/raid1/www/Hosts/bankrupt/TCRLA_Public/170601.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
Thursday, June 1, 2017, Vol. 18, No. 108
Headlines
A R G E N T I N A
PROVINCE OF SANTA FE: Moody's Rates USD250MM Sr. Unsec. Notes B3
B E R M U D A
BANK OF NT BUTTERFIELD: Fitch Ups Rating on Sub. Debt from BB+
B R A Z I L
BRAZIL: Minister Says Reforms Would Continue Even Without Temer
JBS SA: Holding Company in Talks to Settle Corruption Case
SAMARCO MINERACAO: Resuming Operations This Year Challenging
SAMARCO MINERACAO: S&P Affirms Then Withdraws 'D' Issuer Rating
STATE OF MARANHAO: Fitch Affirms BB- IDR; Outlook Stable
VALE SA: Brazil Outlook Change No Impact on Moody's Ba2 Rating
C A Y M A N I S L A N D S
BLUE LAKE: Commences Liquidation Proceedings
COLORADO HOLDINGS: Creditors' Proofs of Debt Due June 19
FIROSTEFANI: Creditors' Proofs of Debt Due June 22
GAIA GLOBAL: Creditors' Proofs of Debt Due June 13
INVESTCORP GOSI: Creditors' Proofs of Debt Due June 14
MIDMICHIGAN ASSURANCE: Commences Liquidation Proceedings
NOVEL DIAMOND: Commences Liquidation Proceedings
PRIMA LUCE: Commences Liquidation Proceedings
THIRTY-EIGHT HUNDRED: Commences Liquidation Proceedings
C H I L E
GEOPARK LATIN: Fitch Affirms 'B' Long-Term IDRS
E C U A D O R
ECUADOR: Fitch Assigns 'B' Ratings to $2BB Notes
E L S A L V A D O R
SALVADORENO DPR: Fitch Lowers Rating Series 2015 Loans to BB+
M E X I C O
MEXICO: Oil And Gas Reserves Fall, Energy Regulatory Body Says
MEXICO: Ready to Revise NAFTA, Within Limits
NOGALES MUNICIPALITY: Moody's Withdraws Caa1 Issuer Rating
P U E R T O R I C O
PUERTO RICO: Unions Say Active Employees Should Have Own Committee
PUERTO RICO: Bankruptcy Judge Freezes $17-Bil. in Bond Payments
S U R I N A M E
SURINAME: S&P Lowers Sovereign Credit Rating to 'B'
SURINAME: Moody's Lowers Issuer Rating to B1; Outlook Stable
- - - - -
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A R G E N T I N A
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PROVINCE OF SANTA FE: Moody's Rates USD250MM Sr. Unsec. Notes B3
----------------------------------------------------------------
Moody's Investors Service has assigned a B3 (Global Scale) foreign
currency debt rating to the planned Senior Unsecured Notes to be
issued by the Province of Santa Fe for up to USD250 million. This
rating is in line with the province's long term foreign currency
issuer rating, which carries a positive outlook.
RATINGS RATIONALE
The planned issuance has been authorized by Provincial Law
Nß13.543 and mandated by Governor's Decree N 1.777 of 2016. The
Province intends to use the net proceeds of this issuance to fund
public infrastructure works detailed in Provincial Law N 13.543.
The Notes will constitute direct, general, unconditional and
unsubordinated obligations of the Province, will be denominated
and payable in US dollars and will be governed by the Law of the
State of New York. According to the information reviewed by
Moody's, the planned Notes will have a maximum tenure of twelve
years and will pay fixed interest rate on a semi-annual basis.
After the issuance of these Notes coupled with additional debts
planned for this years and the effect of the exchange rate
fluctuations over Santa Fe's dollar-denominated debts, Moody's
anticipates that the ratio of total debt to total revenues of the
Province of Santa Fe will rise to approximately 8% by year end
2017 from a very low 6% by the end of 2016 fiscal year which is
still consistent with Santa Fe's current issuer rating of B3 in
foreign currency.
The assigned rating to the Notes is based on preliminary
documentation received by Moody's as of the rating assignment
date. Moody's does not expect changes to the documentation
reviewed over this period nor anticipates changes in the main
conditions that the Notes will carry. Should issuance conditions
and/or final documentation of the Notes deviate from the original
ones submitted and reviewed by the rating agency, Moody's will
assess the impact that these differences may have on the ratings
and act accordingly.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the strong macroeconomic and financial linkages between
sovereign and sub-sovereign entities in Argentina, an upgrade or
an outlook change to positive of Argentina's sovereign bonds
ratings could lead to an upgrade or to an outlook change of the
Province of Santa Fe ratings. Conversely, a downgrade in
Argentina's bond ratings or outlook change to negative and/or
deterioration in the idiosyncratic risk profile arising in this
Province -due to for instance to sustained gross operating
deficits for more than two years coupled with debt levels higher
than 40% of total revenues- could exert downward pressure on the
ratings and could translate into a downgrade.
The principal methodology used in this rating was Regional and
Local Governments published in January 2013.
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B E R M U D A
=============
BANK OF NT BUTTERFIELD: Fitch Ups Rating on Sub. Debt from BB+
--------------------------------------------------------------
Fitch Ratings has upgraded the Bank of N.T. Butterfield & Son
Limited's (BNTB) Viability Rating (VR) to 'bbb' from 'bbb-'
following its review of the bank. Fitch has also affirmed BNTB's
support-driven Long-Term Issuer Default Rating (IDR) of 'BBB'. The
Rating Outlook remains Stable.
KEY RATING DRIVERS
VR
The upgrade reflects BNTB's demonstrated and sustainable
improvement in core profitability, execution of stated strategic
objectives, and continued above-average capital levels. The VR
also reflects Fitch's positive view on the company's liquid
balance sheet and strong market position in Bermuda and the Cayman
Islands. Conversely, product and geographic concentration in
Bermuda and concentration in the loan portfolio constrain the VR.
Return metrics have improved, reflecting growth in the bank's fee-
based business, positive trends in net interest income, as well as
continued decline in non-recurring items. Return on average assets
was 1.07% for 2016, which is in line with similarly-rated peers,
and up 29bps from the prior year.
More recently, the company successfully executed on two major
initiatives related to its capital structure: a U.S. IPO and
diversifying its shareholder investor base. In September 2016,
BNTB completed a sale of its common shares on the New York Stock
Exchange. BNTB used the proceeds to fully redeem the company's 8%
preferred stock. The company's preferred stock was issued in 2009
with an unconditional guarantee from the Government of Bermuda.
The preferred stock issuance was an extraordinary measure of
government support and its redemption has resulted in annual
savings of $16 million in dividends and guarantee fees. Further,
the common share offering improved the bank's access to capital
and provided U.S. secondary market liquidity for BNTB's largest
shareholder, The Carlyle Group, a private equity firm, to exit its
23% position. From a creditor's perspective, Carlyle's exit should
support a more long-term-oriented investor base, which is more
favorable in Fitch views.
The bank continues to maintain above-average capital levels on a
risk-weighted basis, which Fitch views positively and supports the
VR at its new level. As of 1Q17, BNTB's Fitch Core Capital-to-risk
weighted assets ratio was 15.9%, up from 13.1% in the prior year
period. BNTB's revenue and loan portfolio are concentrated in
Bermuda. As such, Fitch expects BNTB to operate with higher
capital than similarly-rated peers.
Fitch also views balance sheet liquidity as a strength to the
rating. The bank operates with a high level of cash and securities
at 65% of total assets at 1Q17, and a low loan-to-deposit ratio of
36%.
BNTB's product and geographic concentration in Bermuda and
concentration in the loan portfolio constrain the VR. The bank's
top 10 commercial lending exposures account for a large percentage
of total commercial loans.
SUPPORT RATING, SUPPORT RATING FLOOR AND IDR
The Government of Bermuda passed resolution legislation in
February 2016 that has weakened the sovereign's propensity to
provide support. In Fitch's view, although the resolution
legislation has weakened support, it has not eliminated it. Fitch
believes the government continues to maintain a strong willingness
to support the country's banking system because BNTB's assets are
considerable when compared to the size of the Bermudan economy and
contagion risk is high. A failure of a major bank could lead to
rapid disruption across the financial services sector and spread
to the wider economy.
As such, Butterfield's Support Rating (SR) of '2' indicates a
'high probability' of external support from the sovereign. The SR
corresponds to a Support Rating Floor (SRF) of 'BBB', which
indicates the minimum level to which BNTB's Long-Term IDRs could
fall if Fitch does not change its view on the potential for
sovereign support.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Subordinated debt issued by BNTB is notched down from the VR in
accordance with Fitch's assessment of each instrument's respective
non-performance and relative loss severity risk profiles.
RATING SENSITIVITIES
VR
Following the upgrade, Fitch envisions limited upward ratings
momentum. The rating action incorporates Fitch's view that BNTB's
earnings performance is sustainable and assumes that current
levels of capitalization and liquidity will continue to be
maintained. The rating action incorporates the expectation that
asset quality should continue to trend around current levels over
the Outlook time horizon, with a moderate level of deterioration
should economic conditions worsen over the medium-to-longer term.
While not anticipated at this time, negative rating action could
occur if asset quality metrics deteriorate significantly below
current levels. Additionally, ratings would be sensitive to
increases in risk appetite, for example through rapid growth
outside of the bank's footprint or increased credit or interest
rate risk in the securities portfolio.
