:
MXN 1,050 million enhanced loan with Banorte
1. Validity of the legal authorization of the transaction, which
authorizes the trust to be used as a mechanism for debt service
payment.
2. Strong trust structure based on an irrevocable instruction to
the Federal Treasury (TESOFE) regarding the transfer of rights and
flows of 6.88% of the state's participation revenues (Ramo 28-
Fondo General) to the trustee.
3. Strong debt service coverage ratios: under a Moody's base case
scenario estimated cash flows generate 2.5x debt service coverage
at the lowest point during the life of the loan. Under a stress
case scenario, estimated cash flows provide 1.8x debt service
coverage, at the lowest point during the life of the loan.
4. Solid level of reserves that represent a minimum of 2.0x debt
service coverage throughout the life of the loan and provide
enough cushion against payment delays.
MXN 500 million enhanced loan with HSBC
1. Validity of the legal authorization of the transaction, which
authorizes the trust to be used as a mechanism for debt service
payment.
2. Strong trust structure based on an irrevocable instruction to
the Federal Treasury (TESOFE) regarding the transfer of rights and
flows of 3.41% of the state's participation revenues (Ramo 28-
Fondo General) to the trustee.
3. Strong debt service coverage ratios: under a Moody's base case
scenario estimated cash flows generate 2.9x debt service coverage
at the lowest point during the life of the loan. Under a stress
case scenario, estimated cash flows provide 2.1x debt service
coverage, at the lowest point during the life of the loan.
4. Solid level of reserves that represent a minimum of 2.0x debt
service coverage throughout the life of the loan and provide
enough cushion against payment delays.
MXN 500 million enhanced loan with Santander
1. Validity of the legal authorization of the transaction, which
authorizes the trust to be used as a mechanism for debt service
payment.
2. Strong trust structure based on an irrevocable instruction to
the Federal Treasury (TESOFE) regarding the transfer of rights and
flows of 2.8% of the state's participation revenues (Ramo 28-Fondo
General) to the trustee.
3. Solid debt service coverage ratios: under a Moody's base case
scenario estimated cash flows generate 2.1x debt service coverage
at the lowest point during the life of the loan. Under a stress
case scenario, estimated cash flows provide 1.6x debt service
coverage, at the lowest point during the life of the loan.
4. Solid level of reserves that represent a minimum of 2.0x debt
service coverage throughout the life of the loan and provide
enough cushion against payment delays.
=====================
P U E R T O R I C O
=====================
COOPERATIVA DE SEGUROS: A.M. Best Affirms C+ FSR, Off Review
------------------------------------------------------------
A.M. Best has removed from under review with negative implications
and affirmed the financial strength rating of C+ (Marginal) and
the issuer credit rating of "b-" of Cooperativa de Seguros de Vida
de Puerto Rico (COSVI) (San Juan, PR). The outlook assigned to
each rating is negative.
The ratings of COSVI reflect its relatively low risk-adjusted
capitalization, potential for further spread compression on its
interest-sensitive business lines and challenges to sustained
premium growth in Puerto Rico's highly competitive marketplace.
The ratings also consider the aggregate excess of loss reinsurance
agreement used to support COSVI's Puerto Rico bond portfolio.
Partially offsetting factors include its diversified product
offerings, well-established presence in the cooperative and life
insurance marketplace in Puerto Rico and its members' commitment
to support the entity's financial flexibility.
===============
S U R I N A M E
===============
SURINAME: Gets $70MM IDB Loan to Improve Governance, Energy Sector
------------------------------------------------------------------
Suriname will increase the efficiency, transparency,
sustainability and accountability of its energy sector, supported
by a $70 million loan approved by the Inter-American Development
Bank (IDB). It will be able to provide more reliable and
sustainable energy to its citizens, and in the process, will both
improve the supply of electricity and foster the reduction in its
reliance on fossil fuels.
Given the absence of an integrated legal and regulatory framework,
Suriname has experienced significant challenges with respect to
effectively managing the energy sector and ensuring the reliable
provision of electricity. Surinamese government agency roles and
responsibilities needed to be defined with a strategy as to how to
implement the required investments in the energy sector, including
least-cost expansion planning, in order to improve the outdated
and stressed power infrastructure.
The IDB loan is the third in a programmatic policy-based series of
independently and technically connected loans to strengthen the
country's electricity sector. The operation will consolidate the
support for regulatory policy reforms and sector decisions
envisioned in the program, including the approval of a sector
policy with an accompanying legal and institutional framework, the
introduction of cost-recovery principles in the commercial
management of N.V. Energie Bedrijven Suriname (EBS), and
improvements in the utility's corporate management and governance.
The project will increase Suriname's technical capacity to
implement a sustainable power sector framework, which will
facilitate the execution of an Electricity Sector Plan that will
include a coordinated strategy for the sustainable and efficient
development of the power sector. The loan also fosters the
inclusion of environmental and social sustainability principles
within the power sector's expansion projects; this action will
contribute to minimize potential environmental impacts.
***********
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
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 2016. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any comillionercial use, resale
or
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* * * End of Transmission * * *