/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/171019.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, October 19, 2017, Vol. 18, No. 208 Headlines A R G E N T I N A BANCO FRANCES: Fitch Raises Local Currency IDR to 'B+' BANCO MACRO: Fitch Affirms 'B' IDR, Outlook Stable BANCO SANTANDER RIO: Fitch Hikes IDR to B+; Outlook Stable TARJETA NARANJA: Fitch Affirms 'B' Long-Term IDRs; Outlook Stable B R A Z I L BRAZIL: Economic Activity Declines 0.38% in August CPFL ENERGIAS: Moody's Withdraws Ba3 Corporate Family Rating OCTANTE SECURITIZADORA: Moody's Rates Agribusiness Certs (P)Ba1 PETROLEO BRASILEIRO: Moody's Hikes Corporate Family Rating to Ba3 D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Taxman to Meet Goal Collecting US$8BB in 2017 P U E R T O R I C O PR WIRELESS: Moody's Lowers CFR to Caa2; Outlook Negative T R I N I D A D & T O B A G O TRINIDAD & TOBAGO: Foreign Reserves Decline AS BRYDEN: Forex Problems Limiting Imports V E N E Z U E L A VENEZUELA: Bonds Fall After Contested Regional Election Result - - - - - ================= A R G E N T I N A ================= BANCO FRANCES: Fitch Raises Local Currency IDR to 'B+' ------------------------------------------------------- Fitch Ratings has upgraded BBVA Banco Frances, S.A.'s Local Currency Long-term Issuer Default Rating (IDR) to 'B+' from 'B' and its Support Rating to '4' from '5'. The Rating Outlook is Stable. Fitch has also affirmed the bank's standalone Viability Rating (VR) at 'b'. The upgrades are based on Fitch's opinion that BBVA Frances' shareholder support has improved. KEY RATING DRIVERS IDRS AND SUPPORT The likelihood of parent support drives the bank's Local Currency IDR. In light of an improved economic and regulatory policy framework and decreased risk of government intervention in private banks' operations, Fitch views the parent's commitment to its subsidiary as having improved and as likely to remain in place given the parent's track record of ordinary support, its investments in the bank's competitive position and the subsidiary's strategic importance to the group. Notwithstanding BBVA's strong financial profile (A-/Stable), BBVA Frances's rating uplift from support is limited to one notch above Argentina's Local Currency Long Term IDR given downside risks of high economic stress, the country's tentative policy reforms and still normalizing relations with creditors. VR The bank's funding and liquidity profile underpin its VR of 'b'. BBVA Frances has a long track record of a stable base of term deposits and savings accounts, which represented 68.4% of total funding at June 2017. BBVA Frances also has access to wholesale funding, primarily market debt issuances and lines from local and international banks. BBVA Frances' liquidity is strong for its rating category, with a Liquidity Coverage Ratio (LCR) of 389% at June 2017. Fitch also considers the bank's risk appetite and other financial metrics, which are in line with its current VR, even when taking into account inflation. Notwithstanding improved financing access, higher monetary policy credibility and lower regulatory risks, the still weak operating environment remains the principal constraint on BBVA Frances's VR. In Fitch's view, progress in correcting macroeconomic imbalances, easing of inflation, lower financing constraints and a return to growth will take time to materialize. Positively, the bank's VR also considers the bank's strong franchise and more than 130-year presence in the local market. As of June 2017, BBVA Frances was the country's third largest private bank with a market share of 6.1% by assets. In July 2017, the bank concluded a capital increase of USD 400 million through an issuance of new ordinary shares through local and international offerings. Regulatory capital subsequently increased to 17.3%. Fitch estimates an increase in Fitch core capital to approximately 16%. The bank plans to use the proceeds from the capital raise to finance organic growth. Fitch expects capital cushion to remain ample over the medium term. Over the longer term Fitch expects BBVA Frances capital levels to revert to adequate historical levels, as measured under local and Spanish standards. Notwithstanding its large retail and middle market corporate portfolios, BBVA Frances has maintained strong asset quality indicators relative to its peers, though inflation blurs international comparisons. At June 2017, it reported an impaired loan ratio of 0.9% compared to a system average of 1.9%. Reserve coverage is also consistently high (not declining below 220% since 2012) according to its internal policy of exceeding regulatory requirements. The bank's profitability at mid-year 2017 softened moderately due to continuing