The rating action also assumes capital management practices will
not lead to deterioration in the bank's above-average capital
levels. Fitch focuses on Fitch Core Capital to risk-weighted
assets (FCC/RWA) as its primary measure of capital adequacy. Fitch
expects that BNTB's FCC/RWA ratio will remain above similarly-
rated banks. In addition, the VR also incorporates Fitch's minimum
expectation that BNTB's tangible common equity position as
measured by its TCE/TA ratio should remain above 5%. BNTB's TCE/TA
ratio was 6.2% as of 1Q17, above Fitch's expectations and the 6%
minimum target set by BNTB management.
SUPPORT RATING, SUPPORT RATING FLOOR AND IDR
While Fitch does not expect further downward revisions to the SR
and SRF, the ratings could be sensitive to changes regarding the
ability of the sovereign to provide support (e.g. deterioration in
financial flexibility) and/or the propensity of the sovereign to
provide support (e.g. bail-in and/or regulations that could
further lower the probability of support).
The IDR is sensitive to changes in the bank's VR as well as
broadly sensitive to the same considerations that might affect its
VR.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The subordinated rating is typically sensitive to any change in
the bank's VR as well as broadly sensitive to the same
considerations that might affect its VR.
Fitch has taken the following rating actions:
Bank of N.T. Butterfield & Son
-- Long-Term IDR affirmed at 'BBB'; Outlook Stable;
-- Short-Term IDR affirmed at 'F2';
-- Support rating affirmed at '2';
-- Support Floor affirmed at 'BBB';
-- Viability Rating upgraded to 'bbb' from 'bbb-';
-- Subordinated debt upgraded to 'BBB-' from 'BB+'.
===========
B R A Z I L
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BRAZIL: Minister Says Reforms Would Continue Even Without Temer
---------------------------------------------------------------
Samantha Pearson at The Wall Street Journal reports that Brazilian
Finance Minister Henrique Meirelles said he expects President
Michel Temer to remain in office until the 2018 presidential
election, but that the embattled leader's economic agenda would
continue even if he's forced to leave.
"This is already an agenda for the country . . . the fact that the
country is growing again shows this," the minister said, according
to The WSJ.
Mr. Meirelles said he believes gross domestic product grew 0.7% to
0.8% in the first quarter, and that GDP will be growing at a 3%
annualized pace by 2018, the report notes.
The country's GDP contracted in 2015 and 2017, plunging Brazil
into its worst recession on record, the report relays. Brazil's
statistics agency will publish its report on first-quarter GDP on,
the report notes. Mr. Meirelles's estimate for GDP is in line
with market expectations, the report discloses.
The report relays that Mr. Temer, who became president after his
predecessor and former ally, Dilma Rousseff, was ousted in
impeachment proceedings last year, has vowed to make changes to
the country's insolvent pension system and to modernize Brazil's
costly and complicated labor regulations.
Mr. Temer was implicated in the vast corruption scandal known as
Operation Car Wash after the former chairman of meatpacking giant
JBS SA told prosecutors the president had asked him to pay bribes,
the report notes.
Mr. Temer has denied any wrongdoing.
Opposition politicians have nevertheless called for his
resignation, and some members of Congress have filed articles of
impeachment against the president, the report discloses. The
country's top electoral court is also investigating allegations
that the Rousseff-Temer ticket used illegal financing during the
2014 election, and if the tribunal rules they did, the election
result could be annulled and Mr. Temer removed from office, the
report adds.
As reported in the Troubled Company Reporter-Latin America on
May 24, 2017, S&P Global Ratings placed its 'BB' long-term foreign
and local currency sovereign credit ratings on the Federative
Republic of Brazil on CreditWatch with negative implications. S&P
also affirmed the short-term foreign and local currency ratings at
'B'. The transfer and convertibility assessment is unchanged at
'BBB-'. In addition, S&P placed the 'brAA-' national scale rating
on CreditWatch with negative implications.
JBS SA: Holding Company in Talks to Settle Corruption Case
----------------------------------------------------------
Luciana Magalhaes at The Wall Street Journal reports that J&F
Participacoes, the holding company of meatpacker JBS involved in
Brazil's vast corruption scandal, is willing to shell out at least
$1.3 billion as part of a leniency deal with prosecutors, said a
person close to the discussions.
JBS became the latest focus of Brazil's Car Wash corruption
investigation when the Supreme Court released plea bargain
testimony from its executives, who said they bribed 1,829
politicians, including President Michel Temer, according to the
WSJ. He has denied wrongdoing and has rejected calls to resign.
The report notes that J&F has been in negotiations with Brazilian
authorities over the leniency agreement, according to the company.
The talks between the company and prosecutors had been halted
after an impasse over the size of the fine J&F will have to pay,
according to prosecutors, the report relays. The prosecutors said
they were asking for a fine of BRL11.2 billion ($3.4 billion), the
report notes. J&F proposed a payment about a BRL1 billion, the
prosecutors said, the report discloses.
Negotiations resumed and advanced, with representatives of J&F now
agreeing that the company would pay a BRL4 billion fine, according
to a person close to the talks, the report relays. Prosecutors
are expected to put pressure on the company to pay more, the
person said, the report notes. J&F didn't have an immediate
comment on the status of the talks.
J&F said in a statement that it is also cooperating with
authorities in the U.S., where JBS owns major meat plants, the
report says. It said it has hired the law firm Baker McKenzie in
the U.S. to represent the company in those discussions, the report
notes.
JBS and its holding firm, which started as a small butcher's shop
in 1953, grew into one of the biggest meatpackers in the world,
with more than 220 production facilities, the report discloses.
The pace of its growth had increased in the past decade, largely
because of heavy government financing under the leftist Workers'
Party that ruled Brazil until President Dilma Rousseff's
impeachment last year, the report relays.
Besides being targeted by prosecutors, JBS is also being
investigated by Brazil's market watchdog, or CVM, which said it
has opened two new probes focusing on the company, the report
notes.
CVM said that in light of local press reports alleging
irregularities, it is now probing the company's ownership
structure, focusing on Blessed Holdings, a company based in
Delaware, a part of JBS's controlling group, the report says.
The market regulator said it had started five separate probes into
the family holding firm, JBS, and Banco Original, which is also
owned by J&F, over allegations company profited by buying dollar
contracts and selling the company's shares before leaking
information about the plea bargains to the press, the report
notes.
JBS has denied wrongdoing related to its financial operations.
Brothers Joesley and Wesley Batista, respectively the chairman and
chief executive of JBS, and five other group executives have
individually signed plea bargains, agreeing to pay a total of 225
million reais, according to JBS, the report says. This gives the
brothers immunity against criminal charges, but not the company,
prosecutors said, the report notes.
There has been growing criticism in Brazil over the plea deals
signed by the Batista brothers, who were given full immunity by
prosecutors in return for providing evidence against prominent
politicians, the report discloses.
Supreme Court Justice Marco Aurelio Mello said that the court
could still change the legal benefits guaranteed to the brothers
in the deal, the report relays.
In a column published by a local news site, Brazil's Attorney
General Rodrigo Janot defended the deal. "Although the benefits
may now seem excessive, the alternative would have been much more
damaging to the interests of the country, since we would never
know of the crimes that would continue to harm honorable Brazilian
citizens," the report quoted Mr. Janot as saying.
As reported in the Troubled Company Reporter-Latin America on May
24, 2017, Moody's Investors Service has downgraded by one notch
the ratings of JBS S.A. and of its wholly-owned subsidiary JBS USA
Lux S.A. ("JBS USA") and placed the ratings of both companies
under review for further downgrade. The rating downgrades include
JBS S.A.'s Corporate Family Rating to Ba3 from Ba2, JBS USA's
senior secured rating to Ba2 from Ba1, and JBS USA's senior
unsecured rating to Ba3 from Ba2. This action follows confirmation
by JBS S.A. that seven executives of the company and its
controlling entity, J&F Investimentos, entered into a plea bargain
agreement with the Federal Public Prosecutor's Office concerning
allegations of corruption.
SAMARCO MINERACAO: Resuming Operations This Year Challenging
------------------------------------------------------------
Marta Nogueira at Reuters reports that Brazilian iron ore miner
Samarco Mineracao SA said that resuming operations this year will
be challenging, though there remains a small possibility, Roberto
de Carvalho, chief executive officer.
The company, which halted operations in November 2015 after a dam
burst, said talks with the government continue, according to
Reuters. "It is getting increasingly tight to resume operations
this year," the report quoted Mr. Carvalho as saying. "Each day
that passes makes it tighter," he added.
SAMARCO MINERACAO: S&P Affirms Then Withdraws 'D' Issuer Rating
---------------------------------------------------------------
S&P Global Ratings said it affirmed then withdrew its 'D'
(default) issuer and issue-level ratings on Samarco Mineracao S.A.
and its senior unsecured debt at the issuer's request.
At the time of the withdrawal, Samarco was in default with all of
its financial obligations, and continues to negotiate with
regulators to regain its licenses and resume operations, as well
as with debtholders to restructure its debts.
STATE OF MARANHAO: Fitch Affirms BB- IDR; Outlook Stable
--------------------------------------------------------
Fitch Rating has affirmed the Long-Term Issuer Default Rating of
the Brazilian state of Maranhao (IDR) at 'BB-'. Fitch has revised
the Rating Outlook to Stable from Negative. Fitch has also
upgraded Maranhao's national long-term rating to 'AA-(bra)' from
'A+(bra)' with a Stable Outlook.
