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/raid1/www/Hosts/bankrupt/TCRLA_Public/170802.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, August 2, 2017, Vol. 18, No. 152 Headlines A R G E N T I N A FIDEICOMISO FINANCIERO XXXIV: Moody's Rates Class B Debt Caa3 PROVINCE OF CHACO: Fitch Affirms B IDRs; Outlook Stable B A R B A D O S BARBADOS: PM Sets Date for Meeting Over Controversial Tax Hike B R A Z I L JBS SA: Taps BNP Paribas for Moy Park Sale, Source Says C A Y M A N I S L A N D S CARENEXT INSURANCE: Creditors' Proofs of Debt Due Sept. 15 OCEAN RIG: Scheme Meetings Scheduled for August 11 C H I L E CUBA: Stops Issuing Licenses for Private Restaurants, Lodging D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Public Urged to be Patient With Power Cuts E L S A L V A D O R EL SALVADOR: Fitch Affirms 'CCC' Long-Term IDRs M E X I C O BANCO MERCANTIL: Moody's Assigns Ba2 Jr. Subordinated Debt Rating OFFICE DEPOT: Fitch Affirms Then Withdraws BB+ Long-Term IDR P U E R T O R I C O * S&P Lowers Various Debt Ratings on Puerto Rico Agencies to 'D' V E N E Z U E L A VENEZUELA: Controversial Constituent Assembly Elected - - - - - ================= A R G E N T I N A ================= FIDEICOMISO FINANCIERO XXXIV: Moody's Rates Class B Debt Caa3 ------------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo has rated Fideicomiso Financiero Pvcred Serie XXXIV. This transaction will be issued by TMF Trust Company (Argentina) S.A.- acting solely in its capacity as issuer and trustee. This credit rating is subject to the fulfillment of contingencies that are highly likely to be completed, such as finalization of documents and issuance of the securities. This credit rating is based on certain information that may change prior to the fulfillment of such contingencies, including market conditions, financial projections, transaction structure, terms and conditions of the issuance, characteristics of the underlying assets or receivables, allocation of cash flows and of losses, performance triggers, transaction counterparties and other information included in the transaction documentation. Any pertinent change in such information or additional information could result in a change of this credit rating. - ARS130,126,000 in Class A Floating Rate Debt Securities (VRDA TV) of "Fideicomiso Financiero Pvcred Serie XXXIV", rated Aaa.ar (sf) (Argentine National Scale) and Ba3 (sf) (Global Scale) - ARS29,378,000 in Class B Floating Rate Debt Securities (VRDB TV) of "Fideicomiso Financiero Pvcred Serie XXXIV", rated Caa3.ar (sf) (Argentine National Scale) and Caa3 (sf) (Global Scale) - ARS13,306,000 in Certificates (CP) of "Fideicomiso Financiero Pvcred Serie XXXIV", rated Ca.ar (sf) (Argentine National Scale) and Ca (sf) (Global Scale). RATINGS RATIONALE The rated securities are payable from the cash flow coming from the assets of the trust, which is an amortizing pool of approximately 6,455 eligible personal loans denominated in Argentine pesos, bearing fixed interest rate, originated by Pvcred, a financial company owned by Comafi's Group in Argentina. Only the installments due after October 31, 2017 will be assigned to the trust. The VRDA TV will bear a floating interest rate (BADLAR plus 300bps) from the issue date with first coupon payment date in December 2017. The VRDA TV's interest rate will never be higher than 31% or lower than 20%. The VRDB TV will bear a floating interest rate (BADLAR plus 600bps). The VRDB TV's interest rate will never be higher than 34% or lower than 23%. Overall credit enhancement is comprised of subordination, various reserve funds and excess spread. The transaction has initial subordination level of 23.2% and 5.9% for the VRDA TV and VRDB TV respectively, calculated over the pool's principal balance as of October 31, 2017. The subordination level will increase overtime due to the turbo sequential payment structure. The transaction will have a grace period for principal and interest payment until December 2017. The transaction also benefits from an estimated 42.8% annual excess spread, before considering losses, taxes or prepayments and calculated at the caps of 31% and 34% for the VRDA TV and VRDB TV respectively. Factors that would lead to an upgrade or downgrade of the ratings: Factors that may lead to a downgrade of the ratings include an increase in delinquency levels beyond the level Moody's assumed when rating this transaction. Although Moody's analyzed the historical performance data of previous transactions and similar receivables originated by Pvcred, the actual performance of the securitized pool may be affected, among others, by the economic activity, high inflation rates compared with nominal salaries increases and the unemployment rate in Argentina. Factors that may lead to an upgrade of the ratings include the building of credit enhancement over time due to the turbo sequential payment structure, when compared with the level of projected losses in the securitized pool. Loss and Cash Flow Analysis: Moody's considered the credit enhancement provided in this transaction through the initial subordination levels for each rated class, as well as the historical performance of Pvcred portfolio. In addition, Moody's considered factors common to consumer loans securitizations such as delinquencies, prepayments and losses; as well as specific factors related to the Argentine market, such as the probability of an increase in losses if there are changes in the macroeconomic scenario in Argentina. These factors were incorporated in a cash flow model that takes into account all the relevant