margin compression and elevated operating expenses. Administrative expenses were 37% higher than June 2016, an increase slightly below the rate of inflation for the period. However, administrative expenses may moderate in response to lower inflation and the bank's efficiency strategy. RATING SENSITIVITIES IDRS, SUPPORT and VR The bank's IDR and SR are sensitive to a change in Fitch's views on BBVA's ability and propensity to provide support. The bank's IDR and VR would also likely move in line with a change in Argentina's sovereign rating. In addition, the bank's IDR and SR could be negatively affected by changes in the political scene that result in a return to unorthodox policies resulting in political and regulatory intervention in the banking system. On the contrary, these ratings could benefit from a medium term consolidation of a more market friendly political framework. Absent a change in the sovereign rating, the bank's VR could be negatively affected by a deterioration in its liquidity position or loss absorption capacity. Fitch considers it unlikely that Argentine banks' VRs could be rated above the sovereign. BANCO MACRO: Fitch Affirms 'B' IDR, Outlook Stable -------------------------------------------------- Fitch Ratings has affirmed Banco Macro S.A.'s Foreign and Local Currency Long-term Issuer Default Ratings (IDR) at 'B' and its Viability Rating (VR) at 'b'. The Rating Outlook is Stable. KEY RATING DRIVERS IDRS, VR AND SENIOR DEBT Despite recent improvements in Argentina's economic policy framework and improved access to international capital markets, the operating environment remains an important driver and constraint of Macros' VR and IDRs. In Fitch's view, a reduction in regulatory risk, a correction of macroeconomic imbalances and economic recovery, will take time to materialize. Macro's ratings also reflect the bank's higher risk appetite and growth strategy relative to peers, its ample capital cushion, as well as its diverse funding and ample liquidity. Macro focuses primarily on low- and middle-income individuals and small- and medium-sized companies, ranking fourth among private sector banks with a market share of 6% of the banking system by assets at June 2017. As of June 2017, Macro had the largest private-sector branch network with 449 branches, 1,425 ATMs, and 916 self-service terminals. Its strategy of acquiring regional banks over the last 20 years has given Macro a widespread geographic presence throughout the country. Macro's ample capitalization is supported by strong internal capital generation, earnings retention and a significant reduction in risk weighted assets since 2015. At June 2017, Fitch Core Capital increased to 22.14% of risk weighted assets from 17.2% at year-end 2016 thanks to a public offering of ordinary shares and American Depository Shares in the United States for a total of USD85.1 million to fund organic and inorganic growth. While the bank does not have a fixed capital target, over the longer term it estimates a decline in regulatory capital in line with year-end 2016. Macro has a diverse funding profile, reliant on a stable retail deposit base, complemented by demonstrated access to capital markets. As of June 2017, customer deposits accounted for 74.8% of total funding. Macro's financial agency services to provincial governments benefits its mobilization of public sector institutional deposits. In addition, the bank's payroll services to 2.3 million retail clients are a source of stable, low-cost funding. Macro has a relatively higher risk appetite than its closest peers due to its middle market, retail focus and growth strategy. Nevertheless, it demonstrates sound risk control. Non-performing loans (NPLs) have remained below 2% of gross loans since 2010, in line with the private sector peers. Like the banking system, Macro's loan quality has been supported by high credit growth, which in turn has been facilitated by elevated inflation (40.7% during 2016). Macro's nominal profitability compares favourably with the banking system average. At June 2017, Macro reported ROA of 5.1% compared to a system average of 3.2%. Its performance benefits from its diversified revenue base, an improving operating efficiency trend and relatively moderate provision expense despite its orientation to riskier consumer loans. SENIOR UNSECURED DEBT Ratings on Macro's senior unsecured issuance are in line with the bank's long term Local Currency IDR as the notes will rank pari passu with all other existing and future senior unsecured debt. The Recovery Rating of 'RR4' assigned to Macro's senior debt issuance reflects the average expected recovery in case of bank liquidation. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating of '5' and the Support Rating Floor of 'NF' reflect that, although possible, external support for Macro cannot be relied upon given the sovereign's track record. SUBORDINATED DEBT The 'B-/RR6' rating of Macro's subordinated debt reflect the low expected recoveries for these bonds in case of bank liquidation. However, these are notched only once due to ratings compression arising from the low VR of the issuer. These securities are plain- vanilla subordinated liabilities, without any deferral feature on coupons and/or principal. RATING SENSITIVITIES IDRS, VR AND SENIOR DEBT Macro's IDRs, VR and senior debt ratings would likely move in line with a change in Argentina's sovereign rating. In addition, Macro's ratings could be affected in the event of a material deterioration in its financial profile. Fitch considers it unlikely that Argentine banks could be rated above the sovereign, making any upside potential in Macro's ratings contingent on positive developments in the sovereign rating. Macro's senior debt ratings are sensitive to a change in Macro's local currency IDR. BANCO SANTANDER RIO: Fitch Hikes IDR to B+; Outlook Stable ---------------------------------------------------------- Fitch Ratings has upgraded Banco Santander Rio S.A.'s (Santander Rio) local currency (LC) long-term Issuer Default Rating (IDR) to 'B+' from 'B' and Support Rating to '4' from '5'. The Rating Outlook is Stable. Fitch has also affirmed the bank's Viability Rating (VR) at 'b'. Fitch has upgraded Santander Rio's local currency IDR and support rating as its view on shareholder support has improved. KEY RATING DRIVERS IDR and Support Rating The likelihood of parent support drives the bank's Local Currency IDR. In Fitch's view, in light of an improved economic and regulatory policy framework and decreased risk of government intervention in private banks' operations, the probability of parent support has improved and is likely to remain in place given the strategic role of this subsidiary. Notwithstanding Banco Santander, S.A.'s (SAN, A-/Stable) strong financial profile, Santander Rio's rating uplift from support is limited to one notch above Argentina's Local Currency Long Term IDR given downside risks of high economic stress, the country's tentative policy reforms and still normalizing relations with creditors. VR The low sovereign ratings of Argentina and the still volatile economic and operating environment constrain Santander's VR. Fitch also weighs the bank's risk appetite and financial metrics, which are in line with its current VR, even when considering the impact of inflation on the bank's performance, in its analysis. The bank's capital adequacy metrics have historically stood at adequate levels, albeit lower than those of its closest peers, in line with its parent's capital allocation strategy for its subsidiaries. At June 30, 2017, however, the bank's Fitch core capital to risk weighted assets ratio declined to 10.3% (from 12.4% as of Dec. 31, 2016) as a consequence of the acquisition of the consumer banking operations from Citibank Argentina. To compensate for this, the bank has issued USD160 million in 10 years subordinated debt that qualifies as regulatory Tier II capital (USD100 of which in July 2017) subscribed by other units of Santander. Fitch estimates that the bank's capitalization will gradually return to levels closer to its historic average, helped by its strong earnings generation capacity and the higher regulatory capital requirements in line with Basel III standards. Santander Rio's main funding source is core customer deposits and its liquidity levels are ample and benefit from strong deposit growth and lower demand of long term credit. Santander Rio's loan to deposits ratio is one of the strongest among the largest Argentine banks due to its retail-oriented focus and has historically been below 85% (80.1% at June 30, 2017) and its liquidity coverage ratio (LCR) was 240%. Fitch estimates that its liquidity will remain adequate but gradually decrease as the bank follows its strategy of strong loan growth. Santander Rio's VR also considers its strong and growing franchise as the largest private sector bank in the country by loans and deposits, with market shares of 9.8% and 9.5%, respectively, as of April 30, 2017, and the ample experience of its main shareholder. Santander Rio's profitability is adequate although, like the rest of the financial system, has been under some pressure affected by slower loan growth. Additionally, high inflation distorts international comparison of these ratios. Net fees and commissions income is a key strength of Santander Rio's, covering roughly 50% of non-interest expenses. Santander Rio's delinquency ratios have deteriorated