/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/170823.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 23, 2017, Vol. 18, No. 167 Headlines B R A Z I L ABENGOA SA: Unit Gets OK From Creditors for Restructuring Plan BANCO DE BRASILIA: Fitch Affirms BB- IDR; Outlook Remains Negative BANCO DO ESTADO: Fitch Affirms B- LT IDR; Outlook Now Stable BANCO ORIGINAL: Moody's Withdraws B2 LT Deposit Rating BANCO PINE: Moody's Withdraws B1 Long-Term Local Deposit Rating BANESTES SA: Fitch Affirms 'B' Short-Term IDR CENTRAIS ELETRICAS: Shares Jump on Privatization Plan GERDAU SA: Explosion Kills Two at Steel Plant in Brazil GERDAU SA: Moody's Revises Outlook to Stable; Affirms Ba3 CFR SUL AMERICA: Fitch Affirms 'B' Short-Term IDR * S&P Takes Various Actions on Three BR State-Owned Utilities * S&P Takes Various Actions on Three Brazilian State-Owned Banks C A Y M A N I S L A N D S CHINA MEDICAL: No Damages Award for Deutsches From Fidelity D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Gives Exporters a Tool for Regional Business J A M A I C A JAMAICA: JCTU President Says Wage Negotiations Could be Lengthy P E R U INKIA ENERGY: Fitch Affirms BB Long-Term IDR; Outlook Stable T R I N I D A D & T O B A G O TRINIDAD & TOBAGO: Will Act on Eden Garden Deal - - - - - =========== B R A Z I L =========== ABENGOA SA: Unit Gets OK From Creditors for Restructuring Plan -------------------------------------------------------------- Reuters reports that the Brazilian unit of struggling Spanish energy and infrastructure group Abengoa SA obtained approval from creditors for its in-court debt restructuring plan, said a lawyer representing one of the creditors. Abengoa has around BRL3.4 billion ($1.08 billion) in debt with suppliers and banks in Brazil and has filed for court protection against creditors last year, after stopping several projects for lack of funding, according to Reuters. Luciana Nogueira, a lawyer with Sao Paulo-based law firm TozziniFreire Advogados, which represents one of those suppliers, said a key factor behind the approval of the plan was a binding proposal from Texas Pacific Group (TPG) to buy Abengoa's power transmission lines in Brazil for BRL400 million in cash, the report notes. "That proposal would guarantee creditors will receive something back this year," she said, the report relays. The TPG offer would be a starting price for the assets in a judicial auction to be organized in coming weeks, the report discloses. The final price for the lines could go up if more companies decide to bid in the auction, the report notes. TPG did not immediately return a request for comment. Abengoa's plan presented to creditors during an assembly in Rio included other actions to raise cash and pay back debt, the report says. The company said it would receive a credit of BRL76 million from its local construction arm, Abengoa Construcao. It also said it would sell a stake it owns in a hospital in the northern Brazilian state of Amazonas, for which it expects to fetch BRL143 million, the report relays. Abengoa also plans to sell licenses it currently holds to build and operate power transmission lines in Brazil, but this sale depends on litigation with the country's power regulator, Aneel, the report discloses. The watchdog is trying to cancel those licenses due to delays in the construction, the report adds. As reported in the Troubled Company Reporter-Latin America on March 23, 2017, Moody's Investors Service has withdrawn all the ratings of Abengoa S.A., including the company's Ca Corporate Family Rating (CFR), Ca-PD Probability of Default Rating ("PDR"), and the senior unsecured Ca ratings at Abengoa Finance, S.A.U., and Abengoa Greenfield, S.A. At the time of withdrawal, the ratings carried negative outlooks. BANCO DE BRASILIA: Fitch Affirms BB- IDR; Outlook Remains Negative ------------------------------------------------------------------ Fitch Ratings has affirmed the long-term Foreign and Local Currency Issuer Default Ratings (IDRs) of BRB - Banco de Brasilia S.A. (BRB) at 'BB-' and its long-term National Rating at 'A+(bra)'. Rating Outlooks on the long-term IDRs remain Negative, while the Rating Outlook on the long-term National Rating is Stable. Fitch also affirmed BRB's Viability Rating (VR) at 'b+' and Support Rating (SR) at '3'. KEY RATING DRIVERS - IDRS, NATIONAL RATINGS The affirmation of BRB's IDRs reflect Fitch's view that the bank would receive support from its majority shareholder, the Government of the Federal District (GDF), should the need arise. The Negative Outlook on BRB's Long-Term IDRs ultimately mirrors the Negative Outlook on Brazil's sovereign ratings and reflects the pressures on GDF's ability to provide support. Fitch believes BRB is strategically important for GDF, as it is the local government's main financial agent, and it has a meaningful market share in the state's loans and deposits. At May 2017, BRB ranked fourth in lending and term deposits within the Federal District with 6% and 10% market shares, respectively. In addition to its commercial operations, BRB performs a policy role for the region through lending operations that aim to promote development and growth. KEY RATING DRIVERS - VIABILITY RATING The affirmation of BRB's VR mainly reflects its capitalization ratios that are slightly lower than its peer averages, and it also incorporates the volatility in its earnings over the past few years and potential asset quality pressures on its loans to companies. The VR also considers BRB's solid franchise in GDF and stable and diversified retail-based funding structure. BRB's Fitch core capital (FCC) and regulatory capital ratios are slightly lower than the average of its three Fitch-rated peers. In 2016, the bank's recognition of an actuarial deficit for its employees' pension fund (both for 2016 and retrospectively for 2015) and an increase in deductible deferred tax assets affected its FCC ratio negatively, but the non-recurring gain and lower RWAs offset this effect. Positively, as of March 2017, the FCC ratio rose to 12.66% from 11.95% in 2016 and 11.11% in 2015. BRB's asset quality indicators have deteriorated since 2015, in line with sector and peer trends. Fitch expects BRB's asset quality to remain under pressure in the short term, in line with the sector outlook. BRB's payroll deductible portfolio, which made up 43% of the total at March 2017, has continued to perform well. Unlike a number of subnational governments, GDF has not reported significant delays in salary payments to its employees. The main pressure has been on the unsecured consumer loans and SME loans, which, made up 38% and 12% of the total, respectively, at March 2017. This drove the increase in BRB's NPLs over 90 days to 4.3% in 2015 and 4.4% in 2016, before going down to 4.1% at March 2017. BRB's loan loss reserve coverage of impaired loans remains adequate (148% and 122% of NPLs, at March 2017 and 2016, respectively). BRB's profitability was negatively impacted in 2015, due to a large increase in loan impairment charges, but in 2016, as impairment charges fell to 61% of pre-impairment earnings, operating profit recovered to a 2.02% of RWAs (0.41% in 2015). In 2016, the bank's overall net income was boosted by a non-recurring gain of BRL118 million from the reversal of tax provisions. In the first quarter of 2017, operating earnings increased slightly to 2.18% of RWAs. This was mainly due to a drop in non-interest expenses that offset slightly higher loan impairment charges that reached 69% of pre-impairment charges. Possible needs of additional loan loss reserves for its loans to companies could pressure 2017 earnings. Funding and liquidity are positive drivers for BRB's VR. The bank has a retail funding base, which is highly stable, diversified and low cost. Deposits and deposit-like financial bills made up 83% of total funding at March 2017. In the same period, gross loans corresponded to a comfortable 105% of deposit and deposit-like financial bills. The bank also has local subordinated financial bills that are eligible as Tier 2 capital. KEY RATING DRIVERS - SUPPORT RATING The affirmation of BRB's SRs at '3' reflects the moderate probability of support from GDF. Fitch believes GDF would have a high willingness to support BRB in case of need; however, its capacity to do so has fallen along with the deterioration in Brazil's sovereign ratings. RATING SENSITIVITIES - IDRS, NATIONAL RATINGS, SUPPORT RATING Any changes in Fitch's assessment of GDF's ability and willingness to provide support to BRB would affect the IDRs and SR of the bank. The National Ratings of BRB would only be affected by changes in local relativities among Brazilian banks. RATING SENSITIVITIES - VIABILITY RATING Negative triggers: BRB's VR could be downgraded if its FCC ratio falls to less than 7% and if its operating ROAA remains below 0.5% for a sustained period. Positive triggers: An upgrade of BRB's VR would be conditional on the maintenance of its operating profit/RWA above 1.25% and FCC ratio above 12%, both for sustained periods. Fitch has affirmed the following ratings: -- Long-term Foreign and Local Currency IDRs at 'BB-', Outlook Negative; -- Short-term Foreign and Local Currency IDRs at 'B'; -- Long-term National Rating at 'A+(bra)', Outlook Stable; -- Short-term National Rating at 'F1(bra)'; -- Support Rating at '3'; -- Viability Rating at 'b+'. BANCO DO ESTADO: Fitch Affirms B- LT IDR; Outlook Now Stable ------------------------------------------------------------ Fitch Ratings has affirmed the ratings of Banco do Estado do Rio Grande do Sul (Banrisul). The Outlooks for the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and National Long-Term Rating were revised to Stable from Negative. The revision of Banrisul's Outlook to Stable reflects the recent stabilization of the credit profile of the state of Rio Grande do Sul (ERS), the bank's main shareholder. This stabilization could result in better asset quality prospects for Banrisul due to its regional importance. Most of the bank's operations take place in ERS, which has seen recent improvements to its economic and operating environments. KEY RATING DRIVERS IDRs, VRs AND NATIONAL RATINGS Banrisul's IDRs are driven by its Viability Rating (VR) and are highly influenced by its operating environment due to the bank's regional importance and concentration. Another factor is Banrisul's asset quality, which showed some deterioration over the past few years but could be stabilized by a less pressured environment. The ratings also incorporate the bank's local franchise, adequate capitalization, stable retail funding base and profitability, and adequate liquidity metrics. In the first half of 2017, Banrisul reported a slight improvement in its capitalization metrics in relation to 2016, but results continue to lag compared to previous years. The Fitch core capital (FCC) was 13.5% in June 2017 and 13.3% in December 2016, versus 14.8% in December 2015. Regulatory capital was 15.7% in June 2017 and 17% in December 2016. Banrisul operates as a commercial bank, targeting both companies and to individuals. IT has a strong presence in Rio Grande do Sul, with an 18% credit market share and 48% of term deposits in March 2017. Loans to ERS' public servants represent around 15% of the bank's loan portfolio. Fitch believes asset quality could stabilize due to improvments in the state's environment. Non-performing Loans (NPLs) amounted to 4.7% of the portfolio in June 2017 (5% in 2016). Loans classified in the 'D-H' risk range amounted to 12.3% in June 2017, versus 13% in 2016. However, charge-offs increased to 3.5% from 3.00%. Banrisul has a non-encumbering exclusive contract with ERS that charged the bank and generated intangible assets in this contract, which negatively impacted the bank's capitalization indicators in 2016. Loan leverage was acceptable at 4.7x the equity in June 2017 and December 2016 and 5.1x in 2015. The bank has distributed 40% of its results in recent years. Banrisul has a stable and varied funding base, with savings and time deposit clients, which is one of its greatest strengths. Total funding (including deposits, financial bills and subordinated debt) increased by 7.7% in 2016 (increased 8.9% since June of 2016 until June of 2016). Time deposits accounted for around 76% of these deposits and remained fairly diversified and growing. Operating profitability remained at an adequate level, with a relative stabilization of the levels of provisions expenses related to the bank's loan exposures, mainly of its corporate portfolio. Support Rating and Support Rating Floor The Support Rating '4' and the Support Rating Floor 'B' reflect the limited support probability provided by the Federal Government under a stress scenario due to the bank's relatively low systemic importance. In March 2017, Banrisul was the 10th biggest financial institution in the country in terms of assets, and the sixth regarding deposits. However, there are no explicit guarantees of support from the federal government. Debt Issuances Subordinated Tier 2 USD Notes: Banrisul's subordinated notes ('B- /RR6') due in January 2022 are two notches below the bank's VR of 'b+'. The notching includes one notch lower for loss severity features and its subordinated status and a one-notch deduction due to moderate non-performance risk. RATING SENSITIVITIES VR, IDRs, NATIONAL RATINGS AND DEBT ISSUANCES Negative Rating Action: Banrisul's ratings are likely to be downgraded if a major weakening of the assets quality indexes and an increase of non-performing credits higher than 7% take place, or if the Fitch Core Capital (FCC) falls below 11%. Moreover, Banrisul's ratings may be impacted by any change of Fitch's opinions regarding the operating and economics of the state of Rio Grande do Sul due to the banks' strong presence in that state. Positive Rating Action: Banrisul's Ratings could be upgraded if the bank maintains adequate profitability, expressed by the operating profit/risk weighted assets ratio above 4%, together with good asset quality ratios, NPLs around 4% and substantial improvements on FCC metrics coupled with the maintenance of Fitch stable view of the state of Rio Grande do Sul. SUPPORT RATING AND SUPPORT RATING FLOOR The SR is potentially sensitive to any change in assumptions around the propensity or ability of the sovereign to provide timely support to the bank FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: -- Long-Term Foreign and Local Currency IDRs at 'B+'; Outlook revised to Stable from Negative; -- Short-Term Foreign and Local Currency IDRs at 'B'; -- Viability Rating at 'b+'; -- Support Rating at '4'; -- Support Rating Floor at 'B'; -- National long-term rating at 'A-(bra)'; Outlook revised to Stable from Negative; -- National short-term rating at 'F2 (bra)'; -- Tier II Capital Subordinated Notes due in February 2022, at 'B-/RR6'. BANCO ORIGINAL: Moody's Withdraws B2 LT Deposit Rating ------------------------------------------------------ Moody's Investors Service has withdrawn all ratings assigned to Banco Original S.A. and Banco Original do Agronegocio S.A. (BOA), including the long and short-term local and foreign currency deposit ratings of B2 and Not Prime, respectively; the long and short-term Brazilian national scale deposit ratings of Ba2.br and BR-4, respectively. Moody's has also withdrawn the baseline credit assessment (BCA) of b2; the adjusted BCA of b2; and the long- and short-term counterparty risk assessments of B1(cr) and Not Prime(cr). Before the withdrawal, the outlook on all ratings was negative. The following ratings were withdrawn: Issuer: Banco Original S.A. -- Long-Term Global Local Currency Deposit Rating, previously rated B2 -- Short-Term Global Local Currency Deposit Rating, previously rated Not Prime -- Long-Term Foreign Currency Deposit Rating, previously rated B2 -- Short-Term Foreign Currency Deposit Rating, previously rated Not Prime -- Long-Term Brazilian National Scale Deposit Rating, previously rated Ba2.br -- Short-Term Brazilian National Scale Deposit Rating, previously rated BR-4 -- Baseline Credit Assessment, previously rated b2 -- Adjusted Baseline Credit Assessment, previously