KEY RATING DRIVERS
The upgrade of the national scale rating and Outlook revision to
Stable reflect Maranhao's adequate fiscal performance even during
periods of overall economic slowdown. The state has been able to
generate operating margins of around 10% over the last five years,
considering the positive tax collections and controlled operating
expenditures. The ratings are limited by the state's modest
economic base, low economic diversification and limited fiscal
autonomy.
The state remains very much dependent on federal transfers, which
accounted for 50.7% of Maranhao's operating revenues in 2016,
despite the state's efforts to increase its tax base. In Fitch's
opinion, the dependence on federal transfers reflects the
limitations of local economic activities. As a result, the state's
fiscal performance is linked to the performance of the national
economy.
In 2016, Maranhao benefited from extraordinary revenue derived
from the usage of judicial deposits and the registration fees for
repatriations of private resources invested abroad. According to
Fitch's calculations, these revenues totalled BRL675 million,
corresponding to 4.4% of the state's operating revenue in 2016.
Per Fitch's methodology, these revenues do not impact operating
margins.
Maranhao's consolidated debt of BRL5.9 billion represented 38% of
the entity's operating revenues in 2016 in declining trend. The
state is moderately exposed to currency risk since some 31% of
total risk is denominated in USD. Maranhao does not have revenues
linked directly or indirectly to the USD. Pension payments
comprise some 15% of the state's personnel expenditures, which is
better than most 'BB'-rated entities.
Maranhao's economy remains below the national average in terms of
stature and diversification. Urbanization and sanitation rates
remain very poor, demanding high and continued investments. The
state has launched a program, Mais IDH, with total investments of
BRL500 million, mostly in education and law enforcement.
Maranhao's GDP corresponds to less than 2% of Brazil's GDP,
despite faster growth than Brazil, due to increased activities
associated with the Itaqui Port and investments in energy and
mining.
Maranhao has not significantly suffered from liquidity squeezes in
2016, with no reported delays in commercial and personnel
payments. Maranhao has not yet fully adopted the international
accounting standards but constituted provisions for the
unrecoverable tax in arrears in late 2015. Moreover, the state has
not implemented tools to measure fiscal risks nor economic
benefits derived from the application of tax incentives.
RATING SENSITIVITIES
Negative Factors: Any rating action affecting the Federative
Republic of Brazil could exert a direct effect over Maranhao's
ratings. Moreover, the ratings could be downgraded if the state's
fiscal performance falls below Fitch's expectations and if debt
metrics deteriorate on a consistent basis.
Positive Factors: An upgrade is unlikely given that ratings
factors are well balanced but the ratings should benefit if the
state significantly increases the participation of its proprietary
revenues over federal transfers in addition to its economic share
in relation to the national economy.
KEY ASSUMPTIONS
-- Fitch assumes similar level of sovereign support for Maranhao
in comparison to the ones supposedly granted to the larger states
even considering the weak institutional framework given that
Maranhao most relevant creditor and guarantor is the Federal
Government.
-- Fitch expects some delays on the government's legislative
agenda especially the ones affecting subnationals such as pension
reform and additional federal debt relief with limited impact for
Maranhao.
Fitch has taken the following rating actions on the State of
Maranhao:
-- Foreign Currency Long-Term IDR affirmed at 'BB-'; Outlook to
Stable from Negative;
-- Foreign Currency Short-Term IDR affirmed at 'B';
-- Local Currency Long-Term IDR affirmed at 'BB-'; Outlook to
Stable from Negative;
-- Local Currency Short-Term IDR affirmed at 'B';
-- National Long-term rating upgraded to 'AA-(bra) from
'A+(bra)'; Outlook Stable;
-- National Short-term rating upgraded to 'F1+(bra)' from
'F1(bra)'.
VALE SA: Brazil Outlook Change No Impact on Moody's Ba2 Rating
--------------------------------------------------------------
Moody's Investors Service says that Vale S.A. ("Vale")'s Ba2
ratings and positive outlook are not affected by the change in
outlook on Brazil's government bond rating to negative from stable
on May 26.
RATINGS RATIONALE
"Vale's competitive position as the leading iron ore and nickel
producer worldwide, strong business profile and high exposure to
markets outside of Brazil support the company's positive outlook,"
says Barbara Mattos, a Moody's Vice President and Senior Credit
Officer. Vale benefits from some degree of insulation from the
domestic macroeconomic environment. Vale is one of the biggest
companies in Brazil, and although about 64% of its assets are
concentrated domestically, it generates over 90% of revenues
through exports, resulting in a low dependence on the domestic
market for cash flow generation. The company also benefits from
ample access to external funding through bank debt, export credit
agencies and capital markets.
Still, although Vale's credit profile is now more strongly
positioned within the Ba2 category than the Brazilian government,
the company's credit cannot be completely de-linked from the
credit quality of the Brazilian government. Evolving sovereign
creditworthiness and macroeconomic conditions in Brazil are likely
to be considered in any potential upgrade of Vale to Ba1. An
upgrade on Vale's rating would also depend on the maintenance of
strong credit metrics and market positioning, as well as a sound
liquidity position and ongoing reduction in absolute debt levels.
Quantitatively, an upgrade would also require Vale's adjusted
total debt/ EBITDA below 3.0x, EBIT/interest expense at 4.0x and
positive free cash flow generation on a sustainable basis.
The positive outlook on Vale's ratings incorporates Moody's
expectation that Vale will maintain a good liquidity position
while reducing debt levels and remaining continually focused on
cost reduction. The outlook also reflects Moody's anticipation
that Vale will continue demonstrating financial discipline around
capital spending and shareholder distributions which will allow it
to withstand the challenges and constraints arising from commodity
price volatility for its main products.
Vale's Ba2 rating continues to be supported by the company's
diversified product base and competitive cost position, and
substantive portfolio of long lived assets. While Vale has
diversified its geographic footprint through various acquisitions
(in Canada and elsewhere), the dominant revenue, earnings and cash
flow driver continues to be its Brazilian-based iron ore
operations and its major position in the seaborne iron ore
markets. The rating acknowledges Vale's more focused and
disciplined approach to project development, capital allocation,
resizing of its asset portfolio to strategically important
business segments, divestiture of non-strategic assets, and focus
on cost reduction, which better positions Vale to withstand
volatility in the prices for its major products.
Constraining Vale's ratings is the company's high debt levels --
although adjusted leverage has declined overtime (2.2x at the end
of March 2017), and Vale has showed a consistent deleveraging
trend from 5.6x at the end of 2015, there has not yet been a
material reduction in absolute debt levels, which totaled USD 29.5
billion at the end of March 2017, a similar level than those
observed since 2012. Besides, Vale remains exposed to iron ore and
base metals, and while there was price improvement in 2016 and
early 2017 from lows observed in late 2015/early 2016, this
movement was mostly driven by stimulus initiatives in China and
significant trading activity, rather than a material change in
supply/demand fundamentals since early 2016. While Moody's does
not expects a retreat of the magnitude seen in late 2015/early
2016, Moody's believes there could be a bit of a correction in the
second half of the year. Relatively muted growth expectations are
likely to limit improvements, while significant trading activity
continues to contribute to high volatility than Moody's has seen
historically.
Vale's ratings also incorporate the long term overhang represented
by the uncertainties regarding the level of support Vale will
provide to Samarco or the outcome of existing litigations and the
impact it would have on the company's liquidity and debt profile.
Headquartered in Rio de Janeiro, Brazil, Vale is one of the
largest mining enterprises globally, with substantive positions in
iron ore and nickel, and participation in copper, coal and
fertilizers, as well as supplemental positions in energy and steel
production. Vale is the largest global supplier of iron ore, with
approximately 357.5 million metric tons (t) of production during
the last twelve months ended March 2017 and the largest global
producer of nickel, with around 308,900t produced during the same
period. Vale's principal mining operations are located in Brazil,
Canada, Indonesia, and Mozambique. In addition, the company is
active in exploration activities in six countries. For the twelve
months through March 2017, Vale had net operating revenues of USD
30.7 billion.
The principal methodology used in these ratings/analysis was
Global Mining Industry published in August 2014.
==========================
C A Y M A N I S L A N D S
==========================
BLUE LAKE: Commences Liquidation Proceedings
--------------------------------------------
The shareholders of Blue Lake Incorporation, on May 1, 2017,
passed a resolution to voluntarily liquidate the company's
business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Marcos Antonio Sorrilha
Avenida Heraclito Fontoura Sobral Pinto
551 Guapore 11, Casa 45, Jardim Botanico
Ribeirao Preto, SP, 14022-000
Brazil
COLORADO HOLDINGS: Creditors' Proofs of Debt Due June 19
--------------------------------------------------------
The creditors of Colorado Holdings Ltd are required to file their
proofs of debt by June 19, 2017, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 9, 2017.
The company's liquidator is:
Ian Phillips
Canella Court, Suite 4210, 2nd Floor
48 Market Street, Camana Bay
P.O. Box 32203 Grand Cayman KY1-1208
Cayman Islands
Telephone: (345) 749-3344
Facsimile: (345) 749-2230
FIROSTEFANI: Creditors' Proofs of Debt Due June 22
--------------------------------------------------
The creditors of Firostefani are required to file their proofs of
debt by June 22, 2017, to be included in the company's dividend
distribution.