features of the transaction's assets and liabilities. Monte Carlo simulations were run, which determines the expected loss for the rated securities. Moody's analyzed the historical performance data of previous transactions and similar receivables originated by Pvcred, ranging from January 2015 to May 2017. Moody's has observed a weaker performance of Refis loans compared to Normal Pvcred Loans (Existing plus OM loans). In addition, Moody's has observed a weaker performance of Open Market Loans compared to Existing Loans. Moody's notes that there is uncertainty around key macroeconomic variables in Argentina, including inflation rates, salary increases compared to inflation, and economic activity, which have an impact on future performance of this transaction. In assigning the rating to this deal, Moody's assumed a lognormal distribution of losses for each one of the different securitized sub-pools: for the loans of Existing Clients, a mean of 15%; for loans of Open Market, a mean of 35% and for the "Refinanciados" loans, a mean of 45% with a coefficient of variation of 60% for each of the three sub-pools. Also, Moody's assumed a lognormal distribution for prepayments with a mean of 50% and a coefficient of variation of 70%. Servicer default was modeled by simulating the default of Banco Comafi S.A. as the servicer consistent with its current rating of B3/Baa1.ar. In the scenarios where the servicer defaults, Moody's assumed that the defaults on the pool would increase by 20 percentage points. The model results showed 1.6% expected loss for the VRDA TV, 43.5% for the VRDB TV and 71.6% for the CP. Moody's also evaluated the back-up servicing arrangements in the transaction. If Pvcred is removed as collection agent, Banco Comafi will be appointed as the back-up collection agent. Stress Scenarios: Moody's ran several stress scenarios, including increases in the default rate assumptions. If default rates were increased by 2% from the base case scenario, the ratings of the VRDA TV and VRDB TV would likely be downgraded to B1 (sf) and Ca (sf) respectively, while that of the Certificates would remain unchanged. PROVINCE OF CHACO: Fitch Affirms B IDRs; Outlook Stable ------------------------------------------------------- Fitch Ratings has affirmed the rating of the Province of Chaco's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'B'. The Rating Outlook is Stable. Fitch has also affirmed Chaco's unsecured USD250 million bond issuance at 'B'. KEY RATING DRIVERS The affirmation at 'B' considers the province's low leverage expected ratios and adequate operating margins forecasted around 3%. In contrast, the rating is limited by the constrained fiscal and budgetary flexibility of the province as well as its peaking debt service. In addition, a tepid economy that is dependent on services is another limitation. Considering Chaco's new debt plan for 2017 and 2018, up to ARS4,900 million, a low leverage ratio would still continue (around 40%), but debt service will continue to be pressured given the limited operating balances, the current macroeconomic context, and capital needs. Exposure to foreign exchange risk is moderate compared to other Provinces. 54% of debt is denominated in foreign currency similar to the median of 'B' category. As expected by Fitch, the Province experienced a constrained budgetary performance in 2016 and this may continue for 2017. Operational expenses grew 49% due to wage increases compared to 22% of operating revenue. The Province has limited flexibility to reduce personnel expenses in the future, as the employees are covered by constitutional guarantees of job security. Also, a context of high inflation remains so staff costs might continue to grow. Despite Compensation Pension Agreement among Nation-Provinces, it does not solve completely the pension deficit in the long run, it helps to reduce part of provincial annual deficit. In 2016, Chaco received ARS320 million which mitigate the ARS1,000 million deficit registered in 2016; around ARS600 million in would be received in 2017. Chaco presents liquidity restrictions hence it has recurred to short term and advance of federal revenues. Liquidity ratios are still adequate in terms of the current rating. Cash deposits cover almost total short-term obligations with suppliers and others short-term liabilities. Fitch considers Chaco's economic profile weak and this influences its limited tax-base thus its capacity to increase revenues. The most significant sector of the economy is services. The local government is one of the main employers. Latest data of 2014 shows that GDP per head is around USD6,915 far below national GDP of USD12,400. However, Chaco's economy typically has grown more than national GDP although only represents 1.3% of the national economy. RATING SENSITIVITIES A sustained recovery in fiscal and budgetary flexibility observed in operating margins, as well as an improvement of liquidity could lead to an upgrade in Chaco's rating. A sudden increase in the public debt burden and weak operating margins that significantly affect debt sustainability ratios, could lead to a negative rating action. =============== B A R B A D O S =============== BARBADOS: PM Sets Date for Meeting Over Controversial Tax Hike -------------------------------------------------------------- Caribbean360.com reports that Prime Minister Freundel Stuart has set August 11 as the new date for talks with the island's social partners to discuss the controversial National Social Responsibility Levy (NSRL) hike and a wider fiscal strategy. The development comes on the heels