since 2015 given the adverse economic conditions and, in 2017, a change in the charge-offs policy from 180 to 360 days. However, its non- performing loans (NPLs) remain at adequate levels, though inflation blurs international comparisons. Conservative lending policies, good risk management, strong loan growth and inflation underpin the bank's asset quality ratios. At June 30, 2017, NPLs represented 2.27% of total loans and were covered by loan reserves 1.1x. RATING SENSITIVITIES IDR, Support AND VR The bank's IDR is sensitive to a change in Fitch's views on Santander's ability and propensity to provide support. Santander Rio's IDR and VR would likely move in line with any change of Argentina's sovereign rating. In addition, the bank's IDR and SR could be negatively affected by changes in the political scene that result in a return to unorthodox policies resulting in political and regulatory intervention in the banking system. On the contrary, these ratings could benefit from a medium term consolidation of a more market friendly political framework. Santander Rio's VR could be affected if the difficult operating environment drives material deterioration in its liquidity position or loss absorption capacity. Fitch has taken the following ratings actions on Santander Rio: -- Local Currency Long-Term IDR upgraded to 'B+' from 'B'; Outlook Stable; -- Viability rating affirmed at 'b'; -- Support Rating upgraded to '4' from '5'. TARJETA NARANJA: Fitch Affirms 'B' Long-Term IDRs; Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Tarjeta Naranja, S.A.'s (TN) Foreign and Local Currency Long-term Issuer Default Ratings (IDR) at 'B'. The Rating Outlook is Stable. KEY RATING DRIVERS IDRS AND SENIOR DEBT Despite recent improvements in Argentina's economic policy framework and improved access to international capital markets, the operating environment remains an important driver of TN's VR and IDRs. In Fitch's view, a reduction in regulatory risk due to a correction of macroeconomic imbalances and economic recovery will take time to materialize. TN's ratings also factor in the relatively higher risk appetite associated with its business model as a non-bank financial institution, its limited range of products and restricted range of funding sources relative to banks. TN is the flagship subsidiary of Tarjetas Regionales, the largest credit card issuer in Argentina and one of the top credit card issuers in the region with 9.5 million active cards at mid-year 2017. In August 2017, Tarjetas Regionales announced the upcoming merger of TN and its affiliate, Tarjetas Cuyanas S.A. (TC), pending regulatory approval. The merger would increase TN's balance sheet by approximately 23%. TN's short-term funding is adequate to its business model, but represents a relative weakness. Payables to merchants (for an average tenor of 45 days) represented 54.5% of liabilities at June 2017, while local and international issues represent a further 36.6%. Liquidity relies on the predictable churn of loan assets (with an approximate duration of four months). TN manages its liquidity by maintaining liquid assets equivalent to three months of debt service as well as maintaining access to contingency liquidity facilities with commercial banks. Fitch views TN's capital position as adequate given its operating environment and business model. Capitalization has benefitted from reduced asset growth, strong internal capital generation and moderate dividend payments averaging 24.3% over the last three years. As of June 2017, the ratio of tangible common equity to tangible assets improved to 20% from 17.2% at year-end 2016. In Fitch's view, the effect of the merger with TC would only be modestly negative for capital, with a combined tangible common equity of 18.8% of tangible assets, not considering potential cost savings on retained earnings. TN's strong profitability, driven by ample margins and fee income, has resulted in double-digit operating return on average assets since 2015. As of April 2017, the regulatory maximum on merchant fees will decline gradually from 3% to 1.8% over four years. Such fees represented approximately 14% of TN's operating income at June 2017. Therefore, the fee reduction is expected to place moderate pressure on TN's operating profitability over the medium term, though this will continue to be a credit strength even when considering the normalization of inflation. TN's loan quality indicators deteriorated moderately at mid-year 2017, primarily due to a decreasing rate of loan growth. Loans past due more than 90 days rose to 5.4% of gross loans compared to 4.3% at year-end 2016. TC reports moderately higher loan impairments in keeping with its focus on a higher risk clientele. On