/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/170908.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, September 8, 2017, Vol. 18, No. 179 Headlines A R G E N T I N A ADECOAGRO SA: Discloses Proposed Senior Unsec. Notes Offering ADECOAGRO SA: Moody's Rates USD500MM Proposed Notes (P)Ba2 B A H A M A S BAHAMAS: Deficit Rises by $32.9MM B A R B A D O S BARBADOS: Minister Issues Warning to International Businesses B R A Z I L BRAZIL: Police Advance Probe Into Meatpackers, Dairy Firms JSL SA: Fitch Affirms BB Long-Term IDR; Outlook Stable MINERVA SA: Fitch Affirms BB- Long-Term IDR; Outlook Stable MONTICELLO INSURANCE: Moody's Keeps B1 IFS Rating on Vale Upgrade C H I L E MASISA SA: Fitch Affirms B+ IDR; Outlook Remains Negative D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Business Leaders Hail US$416.6M Injection J A M A I C A JAMAICA: Signs Billion Dollar Agreement With IDB SAN MIGUEL: Moody's Rates New USD300MM Senior Unsecured Notes Ba2 - - - - - ================= A R G E N T I N A ================= ADECOAGRO SA: Discloses Proposed Senior Unsec. Notes Offering ------------------------------------------------------------- Adecoagro S.A. disclosed that it intends to offer senior unsecured notes in a private placement to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended, and outside the United States to non U.S. persons in accordance with Regulation S under the Securities Act. The Notes are expected to be guaranteed on a senior unsecured basis by certain of the Company's subsidiaries. The timing of pricing and terms of the Notes are subject to market conditions and other factors. The proceeds from the Notes offering will be used by the Company to repay existing debt and for general corporate purposes. ADECOAGRO SA: Moody's Rates USD500MM Proposed Notes (P)Ba2 ---------------------------------------------------------- Moody's Investors Service has assigned a provisional (P)Ba2 Corporate Family Rating to Adecoagro S.A. At the same time, Moody's assigned a (P)Ba2 rating to the company's USD500 million proposed notes. This is the first time that Moody's has rated Adecoagro. The outlook on the rating is negative, which mirrors the outlook on Brazil's sovereign bond ratings. The provisional designation for ratings will be removed once the notes have been issued and assuming no material changes have occurred to the draft documentation reviewed by Moody's. RATINGS RATIONALE Adecoagro's (P)Ba2 ratings incorporate its relevant positioning in Brazil's sugar-ethanol sector, including relevant economies of scale due to the large size of its plants, high productivity levels, and the ownership of over 90% of its sugarcane, which allow for one of the lowest cost profiles among its peers. The company's strong credit metrics, conservative financial policies, and adequate liquidity profile are also key rating considerations, especially in light of the sugar-ethanol industry's inherent volatility. Adecoagro's experienced management and the diversification into agricultural products in Argentina which partly mitigates weather and other event risks are additional credit positives. In 2016, Adecoagro's sugar-ethanol segment presented a production cost of 0.10 USD/lb, including planting renewal and annual plantation maintenance, which compares to an average 0.14 USD/lb for Brazilian producers. Supporting the company's cost efficiency and profitability levels are (i) the continuous harvest system which allowed for 365 days of crushing in 2016, eliminating the off-season, thus further increasing production and energy generation relative to its fixed costs; (ii) a lower land lease cost by being mainly located in the state of Mato Grosso do Sul (MS), in comparison to most sugar and ethanol installed capacity in Sao Paulo; (iii) high installed cogeneration capacity having generated 742 thousand MWh in 2016, or 67 KWh per ton; and (iv) tax benefits for ethanol sales in the state of MS. In its turn, Argentina, where the company has most of its farming operations, is a competitive global producer of soybeans and corn. In 2015/2016 Argentina was the 3rd largest soybean producer globally and 5th largest corn producer. Seventy percent of the company's crops are produced in the humid Pampas region, with a favorable weather pattern and rich soil that does not require the usage of fertilizers. The ratings are constrained by Adecoagro's raw material concentration in the state of Mato Grosso do Sul, where about 74% of its EBITDA was generated by two sugarcane mills in 2016 (an average participation of 66% in the last three years). Moody's views the organization in production clusters in the sector as an important competitive advantage, since it increases operating efficiencies and enhances cost structure. Nevertheless, the fact that Adecoagro runs just one major cluster and concentrates most of its EBITDA generation in a limited geographic region exposes it to relevant weather and event risks. Partly offsetting this risk is the company's diversification into different crops in Argentina. In 2016 Adecoagro generated USD869 million in sales of which 69% from sugar, ethanol and energy sales; 16% from soybeans, corn, wheat, sunflower and others; 11% from rice; and 4% from the dairy business. This segmental diversity helps to mitigate negative sales and margin impacts stemming from each specific segments. Still, given the relevance of the sugar-ethanol business, the company's credit quality is highly correlated to the performance of such business. Other constraints are its small scale, considering annual revenues of USD973 million last-twelve months (LTM) June 2017, as compared to global peers; and its country risk exposure to Argentina and Brazil. As of June 2017, Adecoagro's cash position of USD296 million covered short-term debt by 1.1x. As well, the company has USD95 million in readily marketable inventories (RMI). Pro-forma for the issuance of its USD500 million notes, Adecoagro will reduce secured debt and improve its debt maturity profile. Moody's expects the company's short-term debt to reduce from the current USD230 million to less than USD75 million and that most of its debt will be unsecured. Leverage was at 2.9x in the LTM ended June 2017 and Moody's estimates it will gradually reduce to a range of 2.7x