of an assurance from Stuart that he was available to meet with the island's trade unions and private sector, which had one day earlier led a massive protest of more than 20,000 citizens demanding fresh dialogue, according to Caribbean360.com. The two sides were originally set to meet on August 18 one week later, the report relays. Charles Herbert, chairman of the Barbados Private Sector Association (BPSA), which had joined the island's four major trade unions in leading the march, confirmed he was in receipt of the letter advising of the August 11 meeting and was optimistic that the talks would make headway, the report relays. "I think the 11th allows for emotions to die down, so that when we do meet we have rational discussion and not emotional discussion," he told Barbados Today online newspaper, the report notes. The report relays that Mr. Herbert said while he had no issue with the meeting being televised, as the Prime Minister said they would be, he insisted the talks could not be about show. "I believe that if the right discussion happens in that meeting, it would be good for it to be televised. [However], I think if televising it makes it an opportunity for political grandstanding, then that would be a shame," the report quoted Mr. Herbert as saying. However, at least one trade union leader was not impressed by Stuart setting the talks almost two weeks from now. President of the Barbados Secondary Teachers' Union Mary Redman made it clear that having the talks one week ahead of their scheduled meeting could not be regarded as treating the issue as urgent, the report relays. Mr. Herbert also expressed concern that there was no agenda set for the meeting, the report relays. Trade unions and the private sector have been calling on the Government to roll back the increase in the NSRL which took effect on July 1 -- now ten per cent, up from two per cent -- and consider the introduction of a coping subsidy to cushion the blow of an expected rise in the cost of living for public servants, the report adds. As reported in the Troubled Company Reporter-Latin America on March 7, 2017, S&P Global Ratings lowered its long-term foreign and local currency sovereign ratings on Barbados to 'CCC+' from 'B-'. The outlook is negative. S&P also lowered the short-term ratings to 'C' from 'B.' At the same time, S&P lowered its transfer and convertibility assessment for Barbados to 'CCC+' from 'B-'. =========== B R A Z I L =========== JBS SA: Taps BNP Paribas for Moy Park Sale, Source Says -------------------------------------------------------- Tatiana Bautzer at Reuters reports that JBS SA (JBSS3.SA), the world's No. 2 food processor, has picked BNP Paribas SA to help sell Moy Park Ltd, which the company has put on the block, a person with direct knowledge of the matter said. JBS, whose controlling family has been ensnared in a corruption scandal, announced plans to sell Ireland-based Moy Park on June 20, according to Reuters. According to the person, who requested anonymity to discuss the matter, JBS decided to tap the investment bank of Paris-based BNP Paribas to assess whether interest from several potential bidders could materialize into a transaction, the report relays. Some companies that have expressed interest in purchasing Moy Park include China's WH Group and subsidiary Smithfield Foods Inc and middle-market buyout firm CapVest Partners LLP, according to local reports, the report relays. Others include French commodities giant Louis Dreyfus Co and Groupe Bigard, as well as British foodmaker Two Sisters Food Group, a report by O Estado de S. Paulo newspaper said, the report says. JBS and Smithfield declined to comment. BNP Paribas, LDC, Bigard, Two Sisters and CapVest did not have an immediate comment. Bonds and shares of JBS have dropped since mid-May, when brothers and controlling shareholders Wesley and Joesley Batista sought a plea deal related to a corruption probe, the report discloses. The report relays that Mr. Wesley, the elder of the brothers and JBS's chief executive officer, is personally negotiating any planned asset sales, people told Reuters this month. Further Downsizing A successful Moy Park sale would further downsize the Brazilian meatpacker, which became the world's largest through loans funded with Brazilian taxpayer money during a decade-long acquisition spree, the report relays. JBS SA paid $1.5 billion to rival Marfrig Global Foods SA (MRFG3.SA) for Moy Park two years ago, the report notes. Between 2008 and 2015, JBS participated in about 74 mergers and acquisitions totaling $30 billion, Thomson Reuters deals intelligence data showed. Since agreeing to pay a BRL10.3 billion leniency fine in May, the Batistas have refinanced debt and sold several assets not related to JBS, the report notes. Their investment holding company J&F Investimentos SA is also seeking buyers for a dairy producer and a pulpmaker, the report adds. As reported in the Troubled Company Reporter-Latin America on July 31, 2017, S&P Global Ratings affirmed its 'B+' global scale corporate credit ratings on JBS S.A. and JBS USA and its 'brBBB-' national scale rating on JBS. S&P also affirmed the 'B+' senior unsecured debt ratings on JBS and JBS USA and the 'BB' senior secured debt ratings on JBS USA. At the same time, S&P removed all ratings from CreditWatch. The outlook is negative. ========================== C A Y M A N I S L A N D S ========================== CARENEXT INSURANCE: Creditors' Proofs of Debt Due Sept. 15 ---------------------------------------------------------- The creditors of Carenext Insurance (SPC) Limited are