The company commenced liquidation proceedings on May 10, 2017.
The company's liquidator is:
CDL Company Ltd.
P.O. Box 31106 Grand Cayman KY1-1205
Cayman Islands
GAIA GLOBAL: Creditors' Proofs of Debt Due June 13
--------------------------------------------------
The creditors of Gaia Global Investment Fund Limited are required
to file their proofs of debt by June 13, 2017, to be included in
the company's dividend distribution.
The company commenced wind-up proceedings on May 9, 2017.
The company's liquidator is:
An-Hung Chen
Gaia Global Holding Limited
5th Floor No. 6, Lane 224, Jixian Rd.
Luzhou District, New Taipei City
Taiwan
Telephone: +886 952 003 832
Facsimile: +1 345 949 8613
INVESTCORP GOSI: Creditors' Proofs of Debt Due June 14
------------------------------------------------------
The creditors of Investcorp Gosi Saudi Arabia Investments S.P.C.
are required to file their proofs of debt by June 14, 2017, to be
included in the company's dividend distribution.
The company commenced liquidation proceedings on May 8, 2017.
The company's liquidator is:
Westport Services Ltd.
c/o Evania Ebanks
P.O. Box 1111 Grand Cayman KY1-1102
Cayman Islands
Telephone: (345) 949 5122
Facsimile: (345) 949 7920
MIDMICHIGAN ASSURANCE: Commences Liquidation Proceedings
--------------------------------------------------------
At an extraordinary meeting held on May 1, 2017, the shareholders
of Midmichigan Assurance Group, Ltd. resolved to voluntarily
liquidate the company's business.
The company's liquidator is:
Kieran Mehigan
Marsh Management Services Cayman Ltd.
Governors Square, Building 4, 2nd Floor
23 Lime Tree Bay Avenue
P.O. Box 1051, Grand Cayman
Cayman Islands
NOVEL DIAMOND: Commences Liquidation Proceedings
------------------------------------------------
The sole shareholder of Novel Diamond Fund, on May 1, 2017, passed
a resolution to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Walkers Liquidations Limited
Cayman Corporate Centre
27 Hospital Road, George Town
Grand Cayman KY1-9008
Cayman Islands
Telephone: +1 (345) 949 0100
PRIMA LUCE: Commences Liquidation Proceedings
---------------------------------------------
The sole member of Prima Luce Holdings Ltd., on May 8, 2017,
passed a resolution to voluntarily liquidate the company's
business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Alexandre Kunz
184 Ocean Drive
Sentosa Cove
Singapore 098615
Telephone: +65 6227 9935
THIRTY-EIGHT HUNDRED: Commences Liquidation Proceedings
-------------------------------------------------------
The sole shareholder of Thirty-Eight Hundred Investments Limited,
on May 5, 2017, passed a resolution to voluntarily liquidate the
company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Walkers Liquidations Limited
Cayman Corporate Centre
27 Hospital Road, George Town
Grand Cayman KY1-9008
Cayman Islands
Telephone: +1 (345) 949 0100
=========
C H I L E
=========
GEOPARK LATIN: Fitch Affirms 'B' Long-Term IDRS
-----------------------------------------------
Fitch Ratings has affirmed GeoPark Latin America Limited Agencia
en Chile's (GeoPark) Long-Term Foreign and Local Currency Issuer
Default Ratings (IDRs) at 'B'. Fitch has also revised GeoPark's
Rating Outlook to Stable from Negative.
The rating action reflects the company's increased production and
improved reserve life and its ability to implement an effective
cost reduction plan. Fitch expects GeoPark will remain a low cost
producer while significantly increasing production levels to above
30,000 by 2017 and 60,000 boed by 2020. Despite improved operating
metrics, the rating is constrained by the company's relatively
small size and low diversification of oil fields. Increase in
production to the aforementioned levels while maintaining reserve
life and capital structure unaffected would bode positively
GeoPark's credit quality.
The rating also reflects Fitch's expectations that GeoPark will
continue strengthening its capital structure with a rapid
deleveraging process that would result in the company's gross
leverage declining to approximately 2.0x in the short term
considering Fitch's revised oil price deck assumptions. Fitch's
new price deck expectations for Brent prices are USD52.5/bbl in
2017, $55/bbl in 2018, $60/bbl in 2019 and $65/bbl in the long
term.
KEY RATING DRIVERS
Neutral Cash Flow Generation: Fitch expects GeoPark to report
neutral to positive free cash flow (FCF) generation over the
medium term, supported by growing production, relatively low capex
and no dividends payment. Fitch expects that GeoPark will generate
enough cash flow from operations (CFFO) after interest expenses to
cover capex requirements. GeoPark's financial profile benefits
from stable cash flow from the natural gas contract sales in Chile
and Brazil, the prolific oilfields in which it operates in
Colombia and its low costs structure.
Expected Production Increase: Fitch expects GeoPark's daily
production to increase by 30% yoy, reaching close to 30,000 boe/d
by 2017 and to approximately 60,000 by 2020. These expectations
assume a modest crude oil price increase in the long-term towards
USD65/bbl Brent. During 1Q17, the company's output increased by
12% yoy to 25,180 boed and is expected to reach 30,000 by the end
of 2017. Despite growing production, GeoPark's ratings are
constrained by its small size and low diversification of
oilfields.
Effective Cost Reduction Plan: Fitch expects that the company will
maintain the cost-reduction efforts implemented during the low oil
price environment. GeoPark's competitive advantages are derived
from its operations in onshore and growing oilfields which results
in lower exploration costs than big players in the region. In
2016, it reduced its half cycle cost by almost 8% yoy to
$16.4/bboe. Since 2015, the company has focused on lower risk
projects and concentrated production in Colombia, specifically in
the Tigana and Jacana oil fields in the Llanos 34 block. In 2016,
the company continued focusing on preserving a solid cash position
by reducing capex, drilling costs and operating expenses. Under
Fitch's oil price assumptions, Fitch forecasts the company will
record a netback of USD20 to USD32 per barrel, significantly
increasing the company's EBITDA to USD140 million in 2017 and to
around USD250 million by 2019.
Adequate Reserve Life: GeoPark maintains an adequate reserve life
and it is currently not considered a constraining factor for the
company's ratings. As of Dec. 31, 2016, GeoPark had proved,
developed and producing (PDP) oil and gas reserves of 19.4 million
barrels of equivalent (mmboe), while it's proved reserves (1P)
totalled 78.3 mmboe. This translates into a 1P reserve life of 9.5
years. Certified reserves in Peru were incorporated by the end of
December 2016 following GeoPark's closing of the acquisition of
75% of the Morona field and formal approval of the government of
Peru under supreme decree.
Improving Credit Profile: Fitch expects GeoPark's EBITDA to be
approximately USD140 million for a total debt/EBITDA of 1.9x in
2017. Considering a production of around 30,000 boed in 2017 and
increasing to more than 60,000 boed by 2020, Fitch expects the
company could repay its debt with its own cash flow generation.
GeoPark's credit metrics deteriorated significantly during 2015-
2016 as a result of the decrease in oil prices. During 2015 and
2016, total debt/EBITDA increased to 5.8x and 5.3x, respectively,
from 1.7x in 2014. Debt on a reserve basis remain adequate as
Fitch estimates that total debt/1P reserves stands close to
$4.6/boe after the incorporation of the reserves in Peru.
DERIVATION SUMMARY
The rating action reflects the company's stable production amid
the downturn in the oil and gas industry, and its ability to
maintain an effective cost reduction plan in growing oilfields.
The ratings reflects Fitch's expectation that the company will be
able to maintain reduced production costs and increase production
in the medium and long term and continue with the operational
momentum in an improving oil and gas price environment.
GeoPark production size is comparable with other 'B' rated oil and
gas E&P producers, constraining its ratings. These peers include
Kosmos Energy Ltd (B/Stable) and Compania General de Combustibles
(CGC, B / Stable), although Fitch expects production to
significantly increase as oil prices recover. GeoPark is well
positioned compared with its peers in terms of reserves with a
healthy reserve life of close to 10 years which Fitch considers
optimal and gives the company more flexibility to reduce capex
investments if necessary.
GeoPark's capital structure is expected to significantly improve
after 2017 and be strong for the rating category. Fitch expects
gross leverage to decline to approximately 2.0-2.5x in 2017 as a
result of increased production and improved prices. Peers with
similar gross leverage levels include CGC with expected gross
leverage to be maintained around 2.0x for the next 2 years and
Pacific Exploration and Production Corporation with an expected
gross leverage of approximately 1.0x during the forecasted period.
No Country Ceiling, parent/subsidiary and operating environment
aspects affect GeoPark's ratings.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for this issuer
include
-- Fitch's price deck per barrel of Brent oil of: USD52.5 for
2017, USD55 for 2018 and USD60 for 2019 and USD65 thereafter
-- Average realized oil price of $31.8 for 2017 and $34.3 for
2018
-- 2017 production of approx. 30,000 bboepd in line with
management work program indications for Brent of USD50 or
above
-- Annual production increasing at a similar pace for the next 4
years
-- Half cycle costs between $16 and $18 with EBITDA per boe of
$18-$30
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action
-- Net production rising consistently to 35,000 to 40,000 boe/d
on a sustained basis;
-- Reserve life is unaffected as a result of production increase
at approximately 10 years;
-- Company's ability to maintain a conservative financial profile
with gross leverage of 2.0x or below;
-- Diversification of operations and improvements in realized oil
and gas differentials.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action
-- An inability to maintain current operating costs and increase
production levels;
-- A persistently weak oil and gas pricing environment that
impairs the longer-term value of its reserve base or a
reduction in reserves due to a change in the Peruvian
concession.