a pro forma basis, the two company's combined loans past due more than 90 days were 6.3% of gross loans at mid-year 2017 with combined reserve coverage of 132.4%. SENIOR UNSECURED DEBT Ratings on TN's senior, unsecured debt issuance are in line with the company's long term IDR as the notes will rank pari passu with all other existing and future senior unsecured debt. The Recovery Rating of 'RR4' assigned to TN's senior debt issuance reflects the average expected recovery in case of bank liquidation. RATING SENSITIVITIES IDRS AND SENIOR DEBT TN's ratings could be affected in the event of a material deterioration in liquidity, asset quality, earnings, and/or loss absorption capacity. Upside potential in TN's ratings is contingent on improvement in Argentina's operating environment. TN's senior debt ratings are sensitive to a change in TN's Foreign Currency Long-Term IDR. Fitch has affirmed the following ratings: Tarjeta Naranja S.A. -- Foreign Currency Long-Term IDR at 'B'; Outlook Stable; -- Foreign Currency Short-Term IDR at 'B'; -- Local Currency Long-Term IDR at 'B'; Outlook Stable; -- Local Currency Short-Term IDR at 'B'; -- Senior unsecured debt at 'B/RR4'. =========== B R A Z I L =========== BRAZIL: Economic Activity Declines 0.38% in August -------------------------------------------------- EFE News reports that Brazil's economic activity contracted by 0.38 percent in August, compared to the previous month, the Central Bank said. August was the third month in which economic activity fell in the South American country this year, according to EFE News. 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. At the same time, S&P affirmed the 'BB' long-term ratings, and the outlook is negative. S&P also affirmed its 'B' short-term foreign and local currency ratings on Brazil. The transfer and convertibility assessment is unchanged at 'BBB-'. In addition, S&P 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. CPFL ENERGIAS: Moody's Withdraws Ba3 Corporate Family Rating ------------------------------------------------------------ Moody's America Latina Ltda., has withdrawn the Ba3/A2.br Corporate Family Ratings (CFR) of CPFL Energias Renovaveis S.A. ('CPFL ER') Outlook Actions: Issuer: CPFL Energias Renovaveis S.A. -- Outlook, Changed To Rating Withdrawn From Stable Withdrawals: Issuer: CPFL Energias Renovaveis S.A. -- Corporate Family Rating, Withdrawn , previously rated Ba3 on the global scale and A2.br on Brazilian national scale. RATING RATIONALE Moody's recently assigned Corporate Family Ratings at the level of CPFL ER's controlling parent company CPFL Energia S.A., which already incorporates the credit quality of CPFL ER. CPFL Renovaveis is a holding company with subsidiary interests in wind farm, small hydro power plants and biomass projects. The company features a total installed capacity of 2.1 GW through 45 wind projects (accounting for 62% of total capacity), 39 small hydropower plants (20%), 8 biomass plants (18%) and one solar project. The company is also analyzing a pipeline of greenfield wind small hydro power and solar projects which could add approximately 3 GW in installed capacity in future years. CPFL Renovaveis is own by CPFL Energia (Ba1/Aaa.br) which holds 52% of its voting and total capital, and ultimately controlled by State Grid Brazil, a subsidiary of State Grid Corporation of China ("State Grid" A1 Stable). OCTANTE SECURITIZADORA: Moody's Rates Agribusiness Certs (P)Ba1 --------------------------------------------------------------- Moody's America Latina has assigned provisional ratings of (P) Ba1 (sf) (global scale, local currency) and (P) Aaa.br (sf) (national scale) to the first series of the 15th issuance of agribusiness certificates (certificados de recebiveis do agronegocio, or Senior CRA) to be issued by Octante Securitizadora S.A. (Octante, not rated). The CRA will be backed by agricultural production financial notes (cedulas de produto rural financeira, or CPR Financeiras) and agribusiness receivables certificates (certificados de direitos creditorios do agronegocio, or CDCAs) issued by agricultural producers and distributers, respectively. The transaction will be sponsored by Adama Brasil S.A. (Adama Brasil, not rated). The receivables backing the securities will benefit from a credit insurance policy provided by AIG Insurance Company of Canada (AIG Canada, NR). In turn, the credit insurance policy will be supported by a reinsurance agreement provided by AIG Europe Limited (AIG Europe, A2). Issuer: Octante Securitizadora S.A. First series, 15th issuance -- (P) Ba1 (sf) (global scale, local currency) / (P) Aaa.br (sf) (national scale) The provisional ratings address the structure and characteristics of the