required to file their proofs of debt by Sept. 15, 2017, to be included in the company's dividend distribution. The company's liquidator is: Graham Robinson Chris Johnson Associates Limited Elizabeth Square, 80 Shedden Road Grand Cayman, Cayman Islands KY1-1104 OCEAN RIG: Scheme Meetings Scheduled for August 11 -------------------------------------------------- Ocean Rig UDW Inc. ("Ocean Rig" or "UDW" or the "Company") an international contractor of offshore deepwater drilling services, wishes to remind Scheme Creditors of the need to submit certain documentation to the Information Agent in order to attend and vote at Scheme Meetings. As announced by the Company on July 21, 2017, meetings of Scheme Creditors are to be held on August 11, 2017 (starting at 10:00 a.m. (Cayman Islands time)) for the purpose of considering, and, if thought fit, approving, a scheme of arrangement in respect of each of Drillships Financing Holding Inc. ("DFH"), Ocean Rig UDW Inc. ("UDW"), Drill Rigs Holdings Inc. ("DRH") and Drillships Ocean Ventures Inc. ("DOV") (each in provisional liquidation) (together the "Schemes"). Submission of documents to the Information Agent Irrespective of whether a Scheme Creditor intends to attend a Scheme Meeting, each Scheme Creditor: (a) with a beneficial interest as principal in the 2017 Notes (being the 6.5 per cent senior secured notes due October 1, 2017, issued by DRH pursuant to an indenture dated September 20, 2012) and/or 2019 Notes (being the 7.25 per cent senior unsecured notes due April 30, 2019, issued by UDW pursuant to an indenture dated March 26, 2014) is requested to liaise with its Account Holder to ensure that a validly completed Account Holder Letter is submitted on its behalf, in accordance with the instructions contained therein together with a completed Confirmation Form; and/or (b) who is a lender of record under the DFH Credit Facility (being the US$1.9 billion credit agreement dated July 13, 2013, under which DFH and Drillships Projects Inc. are borrowers) and/or the DOV Credit Facility (being the US$1.3 billion credit agreement dated July 25, 2014, under which DOV and Drillships Ventures Projects Inc. are borrowers) should validly complete a Lender Claim Letter and submit it in accordance with the instructions contained therein together with a completed Confirmation Form. All documents should be submitted to the Information Agent as soon as possible and in any event before the Submissions Deadline (being 5:00 p.m. (Cayman Islands time) on August 9, 2017). Acceptance of an Account Holder Letter by the Information Agent for the purposes of voting on the UDW Scheme and/or the DRH Scheme with respect to Scheme Creditors with a beneficial interest as principal in the 2017 Notes or 2019 Notes (as applicable) is also subject to the receipt by the Information Agent of the relevant Scheme Creditor's Custody Instructions prior to the Submission Deadline. All Scheme Creditors are encouraged to complete the relevant documentation in order to exercise voting rights at the Scheme Meetings. A telephone dial-in facility will be made available for those Scheme Creditors who have submitted a validly completed Account Holder Letter and/or Lender Claim Letter to the Information Agent prior to the Submission Deadline. This facility will allow Scheme Creditors to listen to the Scheme Meetings relevant to them and ask questions. Scheme Creditors will not be able to vote or revoke any vote indicated in their Account Holder Letter and/or Lender Claim Letter using the facility. Scheme Creditors may request telephone dial-in details from the Information Agent up to the Submission Deadline. Copies of the Explanatory Statement Any person entitled to attend the Scheme Meetings can obtain a copy of the relevant Scheme(s), together with the relevant form of proxy and an explanatory statement explaining the effect of the Schemes (the "Explanatory Statement") on request to the Information Agent by calling +1 855-631-5346 (toll-free US and Canada) or +1 917-460-0913 (International) or by email to oceanrigteam@primeclerk.com, or on request to the Joint Provisional Liquidators by calling +44 20 7098 7400 or +1 345 946 0081 or by email to Oceanrig@alixpartners.com or Oceanrig@kaloadvisors.com. A copy of the Explanatory Statement, which contains the Schemes, together with the relevant voting forms has been made available to the Scheme Creditors through the Information Agent website at https://cases.primeclerk.com/oceanrig. Where otherwise undefined, the terms used in this press release shall have the meaning given to them in the Explanatory Statement. About Ocean Rig UDW Inc. Ocean Rig. (NASDAQ: ORIG) -- http://www.ocean-rig.com/-- is an international offshore drilling contractor providing oilfield services for offshore oil and gas exploration, development and production drilling, and specializing in the ultra-deepwater and harsh-environment segment of the offshore drilling industry. On March 24, 2017, the Debtors filed winding up petitions with the Cayman Court and issued summonses for the appointment of joint provisional liquidators for the purpose of the Restructuring. By orders of the Cayman Court dated March 27, 2017, Simon Appell and Eleanor Fisher were appointed as the JPLs and duly authorized foreign representatives, and the Cayman Provisional Liquidation Proceedings were commenced. Simon Appell and Eleanor Fisher of AlixPartners, LLP, in their capacities, as the joint provisional liquidators and authorized foreign representatives, filed for Chapter 15 protection for Ocean Rig and its affiliates (Bankr. S.D.N.Y. Lead Case No. 17-10736) to seek recognition of the Cayman proceedings. The JPLs' U.S. counsel are Evan C. Hollander, Esq., and Raniero D'Aversa Jr., Esq., at Orrick, Herrington & Sutcliffe LLP, in New York. ========= C H I L E ========= CUBA: Stops Issuing Licenses for Private Restaurants, Lodging ------------------------------------------------------------- EFE News reports that the Cuban government temporarily stopped issuing licenses to privately operated restaurants and lodging establishments catering to tourists, among other businesses, in an effort to regulate enterprises run by self-employed people, state media reported. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Public Urged to be Patient With Power Cuts -------------------------------------------------------------- Dominican Today reports that the executive vice president of the State Electricity Corporation (CDEEE), Ruben Jimenez Bichara, is calling on the public to be patient despite the recent increase in power cuts. Mr. Bichara explained that the outages are being caused by increased demand and because some generators are offline for maintenance or are inefficient, according to Dominican Today. He said the weather had been particularly hot and that this increases energy demand by 20 or 25%, which is compounded by the inefficiency of the generators, the report notes. The report relays that Mr. Bichara assured the public that they were working on a solution to the problem but that some outages were still to be expected. He added that the situation highlights the urgent need for completing the new power generation projects underway, which he said would provide sustainable energy at a lower cost, the report relays. "The solution to the power cuts is more energy and to provide this, more and better generators are needed and this is what we are working on," the report quoted Mr. Bichara as saying. The report notes that Mr. Bichara stated that some generators were out of service for technical reasons, breakdowns and imperfections. "We have a demand that is growing every year and the only way to meet this is by creating new projects and new generators, and building a generator takes four, five or six years and it is essential that these projects are allowed to be completed, as well as future initiatives," Mr. Bichara added. The vice president of the CDEEE said that work was underway on a long-term tender (for 2021) for electricity generation that will be ready by the end of this year as a way of guaranteeing the increased demand, the report notes. Mr. Bichara Bichara was speaking during the signing of an agreement with the electricity superintendent (SIE), Cesar Prieto, for cooperation and support in improving the national power sector regulating body's technological platform, the report relays. The agreement also involves exchanges of good practices in information technology as well as making use of the CDEEE infrastructure, while preserving confidentiality at all times, as established by law, the report adds. As reported in Troubled Company Reporter-Latin America on July 24, 2017, Moody's Investors Service has upgraded the Dominican Republic's long term issuer and debt ratings to Ba3 from B1 and changed the outlook to stable from positive, based on the following key drivers: (1) The Dominican Republic's continued robust growth outlook compared to rating peers, coupled with a reduction in external risks as current account deficits have declined and international reserves have increased. (2) The reduction in fiscal deficits over the last four years and Moody's expectation that fiscal deficits will remain shy of 3% of GDP, supported by fiscal restraint and reduced transfers to the electricity sector. ==================== E L S A L V A D O R ==================== EL SALVADOR: Fitch Affirms 'CCC' Long-Term IDRs ----------------------------------------------- Fitch Ratings has affirmed El Salvador's Long-Term Foreign and Local Currency IDRs at 'CCC'. The issue ratings on El Salvador's senior unsecured bonds are also affirmed at 'CCC'. The Country Ceiling is affirmed at 'B-' and the Short-Term Foreign and Local Currency IDR at 'C'. KEY RATING DRIVERS El Salvador's 'CCC' Long-Term ratings reflect Fitch's assessment that political polarization complicating the sovereign's ability to meet its financing gap for 2017-2018, continues, highlighting the risk for default. The government has defaulted on Certificados de Inversion Previsionales (CIPs, debt issued to the local pension funds under domestic law) due in April 2017. Although the government cured the default in early May and made the principal and interest payment on the CIPs due in July, payments of over $80 million are due in October, which could again test the government's ability to reallocate resources from the budget. It has already done so twice in 2017 and budget flexibility is limited. The government issued USD601 million in Eurobonds in February, which is less than half of its estimated USD1.3 billion in financing needs for 2017. The government could continue to build the stock of Letes (short-term instruments) during the year, increase arrears and make ad hoc adjustments to spending. However, this does not sustainably reduce the risks around meeting its financing needs in a credible manner. Local sources of financing are limited. The banking system (the primary buyer of Letes) is reluctant to increase its exposure to the government given the default on local debt in April and the private pension system is nearing the 45% legal limit on exposure to the CIPs. A two-thirds majority in congress is needed