LIQUIDITY
As of March 31, 2017, GeoPark had cash on hand totalling $70.3
million, which cover its debt maturities up to 2019. The company
does not have any major maturities until the USD300 million bond
comes due in 2020. During 2016, the company paid $25.5 million in
interest for its $300 million bond and bank loans
FULL LIST OF RATING ACTIONS
Fitch has affirmed GeoPark's ratings:
-- Long-Term Foreign and Local Currency IDRs 'B'; Outlook
reviewed
to Stable from Negative;
-- Senior unsecured debt rating at 'B/RR4'.
=============
E C U A D O R
=============
ECUADOR: Fitch Assigns 'B' Ratings to $2BB Notes
------------------------------------------------
Fitch Ratings has assigned a 'B' rating to Ecuador's $1 billion
notes maturing June 2, 2023, and $1 billion notes maturing June 2,
2027. The notes have coupons of 8.750% and 9.625%, respectively.
Proceeds from this issuance will be used in accordance with local
budget laws for government programs and investment projects.
KEY RATING DRIVERS
The bond rating is in line with the Ecuador's Long-Term Foreign-
Currency Issuer Default Rating (IDR) of 'B'.
RATING SENSITIVITIES
The bond rating would be sensitive to any changes in Ecuador's
Long-Term Foreign-Currency IDR, which Fitch affirmed at 'B' on
August 25, 2016, and changed the Outlook to Negative from Stable.
====================
E L S A L V A D O R
====================
SALVADORENO DPR: Fitch Lowers Rating Series 2015 Loans to BB+
-------------------------------------------------------------
Fitch Ratings has downgraded Salvadoreno DPR Funding Ltd's series
2015 loans to 'BB+' from 'BBB-' and revised the Rating Outlook to
Negative from Stable.
The future flow program is backed by existing and future U.S.
dollar-denominated diversified payment rights (DPRs) originated by
Banco Davivienda Salvadoreno, S.A. (Davivienda Sal). The majority
of DPRs are processed by designated depositary banks (DDBs) that
have signed acknowledgement agreements (AAs) irrevocably
obligating the DDBs to send DPRs to an offshore account controlled
by the trustee.
Fitch's ratings address timely payment of interest and principal
on a quarterly basis.
KEY RATING DRIVERS
Downgrade to Davivienda Sal: On Feb. 10, 2017, Fitch downgraded
Davivienda Sal's Long-Term Issuer Default Rating (IDR) to 'BB-'
and revised the Outlook to Negative from Stable. The Viability
Rating (VR) was downgraded to 'b' from 'b+'. The downgrade follows
Fitch's downgrade of El Salvador.
Sovereign Downgrade: On Feb. 1, 2017, Fitch downgraded El
Salvador's Long-Term IDRs to 'B' from 'B+'. The Rating Outlook was
revised to Negative from Stable. The Country Ceiling was
downgraded to 'BB-' from 'BB'. The downgrade reflects El
Salvador's continuing high level of political polarization with a
prolonged period of congressional gridlock that has severely
limited the government's financing options and hindered meaningful
fiscal measures to arrest the deterioration of public finances.
The Negative Outlook reflects persisting risks to meeting
financing needs for 2017 in the absence of a political agreement
that unlocks additional external borrowing.
Going Concern Assessment (GCA) Score: Davivienda Sal's GCA score
of 'GC2' reflects the bank's moderate systemic importance and the
strong likelihood of parent support. The GCA score serves as a
rating cap on the future flow transaction, but Fitch tempers
notching uplift from the originator's IDR when the bank rating
benefits from parent support.
Performance Consistent with Expectations: DDB and former DDB flows
supported an average debt service coverage ratio (DSCR) of
approximately 38x in 2016. This moderate coverage level is in line
with Fitch's expectations.
Moderately Large Program Size: The outstanding balance of the
program is $175 million, which represents 7.6% of the bank's total
liabilities and 31.3% of non-deposit funding. While Fitch is
comfortable with the level of future flow debt at the current
rating level, an increase in these ratios could impact the
transaction ratings.
RATING SENSITIVITIES
The credit strength of the transaction is linked to the
performance of Davivienda Sal. The future flow ratings are
sensitive to changes in the credit quality of Davivienda Sal, the
ability of the DPR business line to continue operating (as
reflected by the GCA score) and changes in the ratings assigned to
El Salvador. A downgrade of the bank would trigger a downgrade to
the future flow ratings. In addition, severe reductions in DSCRs
or an increase in the level of future flow debt as a percentage of
the bank's liabilities could result in rating downgrades.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and
enforcement mechanisms (RW&Es) that are disclosed in the offering
document and which relate to the underlying asset pool was not
prepared for this transaction. Offering documents for future flow
transactions do not typically include RW&Es that are available to
investors and that relate to the asset pool underlying the
security. Therefore, Fitch credit reports for future flow
transactions will not typically include descriptions of RW&Es. For
further information, please see Fitch's Special Report titled
'Representations, Warranties and Enforcement Mechanisms in Global
Structured Finance Transactions,' dated May 31, 2016.
Fitch has downgraded following ratings:
-- Series 2015-1 loan to 'BB+' from 'BBB-'; Outlook to Negative;
-- Series 2015-2 loan to 'BB+' from 'BBB-'; Outlook to Negative;
-- Series 2015-3 loan to 'BB+' from 'BBB-'; Outlook to Negative.
===========
M E X I C O
===========
MEXICO: Oil And Gas Reserves Fall, Energy Regulatory Body Says
--------------------------------------------------------------
EFE News reports that Mexico's oil and gas reserves have dropped,
compared to 2016, dragged down by a sharp decline in total proven
and probable reserves (2P) of natural gas, the National
Hydrocarbons Commission (CNH) said.
The energy regulatory agency looked at 2P and total proven,
possible and probable reserves (3P) as of Jan. 1, 2017, according
to EFE News.
Mexico's 2P gas reserves fell from 22.02 billion cubic feet on
Jan. 1, 2016, to 19.3 billion cubic feet on Jan. 1 of this year, a
drop of 12.4 percent, the CNH said, the report relays.
The report notes that the country's 2P oil reserves dropped from
13.27 billion barrels to 12.84 billion barrels, a decline of 3.2
percent, while crude equivalent reserves fell from 17.79 billion
barrels to 16.76 billion barrels, a drop of 5.7 percent.
Mexico's 3P reserves of crude rose 2.7 percent from 19.45 billion
barrels on Jan. 1, 2016, to 19.97 billion barrels on the first day
of this year, the CNH said, the report discloses.
The country's 3P gas reserves fell from 32.56 billion cubic feet
to 28.95 billion cubic feet, a drop of 11.1 percent, while oil
equivalent reserves declined from 26.14 billion cubic feet to
25.85 billion cubic feet, a decrease of 1.1 percent, the report
says.
The government hopes that the 2013 energy reforms, which ended an
eight-decade state monopoly over the oil industry, will lead to
more efficient exploitation of oil and gas resources, the report
adds.
MEXICO: Ready to Revise NAFTA, Within Limits
--------------------------------------------
EFE News reports that the Mexican foreign secretary said that
while his county is open to updating the North American Free Trade
Agreement, it will not accept changes that would reduce economic
integration among the United States, Canada and Mexico.
"We don't want it to stop being a free-trade treaty," Luis
Videgaray said during a town-hall interview with The Miami
Herald's Andres Oppenheimer that also addressed the wall US
President Donald Trump wants to build on the Mexican border to
keep out "criminals," according to EFE News.
NOGALES MUNICIPALITY: Moody's Withdraws Caa1 Issuer Rating
----------------------------------------------------------
Moody's de Mexico withdrew the issuer ratings of the Municipality
of Nogales at Caa1 (Global Scale, local currency) and B2.mx
(Mexico's National Scale). Moody's has withdrawn the stable
outlook.
RATINGS RATIONALE
Moody's has withdrawn the ratings for its own business reasons.
Please refer to the Moody's de MÇxico Policy for Withdrawal of
Credit Ratings, available on its website, www.moodys.com.mx.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2013.
The period of time covered in the financial information used to
determine Nogales, Municipality of's rating is between 01/01/2012
and 12/31/2015.
Moody's National Scale Credit Ratings (NSRs) are intended as
relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global
scale credit ratings in that they are not globally comparable with
the full universe of Moody's rated entities, but only with NSRs
for other rated debt issues and issuers within the same country.
NSRs are designated by a ".nn" country modifier signifying the
relevant country, as in ".za" for South Africa. For further
information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in May
2016 entitled "Mapping National Scale Ratings from Global Scale
Ratings". While NSRs have no inherent absolute meaning in terms of
default risk or expected loss, a historical probability of default
consistent with a given NSR can be inferred from the GSR to which
it maps back at that particular point in time. For information on
the historical default rates associated with different global
scale rating categories over different investment horizons.
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the
ratings, public information and confidential and proprietary
Moody's information.
The ratings have been disclosed to the rated entity prior to
public dissemination.
A general listing of the sources of information used in the rating
process, and the structure and voting process for the rating
committees responsible for the assignment and monitoring of
ratings can be found in the Disclosure tab in www.moodys.com.mx.