transaction based on the information provided to Moody's as of October 17, 2017. Certain issues relating to this transaction have yet to be finalized. Upon conclusive review of all documents and legal information as well as any subsequent changes in information, Moody's will endeavor to assign definitive ratings to this transaction. If any assumptions or factors considered by Moody's in assigning the ratings change, Moody's could change the ratings assigned to the Senior CRA. RATINGS RATIONALE The transaction is a 3-year revolving securitization program to provide financing to agricultural producers and distributors of agricultural inputs to acquire: (i) defensives and other products sold by Adama Brasil, and (ii) other agricultural inputs sold by preapproved suppliers. The transaction will be backed by either (i) CPR Financeiras, which are notes issued by the agricultural producers, as obligors, which are payment obligations or (ii) CDCAs, or certificates issued by the distributors, as obligors, which in turn will be backed by promissory notes. The provisional ratings on the Senior CRA are based on the following factors, including: - The underlying receivables will benefit from a credit insurance policy provided by AIG Canada, that will cover credit losses in excess of the initial 15% subordination. In addition, AIG Canada will assign to Octante and the fiduciary agent its rights under a reinsurance agreement to be provided by AIG Europe, covering all payment obligations of AIG Canada under the insurance policy. This assignment will provide Octante with direct access to AIG Europe in relation to the payment of claims under the insurance policy as if AIG Europe was named in the policy as insurer. The ratings of the Senior CRA are primarily linked to AIG Europe's ability and willingness to make payments under the reinsurance policy, with a maximum indemnification amount equal to the outstanding principal and interest of the Senior CRA, subject to estimated limit of BRL 110.2 million for the first year insurance policy. - Credit enhancement of 15% for the benefit of the Senior CRA (first series) provided through (i) the Mezzanine CRA representing 10% of the issuance amount and (ii) the Subordinated CRA representing 5% of the total issuance amount The transaction will have an overcollateralization trigger which will prevent the acquisition of new receivables if the Senior CRA represents more than 85% of the underlying assets. Adama Brasil, as the sole Mezanine CRA Investor, has the ability to subscribe additional CRA to maintain the minimum overcollateralization level. - The legal final maturity of the CRA will occur in December 2021, and it provides sufficient time to receive any payments on the insurance claims. Indemnification payments from the insurance company can occur up to 6 months after the defaulted credits maturity date and, this term could increase by 5 additional months, if the payment is related to unfulfilled obligations of Adama Brasil. - The formalization of the underlying agribusiness receivables will be verified by Luchesi Advogados, who will provide a legal opinion on each individual receivable addressing its existence, validity, and effectiveness. This feature reduces the risk related to incomplete formalization of the assets that could lead to a challenge by the insurance provider. Despite of Luchesi Advogados's roles, Adama Brasil, as administrative agent, will be the ultimately responsible for the appropriate formalization of the underlying CPR Financeiras and CDCAs (except for third party fraudulent acts) and for other operational obligations under the insurance policy. - Adama Brasil will be responsible for servicing the underlying receivables. In addition, Adama Brasil will remain responsible for providing monitoring reports to the insurance company about the performance of the underlying obligors. The transaction will benefit from a put option against Adama Brasil if it fails to deliver the monitoring reports. In case the administrative agent is unable to perform its monitoring obligations, the documents allow for a third party to be contracted as a backup administrative agent. However, the credit insurance policy will also cover to the default of Adama Brasil regarding the put option and other payment obligations of the company related to the operational agreement. - Interest rate mismatch risk. The receivables will be purchased at a fixed discount rate and the CRA will be indexed to the CDI rate (interbank deposit rate). This risk will be mitigated through interest rate options negotiated at B3 S.A. - Brasil, Bolsa, Balcao (B3 S.A.) (rated Ba1). The interest rate options will cover the period from the acquisition date until the