to secure approval for long-term borrowing, which has not proven possible given strong resistance from the main opposition party, Arena, which has linked its approval for issuance to a commitment to reduce the fiscal deficit. Upcoming congressional elections in March 2018 followed by presidential elections in February 2019 further complicate the likelihood of political agreement. El Salvador's ratings reflect the sovereign's severe financing constraints and lack of progress on reforms to arrest the deterioration of public finances as a result of extreme political polarization and gridlock. Fitch expects continued fiscal deficits of near 3% of GDP and low growth of around 2.3% to keep the general government debt on an upward trajectory in 2018-19 from an estimated 62.7% of GDP in 2017. The Congress is debating reform to the pension system, which has been a key source of fiscal pressure, representing nearly 2/3 of the fiscal deficit and 1/3 of the entire government debt burden. El Salvador's macroeconomic stability supported by dollarization and its relatively sound banking system are relative credit strengths. El Salvador has higher per capita income, social development and governance indicators relative to peers. SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns El Salvador a score equivalent to a rating of 'B' on the Long-Term FC IDR scale. Reflecting Fitch's view that El Salvador faces a challenging financing gap with diminished sources of available financing, Fitch's sovereign rating committee decided to maintain the Long- Term FC IDR at 'CCC'. In these circumstances, Fitch criterias do not require a reconciliation of the SRM output and the rating assigned using Fitch QO. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a Long-Term FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within Fitch criteria that are not fully quantifiable and/or not fully reflected in the SRM. RATING SENSITIVITIES The main factors that could, individually or collectively, lead to a negative rating action are: -- Failure to reduce the government's financing needs and/or continued inability to secure financing options; -- Signs of weakening willingness to service debt due to failure to reallocate budget spending or break the political impasse regarding financing. Future developments that could, individually or collectively, result in a positive rating action include: -- An easing of political tensions that improves financing flexibility; -- Fiscal adjustment (including a possible IMF agreement) that improves prospects for debt stabilization. KEY ASSUMPTIONS -- The agency assumes that U.S economic growth continues to support El Salvador's economic growth and external balance of payments. Furthermore, oil prices rise only gradually to USD52.5 per barrel in 2017 and USD55 per barrel in 2018, helping contain imports, utility subsidies and consumer prices. -- Fitch assumes that monetary policy normalization in the U.S. proceeds in a gradual and orderly manner. =========== M E X I C O =========== BANCO MERCANTIL: Moody's Assigns Ba2 Jr. Subordinated Debt Rating ----------------------------------------------------------------- Moody's Investors Service has assigned a definitive Ba2 (hyb) foreign currency junior subordinated debt rating to two of Banco Mercantil del Norte, S.A.'s (Banorte) perpetual callable subordinated non-preferred non-cumulative Additional Tier 1 capital notes, with an optional redemption on the first call date. The Contingent Convertible Capital Notes were issued through Banorte's Cayman Islands branch, Banco Mercantil del Norte, S.A. (Cayman Islands). The capital notes totaled USD900 million, split into two tranches of different maturities and coupons. LIST OF AFFECTED RATINGS: The following definitive ratings were assigned to Banco Mercantil del Norte, S.A.'s Contingent Convertible Capital Notes issued through Banco Mercantil del Norte, S.A. (Cayman Islands) in two tranches: -- Long-term foreign currency junior subordinated debt rating of Ba2 (hyb) to BANORT 6 7/8 PERP, issued for an amount of USD350 million and a fixed rate of 6.875% -- Long-term foreign currency junior subordinated debt rating of Ba2 (hyb) to BANORT 7 5/8 PERP, issued for an amount of USD550 million and a fixed rate of 7.625% RATINGS RATIONALE Moody's definitive ratings of Ba2 (hyb) for tranche "BANORT 6 7/8 PERP" for USD350 million and tranche "BANORT 7 5/8 PERP" for USD550 million are in line with the provisional rating assigned on June 20, 2017. Moody's rating rationale was set out on that date in the press release and has not changed since then. WHAT COULD CHANGE THE RATINGS UP OR DOWN The ratings are likely to face downward pressure if the bank's core capitalization levels significantly decrease or if its expansion into consumer and small and midsized company lending in the midst of a difficult operating environment leads to a substantial deterioration of asset quality. Upward pressure could accumulate if Banorte is capable of sustaining its asset quality metrics while slowing its expansion to levels more comparable to those of Mexico's GDP growth. The principal methodology used in this rating was Banks published in January 2016. OFFICE DEPOT: Fitch Affirms Then Withdraws BB+ Long-Term IDR ------------------------------------------------------------ Fitch Ratings has affirmed Office Depot de Mexico S.A. de C.V.'s (ODM) Long-Term Foreign and Local Currency Issuer Default Rating (IDR) at 'BB+'. The Rating Outlook has been revised to Positive from Stable. Fitch has simultaneously withdrawn ODM's) Long-Term Foreign and Local Currency