rated b2 -- Long-Term Counterparty Risk Assessment, previously rated B1(cr) -- Short-Term Counterparty Risk Assessment, previously rated Not Prime(cr) -- Outlook, Changed To Rating Withdrawn From Negative Issuer: Banco Original do Agronegocio S.A. -- Long-Term Global Local Currency Deposit Rating, previously rated B2 -- Short-Term Global Local Currency Deposit Rating, previously rated Not Prime -- Long-Term Foreign Currency Deposit Rating, previously rated B2 -- Short-Term Foreign Currency Deposit Rating, previously rated Not Prime -- Long-Term Brazilian National Scale Deposit Rating, previously rated Ba2.br -- Short-Term Brazilian National Scale Deposit Rating, previously rated BR-4 -- Baseline Credit Assessment, previously rated b2 -- Adjusted Baseline Credit Assessment, previously rated b2 -- Long-Term Counterparty Risk Assessment, previously rated B1(cr) -- Short-Term Counterparty Risk Assessment, previously rated Not Prime(cr) -- Outlook, Changed To Rating Withdrawn From Negative RATINGS RATIONALE Moody's has withdrawn the ratings for its own business reasons. The last rating action on both Banco Original S.A. and Banco Original do Agronegocio S.A. was on June 1, 2017, when Moody's downgraded the bank's local and foreign currency deposit ratings to B2, from B1, as well as the long- and short-term Brazilian national scale ratings to Ba2.br and BR-4, from Baa1.br and BR-2, respectively. The BCA and adjusted BCA was also downgraded to b2, as well as the bank's counterparty risk assessment to B1(cr) for long-term, from Ba3(cr). The short term deposit ratings were affirmed at Not Prime. Banco Original and Banco Original do Agronegocio are headquartered in Sao Paulo and are part of Original Financial Conglomerate. Original financial conglomerate had total assets of BRL 8,723 million ($ 2,680 million) and equity of BRL 2,225 million ($ 683.7 million) as of December 31, 2016. BANCO PINE: Moody's Withdraws B1 Long-Term Local Deposit Rating --------------------------------------------------------------- Moody's Investors Service has withdrawn all ratings assigned to Banco Pine S.A., including the long- and short-term local and foreign currency deposit ratings of B1 and Not Prime, respectively, as well as the long- and short-term Brazilian national scale deposit ratings of Baa2.br and BR-3, respectively. Moody's has also withdrawn the b1 baseline credit assessment (BCA), the b1 adjusted baseline credit assessment (adjusted BCA) and the counterparty risk assessments of Ba3(cr) and Not Prime(cr) assigned to Pine. Before the withdrawal, the outlook on the global local and foreign currency deposit ratings was stable. The following ratings were withdrawn: Issuer: Banco Pine S.A. -- Long-Term Global Local Currency Deposit Rating, previously rated B1, outlook withdrawn -- Short-Term Global Local Currency Deposit Rating, previously rated Not Prime -- Long-Term Foreign Currency Deposit Rating, previously rated B1, outlook withdrawn -- Short-Term Foreign Currency Deposit Rating, previously rated Not Prime -- Long-Term Brazilian National Scale Deposit Rating, previously rated Baa2.br -- Short-Term Brazilian National Scale Deposit Rating, previously rated BR-3 -- Baseline Credit Assessment, previously rated b1 -- Adjusted Baseline Credit Assessment, previously rated b1 -- Long-Term Counterparty Risk Assessment, previously rated Ba3(cr) -- Short-Term Counterparty Risk Assessment, previously rated Not Prime(cr) -- Outlook, Changed To Rating Withdrawn From Stable RATINGS RATIONALE Moody's has withdrawn the ratings for its own business reasons. Please refer to the Moody's Investors Service's Policy for 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. Banco Pine S.A. is headquartered in Sao Paulo, Brazil. As of 30 June 2017, the bank had total assets of approximately BRL8.97 billion ($2.7 billion) and equity of BRL1.13 billion ($340 million). BANESTES SA: Fitch Affirms 'B' Short-Term IDR ---------------------------------------------- Fitch Ratings has affirmed the ratings of Banestes SA Banco do Estado do Espirito Santo (Banestes). KEY RATING DRIVERS VR, IDRs and NATIONAL RATINGS Banestes' Issuer Default Ratings (IDRs) are driven by its 'bb-' Viability Rating (VR), which mainly reflects the high influence of the operating environment on the bank's performance and prospects since it primarily operates in the State of Espirito Santo and due to its regional importance. The ratings also consider the bank's regional franchise and its adequate financial profile which positively compare to those of the subnational-owned peers. Fitch considers the bank's stable liquidity, relatively strong capitalization and adequate sources of funding. The quality of the bank's assets began to stabilize in early 2017. The Rating Outlook for the bank's Long-Term IDR is Negative, reflecting that, as a retail bank, its VR could be impacted by any further deterioration in the operating environment. Additionally, any change in Fitch's opinion of the creditworthiness of its main shareholder, State of Espirito Santo, could impact the bank's VR, since Fitch believes there is little room to position Banestes' VR much above that of State of Espirito Santo. Banestes' business model relies on lower-cost retail funding, provided by its branch network, mainly in the State of Espirito Santo. Furthermore, the bank has reasonably well-diversified products, which makes it less dependent on revenues linked to credit than its peers. Banestes focuses its operations in the state of Espirito Santo, where it maintains a good participation in deposits and credit operations. As a state bank, a relevant part of its strategy includes providing services and granting credit to state and municipal public servants, as well as to companies that intend to invest in the state. Through agreements and partnerships with municipalities and the state government itself, the bank also manages the financial resources of these entities, increasing the capacity to expand its customer base. Underwriting standards are in line with the practices of the leading banks in the banking industry. Credit risk is the one that consumes the most capital. The quality of credit remained acceptable, indicators of NPLs of more than 90 days in the first half of 2017 totaled 3% until June 2017 (3.6% in 2016, 4.8% in 2015 and 5.3% in 2014). As of March 2017, securities classified as 'D-H' stood at 15.6% of the portfolio and 15.5% in December 2016, which show some deterioration from previous years (12.3% in December 2015 and 10.1% in December 2014). The bank shows good profitability, without great oscillations. Operating profit on average assets was 1% as of the 1Q17, presenting stability in recent years. Banestes has optimized costs, implemented operational efficiency targets and has reviewed all of its fixed cost contracts. Fitch believes capitalization metrics are relatively strong and positively compare to its closest peers. By management's policy, the regulatory capitalization index must be at least 14%. In March 2017, it was 18.5%. The credit leverage was approximately 2.9 times the shareholders' equity in March 2017 (3.0 times in December 2016 and 3.4 times in December 2015). Fitch deducted the insurer's equity to calculate the Fitch Capital Core, which was still at comfortable 16.4% in March 2017 (16.6% in December 2016, 17.3% in December 2015) and better on average than its peers. Banestes presents a granular and low cost deposit base given its retail profile. The bank holds about a third of the Espirito Santo market. The concentration of the 20 largest depositors was about 20% of total in March 2017. The moderate percentage is explained by the state's investments or by entities linked to it, as a large part of governmental funds (and of its companies) is deposited in Banestes. Fitch views Banestes' liquidity as adequate and its minimum cash policy as conservative. The most liquid assets accounted for about 50% of total deposits and comprised mainly federal government securities. SUPPORT RATING The '4' Support Rating reflects the moderate probability of support