to 2.5x in the next 12 to 18 months. Rating Outlook The negative outlook of Adecoagro reflects the negative outlook of the Brazilian Government sovereign bond ratings. Despite a relevant export element in Adecoagro's sales and price environment its operations are highly reliant on the local dynamics, as such, the company's rating could be impacted by a downgrade of the sovereign rating. A deterioration of the sovereign rating caused by economic and/or political distress could have a relevant impact in its business via increased risk aversion by banks and creditors, more restricted consumer environment, high inflation, and government policies that directly affect the business. Upgrade Triggers An upgrade would require increased production diversification, sustained free cash flow generation and an improvement in liquidity profile, with a cash balance that consistently covers its short-term obligations. Quantitatively an upgrade would require Debt/EBITDA below 2.0x and EBITA/Interest Expense above 5.0x. Downgrade Triggers The ratings could be downgraded in case of a deterioration in the company's liquidity profile, profitability or credit metrics. Quantitatively, a downgrade could happen if Debt/EBITDA remains above 3.5x or EBITA/Interest Expense remains below 2.0x. Adecoagro is headquartered in Buenos Aires and it generated revenues of USD973 million LTM June 2017. An average of 77% of these sales were generated by the Brazilian operations in the last three years. The company is primarily engaged in agricultural and agro-industrial activities into three segments: (i) sugar-ethanol and energy, mainly in Brazil; (ii) farming, including the production and commercialization of soy, corn, wheat, rice, dairy and others, and (iii) land transformation. In the LTM the company's consolidated EBITDA reached USD299 million with a margin of 30.7%. ============= B A H A M A S ============= BAHAMAS: Deficit Rises by $32.9MM --------------------------------- RJR News reports that the Central Bank of the Bahamas' (CBOB) Monthly Economic Report for July revealed that the country's deficit rose by $32.9 million, an increase of 13 per cent due to a $98.2 million "expansion in total expenditure". The CBOB's figures for the 11 months of fiscal year 2016/2017 reveal that the country's deficit now sits at $285.3 million, after total government expenditure ballooned to $2,104.5 million, according to RJR News. The bank's news got even more grim as it announced that all of government's spending commitments have yet to be paid, the report relays. As reported in the Troubled Company Reporter-Latin America on July 31, 2017, Caribbean360.com reports that Bahamian Prime Minister Dr. Hubert Minnis has disclosed harsh cuts in the Bahamas Government spending as he embarks on a strategy to remedy the country's fiscal deficit, which is projected to reach $500 million this year. =============== B A R B A D O S =============== BARBADOS: Minister Issues Warning to International Businesses ------------------------------------------------------------- Caribbean360.com reports that Dominican Republic Minister of Commerce, International Business and Small Business Development Donville Inniss says he's prepared to give some financial services and international business companies the boot if that's what it takes to protect Barbados' reputation. With the sector facing increasing scrutiny and mounting threats of international sanction, Minister Inniss said it was important to maintain Barbados' good name as a preferred jurisdiction in which to do business, according to Caribbean360.com. His comments came in light of tax reforms from the Organization for Economic Cooperation and Development (OECD), the latest of which is a multilateral convention to prevent base erosion and profit shifting (BEPS), the report notes. BEPS, considered a harmful tax practice, is defined by the OECD as tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations, the report relays. International business and financial services jurisdictions also have to grapple with ring-fencing rules -- where companies financially separate portions of their assets or profits for various reasons without necessarily being operated as a separate entity, the report says. Addressing the recent 'What Businesses need to Know about Base Erosion and Profit Shifting and Double Taxation Treaties' seminar at the Savannah Hotel, Minister Inniss said local authorities were engaging with the OECD forum, in relation to the new tax rules, "almost on a bi-weekly basis looking at templates provided and determine what changes need to be made in Barbados regime regarding the sector," the report relays. "So, I throw a caution out to you that it will not be business as usual," he told industry representatives, including officials of the Barbados International Business Association, the Central Bank and the Financial Services Commission, the report quoted Minister Inniss as saying. The report discloses that stating that Barbados was still addressing issues that were raised before BEPS, Minister Inniss said now is the time for decisive action "in terms of what the new international business and financial services sector will look like". "I caution you that it will not be perhaps what it was ten or 15 years ago," he said, pointing out that Barbados was making efforts to strengthen its regulatory regime while ensuring greater transparency, the report says. "We can't leave any stone unturned when it comes to compliance issues, when it comes to risk analysis and the ability to know your customer. At the end of the day, if we are to remain in the international business and financial services industry, we cannot compromise on a strong regulatory environment. It will create some discomfort to some clients, but at the end of the day we want business of substance that can fly under any radar and do no harm to this jurisdiction, the report quoted Minister Inniss as saying. "So if we have to ask some companies to leave our domicile, we will do so in the most diplomatic manner. If it doesn't work through diplomacy, we kick your butt through the door and ask you to go, but suffice to say, this industry is too critical for us to compromise in this area," warned Minister Inniss, 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 =========== BRAZIL: Police Advance Probe Into Meatpackers, Dairy Firms ---------------------------------------------------------- Channel News Asia reports that Brazilian federal police advanced a probe into alleged inspection bribes involving officials from the Agriculture Ministry, meatpackers and dairy companies in northern and northeastern Brazil. In a statement, police said they were serving 11 arrest warrants, 28 search-and-seizure warrants and bringing in 12 people for questioning as part of the probe, according to Channel News Asia. The statement did not disclose the names of any of the people involved, the report notes. The probe is one in a series of corruption scandals in Brazil, Latin America's largest economy, ensnaring major companies from meatpackers and engineering firms to oil producers, as well as several high ranking politicians, the report relays. Police unveiled the investigation in May, citing meatpacker Minerva SA as one of the companies targeted, the report notes. Calls to media representatives for Minerva went unanswered. As reported in the Troubled Company Reporter-Latin America on Aug. 17, 2017, S&P Global Ratings removed its 'BB' long-term foreign and local currency sovereign credit ratings on the Federative Republic of Brazil from CreditWatch, where it had placed them with negative implications on May 22, 2017. S&P said, "At the same time, we affirmed the 'BB' long-term ratings, and the outlook is negative. We also affirmed our 'B' short-term foreign and local currency ratings on Brazil. The transfer and convertibility assessment is unchanged at 'BBB-'. In addition, we removed the 'brAA-' national scale rating from CreditWatch with negative implications and affirmed the rating with a negative outlook. This incorporates the revision of the mapping table for Brazil national scale ratings, published Aug. 14, 2017." JSL SA: Fitch Affirms BB Long-Term IDR; Outlook Stable ------------------------------------------------------ Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of JSL S.A. (JSL) at 'BB' and National scale ratings at 'AA-(bra)'. The Rating Outlook is Stable. JSL's ratings reflect its strong business profile, supported by a leading position in the Brazilian logistics industry and diversified and resilient portfolio of products. The company's cash flow generation has been improving despite the recession in Brazil. Fitch's base case scenario projects that JSL's leverage ratio, as measured by FFO adjusted leverage, will remain around 2.5x in the next two years. Fitch expects JSL to pursue managed growth for Movida Participacoes S.A (Movida - National scale rating A+(bra)/Stable Outlook)and does not incorporate material dividends from this subsidiary in its projections. KEY RATING DRIVERS Prominent Market Position and Diversified Portfolio JSL has a leading position in the Brazilian logistics industry with a diversified portfolio of services with relevant presence in multiple sectors of the economy. The company's main services include: supply chain management (32% of its gross revenue), car rental and fleet management (32%), outsourcing of fleet and equipment (13%), dealerships (12%), passenger transportation (6%) and general cargo transportation (4%). JSL's strong market position, coupled with long-term contracts for most of its revenues, minimizes its exposure to more volatile economic cycles. The company's significant operating scale has made it an important purchaser of light vehicles and trucks, giving it a significant amount of bargaining power versus other competitors in the industry. Solid Operating Cash Flow Generation JSL has been efficiently managing its business growth and profitability during the recession period in Brazil. The integration of its business and cross-selling opportunities has supported growth and gains in scale. Between 2015 and the latest 12-month period (LTM) ended June 30, 2017, JSL's net revenue increased by 18%, to BRL7.1 billion. During the same period, the company's EBITDA remained almost stable at BRL1.1 billion while its FFO rose to BRL2.2 billion from BRL1.4 billion. Excluding Movida, Fitch calculates that EBITDA was almost stable at around BRL800 million while FFO grew to BRL825 million from BRL587 million. More Rational Capex Growth to Ease Pressure on FCF On a consolidated basis, BRL2.8 billion of gross capital expenditures led to negative FCF of BRL171 million during the LTM ended June 30, 2017. FCF is expected to remain negative in the range of BRL200 million to BRL300 million in the next two years. JSL has the flexibility to improve FCF by reducing growth capex, as most of its capital investments are geared toward increasing the size of its fleet/equipment and are linked to specific contracts. Considering only renewal capex, JSL's operating cash flow generation is sufficient to support these investments. Excluding growth capex, JSL generated BRL1.2 billion of positive FCF during LTM June 30, 2017. Excluding Movida, gross capex was BRL638 million and FCF was positive at BRL109 million. Moderate Leverage JSL's leverage, as measured by FFO adjusted leverage, was 2.4x as of LTM June 30, 2017. This FFO ratio is considered low for the rating category. Fitch does not expect a material reduction in the near term with leverage expected to be around 2.6x in 2017, declining to 2.2x by 2018, following deleverage trend at Movida. Fitch's calculation of EBITDA does not add-back the non-cash cost of the vehicles sold. As a result, leverage as measured by EBITDA is higher than leverage measured by FFO. In Fitch's base case, JSL's net debt-to-EBITDA ratio will remain around 4.0x to 4.5x in the next two years. DERIVATION SUMMARY Given the nature of its business, Fitch believes JSL has an above- average ability versus its 'BB' rated peers to post FCF generation, given its flexibility to postpone capital expenditures related to new vehicles (growth capex). The company's relatively higher leverage and weaker financial flexibility are key differentiators to Localiza Rent a Car S.A (LT FC IDR BB+; LT LC IDR BBB; National LT rating AAA(bra)). KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: -- Mid-single-digit revenue growth in 2017; -- FFO margins at around 32%; -- Net capex at around BRL750 million in the next two years; -- Cash balance remains sound compared to short-term debt; -- Dividends at 25% net income; -- No large-scale M&A activity. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action: -- FFO Adjusted Leverage around 2.0x on a sustained basis; -- Solid and consistent operating results from its retail rent a car business (Movida), with FFO margin above 27%. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action: -- FFO adjusted leverage consistently above 3.0x; -- Deterioration of sound liquidity compared to short-term debt, leading to refinancing risk exposure; -- Deterioration in used car sales in Brazil and/or in the coverage ratio fleet value-to-net debt to below 1.0x; -- Large debt-funded M&A acquisition or entering into a new business in the logistics sector that adversely impacts JSL's capital structure on a sustained basis or increases its business risk exposure; -- Secured debt relative to FFO above 2.0x could lead to a downgrade of the unsecured debt. LIQUIDITY Improved Liquidity: JSL's adequate liquidity position vis-a-vis its short-term debt obligations is a key credit consideration, with cash covering short-term debt by an average 1x during the last five years. JSL has a recurring need for debt refinancing, since its debt amortization schedule had been historically concentrated in the next three years. During the first eight months of 2017, JSL has issued over BRL3.5 billion in a series of debt instruments, including the recent BRL1.019 billion of cross- border bond issuance (USD325 million) due to 2024 and Movida's BRL400 million of local debentures due to 2022. On a pro forma and consolidated basis, including recent debt issuances, JSL had BRL3.3 billion of cash and BRL1.8 billion of short-term debt as of June 30, 2017. Excluding Movida's cash and short-term debt, JSL's cash-to-liquidity position is adequate with BRL2.3 billion of cash and BRL1.1 billion of short-term debt. JSL has BRL2.8 billion of debt coming due up until year-end 2018 (BRL1.7 billion, when excluding Movida). As of June 30, 2017, JSL reported total debt of BRL7.2 billion. The company's debt profile is mainly composed of banking credit lines (33%), local debentures and CRA issuances (36%), FINAME operations (18%), and leasing operations (6%). Currently, about 22% of JSL's debt is secured. Fitch has affirmed the following ratings: JSL S.A. -- Long-Term Foreign Currency IDR at 'BB'; -- Long-Term Local Currency IDR at 'BB'; -- National Long-Term Rating at 'AA-(bra)'; -- Local debentures issuance at 'AA-(bra)'. The Rating Outlook is Stable. JSL Europe -- USD325 million senior unsecured notes due to 2024 at 'BB'. MINERVA SA: Fitch Affirms BB- Long-Term IDR; Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Minerva S.A.'s Long-Term Foreign and Local Issuer Default Ratings at 'BB-'. The Rating Outlook remains Stable. Minerva's ratings reflect the improving fundamentals for beef in Brazil due to a better cattle cycle, the company's good profitability, its strong position in the export market, comfortable liquidity and Fitch's expectations of an improvement in the company's credit profile over as sustained period. Minerva's rating is tempered by the volatility of free cash flow and its rapid expansion. KEY RATING DRIVERS Acquisition of JBS Mercosul: Fitch views the deal as positive to Minerva's business profile. The daily slaughtering capacity increase to 26,380 (+52%) will consolidate the company's operating base in South America while diversifying operations outside Brazil. The acquired plants are certified to exports to markets including the U.S., China and Japan. Fitch views the acquisition as complementary with minimal integration risk given the company's track record of satisfactory integration. Brazilian operations will account for 45% of the Minerva's total capacity, while 21% will be located in Paraguay, 19% in Argentina, 12% in Uruguay, and 3% in Colombia. The assets acquired will contribute fully to operating cash flow in 2018. Delayed Deleveraging: Fitch expects that the recent acquisition of JBS S.A.'s Mercosul assets will slow down Minerva's deleveraging process as Fitch initially anticipated. Minerva has been growing very fast over the last four years. Fitch estimate EBITDA contribution from the acquired plants to be approximately BRL60 million-BRL70 million in 2017. Annual EBITDA should improve to BRL280 million-BRL330 million by 2020 from increased revenues and higher margins. Fitch expects Minerva's net debt/EBITDA ratio at around 4.3x in 2017, including only five months of the acquired plants, and for it to gradually decline towards 3.5x by 2018, compared to 3.6x in 2016 and 4.2x in the second quarter of 2017 (2Q17). Management is targeting a net debt/EBITDA of about 3x for the company. Product and Region Concentration Risks: Minerva operates solely in the beef business in South America countries and is therefore less diversified from a product standpoint than Brazilian-based protein companies JBS S.A. and Marfrig S.A. Minerva has limited product diversification as it operates mostly in the commodity meat with no presence in branded packaged food products. Although increased participation of live cattle, cattle by products and distribution of third party products in consolidated sales (22% of sales as of the latest 12 months [LTM] 2Q17), these revenues are still dictated by the same risks of the meat commodity industry. Among the significant industry risks are a downturn in the economy of a given export market, the imposition of increased tariffs or sanitary barriers, and strikes or other events that may affect the availability of ports and transportation. Free Cash Flow (FCF) Negative: Fitch expects Minerva's FCF after interest and dividends to remain negative in 2017 due to increased capex, working capital need as a result of the recent acquisition and increased capacity utilization of its plants due to increased demand. Fitch expects FCF to normalize in 2018 due to less capex and working capital requirements. Stable Margins: Minerva's sales and earnings are subject to periodic volatility caused by changes in input costs and protein prices due to supply and demand dynamics of commodity meat. The company registers the highest EBITDA margin in the beef sector with EBITDA margin above 10% over the last two