IDRs. Fitch has withdrawn ODM's ratings for commercial reasons and will no longer provide rating or analytical coverage. The revision of the Rating Outlook to Positive reflects ODM's stronger credit metrics after the prepayment of the USD350 million senior notes and its good operating performance within the sluggish economic context in Mexico and Chile. The Positive Outlook would be resolved if Fitch had a greater degree of certainty regarding Grupo Gigante's strategy towards cash flow and dividend requirements from ODM and maintenance of total adjusted debt to EBITDAR at or below 2.5x in the medium term. ODM's credit quality reflects its leadership position in the office products super-store segment, diversified geographical footprint and consistent cash flow generation. The ratings also consider ODM's sound liquidity position and the expectation that the company will successfully integrate and align the recent acquisitions into its operations and financial results. KEY RATING DRIVERS Strong Business Profile: ODM's operating profile is supported by its national retail presence in Mexico, operations in Central and South America, mix of large corporate customers, small businesses and consumers. It has a leading position among Mexican office supply super stores and non-Mexican sales represent about 28% of total revenues. In addition, its wide distribution network, preponderance of cash sales and mostly local sourcing of inventory further supports ODM's business profile. Stable cash Flow Generation: ODM has grown consistently over the years, with solid EBITDA even during economic downturns. In 2016, same-store sales (SSS) grew 8.6% due to improved consumer confidence, low inflation rates and increasing real wages, while total sales increased by 17.9%, due to the full-year consolidation of Grupo Prisa and RadioShack de Mexico (RSM). During the LTM ended March 31, 2017, its EBITDA margin was 8.9%, due the recently acquired companies' lower margins. Fitch expects ODM's EBITDA margin to be around 9.5% in the medium term. Important Reduction in Debt: ODM's leverage ratios should improve after the USD350 million notes prepayment. The company refinanced part of those bonds with a MXN3 billion Mexican peso-denominated facility with Banco de Comercio Exterior. For the LTM ended March 31, 2017, adjusted debt/EBITDAR was 2.6x from 4.5x a year earlier. Fitch expects ODM's leverage to improve as synergies and margin improvements from recent acquisitions materialize. Pressures on Mexican Economic Environment: During the first semester of 2017, Mexico has presented increasing interest rates and higher inflation rates due to a weak and volatile peso as well as fuel price increases. Fitch expects this economic environment might hit consumption, reversing positive consumption trends presented in the last two and half years. However, Fitch believes ODM is well positioned to face potential headwinds given its sound liquidity, solid business position and strong operating cash flows. Growth Through Targeted Acquisitions: During 2015, ODM acquired Prisa, a Chilean office supply company, as well as RSM. These acquisitions increased revenues by about 30%. Fitch believes Prisa adds geographical diversification to ODM, while RSM could see improved margins and market share under ODM's stewardship. The Mexican office supply and small electronics retail industry is very fragmented, with the potential for consolidation by big players such as ODM. Going forward, ODM will also pursue a robust growth strategy, with an estimated 30 store openings per year on average. Fitch expects these openings and any upcoming acquisitions to be funded with internally generated cash flow, as the company has done in the past.. DERIVATION SUMMARY ODM presents smaller size of operations than other specialized retailers, such as Best Buy Co. Inc. (rated 'BBB-'/Stable Outlook) and Staples ('BB+'/Rating Watch Negative). However, ODM has lower adjusted leverage ratios and a stronger business profile, which is reflected in its leading market share in Mexico, higher profitability, and stable margins. ODM enjoys a moderate degree of geographic diversification, which makes it more resilient to specific market downturns. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Average revenue growth of 5.9% per year during 2017 - 2020; -- EBITDA margins close to 9% on average during 2017 - 2020; -- CFO generation above MXN1.3 billion per year; -- Average annual capex of MXN638 million during 2017 - 2020; -- Cash dividend payments of 50% of net income. RATING SENSITIVITIES Rating sensitivities are no longer relevant given rating withdrawals. LIQUIDITY ODM's liquidity is sound. As of March 31, 2017, ODM had a cash and marketable securities balance of MXN880 million and no short-term debt. No material debt maturities are due until 2019, when the new credit facility's amortization begins. On Dec. 19, 2016, ODM prepaid its USD350 million senior notes with a combination of operating cash flows, a USD200 million capital increase from Grupo Gigante S.A.B. de C.V. and Mexican peso- denominated debt with Banco de Comercio Exterior. After the prepayment, the only financial obligation the company has is the MXN3 billion credit facility. The new debt has a 10- year term and two-year grace period, which should allow the company to focus on the potential synergies of Prisa and RSM. As of March 31, 2017, total adjusted debt/EBITDAR was 2.6x and Fitch expects it to be around 2.3x in the medium term. FULL LIST OF RATING ACTIONS Fitch has affirmed and withdrawn the following ratings: Office Depot de mexico