from its controlling shareholder, the State of Espirito Santo. In Fitch's opinion, Banestes is strategically important to the state, as it acts as the state's financial agent. In addition, the bank provides services to public entities and grants credit to their suppliers, as well as payroll deductible loans to public employees, which together make up an important part of the bank's business. RATING SENSITIVITIES VR, IDRs and National Ratings Banestes' VR is sensitive to any change in Fitch's assumptions regarding exposure to regional risk, capitalization and credit quality. The VR may be downgraded if Banestes' NPL's (overdue for more than 90 days) increase to more than 6% and / or if the FCC falls to less than 10%. Fitch's internal analysis of the state of Espirito Santo may affect the bank's ratings. Thus, its ratings could be impacted by any change in the financial profile of that state. SUPPORT RATING SR could be modified from any change on the strategic importance of the bank or the propensity of support of the state of Espirito Santo. FULL LIST OF RATING ACTIONS: Fitch has affirmed the following ratings: Banestes S.A. - Bank of the State of Espirito Santo: -- Long-term IDRs in Foreign and Local Currencies at 'BB-'; Outlook Negative; -- Short-term IDRs in Foreign and Local Currencies at 'B'; -- National Long-Term Rating at 'A + (bra)', Stable Outlook; -- National short-term rating at 'F1 (bra)'; -- Support Rating at '4'. -- Viability Rating at 'bb-'. CENTRAIS ELETRICAS: Shares Jump on Privatization Plan ----------------------------------------------------- Paulo Trevisani at The Wall Street Journal reports that shares of Centrais Eletricas Brasileiras SA jumped 48% a day after Brazil's cash-strapped government announced it would cut its controlling stake in the power utility. Eletrobras Chief Executive Wilson Ferreira Junior and Energy Minister Fernando Coelho Filho said Aug. 22 they have yet to decide whether the government will sell part of its holdings or issue new shares to dilute its position Brazil's largest power operator, according to The Wall Street Journal. The officials said the move wasn't aimed at raising money to close the country's budget deficit, equal to 9.5% of annual economic output, but that they were instead to make the company more efficient by freeing it from state control, the report notes. "This is an indebted company whose market value is below its net assets," Mr. Ferreira said to reporters, the report relays. "Without the state bureaucracy it will be more efficient and nimble to compete," he said, the report notes. The report discloses that they said the plan was floated now to avoid rumors that could shake financial markets as discussions progressed within the government. Both men declined to put a figure on the planned sale, which would result in the country's largest privatization in decades, the report says. Mr. Coelho said the government still hasn't decided the fate of large assets that the company likely won't be able to privatize, the report notes. One is Itaipu, the gargantuan 103 million megawatt/hour hydroelectric dam whose ownership Brazil shares with the government of Paraguay, the report relays. The privatization of its nuclear plants are also barred by the Constitution, the report says. "We certainly won't do anything that runs against the Constitution," the minister said, the report adds. As reported in the Troubled Company Reporter-June 2, 2017, Moody's Investors Service has changed the outlook on Centrais Eletricas Brasileiras SA-Eletrobras ratings to negative from stable and affirmed the corporate family and senior unsecured ratings at Ba3. The action follows Moody's May 26, 2017 rating action in which the outlook for Brazil's government bond rating was revised to negative from stable. GERDAU SA: Explosion Kills Two at Steel Plant in Brazil ------------------------------------------------------- Reuters reports that an explosion at a Brazilian steel plant operated by Gerdau SA killed two people and injured 10 others, the company and local metalworkers union said. The blast occurred at a coke oven at Gerdau's plant in the center- south state of Minas Gerais, according to the Metalworking Union of Ouro Branco (Sindob), the report notes. It was the second major accident in less than a year at the steel plant that employs roughly 2,000 people, according to the union, reports Reuters. A blast furnace explosion killed four in November, the report relays. The plant's operations were not affected, but Gerdau's preferred shares dropped BRL2.1 percent to BRL10.97 by the close of trading on Aug. 16, notes the report. Sindob said it is preparing a protest at the plant, the report relays. "We attribute this (series of accidents) to the pure and simple lack of maintenance of equipment . . . It has not had preventative maintenance, we have been aware of this situation in the plant for two years," said Sindob President Raimundo Nonato Roque de Carvalho, the report discloses. Gerdau said in a statement the plant's equipment was in adequate condition and conformed with safety standards under current law. The company was investigating the cause of the accident and assisting the families of the victims, it said, the report adds. GERDAU SA: Moody's Revises Outlook to Stable; Affirms Ba3 CFR -------------------------------------------------------------- Moody's Investors Service affirmed Gerdau S.A. Ba3 corporate family rating and the Ba3 ratings of the debt issues of Gerdau Trade Inc (guaranteed by Gerdau S.A. and its operating subsidiaries in Brazil) and of GTL Trade Finance Inc (guaranteed by Gerdau S.A. and its operating subsidiaries in Brazil), as well as the industrial revenue bonds issued by Jacksonville Economic Development Commission, FL (guaranteed by Gerdau S.A.) and the solid waste disposal bonds issued by St. Paul Port Authority, MN (guaranteed by Gerdau S.A.). The outlook was changed to stable from negative. Ratings actions: Issuer: Gerdau S.A LT Corporate Family Ratings: affirmed at Ba3 Issuer: Gerdau Trade Inc.: USD 750 million senior unsecured notes due 2023: affirmed at Ba3 Issuer: GTL Trade Finance Inc. USD 1,250 million senior unsecured notes due 2024: affirmed at Ba3 USD 500 million senior unsecured notes due 2044: affirmed at Ba3 Issuer: Jacksonville Economic Development Comm., FL USD 23 million industrial revenue bonds due 2037: affirmed at Ba3 Issuer: St Paul (City of) MN, Port Authority USD 51 million solid waste disposal revenue bonds due 2037: affirmed at Ba3 Outlook Actions: Issuer: Gerdau S.A. -- Outlook, Changed To Stable From Negative Issuer: Gerdau Trade Inc.: -- Outlook, Changed To Stable From Negative Issuer: GTL Trade Finance Inc. -- Outlook, Changed To Stable From Negative RATINGS RATIONALE The stable outlook reflects the resilience of Gerdau's operations during 2016 and 1H2017 despite Brazil's market downturn, supported by the initiatives taken by the company to reduce costs, and Gerdau's financial discipline regarding capex and dividend payments. Although Gerdau's main markets - namely Brazil and the US -- continue weak the company's adjusted EBITDA margins have slowly recovered in the past few quarters, and closed June 2017 at 11.4% (down from 13.5% in 2014, but an improvement over 10.7% in 2015). Moody's does not expect any material recovery in the steel industry in Brazil at least through 2018, as the main steel consuming segments for long steel (construction, infrastructure) will likely remain weak until there is a more evident recovery in the economy and resumption of investments in infrastructure. Despite that, declining inflation and interest rates should support a gradual recovery in the commercial construction and homebuilding segments compared to 2016 levels. In the US, Gerdau will continue to face competition of imported steel through 2017, while infrastructure investments will likely not resume at least until 2018. Despite the soft operating environment, Gerdau has generated positive free cash flows since 2013, and was able to reduce debt levels, partially with the proceeds from asset divestitures. The