The date of the last Credit Rating Action was 28/04/2017.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in
relation to each rating of a subsequently issued bond or note of
the same series or category/class of debt or pursuant to a program
for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on
the support provider and in relation to each particular credit
rating action for securities that derive their credit ratings from
the support provider's credit rating.
For any affected securities or rated entities receiving direct
credit support from the primary entity(ies) of this credit rating
action, and whose ratings may change as a result of this credit
rating action, the associated regulatory disclosures will be those
of the guarantor entity. Exceptions to this approach exist for the
following disclosures, if applicable to jurisdiction: Ancillary
Services, Disclosure to rated entity, Disclosure from rated
entity.
This credit rating is subject to upgrade or downgrade based on
future changes in the financial condition of the Issuer/Security,
and said modifications will be made without Moody's de MÇxico S.A.
de C.V accepting any liability as a result.
Regulatory disclosures contained in this press release apply to
the credit rating and, if applicable, the related rating outlook
or rating review.
Moody's considers the quality of information available on the
rated entity, obligation or credit satisfactory for the purposes
of issuing a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from
sources Moody's considers to be reliable including, when
appropriate, independent third-party sources. However, Moody's is
not an auditor and cannot in every instance independently verify
or validate information received in the rating process.
======================
P U E R T O R I C O
======================
PUERTO RICO: Unions Say Active Employees Should Have Own Committee
------------------------------------------------------------------
The International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America ("UAW") and Service
Employees International Union ("SEIU") said they have no objection
to, and indeed welcome, the appointment of an official retiree
committee in the Commonwealth of Puerto Rico's PROMESA Title III
cases, and are in solidarity with public-sector retirees in Puerto
Rico, in their struggle for preservation of their hard-earned
retirement benefits.
However, the Unions believe that the official retiree committee
should represent the interests of retirees only, and that the
interests of the many tens of thousands of individuals who are
still actively employed by the Commonwealth or other Puerto Rico
public-sector instrumentalities should be represented by a
separate official employee committee.
A group called the Ad Hoc Committee for the Protection of Accrued
Retirement Benefits of Puerto Rico's Public Employees and Retirees
in early May 2017 filed a motion asking the U.S. District Court
for the Commonwealth of Puerto Rico for entry of an order
directing the appointment of an official retiree committee with
respect to the interests of Puerto Rico's public employees and
retirees as holders of accrued pension and other retirement
benefits. The Ad Hoc Retiree Committee wants the District Court
to enter an order specifically appointing its members to serve as
the members of the Official Retiree Committee.
Guy G. Gebhardt, Acting United States Trustee for Region 21, has
announced that he intends to solicit for and appoint three
official committees in the Title III cases, namely a committee of
general unsecured creditors in the Commonwealth's case, a
committee of retirees in the Commonwealth's case; and a committee
of general unsecured creditors in COFINA's case (recognizing there
may be an insufficient number of unsecured creditors qualified or
willing to serve).
In its Motion, the Ad Hoc Retiree Committee asks that the Court
issue an order directing the appointment of an official retiree
committee with respect to the interests of Puerto Rico's
"Retirees." The Motion defines "Retirees," however, to include
not only individuals who are already retired but also the many
tens of thousands of active public-sector employees in Puerto Rico
who have accrued pension or other retirement benefits.
UAW and SEIU do not dispute that adequate representation of those
already retired requires the appointment of an official retiree
committee. Absent appointment of such a committee, retirees may
go unrepresented, and have no institutional voice in these
reorganization proceedings. However, the Unions aver that the
Court should not vest the official retiree committee with
authority to represent the interests of both Puerto Rico's public-
sector retirees and its public-sector active employees. Rather,
SEIU and UAW submit, Puerto Rico's public-sector employees should
be represented by a separate Section 1102 committee, with
membership to include SEIU, UAW and other labor organizations
willing to serve as representatives of the active employees
affected by the reorganization proceedings.
"An official retiree committee vested with the authority to
represent the interests of active employees would deny the active
employees adequate representation. The interests of active
employees may diverge in significant ways from those of retirees.
Retirees have a primary, if not exclusive, interest in protecting
their accrued pension and other retirement benefits. Active
employees who have accrued pension and other retirement benefits
share that concern, but they have additional important interests:
a job security interest in seeing that available resources go to
jobs and job opportunities and interests in decent pay, sufficient
work hours, non-retirement benefits, and fairness with respect to
other terms and conditions of employment," counsel to the Unions,
Peter D. DeChiara, Esq., at Cohen, Weiss And Simon LLP, explains.
"Even regarding accrued retirement benefits, retirees and active
employees may differ in their degree of interest. Because
retirees tend to rely heavily, if not entirely, on their
retirement benefits, their degree of interest in those benefits
exceeds that of active employees. Active employees share with
their retired sisters and brothers a sense of solidarity and
justice regarding the need for secure retirement benefits, but
active employees also have a strong interest in a secure income
stream from present and future wages and benefits. Here, the
degree of interest in accrued retirement benefits between active
employees and retirees may vary if future pension payments are
made from the Government's general funds, which currently finance
the employment of active employees. Finally, employees -- unlike
retirees -- may have future opportunities, over the remainder of
their careers, to earn other retirement income or savings."
SEIU members employed by the Government of the Commonwealth of
Puerto Rico ("Government") belong to one of two SEIU local unions:
SEIU Local 1996/Sindicato Puertorrique§o de Trabajadores y
Trabajadoras ("SPT"), and SEIU Local 1199/Uni¢n General de
Trabajadores ("UGT"). The two locals represent a total of
approximately 27,000 employees, of whom approximately 16,000 work
for the Government. Some of those who work for entities other
than the Government, such as the SPT-represented employees who
work for the City of San Juan and the UGT-represented employees
who work for the Puerto Rico Medical Center, nonetheless
participate in the Employees Retirement System of the Government
of the Commonwealth of Puerto Rico ("ERS"), and many of the
entities for which they work depend on funding from the
Government.
UAW members employed by the Government belong to one of eight
different UAW locals, the largest of which are UAW Local 2396,
which represents school cafeteria employees, and UAW Local 2373,
which represents employees of the Commonwealth's Treasury
Department. The eight UAW locals together represent approximately
6,800 Government employees. A ninth UAW local, Local 1850,
represents credit union employees employed under private-sector
labor law but who nonetheless participate in the ERS.
Attorneys for United Auto Workers, International Union and Service
Employees International Union:
Thomas N. Ciantra
Peter D. DeChiara
Hiram M. Arnaud
COHEN, WEISS AND SIMON LLP
330 West 42nd Street
New York, New York 10036-6976
Tel.: (212) 563-4100
Fax: (646) 473-8216
E-mail: tciantra@cwsny.com
pdechiara@cwsny.com
harnaud@cwsny.com
- and -
Miguel Simonet Sierra
MONSERRATE SIMONET & GIERBOLINI
101 San Patricio Ave., Suite 1120
Guaynabo, PR 00968
Tel.: (787) 620-5300
Fax: (787) 620-5305
E-mail: msimonet@msglawpr.com
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States. The chief of state is the President of the
United States of America. The head of government is an elected
Governor. There are two legislative chambers: the House of
Representatives, 51 seats, and the Senate, 27 seats. The
governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the
son of former governor Pedro Rossello.
In 2016, the U.S. Congress passed PROMESA, which, among other
things, created the Financial Oversight and Management Board and
imposed an automatic stay on creditor lawsuits against the
government, which expired May 1, 2017.
The members of the oversight board are: (i) Andrew G. Biggs, (ii)
Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J.
Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and
(vii) David A. Skeel Jr.
On May 3, 2017, the Commonwealth of Puerto Rico filed a petition
for relief under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The case is
pending in the United States District Court for the District of
Puerto Rico under case number 17-cv-01578. A copy of Puerto
Rico's PROMESA petition is available at
http://bankrupt.com/misc/17-01578-00001.pdf
On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation
(COFINA) commenced a case under Title III of PROMESA (D.P.R. Case
No. 17-01599). Joint administration has been sought for the
Title III cases.
On May 21, 2017, two more agencies -- Employees Retirement System
of the Government of the Commonwealth of Puerto Rico and Puerto
Rico Highways and Transportation Authority (Case Nos. 17-01685 and
17-01686) -- commenced Title III cases.
U.S. Chief Justice John Roberts has named U.S. District Judge
Laura Taylor Swain to preside over the Title III cases.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq.,
at O'Neill & Borges LLC are onboard as attorneys.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
Jones Day is serving as counsel to certain ERS bondholders.
Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General
Obligation Bondholders.
PUERTO RICO: Bankruptcy Judge Freezes $17-Bil. in Bond Payments
---------------------------------------------------------------
Andrew Scurria, writing for The Wall Street Journal Pro
Bankruptcy, reported that U.S. District Judge Laura Taylor Swain
in Manhattan ordered a freeze on all disbursements, including $17
billion in sales-tax bond payments, until she decides how money
should be divided among feuding creditors.
According to the report, Judge Swain's ruling means that a $16.3
million Cofina bond payment due will instead be placed into escrow
until she decides "who is rightfully entitled to it." Subsequent
monthly payments will also be escrowed, the judge said, the report
said.
The Journal pointed out that the decision marks a victory for Bank
of New York Mellon Corp., the bond trustee caught between
competing demands from hedge funds, mutual funds and bond insurers
about which Cofina bonds, if any, should be paid out of roughly
$400 million in available sales-tax money.