years. Fitch expects EBITDA margin to remain in the range 9.5%-10% over the next years. The expected margin contraction is the result of the ramp-up of the recent acquisition and the re-opening of a new plant in Brazil. Fitch expects a gradual improvement of EBITDA margin in 2018 due to increased synergies, good cattle cycle and improved domestic demand. Favorable Operating Outlook: Global beef fundamentals are expected to remain positive in the next couple years for Brazilian producers due to steady global demand, limited global beef supply, ample livestock supply in Brazil and the continued depreciated Brazilian currency relative to the U.S. dollar. Minerva's export revenues, including the "Other Division", represented 60% of total revenues in the LTM ended June 30, 2017. The domestic market is expected to slowly rebound as purchasing power of Brazilian consumers gently improves and the uncertainty about political risk clears up. DERIVATION SUMMARY Minerva is well positioned to compete in the global protein industry under its South America operations. Compared to Marfirg Global Food S.A. (BB-/Stable) and JBS S.A. (BB/Rating Watch Negative), Minerva is smaller and less diversified from a product and geographic stand point as the company is mainly a beef processor in South America. The three companies operate with similar capital structure and liquidity position. Its competitive advantages include its location in a favorable cattle grow environment, large cattle scale, operating efficiency in line with industry average, relationship with farmers, customers and distributors. Minerva's rating is tempered by the volatility of free cash flow due to its rapid expansion. KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: -- Acquisitions of JBS Mercosul plants in Argentina, Uruguay and Paraguay of USD300 million; -- Organic Revenues growing by mid-single digits in 2017 and 4% in the medium term due to slightly higher volume, stable domestic and international prices and incremental revenue of recent acquisition of BRL1.3 billion in 2017 growing to BRL3.5 billion by 2020; -- EBITDA margin in the range of 9.5%-10% over the next two years; -- Capex to sales of about 2.5% to 2.6% in the medium term; -- Dividends payment/shares buybacks of BRL160 million in 2017. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Improved product mix; -- Sustainable positive FCF generation and; -- Substantial decreases in gross and net leverage to below 4.5x and 3.0x, respectively, on a sustained basis. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action -- Sharp contraction of Minerva's performance; -- Increased net leverage above 4.0x-4.5x on a sustained basis; -- A pronounced and sustained liquidity deterioration. LIQUIDITY Adequate Liquidity: Fitch considers Minerva's liquidity position adequate. As of June 30, 2017, cash and cash equivalent totaled BRL4.4 billion, which is sufficient to amortize debt through 2025 and cover ongoing working capital requirements. On the same date, total debt was BRL8.5 billion of which 29% was short-term debt and 78% was denominated in foreign currency, mainly U.S. dollars. Minerva's cash policy is to hold enough cash to cover three months of cattle purchase with a minimum of BRL2.5 billion to run business considering political uncertainties in Brazil. FULL LIST OF RATING ACTIONS Fitch affirms the following ratings: Minerva S.A.: -- Long-Term Foreign and Local Currency IDR at 'BB-'; Outlook Stable; -- National Long-Term Rating at 'A(bra)'; Outlook Stable. Minerva Luxembourg S.A.: -- Senior unsecured notes due 2023, 2026 and perpetual at 'BB-'. MONTICELLO INSURANCE: Moody's Keeps B1 IFS Rating on Vale Upgrade ----------------------------------------------------------------- Moody's Investors Service (MIS) says that the B1 insurance financial strength (IFS) rating, with a stable outlook of Monticello Insurance Limited, the captive reinsurance subsidiary of Brazil based Vale S.A. (senior unsecured debt at Ba1, stable outlook), is not affected by the upgrade of Vale's ratings. RATINGS RATIONALE Moody's said that MIL's B1 rating with a stable outlook was unaffected, despite the upgrade of Vale's ratings, primarily because of the weak sovereign credit profile and operating environment of Barbados (Caa3, stable outlook), where MIL is domiciled, which mitigate upward rating pressure for MIL. According to Moody's, the likelihood of a credit event in Barbados in the near-term is very high, given lack of fiscal adjustment and limited financing options. Also, the low level of foreign exchange reserves in addition to weak funding conditions make the country increasingly susceptible to event risks (see press release titled "Moody's downgraded Barbados' government bond and issuer ratings to Caa3 and maintained a stable outlook." dated March 9, 2017). Consequently, Monticello's rating is still appropriately positioned at its current level, without any impact by the upgrade on Vale's ratings. Moody's noted that MIL's B1 rating is based primarily on the support provided by Vale and on Monticello's integration with the global risk management function of the group. MIL is a core part of Vale's risk-management program and is the sole insurance captive utilized in Vale's property insurance and business interruption program worldwide. Explicit support from Vale to MIL, which has been provided through capital injections -- totaling US$240 million over the past three years --and ongoing financial support to cover losses is a key driver of MIL's credit rating, absent which MIL's rating would be lower. The rating agency expects that MIL will continue to receive extensive parental support from Vale, including the parent company's willingness to backstop MIL's obligations to its fronting insurance carriers, and to provide additional capital to MIL in the event that it has insufficient funds to meet its obligations under the reinsurance assumed. MIL's rating is primarily constrained by the weak sovereign credit profile and operating environment of Barbados as well as by its product risk concentration and significant risk exposures which has resulted in earnings volatility, as the company has reported net losses in 2015. Moody's mentioned that MIL's rating could be upgraded in the case of a further upgrade of Vale's