company's liquidity remains solid and adequate to meet the debt amortization schedule. As of June 30, 2017, Gerdau held close to BRL 5.4 billion in cash and equivalents, and additional liquidity sources under its USD 1.0 billion committed credit facility. Moody's expects Gerdau to use part of cash balance to amortize upcoming debt and reduce gross leverage. Moody's expects total adjusted leverage, measured by total debt to EBITDA, to decline to 5.2x at the end of 2017 and 4.4x at the end of 2018, from 5.6x in the last twelve months ended in June 2017. Gerdau's Ba3 ratings are supported by the company's historically solid cash generation, which reflects its strong market position in the several markets where it operates, its good operational and geographic diversity, its cost-driven management, as well as its conservative financial policies. While Gerdau's variable cost structure, high integration level and large scale provide good operating flexibility, reducing downside risk, the economic slowdown in Brazil should keep steel volumes and demand under pressure at least through 2018. Over the last couple of years, Gerdau's leverage substantially increased (and remained between 5x and 6x total adjusted debt to EBITDA) as a result of the EBITDA contraction, in particular in Brazil, and interest coverage ratios, measured by EBIT to interest expenses, also deteriorated, declining to levels close to 1x, much weaker when compared to historical averages in the 3x-4x range. The ratings reflect the continued weaknesses of the steel industry in Brazil, a key market for Gerdau, and challenges in the US steel market, and Moody's expectations that the company's credit metrics, particularly margins, leverage and interest coverage will remain pressured in the next 12-18 months. Leverage and interest coverage remain exposed to exchange rate movements, and as the BRL has depreciated since 2015, FX will continue to impact leverage metrics given that about 80% of the company's debt is denominated in foreign currencies. The ratings could be upgraded if there is a more meaningful recovery in Gerdau's operations, with sustainable improvements in volumes and the company is able to improve profitability to levels observed prior to 2015, with EBIT margins of at least 6% (4.8% in LTM ended June 2017), while maintaining an adequate liquidity profile and reduce debt levels, with total adjusted debt to Ebitda below 3.5x (5.6x in the LTM ended in June 2017) and EBIT to interest expense above 3.0x (1.1x in the LTM ended in June 2017) on a sustained basis. Negative pressure on the rating could result from weaker liquidity or from persistently high leverage, with total debt to Ebitda above 4.0x on a sustainable basis over the long-term. Further deterioration in volumes and margins in Gerdau's main markets (namely Brazil and the US), affecting its ability to generate positive free cash flow or limited flexibility for capex reduction could trigger a downgrade. A sharp deterioration in the controlling shareholders' (Metal£rgica Gerdau) financial position and an increase in dividends at levels such that the cash flow from operations less dividends to debt ratio remains below 15% (8.3% in the LTM ended in June 2017) for a prolonged period could also precipitate a downgrade. Based in Brazil, Gerdau S.A. is the leading producer of long steel in the Americas , with total annual capacity of over 25.5 million tons of crude steel. The group has operations in 12 countries with relevant market shares in many of them, including Brazil, USA, Canada, Chile, Peru, Uruguay, Argentina, Mexico, Venezuela and India, and joint ventures in Colombia and the Dominican Republic. In the last twelve months ended June 30, 2017, Gerdau reported consolidated annual revenues of approximately BRL 34.9 billion (USD 10.8 billion converted by the average exchange rate). The principal methodology used in these ratings was Global Steel Industry published in October 2012. SUL AMERICA: Fitch Affirms 'B' Short-Term IDR --------------------------------------------- Fitch Ratings has affirmed Sul America S.A.'s (SASA) ratings: -- Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) at 'BB-'; -- Short-Term Local and Foreign Currency IDRs at 'B'; -- Long-term National Rating at 'AA-(bra)'; -- Short-term National Rating at 'F1+(bra)'; -- Long-term National Rating of its debentures due 2019, 2021 and 2022 at 'A+(bra)'. The Rating Outlook on SASA's Long-Term IDRs and National Rating is Negative and mirrors the Negative Outlook of Brazil's sovereign ratings (Long-Term IDR 'BB'/Outlook Negative). KEY RATING DRIVERS The affirmation of SASA's ratings reflects the resilience of its technical results and other credit metrics to the challenging economic environment in Brazil, its strong and stable franchise led by a significant presence in the health and auto segments, adequate liquidity and capitalization, and robust risk management practices. The rating action also takes into account the constraints posed by Brazil's sovereign ratings on SASA's IDRs reflecting the full concentration of its operations in Brazil and its large Brazilian government securities holdings (approximately 1.7 times its total capital at June 2017). SASA's premium and contribution growth slowed down to 6% in 2016 from an average of 12% between 2013-2015, compared with sector growth of 10% and 12%, respectively (both excluding the saving bonds segment). It maintained its ranking as the third and fourth largest insurer in health and auto insurance segments, with market shares of 9.6% and 10%, respectively, at year-end 2016. In the first half of 2017, SASA's growth was 7% on a year-on-year basis, when strong growth in health offset the negative growth in auto. Fitch believes that SASA will maintain its leadership in its key businesses. SASA's performance remained adequate and broadly stable through June 2017, despite the severe recession of 2015 and 2016 and modest economic recovery in the first half of 2017. Return on average assets (ROAA) was 3.3% in 2016 and 1.9% at June 2017, compared to an average of 3.5% in 2015 and 2014. This was a result of both solid technical results (combined ratio was 99% and 101%, respectively, in 2016 and June 2017) and meaningful financial income. The slight deterioration in SASA's technical results in first-half 2017, was due to both seasonal effects and a slight increase in loss ratios. SASA's leverage, measured by the net liabilities/equity ratio, and operating leverage, measured by net earned premiums/equity, is higher than peer averages in Latin America but has fallen slightly since 2014, as a result of slower growth. At June 2017, these stood at 3.1x and 3.2x, respectively, slightly lower than the levels of a year ago, while financial leverage (debt-to-total capital) remained broadly stable at 21% in June 2017. Fitch expects leverage to stabilize at the existing levels, but any continued increase could become a negative rating driver in the future. SASA's liquidity remained adequate at June 2017. Its liquid assets/net technical reserves ratio was 1.17x, up from an average of 1.16x in 2016-2015. In first-half 2017 and 2016, the interest coverage ratio was 5.8x and 9.1x, respectively. The decline is explained by the fall in the operating income that offset the benefit of lower interest rates and inflation. Fitch does not expect the ratio to fall below 3.0x, and views the current levels compatible with SASA's ratings. Exceptional notching for a ring-fenced regulatory environment was applied between the implied insurance operating company ratings and holding company IDRs. Notching was compressed by two relative to standard notching, as sovereign-related risks have so far not materially affected SASA's key credit metrics. RATING SENSITIVITIES In case of an additional downgrade to Brazil's sovereign ratings, SASA's IDRs would be subject to a review that could result in a range of rating actions from affirmation to a two notch downgrade based on Fitch's insurance rating criteria that allows flexibility on how sovereign considerations are factored into