It is also a win for creditors holding general obligation bonds
who are vying with Cofina bondholders for priority in the
unprecedented bankruptcy, the report related.
Judge Swain cited the general obligation bondholders' claims
against Cofina as a reason to hold back the payment, saying they
demonstrated the conflicting theories surrounding the proper
distribution of the funds, the report said.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States. The chief of state is the President of the
United States of America. The head of government is an elected
Governor. There are two legislative chambers: the House of
Representatives, 51 seats, and the Senate, 27 seats. The
governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the
son of former governor Pedro Rossello.
In 2016, the U.S. Congress passed PROMESA, which, among other
things, created the Financial Oversight and Management Board and
imposed an automatic stay on creditor lawsuits against the
government, which expired May 1, 2017.
The members of the oversight board are: (i) Andrew G. Biggs, (ii)
Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J.
Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and
(vii) David A. Skeel Jr.
On May 3, 2017, the Commonwealth of Puerto Rico filed a petition
for relief under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The case is
pending in the United States District Court for the District of
Puerto Rico under case number 17-cv-01578. A copy of Puerto
Rico's PROMESA petition is available at
http://bankrupt.com/misc/17-01578-00001.pdf
On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation
(COFINA) commenced a case under Title III of PROMESA (D.P.R. Case
No. 17-01599). Joint administration has been sought for the
Title III cases.
On May 21, 2017, two more agencies -- Employees Retirement System
of the Government of the Commonwealth of Puerto Rico and Puerto
Rico Highways and Transportation Authority (Case Nos. 17-01685 and
17-01686) -- commenced Title III cases.
U.S. Chief Justice John Roberts has named U.S. District Judge
Laura Taylor Swain to preside over the Title III cases.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq.,
at O'Neill & Borges LLC are onboard as attorneys.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
Jones Day is serving as counsel to certain ERS bondholders.
Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General
Obligation Bondholders.
===============
S U R I N A M E
===============
SURINAME: S&P Lowers Sovereign Credit Rating to 'B'
---------------------------------------------------
S&P Global Ratings lowered its long-term sovereign credit rating
on the Republic of Suriname to 'B' from 'B+. The outlook is
negative. At the same time, S&P Global Ratings revised its
transfer and convertibility assessment on Suriname to 'B+' from
'BB-'. S&P Global Ratings also assigned its 'B' senior unsecured
debt rating to Suriname's 10-year US$550 million bond and affirmed
its 'B' short-term issuer credit rating on the country.
RATIONALE
The downgrade reflects a worsening of assessment of Suriname's
financial profile and economic strength following a significant
economic contraction in 2016 that resulted in higher government
debt, a substantial currency devaluation, and high inflation.
Suriname's per capita GDP fell 7.5% in 2016 (after falling 2.0% in
the previous year) to about US$7,400. Despite a projected
stabilization in GDP in 2017, S&P is lowering its economic
assessment because economic growth rates are below the range S&P
expects for countries at a similar level of per capita GDP.
Real GDP will get a boost in 2017 by a full-year of production at
Suriname Gold Co. LLC's recently opened Merian gold mine.
However, weak domestic demand because of continued fiscal
adjustments and recent declines in real wages will offset this.
S&P expects real GDP growth will be close to zero in 2017. S&P
expects growth to be positive-but-low in 2018 and 2019, with per
capita growth to be about 1%. The country's economy is narrow,
owing to its concentration in natural resources. Mining and
manufacturing (mostly related to gold and oil production and
refining) represented about 23% of real GDP and 17% of nominal GDP
in 2016. Neither gold nor oil represents more than 20% of GDP.
Nevertheless, the concentration in natural resources makes the
economy's sensitive to commodity price fluctuations.
The combination of currency depreciation, new external debt, and
large fiscal deficits increased net general government debt to 55%
of GDP in 2016 from 39% in 2015. S&P expects net general
government debt to decrease to 52% of projected GDP in 2017 and
stabilize after that, provided that the exchange rate stays
relatively stable. Depreciation helped to raise interest costs in
2017 to 16.6% of government revenues from 9.6% the previous year.
S&P expects that the interest burden will remain high in the next
three years, well above 10%.
S&P expects that the change in general government debt will
average about 3% of GDP during 2017-2020, but S&P's forecast is
sensitive to the trajectory of commodity prices. S&P expects that
the government will continue to reduce its general government
deficits in the next three years. Revenues will increase in 2017
and beyond with full-year production at the Merian mine, an
increase in fuel taxes and electricity tariffs, higher dividends
from Staatsolie Maatschappij Suriname N.V., and the potential
implementation of a value-added tax. S&P's base-case forecast
calls for fiscal deficits of 4% of GDP in 2017 and 3% in 2018.
The general government balance improved in 2016 as the deficit
decreased to 5% of GDP from 11% in 2015, due exclusively to lower
spending (which fell from 31% of GDP in 2015 to 19% last year).
Some of the drop in spending could reflect arrears rather than
explicit spending cuts, and S&P's base-case forecast includes
moderate increases in spending during 2017-2020.
Suriname's current account deficit narrowed considerably in 2016
to 4% of GDP from 17% the previous year, thanks to significant
import compression (goods imports fell almost 40%) resulting from
the devaluation of the Surinamese dollar (SRD) and the beginning
of Merian production. S&P expects the country will return to near
current account balance in 2017 and surplus by 2018. For the last
quarter of 2016, Suriname recorded a small current account
surplus. S&P expects goods imports to increase somewhat in 2017
but remain at or close to historically low levels. Exports, on
the other hand, should increase with full production at Merian.
S&P expects improvement in official reserves to about four months
of import cover in 2017. Reserves fell to SR$400 million as of
Dec. 31, 2016, from a peak in 2012 of about US$1 billion. S&P
expects that Suriname's external metrics will remain weak but
slowly improve in 2017 and 2018. The country's gross external
financing requirements as a share of current account receipts
(CAR) and usable reserves will improve to about 105% in 2017 and
100% in 2018 (from about 116% in 2016 and 122% in 2015). Narrow
net external debt CAR should be close to 42% of CAR in 2017,
rising to 47% in 2018.
The gap between Suriname's net external liabilities and net
external debt as a share of CAR was over 100% in 2016,
highlighting the country's vulnerability to a marked deterioration
in access to external financing. Suriname's external accounts
have material data inconsistencies and statistical discrepancies
in fiscal results. S&P's credit assessment of the country
reflects these shortcomings.
Suriname has a stable democratic government led by the Mr. Desi
Bouterse's Nationale Democratische Partij (NDP), which has a slim
majority (26 of 51 seats) in the National Assembly. S&P believes
that the checks and balances that are the hallmark of stronger
institutional frameworks are weak in the country. Poor economic
management has undermined the sustainability of Suriname's public
finances. The IMF approved a US$480 million stand-by agreement
with the government in May 2016, but the program has stalled. The
government has not met targets for raising fuel taxes and
eliminating electricity subsidies.
S&P believes that the exchange rate could weaken somewhat in 2017.
S&P's ratings on Suriname reflect the country's lack of monetary
flexibility. Small local capital markets and high dollarization
of both bank assets and liabilities constrain the effectiveness of
monetary policy. The central bank has limited monetary policy
tools. Its primary tool is reserve requirements on local and
foreign currency deposits, which it uses to manage credit growth
in the local banking system. It has taken steps to set up an
interbank market and holds regular treasury bill auctions with the
goal of eventually conducting open market operations. S&P expects
inflation will decline in 2017 after spiking in 2016. Inflation
spiked in 2016 to 52% on average for the year (7% in 2015), due to
the impact of currency depreciation and increases in administered
prices.
S&P believes that Suriname's new foreign exchange auction, which
replaced its former long-standing fixed rate regime, could
gradually increase monetary flexibility. A credible track record
in using a flexible exchange rate could help the country to better
manage external shocks.
Financial dollarization increased significantly in 2016 with the
SRD's depreciation, further limiting the potential effectiveness
of monetary policy. About 70% of deposits and just more than 50%
of claims by resident commercial banks and credit unions
(excluding the government and the central bank) were denominated
in foreign currency at the end of 2016. These levels of
dollarization are up significantly from 2015's 58% and 39%,
respectively. The ratios had been quite stable until the SRD's
depreciation.
S&P believes that the financial system poses a limited contingent
liability to the country. The banking system in Suriname is not
large, and the three biggest banks hold more than 80% of all
deposits. The total assets of all depository companies were
almost 62% of GDP at the end of 2016. The financial system's
nondepository segment is also small, with total assets below 20%
of GDP. In 2016, the government merged one small, under-
capitalized state-owned bank with a larger, better-capitalized
one. S&P believes the government could provide additional capital
in 2017 to some financial institutions. S&P expects the main
nonfinancial public enterprise, the energy company Staatsolie,
will increase its profitability in 2017 from the low level
recorded in 2016. S&P also expects nonfinancial public sector
enterprises as a whole to pose a limited contingent liability to
the government.
OUTLOOK
The negative outlook reflects S&P's expectation that there is an
at least one-in-three chance of a downgrade over the next 12
months if the government fails to stabilize the recent
deterioration in external liquidity, reduce fiscal deficits,
stabilize its debt burden, and restore investor confidence. S&P
expects that the government will contain spending pressures and
move toward strengthening its revenue base.