rating or stronger explicit support from Vale to MIL, in the form of an unconditional, irrevocable guarantee, and if Barbados' sovereign rating is upgraded. Conversely, MIL's rating could be downgraded if: 1) Vale's rating is downgraded; 2) support from the group to the captive company is reduced; 3) the captive reinsurer begins to cover risks of external (i.e. non-Vale) entities or engages in non-reinsurance business; or 4) Barbados' sovereign rating is downgraded. Monticello Insurance Limited is based in Barbados. As of December 31, 2016, its total assets amounted to US$348 million and its shareholders' equity was US$155 million. The company's total annual gross premium for 2016 totaled US$34.7 million, and the company recorded a net income of US$3.9 million in 2016. The principal methodology used in these ratings was Global Reinsurers published in April 2016. ========= C H I L E ========= MASISA SA: Fitch Affirms B+ IDR; Outlook Remains Negative --------------------------------------------------------- Fitch Ratings has affirmed the Foreign and Local Currency Issuer Default Ratings (IDRs) of Masisa S.A. (Masisa) at 'B+' and its National long-term rating at 'BBB(cl)'. The Rating Outlook remains Negative. Masisa's ratings reflect the company's still weak cash flow generation and high leverage, pressured by declining demand for wood boards in Latin America and weak currencies in several markets. The Negative Outlook continues to reflect concerns about economic weakness in Latin America and Fitch's expectation that the company will continue to struggle in this market during 2017 and 2018. It also reflects concern about a decline in the company's size and presence in the global board market if the company follows through with the sale of industrial units in Brazil and Mexico. A Stable Outlook is possible with additional assets sales if the company's leverage is reduced significantly and if Fitch determines the cash flow from the remaining markets to be relatively predictable and stable. KEY RATING DRIVERS Still Weak Operational Cash Flow: Fitch expects Masisa to generate about USD115 million of recurring EBITDA and USD40 million of cash flow from operations (CFFO) in 2018. Fitch's base case projections consider the sale of industrial assets only in Argentina during 2017 and includes about USD12 million of EBITDA from Venezuela. This is a decline from USD122 million of EBITDA and USD47 million of CFFO during the latest 12 months (LTM) ended June 30, 2017, and compare unfavourably versus USD157 million of EBITDA in 2015. Masisa's results remain pressured by declining demand for wood boards in Latin America and weak currencies in several markets. Lower investments and dividends contributed to free cash flow (FCF) of USD11 million in the LTM ended June 2017, compared with negative USD14 million and USD120 million in 2016 and 2015, respectively. The company invested USD36 million in the LTM June 2017, after investing USD364 million between 2013 and 2015. Sharp EBITDA Reduction from Asset Sales: The sale of industrial units in Argentina, Brazil and Mexico should lower annual recurring EBITDA generation by about USD50 million. If the asset sales are concluded as announced, Fitch projects EBITDA of USD74 million in 2018, compared with USD122 million in the LTM ended June 30, 2017. Chile is Masisa's main market and accounted for about 39% of the company's net revenues in the LTM ended June 2017, while Mexico, Brazil and Argentina accounted for about 47%, Venezuela for 12%, and Argentina forestry business for about 2%. Brazil's EBITDA contribution significantly deteriorated in the last three years, pressured by the adverse economic conditions. Recurring EBITDA from Mexico was expected to gradually increase following the startup of the new MDF plant in June 2016. Less Diversified Business Profile: Masisa's strategy to sell its industrial units in Argentina, Mexico and Brazil will weaken the company's geographic diversification, making it more susceptible to downturns in one market. Masisa signed an agreement to sell the industrial business unit of Masisa Argentina to EGGER Holzwerkstoffe GmbH (EGGER, Austria) for USD155 million in July 2017. The transaction includes the sale of about 280,000 m3 of MDF's annual production capacity, 165,000 m3 of particleboard, 274,000 m3 of melamine, and 74,000 m3 of MDF mouldings. The company also announced in July 2017 its intention to sell its industrial assets in Mexico and Brazil. Masisa believes it could generate more than USD350 million from these sales. If successful, the sale of assets will reduce Masisa's annual production capacity of PB, MDP, and MDF board to 1.3 million cubic meters, from 3.5 million cubic meters before the sale of assets. High Leverage: Leverage remained high due to weak results from Brazil and sluggish economic growth throughout the region, while the company's debt levels remain elevated. Cash flow from Mexico has been slow to materialize following the completion of the board mill during 2016. Net leverage was 5.3x in LTM ended June 2017, or 6.0x excluding Venezuela. Masisa's net debt was USD649 million at the end of June 2017. This compares with USD667 million in December 2016 and USD707 million in December 2015. The sale of industrial assets in Argentina, Brazil and Mexico would lower Masisa's net leverage to more conservative levels of 2x, or 2.5x excluding Venezuela, and considers that proceeds will be used to reduce the company's indebtedness. Considering only the sale of Argentina's industrial units, the loss of EBITDA generation is partially offset by debt reduction with the proceeds from the asset sale, and lower interest expenses. In Fitch's base case projections, excluding only Argentina, net leverage would reduce to about 4.0x in 2018, or 4.5x excluding Venezuela. Significant Presence in Venezuela: Masisa is exposed to exchange controls in its Venezuelan operations, although its operations are self-sufficient in the country. Restrictions imposed by the Venezuelan Central Bank have limited the U.S. dollar supply in that country, which constrains the repatriation of available cash. Venezuela represented about 9% of total recurring EBITDA in the LTM ended June 2017. DERIVATION SUMMARY Masisa is the second largest player in terms of production