insurance rating notching. The ultimate decision would be driven by the rationale for the sovereign rating action and Fitch's view of how this impacts SASA's operating environment, investment risk and overall creditworthiness. In addition, the ratings could be negative affected by: -- A sustained and material deterioration in profitability, characterized by an ROA below 0.5%; -- Deterioration of the liabilities/equity ratio to above 5.0x; -- An increase in the financial leverage to above 25% for a sustained period; -- A fall in the interest coverage ratio to below 3.0x. * S&P Takes Various Actions on Three BR State-Owned Utilities ------------------------------------------------------------- S&P Global Ratings took several rating actions on government- related entities linked to two Brazilian state governments. S&P said, "We also removed the national scale ratings on these entities from UCO, where we had placed them on August 14." S&P said, "We affirmed the 'BB' global and 'brAA-' Brazil national scale ratings on CESP -- Companhia Energetica de Sao Paulo and Companhia de Saneamento Basico do Estado de Sao Paulo (Sabesp) and removed the ratings from CreditWatch negative. These actions followed the same rating action on the state of Sao Paulo. The outlook on these entities is now negative. We also downgraded on the Brazilian national scale Companhia Pernambucana de Saneamento - Compesa to 'brA-' from 'brA'. The outlook on this rating is now stable." The ratings on the Brazilian states usually pose a limitation on the entities they control. S&P said, "We believe states might intervene by redirecting resources to the government and therefore weakening the entities' credit quality, particularly amid challenging fiscal conditions. Therefore, we took the same rating actions on CESP and Sabesp as on the state. The outlooks on these two utilities are now negative, mirroring the one on the state. "The downgrade of Compesa reflects our view of a potential intervention from its controlling shareholder, the state of Pernambuco (not rated), amid current economic woes. The stable outlook on Compesa reflects our belief that the state's economy, although currently weak, won't deteriorate further in the next 12 months." * S&P Takes Various Actions on Three Brazilian State-Owned Banks ---------------------------------------------------------------- S&P Global Ratings lowered its long-term foreign and local currency global scale ratings on BRB - Banco de Brasilia S.A. (BRB) to 'B+' from 'BB-'. S&P said, "At the same time, we removed them from CreditWatch. The outlook on these ratings is stable. We also affirmed and removed from CreditWatch our 'brA-/brA-2' national scale ratings on BRB." S&P said, "Furthermore, we affirmed our 'BB-/B' foreign and local currency global scale ratings on Banco do Estado do Para S.A. (Banpara) and removed them from CreditWatch. In addition, we raised our long-term national scale rating on Banpara to 'brA+' from 'brA'. The outlook on both scale ratings is negative. "We also affirmed our 'B-' foreign and local currency global scale ratings on Banco de Desenvolvimento de Minas Gerais S.A. - BDMG (BDMG). At the same time, we revised the outlook on these ratings to stable from negative. We also raised our national scale ratings on BDMG to 'brB+' from 'brB-'. The outlook on this rating is now stable. "Finally, we removed the under criteria observation (UCO) identifier on the national ratings on all three banks." The rating actions on these government-owned banks reflect our reassessment of the institutional framework under which LRGs operate in Brazil, as well as maintenance of our BICRA of Brazil in group '6' and, consequently, the anchor for banks operating only in Brazil at 'bb+'. The national scale rating actions on banks also reflect the updated mapping table for national scale ratings in the country. S&P said, "We lowered our global scale ratings on BRB due to our revision our evaluation of the Brazilian LRGs' institutional framework, which weakened our view of the creditworthiness of the bank's controller, the Federal District. Our current assessment on the institutional framework reflects an intrinsically rigid intergovernmental system, which has failed to address LRGs' significant budgetary imbalances (see "Brazilian Local And Regional Governments Ratings Affirmed And Off Watch Following Similar Action On The Sovereign," published on Aug. 16, 2017). The Federal District's weaker credit quality also reflects the slow improvement in its fiscal performance, with payroll expenditures still above the limit set by the Fiscal Responsibility Law. Finally, the District's liquidity position remains weak, with free cash covering less than 10% of next 12-month debt service. "We have also reviewed BRB's capitalization due to the update in our risk-adjusted criteria framework (RACF) criteria. The application of the new RACF criteria didn't change the bank's stand-alone credit profile, because we expect its risk-adjusted capital ratio to average 5.4% over the next 18 months. We also applied the new mapping table for Brazilian national scale ratings, which resulted in an affirmation of the 'brA-' national scale rating on the bank, despite the change of its global scale ratings. After fully applying both updated criteria pieces, we removed the UCO identifier on national scale rating on BRB. "The global scale ratings on Banpar† and BDMG, on the other hand, remained unchanged after our revision of the institutional framework to a weaker category. Our 'BB-' ratings on Banpara continue reflecting its narrow range of business lines, adequate capitalization levels, and strong profitability metrics. In turn, the 'B-' ratings on BDMG reflect the eroded fiscal position of the state of Minas Gerais and its difficulties to implement tougher cost-control measures to improve public finances. We also removed the UCO identifier on the national scale ratings on Banpar† and BDMG's after applying Brazil's revised mapping table, which resulted in the upgrades on the national scale." ========================== C A Y M A N I S L A N D S ========================== CHINA MEDICAL: No Damages Award for Deutsches From Fidelity ----------------------------------------------------------- Jon Hill, writing for Bankruptcy Law360, reports that a Financial Industry Regulatory Authority (FINRA) arbitration panel did not fully support William and Peter Deutsch's allegations that Fidelity Brokerage LLC made them lose their chance of taking control of China Medical Technologies Inc. through stock purchases. "Whatever Fidelity did or did not do would not have altered the failure of claimants' investment because the events that doomed the strategy were either external to Fidelity or internal to [China Medical]," the panel said, Law360 cites. Law360 relates that the Deutsches started purchasing China Medical shares in 2011, grew their stake in the company to nearly 12 million shares by mid-2012, and eventually became interested in acquiring a controlling interest in China Medical to be able to make a deal with a strategic buyer and save the company from liquidation. The Deutsches said Fidelity foiled this effort when it stopped accepting China Medical stock purchase orders from them in July in the belief that they were "effectuating a short squeeze in the stock," Law360 points out. The panel did not agree with awarding damages to the Deutsches for Fidelity's alleged misconduct; howeve, it agreed with the Deutsches that Fidelity had botched its responsibilities in that the brokerage failed to communicate effectively with the Deutsches before cutting off their stock purchases, Law360 relays. About China Medical China Medical Technologies Inc., a maker of diagnostic products, filed a Chapter 15 bankruptcy petition in New York to locate money fraudulently transferred by its principals. The Debtor, which has been taken over by a trustee, is undergoing corporate winding-up proceedings before the Grand Court of the Cayman Islands. Kenneth M. Krys, the joint official liquidator, wants U.S. courts to recognize the Cayman