Upside scenario
Steps to boost investor confidence and GDP growth would increase
government revenues, reducing the burden of interest expense on
the government's budget and improving fiscal sustainability.
These improvements, combined with declining general government
deficits and the return to current account surpluses and a
stronger external position, could lead to an outlook revision to
stable.
Downside scenario
Delays in strengthening the government's revenue base or failure
to contain spending could result in a return to persistently high
fiscal deficits and further increases in general government debt
and interest expense. Alternatively, a weaker external liquidity
position could put greater pressure on the exchange rate, boost
inflation expectations, undermine domestic confidence, and place
greater strain on the domestic financial system. S&P could
downgrade Suriname as a result.
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 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
Downgraded; Short-Term Rating Affirmed
To From
Suriname (The Republic of)
Sovereign credit rating B/Negative/B
B+/Negative/B
Revised
To From
Suriname (The Republic of)
Transfer and convertibility assessment
Local currency B+ BB-
New Rating
Suriname (The Republic of)
Senior unsecured B
SURINAME: Moody's Lowers Issuer Rating to B1; Outlook Stable
------------------------------------------------------------
Moody's Investors Service has downgraded Suriname's foreign
currency and local currency issuer ratings to B1 from Ba3. The
outlook is stable.
The key driver of the rating action is the substantial
deterioration in Suriname's credit profile over the past year both
in absolute terms and relative to peers that is now apparent. In
particular:
1) The significant worsening in macroeconomic conditions and the
external liquidity pressures that have resulted; and
2) The deterioration in the strength of the government's balance
sheet which will push public debt above 45% of GDP in 2016,
despite consolidation measures that are being implemented.
The stable outlook reflects the measures that the government now
appears to be taking to consolidate its position, which are
expected to be underpinned by the impending International Monetary
Fund (IMF) program that will provide an important anchor for
macroeconomic and fiscal stabilization. The expected benefits to
fiscal and external accounts from the completion of large energy
and mining projects will support a strong improvement in external
finances and a stabilization of debt metrics in 2016-18.
Suriname's long-term local currency country risk ceilings have
been changed to Ba2 from Ba1. The foreign currency bond ceiling
was changed to Ba2 from Ba1 and the foreign currency bank deposit
ceilings to B2 from B1, respectively. The short-term foreign
currency bond and deposit ceilings remain at NP (Not-Prime).
These ceilings reflect a range of undiversifiable risks to which
issuers in Suriname are exposed, including economic, legal and
political risks. These ceilings act as a cap on ratings that can
be assigned to the foreign and local-currency obligations of
entities domiciled in Suriname.
RATINGS RATIONALE
RATIONALE FOR THE DOWNGRADE
-- FIRST DRIVER: LARGE TRADE AND CURRENT ACCOUNT DEFICITS IN
2015 PROMPTED A WEAKENING OF SURINAME'S EXTERNAL LIQUIDITY --
The principal driver of Moody's decision to downgrade Suriname's
rating is the substantial weakening of Suriname's external
liquidity stemming from the significant recent increase in current
account deficits. Low commodity prices led to falling export
earnings, resulting a near doubling in Moody's estimate of the
current account deficit to 14.9% of 2015 GDP from a peak surplus
of 15% in 2010. The large current account deficit is owed to a
shift in the goods balance, which fell into a deficit for the
first time in more than a decade. Foreign exchange reserves have
halved, falling from $447 million at the end of 2014 to $222
million in 2015 (approximately 3 months of imports). The drop in
reserves undermined the central bank's ability to meet demand for
foreign exchange and defend the exchange rate peg to the dollar.
As a result, the central bank devalued the currency by 20% in
November 2015, and then moved to abandon the peg and introduce
an auction based foreign-exchange system in March 2016. The
exchange rate regime is gradually shifting toward a more flexible
system without a pre-determined target that Moody's expects will
aid the current adjustment and increase the country's absorption
capacity against possible future external shocks.
Moody's expects that the export decline will bottom out in 2016,
and that the current account will begin to see a moderate
adjustment this year, followed by a decrease in the external
imbalance in 2017.
State-owned oil company Staatsolie's refinery project was finished
in late 2015, and the authorities expect a gradual ramp-up in
production of refined oil products. This will have an import
substitution effect given that Suriname previously exported crude
oil but imported refined products. A gold mine project, which is
set to be completed in September 2016, will likely double gold
production and exports, and will contribute to the current account
adjustment. Importantly, capital and service imports related to
the construction of both projects will also taper off in 2016,
which will underpin further import compression.
Nevertheless, the erosion of the country's external position has
been materially larger than that of 'Ba'-rated peers, leaving an
important aspect of the sovereign's credit profile more in line
with that of commodity-reliant economies rated in the 'B'
category.
-- SECOND DRIVER: FISCAL DETERIORATION WILL PUSH PUBLIC DEBT
ABOVE 45% OF GDP --
The second driver of the rating action is the marked deterioration
in the government's balance sheet that has become apparent
following recent data releases, and which resulted from a widening
of the fiscal deficit to 8.7% of GDP. Consolidation targets were
abandoned during the first half of 2015 as spending tied to
legislative elections in late May and a further large drop in
commodity-related revenues drove the enlarged deficit. The IMF
estimates that the fiscal imbalance reached an annualized 12.5% of
GDP during January-July 2015.
Moreover, fiscal deficits reported in previous years did not
reflect the accumulation of payment arrears.
In order to stabilize the fiscal accounts and re-build fiscal
credibility, the former president of the Central Bank was named
finance minister in early August, and consolidation measures were
put in place. Since the new authorities took over at the Ministry
of Finance in August 2015 no new arrears have been created and in
August-December arrears from previous years have been cleared.
Consolidation measures included the rationalization of electricity
subsidies. Two out of three planned electricity tariff increases
have been implemented which will contribute strongly to reducing
expenditures in 2016, and the ultimate elimination of the subsidy
in December 2016 will also help underpin consolidation in 2017.
In line with the wider fiscal deficits, public debt increased to
38.3% of GDP in 2015 from 26.5% in 2014. Central bank financing,
a further indication of fiscal pressures, underpinned the strong
increase in debt. Moody's expects that public debt will peak in
2016 at 45.7% of GDP. While it may begin to decline in 2017 as a
consequence of consolidation measures undertaken and in train,
Moody's confidence in the authorities' ability to stabilize debt
dynamics is tempered by the fact the adjustment comes after
significant economic and fiscal deterioration.
RATIONALE FOR THE STABLE OUTLOOK
On April 15, the IMF announced that it had reached a staff-level
agreement with Suriname on the key elements of an economic program
which would involve a two-year $478 million Stand-By Arrangement
(SBA). The program targets the adoption of broad-based measures.
Elements of the program include economic diversification,
enhancing sources of non-mineral revenues for the government, and
a suite of other structural reforms to facilitate fiscal
consolidation and improve fiscal and monetary policy frameworks.
The SBA will help to cushion government finances and the economy
during the period of fiscal and economic adjustment as well as
allowing for a steady rebuilding of foreign reserves.
Moody's expects that the announced and already-adopted fiscal
measures will reduce the fiscal deficit to 6.6% of GDP in 2016
from 8.7% in 2015. This is in line with the target the
authorities have set under the IMF program (6.5% of GDP). Cuts to
goods and services purchases and the reduction in the electricity
subsidy should result in significant expenditure reduction.
Although oil prices are now closer to the 2015 average, gold
prices have recovered from 2015 levels which should underpin
stable-to-higher revenues.
The new exchange rate regime will aid the current adjustment and
increase the country's absorption capacity against possible future
external shocks. Moreover, the completion of the large energy and
mining projects will also underpin mending external and fiscal
finances.
WHAT COULD MOVE THE RATING UP/DOWN
Moody's would consider upgrading the rating if a sustainable
narrowing of the fiscal deficit were to indicate that a strong
decrease in government debt metrics was likely, particularly if
accompanied by an accumulation of substantial fiscal savings in
the planned sovereign wealth fund. A strengthening of the
budgetary and fiscal framework through institutional enhancements
that decreases fiscal volatility would also lead to upward
pressure on the government's rating.
Conversely, Suriname's sovereign rating could be downgraded in the
event of a further deterioration in fiscal performance that led to
a continued increased of government debt ratios or a material
weakening of economic growth prospects, given the lower than
expected economic and fiscal strength that environment would
imply. Failure to implement planned reforms or to comply with
those aspects of the IMF program would likely be a forward
indicator of such a deterioration.
GDP per capita (PPP basis, US$): 16,261 (2014 Actual) (also
known as Per Capita Income)
Real GDP growth (% change): 0.9% (2015 Actual) (also known as
GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 25% (2015 Actual)
Gen. Gov. Financial Balance/GDP: -8.7% (2015 Actual) (also known
as Fiscal Balance)
Current Account Balance/GDP: -14.9% (2015 Actual) (also known as
External Balance)
External debt/GDP: [not available]
Level of economic development: Low level of economic resilience
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On May 18, 2016, a rating committee was called to discuss the
rating of the Suriname, Government of. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have not materially changed. The
issuer's institutional strength/ framework, have not materially
changed. The issuer's fiscal or financial strength, including its
debt profile, has materially decreased. The issuer has become
more susceptible to event risks.
The principal methodology used in these ratings was Sovereign Bond
Ratings published in December 2015.
The weighting of all rating factors is described in the
methodology used in this credit rating action, if applicable.
***********
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
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definitive compilation of stocks that are ideal to sell short.
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***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
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