capacity of boards in Latin America. The company's main competitors are the Brazilian Duratex (not rated), the leader in the segment in Latin America, and the Chilean Celulosa Arauco y Constitucion S.A. (Arauco, 'BBB'/Negative). Arauco is also the second-largest market pulp company in the world. Among the Latin America forestry products companies, like Arauco, Empresas CMPC ('BBB'/Stable), Fibria ('BBB-'/Stable), Suzano ('BB+'/Positive), and Klabin ('BB+'/Stable), Masisa is more exposed to the economic weakness in Latin America as its activities are concentrated in boards, has higher leverage and a more limited liquidity position. KEY ASSUMPTIONS Fitch's key assumptions within Fitch ratings case for the issuer include: -- Sale of industrial assets in Argentina for USD155 million in 2017. Proceeds will be used to amortize debt. -- Fitch did not consider the potential sale of industrial assets in Mexico and Brazil. -- Additional asset sale of USD20 million in 2017. -- No dividends. -- Investments around USD40 million per year. KEY RECOVERY RATING ASSUMPTIONS -- The recovery analysis assumes that Masisa would be considered a going-concern in bankruptcy and that the company would be reorganized rather than liquidated. -- Fitch has assumed a 10% administrative claim. Going-Concern Approach: -- Masisa's going-concern EBITDA is based on LTM June 2017 EBITDA and includes pro forma adjustments for the sale of industrial assets in Argentina. -- The going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch base the valuation of the company. The going-concern EBITDA is 18% below LTM EBITDA to reflect the sale of assets and declining demand for wood boards in Latin America. -- An EV multiple of 6x is used to calculate a post- reorganization valuation and reflects a mid-cycle multiple. The estimate considered that Masisa is not considered to have any unique characteristic that would allow for a higher multiple, such as significant market share, unique brand, or undervalued assets. The waterfall results in a 69% recovery corresponding to 'RR3' recovery. However, Masisa's recovery rating is capped at 'RR4' due to Fitch's methodology than imposes a cap for Chile. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action -- The conclusion of the divestitures of Argentina, Brazil and Mexico, significantly improving capital structure and reducing net debt/recurring EBITDA, excluding Venezuela, to below 5.0x, would likely result in a revision of the Rating Outlook to Stable. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action -- Net debt/recurring EBITDA ratio, excluding Venezuela, above 7.0x. LIQUIDITY Masisa's liquidity position is manageable for operational purposes with USD89 million of cash and equivalents, of which only USD1 million was held in Venezuela as of June 30, 2017, compared with USD64 million as of Dec. 31, 2016. Masisa made a non-recurring sale of non-core assets for USD62 million in 2016 and USD5 million during the first half 2017, which benefited the company's liquidity. In February 2017, Masisa disbursed a USD65 million long-term loan in a Club Deal up to USD100 million due in five years. Proceeds will be used to extend debt maturity profile, reducing refinancing risk in the short term. As of June 30, 2017, Masisa had USD141 million of debt maturing in the short term and USD281 million from July 2018 to June 2019, including the USD200 million senior notes due in the first half 2019. Masisa plans to use the proceeds from the sale of its industrial unit in Argentina, of USD155 million, to reduce debt. Potential sale in Mexico and Brazil should also contribute for debt amortization and a more conservative capital structure. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Masisa S.A. -- Long-Term Foreign and Local Currency IDRs at 'B+'; -- National scale rating of Bond Lines at 'BBB(cl)'; -- Long-term National Scale rating at 'BBB(cl)'; -- USD200 million senior unsecured 9.5% notes due 2019 at 'B+/RR4'; the notes are unconditionally guaranteed by Forestal Tornagaleones and Masisa Forestal; -- National Short-term rating at 'N2(cl)'. -- National Equity rating at 'First Class Level 3(cl)'. The Rating Outlook remains Negative. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Business Leaders Hail US$416.6M Injection ------------------------------------------------------------- Dominican Today reports that north region business leaders stressed the impact of the government's announced RD$20 billion injection to the economy, as well as the release of more than RD$22 billion (US$416.6 million) from the legal reserve. Santiago Retailers and Industrialists Association former president Sandy Filpo and other Santiago and Espaillat province business leaders agreed that this injection is important, because in their view, will spur economic activities, according to Dominican Today. Administrative minister Jose Ramon Peralta announced the government's initiative, which according to business leaders, will benefit national producers and retail in general, the report relays. In a statement, Mr. Filpo said that in addition to boosting the cash flow and making productive entities more dynamic, the injection of the more than RD$43.0 billion will have a positive impact on the agro sector and all key economic activities, the report notes. "When retail is boosted, it has a positive impact on all productive sectors of the nation," he added. Timely Mr. Filpo called the government measure is timely, "because it occurs when there's been a reduction of the cash flow, which will change as more capacity is produced in demand for goods and services," 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: Signs Billion Dollar Agreement With IDB ------------------------------------------------ RJR News reports that Jamaica is to receive $2.5 billion under an agreement signed with the Inter-American Development Bank, (IDB). The loan was signed through the Credit Enhancement Fund which will provide funds to Micro Small and Medium Entrepreneurs (MSMEs) through the Development Bank of Jamaica, according to RJR News. Finance Minister Audley Shaw reiterated that the Government is committed to providing access to financing to MSMEs, the report notes. Mr. Shaw said micro entrepreneurs are a significant sector that commercial banks have often overlooked, the report relays. The Credit Enhancement Fund will provide a partial guarantee for each MSME loan not exceeding 385 thousand US dollars, the report notes. Individual loan requests in areas such as agriculture, construction, energy, manufacturing, tourism, trade and distribution as well as other activities not included in the IDB's Exclusion List will be eligible for partial guarantees, the report discloses. 