proceeding as the "foreign main proceeding". The liquidator filed a Chapter 15 petition for China Medical (Bankr. S.D.N.Y. Case No. 12-13736) on Aug. 31, 2012. Curtis C. Mechling, Esq., at Stroock & Stroock & Lavan, LLP, in New York, serves as counsel. China Medical listed as much as $500 million in assets and debt. Cosimo Borrelli and Yuen Lai Yee (Liz) on Nov. 29, 2012, were appointed as liquidators of China Medical Technologies Inc. The liquidators may be reached at: Cosimo Borrelli Yuen Lai Yee (Liz) Level 17, Tower 1 Admiralty Centre 18 Harcourt Road Hong Kong =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Gives Exporters a Tool for Regional Business ---------------------------------------------------------------- Dominican Today reports that the Dominican Government, through the National Competitiveness Council, provided exporters with a catalog with key information on the main routes, ports, agents and commercial operators between the Dominican Republic and the Caribbean. Competitiveness director Rafael Paz said the catalog "shows the main trade routes between the Dominican Republic and the Caribbean, according to Dominican Today. The compendium covers key information for all companies wishing to export to the Caribbean and constitutes a first contribution of the plan for a better use of the Caribbean market," the report relays. The catalog includes information on the main routes, ports, agents, logistics operators, contact numbers of maritime and air service providers as well as routes frequency, the report notes. The tool was developed as part of the Caribbean Export Promotion Board coordinated by the Presidency's Administrative Ministry, which includes the Export and Investment Center (CEI-RD); the National Exports Bank (Bandex); the National Business Council (Conep), the Industries Association (AIRD); the Dominican Exporters Association (Adoexpo); the Dominican Agribusiness Board (JAD), and the Dominican Port Authority (Apordom), 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. ============= J A M A I C A ============= JAMAICA: JCTU President Says Wage Negotiations Could be Lengthy ---------------------------------------------------------------- RJR News reports that President of the Jamaica Confederation of Trade Unions (JCTU) Helene Davis Whyte said public sector workers might have to wait until next year to get a new wage agreement. According to the JCTU President, the wage negotiations could be lengthy, the report notes. "We have for the last several years been negotiating where we are focusing on what is called interest based bargaining as our approach where it's not just about putting figures on the table, but really looking at the interest of each party and trying to come to some understanding based on that. This is one of the reasons why we are saying that we will not arrive at an agreement but we do know that the offers that we will get initially -- our members will not be happy," the report quoted Ms. Whyte as saying. She, however, said it is hoped that the negotiations will be concluded as quickly as possible, according to RJR News. "Hopefully we can conclude by the end of the year, but as things look right now - that might not be possible," she added. As reported in the Troubled Company Reporter-Latin America on Feb. 9, 2017, Fitch Ratings affirmed Jamaica's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B' with a Stable Outlook. The issue ratings on Jamaica's senior unsecured Foreign and Local Currency bonds are also affirmed at 'B'. The Outlooks on the Long-Term IDRs are Stable. The Country Ceiling is affirmed at 'B' and the Short-Term Foreign Currency and Local Currency IDRs at 'B'. ======= P E R U ======= INKIA ENERGY: Fitch Affirms BB Long-Term IDR; Outlook Stable ------------------------------------------------------------ Fitch Ratings has affirmed Inkia Energy Ltd.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB'. The rating action affects USD450 million of notes outstanding due 2021. The Rating Outlook is Stable. Inkia's ratings are supported by its strong competitive position in the Peruvian electricity generation sector, as well as its broad geographic footprint throughout Latin America. Its Peruvian operations are primarily captured under its subsidiary Cerro del Aguila S.A. ('BBB-' / Stable Outlook), which consists of a 545MW base-load hydroelectric plant, and two thermal generation plants with aggregate installed capacity of 1,063MW. In addition, Inkia's ownership of the Energuate-branded distribution companies Distribuidora de Electricidad del Oriente S.A. (DEORSA) and Distribuidora de Electricidad del Occidente S.A. (DEOCSA) provides Inkia with a broader geographic and business risk profile. Inkia's ratings are constrained by its intense and ongoing expansion strategy, which carries concomitant execution risks, and a weaker capital structure driven by capex. Moreover, its ratings consider a history of aggressive dividend demands from Inkia's parent company. KEY RATING DRIVERS Credit Profile Linked to Peruvian Operations: Inkia's ratings are supported by the solid credit profile of its most important subsidiary, Cerro del Aguila S.A. (CdA). CdA's assets consist of a 545MW base-load hydroelectric plant, and two thermal generation plants with aggregate installed capacity of 1,063MW. Inkia has a 74.9% participation in CdA which is expected to provide approximately half of Inkia's consolidated EBITDA as key power purchase agreements (PPAs) are activated over the next 12 months. CdA pursues a contractual strategy that minimizes exposure to the spot market. Its hydroelectric plant has signed PPAs for 483 MW out of an installed capacity of 545 MW. Of these contracts, 200 MW are currently in effect, and, by the beginning of 2018, nearly 75% of its firm capacity will be under active contracts with high credit quality offtakers. As of 2016, approximately 96% of thermal energy sales were contracted under U.S. dollar-denominated PPAs, with an average life of 5.7 years. These PPAs support the company's cash flow stability through USD-linked payments and pass-through clauses related to potential increases in fuel costs or other costs due to changes in the regulatory framework. The combination of these distinct asset types will serve to offset seasonal volatility in spot prices and increase contractual flexibility, strengthening cashflow stability and improving CdA's already-strong competitive position in Peru. Leverage to Improve: Inkia's stand-alone financial profile has historically been weak for the rating category as the company adopted an aggressive growth strategy. The company's consolidated leverage peaked at 8.5x in 2015 as a result of increasing debt to fund expansion capex. Deleveraging in 2016 was slower than anticipated due to attrition from Peru's regulated system by smaller industrial users who instead negotiated bilateral PPAs directly with local generators. The resulting EBITDA contraction at CdA's thermal plant resulted contributed to Inkia's continued high leverage of 7.4x at YE16. Leverage is expected to decrease to around 5x in 2017 and around 4.5x in the medium term, as the staggered activation of CdA's major contracts initially linked to the completion of the hydroelectric plant will result in rapid EBTIDA growth over the next 18 months. Additionally, in medium term, Fitch expects CdA to see some benefit from increasing spot prices. Positive Reversal in FCF Trend: FCF has been negative in the last four years due to aggressive capex. Total investments for Inkia's two largest power generation projects in Peru accounted for USD1.3 billion. Cerro del Aguila's (CdA) capex was USD959 million (62% debt funded) and USD380 million was invested in Samay I (80% debt funded). Although, the Inkia has indicated its intention to increase investment in its Guatemalan DisCos, and improve their technological and operational efficiency, Fitch expects a material reduction in consolidated capex for 2017, resulting in positive FCF. This should be further supported by the full-year operations of CdA's hydroelectric plant and Inkia's 