S.A. de C.V. -- Long-Term Foreign Currency IDR at 'BB+', Outlook Positive; -- Long-Term Local Currency IDR at 'BB+', Outlook Positive. ====================== P U E R T O R I C O ====================== * S&P Lowers Various Debt Ratings on Puerto Rico Agencies to 'D' --------------------------------------------------------------- S&P Global Ratings has lowered various debt ratings on Puerto Rico agencies to 'D' from 'CC' as follows: -- Puerto Rico Highway and Transportation Authority (HTA) highways and transportation highway revenue bonds, highway revenue refunding bonds, transportation revenue bonds, transportation revenue refunding bonds, and subordinated transportation revenue bonds; -- Puerto Rico Convention Center District Authority hotel occupancy tax revenue bonds; -- Puerto Rico Industrial Development Company (PRIDCO) general purpose revenue and refunding bonds; and -- Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (AFICA) tourism revenue refunding bonds, 2011 series A; the ratings on other AFICA hotel tax tourist development fund supported bonds are withdrawn, as they are now solely supported by unrated underlying resort fees. Default occurred for the above bonds on July 3, 2017, due to a rollover to the first available business day from their July 1 principal due dates. S&P said, "It is our understanding that the missed July 3 principal payment on PRIDCO general purpose revenue bonds, series 1997A will be redeemed on Aug. 21, 2017 from available reserve funds, based on notice from the trustee and direction of PRIDCO, while the series 2003 since may have been made current. Puerto Rico has indicated there are sufficient reserve funds available to make the Aug. 21 PRIDCO principal redemption, as well as the next January PRIDCO interest payment. "We have affirmed our 'CC' rating, with a negative outlook, on the Puerto Rico Employees Retirement System (ERS) bonds. It is our understanding that interest payments were missed on the ERS bonds on July 3, but have since been made current pursuant to a stipulated judgment." ================= V E N E Z U E L A ================= VENEZUELA: Controversial Constituent Assembly Elected ----------------------------------------------------- Caribbean360.com reports that President Nicolas Maduro has claimed victory in the vote that saw a Constituent Assembly -- which will have the power to rewrite Venezuela's constitution -- replacing the National Assembly. President Maduro claims the new body it will bring peace to the country, but opposition parties who boycotted the election described it as a naked power grab, and officials in the United States called it a sham, according to Caribbean360.com. In the protests that followed the vote, at least 10 people were killed, the report relays. The Constituent Assembly is expected to give Maduro sweeping powers, as all 545 seats in the new legislative body were won by allies of his Socialist Party, the report notes. In addition to being able to rewrite the constitution, the Constituent Assembly will also have the power to dissolve state institutions, such as the opposition-run Congress and dismiss dissident state officials, the report discloses. Following the vote, the President mocked the US authorities who have threatened sanctions against Venezuela over the election and said they would not recognize the results, the report says. "A spokesperson for Emperor Donald Trump said that they would not recognize the results of Venezuela's Constituent Assembly election," he told cheering supporters. "Why the hell should we care what Trump says? We care about what the sovereign people of Venezuela say," he added. However, in a statement issued, the US State Department said the elections were "designed to replace the legitimately elected National Assembly and undermine the Venezuelan people's right to self-determination," the report notes. "We will continue to take strong and swift actions against the architects of authoritarianism in Venezuela, including those who participate in the National Constituent Assembly as a result of today's flawed election," it added, the report relays. Venezuela's National Electoral Council said more than 8 million people voted in the election -- "the biggest turnout that the Bolivarian Revolution has had in its entire 18-year history", Maduro had claimed, the report says. However, the opposition put the figure at less than 3 million, the report adds. As reported on Troubled Company Reporter-Latin America on July 13, 2017, S&P Global Ratings lowered its long-term foreign and local currency sovereign credit ratings on the Bolivarian Republic of Venezuela to 'CCC-' from 'CCC'. The outlook on the long-term ratings is negative. S&P said, "We affirmed our 'C' short-term foreign and local currency sovereign ratings. In addition, we lowered our transfer and convertibility assessment on the sovereign to 'CCC-' from 'CCC'." *********** Monday's edition of the TCR-LA delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-LA editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-LA constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-LA editor holds some position in the issuers' public debt and equity securities about which we report. Tuesday's edition of the TCR-LA features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Submissions about insolvency-related conferences are encouraged. Send announcements to conferences@bankrupt.com *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2017. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000 or Joseph Cardillo at 856-381-8268. * * * End of Transmission * * *