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'. SAN MIGUEL: Moody's Rates New USD300MM Senior Unsecured Notes Ba2 ------------------------------------------------------------------ Moody's Investors Service has assigned a Ba2 rating to San Miguel Industrias PET S.A. new USD300 million senior unsecured notes due 2024. The outlook on the rating is stable. The company's CFR and the ratings on its outstanding USD200 million notes remain unchanged. Ratings are: Issuer: San Miguel Industrias PET S.A. ("SMI") - LT Corporate Family Rating: Ba2 - USD200 million Senior Unsecured notes due 2020: Ba2 - USD300 million Senior Unsecured notes due 2024: Ba2 Outlook: Stable RATINGS RATIONALE The USD300 million issuance proceeds will be directed mostly to refinance existing debt, including the tender offer for SMI's 7.75% senior notes due 2020 announced on August 29. Accordingly, if the issuance is successfully completed, there will be no reduction in leverage, but the lengthening of SMI's debt amortization schedule will enhance its credit and financial profile, as it improves the company's liquidity and potentially reduces interest expenses. In the scope of the tender offer, the holders who tender prior to September 11, 2017 will be eligible to receive USD1,046.53 per USD1,000 of principal amount of SMI 2020 Notes, while holders who tender after September 11, 2017 and prior to September 26, 2017, will receive USD1,016.53 per USD1,000 of principal amount of SMI's 2020 Notes. While the transaction will not lead to leverage reduction, Moody's expects that SMI's leverage will decrease, despite the deterioration observed at the end of 2016. Although still below the 5.8x observed in 2013, total adjusted debt to EBITDA increased to 5.0 times in fiscal year 2016, from 4.2 times in fiscal year 2015, due to the additional debt raised to fund investments related to new long term contracts such as the agreement extension with a regional client in Peru and Ecuador, the purchased injection and compression assets in Peru, Colombia, Ecuador, Central America and Mexico, the acquisition of a new blowing molds in Peru and Colombia and a thermoforming line in Peru and a recycling PET machinery in Colombia. All of these, which were mostly funded with debt, will allow the company to absorb a potential incremental volume growth coming from the before mentioned signed contracts, contributing on about USD14 million of additional EBITDA which the company expects to reach to USD90 million in the next 12-18 months. Moody's expects leverage will materially decline as debt should remain stable and the EBITDA of the new contracts will be fully incorporated in 2017 and 2018, reaching levels below 4.0x (total adjusted debt to EBITDA) over the next 18 months SMI's Ba2 rating reflects its leading position in the Andean Region, Central America & Caribbean rigid plastic market and its track record of being able to pass through volatility in raw material costs to its customers, avoiding material impacts on operating margins. The ratings consider SMI's advantageous position from its intensive use of modern technology and the existence of long term contract agreements (90% of total sales) with its main clients. Also incorporated in the ratings is its ownership by one of the largest business conglomerates in Peru, Intercorp Peru Ltd. (Ba2 stable), which amongst others, owns one of the largest banks in Peru, Interbank (Baa2 stable). On the other hand, the rating is mainly constrained by the company's reduced size and scale when compared to global industry peers. As well, the rating is limited by SMI's tight liquidity profile with a cash position of USD 24 million as of December 2016 despite the adequate debt amortization profile after the potential issuance of the new USD300 million bond, with very low short term debt. The stable outlook is supported by SMI's improving credit metrics overall, specially its operating margins and the adjusted leverage ratio that was reduced back in December 2015. The ratings could experience upward pressure if the company were to increase its size and scale while sustaining its operating margins, its market position and improving its financial profile in addition to regular publication of quarterly audited financial statements. Moody's cautions that a rating downgrade could be triggered if the company's credit metrics deteriorate materially whether due to operating difficulties or deterioration in its market leading position. Specifically, a downgrade could result if adjusted leverage is above 4.5 times (5.0x as of December, 2016) and EBIT/Interest expense ratio below 3 times (1.8x for December 31, 2016) for an extended period. Headquartered in Lima, Peru, SMI is a Peruvian manufacturer and distributor of rigid plastics, offering a full rigid packaging product portfolio with special focus on PET preforms and bottles utilized in food & beverage and consumer markets. With operations in Peru, Ecuador, Panama, El Salvador and Colombia, and more recently in Mexico, Honduras, Guatemala, Nicaragua and Costa Rica among other countries in Central America and the Caribbean, the Company has six product lines and 13 facilities strategically located in seven countries in Latin America, which include two recycling PET resin plants, one in Peru and other in Colombia. For fiscal year ended December 31, 2016 SMI reported total revenues of approximately USD245 million. Since August 2013, SMI is part of Intercorp Peru Ltd, one of the largest and most diversified conglomerates in Peru with operations in the Financial Services Industry, Retail, Education, Real Estate, Restaurants, among others. The principal methodology used in this rating was Packaging Manufacturers: Metal, Glass, and Plastic Containers published in September 2015. *********** 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 * * *