632MW cold-reserve thermal plant, Samay I, which will receive fixed capacity payments for 20 years. A moderate dividend policy is expected in order to preserve positive FCF and allow for leverage reduction. Debt Structurally Subordinated: Inkia's debt is structurally subordinated to debt at the operating companies. Total debt at the subsidiary level amounted to approximately USD2.1 billion, or 82.4% of total consolidated adjusted debt as of December 2016. The bulk of this debt was represented by bank debt to finance the company's projects and acquisitions. Although, Inkia's HoldCo debt remains structurally subordinated to OpCo debt, the refinancing of nearly USD1 billion of project debt at the subsidiary level with international bonds in 2017 has effectively eliminated onerous cash trapping mechanisms that could negatively impact cash flow predictability to the HoldCo. Inkia's cash flow depends on dividends received from subsidiaries and associated companies, of which it received USD147 million in YE2016. Geographic and Business Diversification: The company is focused on diversify its energy asset base in Latin American markets where overall and per capita energy consumption has a higher potential for growth compared to developed markets. Inkia adopted an aggressive plant expansion strategy during the last four years, while the Energuate acquisition provided further geographic and business diversification in Guatemala and in the electricity distribution sector. Energuate's EBITDA is expected to be USD107 million in 2017. Operations in Peru (rated 'BBB+' /Stable Outlook), which include CdA and Samay, should account for 57% of 2016 consolidated EBITDA, followed by Guatemala with 24% ('BB'). The remaining EBITDA (19%) should arise from assets located mainly in Panama ('BBB' /Stable ), Bolivia ('BB-'/Stable ), Chile ('A' /Stable ), the Dominican Republic ('BB-' /Stable ), El Salvador ('CCC') and Nicaragua ('B+' /Stable ). DERIVATION SUMMARY Locally, Inkia has limited peers, given its overall size and asset diversification. In Peru, Fitch also rates Orazul Energy Egenor S. en C. por A ('BB' / Stable). Orazul is expected to maintain gross leverage of above 5.0x through the rating horizon. Although lacking Inkia's geographical diversification, Orazul benefits from asset mix locally similar to Inkia's subsidiary Cerro del Aguila S.A. ('BBB-' /Stable), with both thermal and hydroelectric generation, albeit on a smaller scale. Inkia presents a generally weaker capital structure relative to its large, multi-asset energy peers in the region. Its nearest peer in this group is the Chilean generator, AES Gener ('BBB-' /Negative Watch), which is also in the midst of a deleveraging period. Prior to an announcement regarding delays and difficulties surrounding the construction of AES Gener's Alto Maipo plant, Fitch forecasts deleveraging from around 5x to below 4x over the next 3 years. This puts the company at the upper limits of its rating category. Following the announcement, Fitch placed AES Gener on Negative Watch. Colbun S.A. ('BBB' /Stable) and Engie Energia Chile S.A. ('BBB'/Stable) compare favorably to Inkia, with leverage consistently at or below 3.0x, comfortably within the investment- grade rating category. KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: - CdA (thermal): Southern Copper PPA fully recognized in 2018, GDP-linked demand growth; - CdA (hydro): ~400MW of contracted capacity beginning in 2018; ~1,00 GWh of spot sales annually; - Samay (cold-reserve): No Southern Gas Pipeline through rating horizon; load factor below 5%, fully passed through; - Capacity payments annually adjusted by PPI; - Peru: average energy spot price of $12/MWh until 2021; - Energuate: demand growth generally in line with GDP forecast (~3.5%); - ~USD460 million dividends over next 5 years; - ~USD440 million in capex over next 5 years. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action - A positive rating action could be considered as a result of leverage reduction below 4x on a sustainable basis and/or consistently conservative cash flow management. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - A negative rating action could be triggered by a combination of the following: Consolidated gross leverage remains above 4.5x over the medium term following additional investment opportunities undertaken without an adequate amount of additional equity; reduction in cash flow generation due to adverse regulatory issues and deterioration of its contractual position; aggressive dividend policy; and/or Inkia's asset portfolio becomes more concentrated in countries with high political and economic risk. LIQUIDITY Inkia's liquidity primarily relies on cash on hand and readily monetizable assets of USD173 million as of YE2016. The company has historically benefitted from access to local capital markets to finance investment projects at the subsidiary level. This year, two of its subsidiaries have replaced nearly USD1 billion in aggregate of syndicated loans with international bonds. In April, Energuate Trust ('BB' / Stable ) issued USD330 million to replace existing debt as well as a bridge loan of USD120 million used to fund Inkia's 2016 acquisition of the Guatemalan DisCos. In early August, CdA replaced the syndicated bank facility used during its hydroelectric plant's construction phase with a USD650 million international bond. Fitch estimates that over 90% of Inkia's consolidate debt is scheduled to mature after 2020, including Inkia's USD450 million bond. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Inkia Energy Ltd -- Long-term Foreign currency IDR at 'BB'; -- Long-Term Local Currency IDR at 'BB'; -- Senior unsecured notes at 'BB'. The Rating Outlook is Stable. ================================ T R I N I D A D & T O B A G O ================================ TRINIDAD & TOBAGO: Will Act on Eden Garden Deal ------------------------------------------------- Trinidad Express reports that Trinidad and Tobago Government is committed to following through on any reports of money laundering that it receives as a result of the Eden Garden investigation and litigation. At a news conference on July 7, Minister in the Office of the Attorney General, Stuart Young, said the Government had commenced a civil suit against several former government officials over the purchase of 50 acres of land at Eden Gardens for $175 million in 2012, according to Trinidad Express. The land had been independently valued by property valuers Linden Scott, who assessed the acreage at $52 million, the report notes. However, a valuer attached to the Commissioner of Valuations valued the 50-acre parcel at $180 million, the report relays. The land was then purchased by the Housing Development Corporation (HDC) for $175 million, giving the impression of a $5 million discount, the report notes. At the news conference in July, Young said the Government's case alleges that a $50,000 payment was made to an individual at the Valuation Division of the Ministry of Finance, the report discloses. The payment is linked to a valuation that was "substantially inflated," the report notes. At last the post-Cabinet news conference, Young was asked if any local commercial bank was in jeopardy as a result of the enquiries into corruption involving the purchase of the large parcel of land at Eden Gardens in Central Trinidad. The report notes that Mr. Young said: "If in our continuing investigations and developments we believe there has been any breach of the law by any financial institution, we certainly will bring it to the attention of the regulator," the report adds. *********** Monday's edition of the TCR-LA delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-LA editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-LA constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-LA editor holds some position in the issuers' public debt and equity securities about which we report. Tuesday's edition of the TCR-LA features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. 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 * * *