receivables' maturity date. The senior CRA are subject to a residual interest rate risk during the 11 months period of the insurance indemnification payment (which includes the extension period related to the put option against Adama Brasil), if an increase in the CDI rate causes the claim to exceed the maximum indemnification amount. Moody's considers this residual risk consistent with the ratings assigned to the Senior CRA. - Reserve fund for CRA expenses. At closing, an expense fund will be funded from issuance proceeds with sufficient funds to cover all the initial and expected transaction expenses plus a BRL 100,000 excess for extraordinary expenses, which may be increased up to the equivalent of 15% of the total issuance in case of underlying assets' defaults. - Segregated assets. The CRA benefits from a fiduciary regime (regime fiduciario) whereby the assets backing the CRA will be segregated. These segregated assets are destined only for payments on the CRA and payment of certain fees and expenses, and will be segregated from all other assets on the issuer's balance sheet. However, the transaction is subject to residual legal risk because Octante's agribusiness credits can be affected by the securitization company's tax, labor and pension creditors. (For more information, see the "Fiduciary Regime and Segregation of Assets" ("Regime Fiduciario e Patrimìnio Separado") section in the pre-sale report.) The senior CRA accrue, on a daily basis, a floating interest rate equivalent to a percentage of the DI rate, to be determined before the transaction closing. There will be no scheduled payments to the CRA. During the revolving period, the securitization company will be able to use collection proceeds to provide additional financing to the obligors that paid the receivables up to the due date. In such scenarios, the excess between the acquisition price of new receivables and collection proceeds, if available, will be applied to amortize the CRA on a pro rata basis. Any amounts received from: (i) collections not reinvested on additional finance to obligors (ii) recoveries from delinquent receivables, (iii) insurance claim settlements, (iv) exercise of the receivables' put option against Adama Brasil or (v) investments in additional Mezzanine and/or Subordinate CRA will be applied to amortize the Senior CRA on a cash basis. Moody's ratings consider the ultimate payment of interest and principal to the senior CRA until the legal final maturity established in December 2021. The (P) Ba1 (sf) (global scale, local currency) and (P) Aaa.br (sf) (national scale) ratings assigned to the Senior CRA are based mainly on AIG Europe' ability and willingness to honor its obligations to indemnify credit losses under the reinsurance agreement assigned by AIG Canada to Octante and the fiduciary agent. Any change in AIG Europe' ratings during the life of the transaction could lead to a change in the ratings of the Senior CRA. The ratings also take into residual legal risks related to the securitization company, and the ratings of B3 S.A. as the counterparty of the interest rate options. Octante was incorporated in 2010. It is headquartered in Sao Paulo and focuses on structuring CRA transactions with large sponsors within the agribusiness industry. Since beginning operations, Octante has issued 30 securitizations (with 16 transactions outstanding). In 2017 alone, Octante has issued BRL 351.5 million in agribusiness certificates. Factors that would lead to an upgrade or downgrade of the ratings: Any changes in the ratings of AIG Europe or B3 S.A. could lead to a change in the ratings on the Senior CRA. The principal methodology used in these ratings was "Moody's Approach to Rating Trade Receivables-Backed Transaction" published in May 2015. PETROLEO BRASILEIRO: Moody's Hikes Corporate Family Rating to Ba3 ----------------------------------------------------------------- Moody's Investors Service upgraded all ratings of Petroleo Brasileiro S.A. and ratings based on Petrobras' guarantee, including the company's senior unsecured debt and corporate family rating (CFR), to Ba3 from B1. The upgrade reflects Petrobras' material liquidity improvement, declining debt leverage, solid management discipline and strengthened corporate governance. Simultaneously, Moody's raised the company's baseline credit assessment (BCA) to b1 from b2 and changed the outlook to stable from positive. Upgrades: Issuer: Petrobras Global Finance B.V. -- Senior Unsecured Shelf, Upgraded to (P)Ba3 from (P)B1 -- Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 from B1 Issuer: Petrobras International Finance Company -- Subordinate Shelf, Upgraded to (P)B1 from (P)B2 -- Senior Unsecured Shelf, Upgraded to (P)Ba3 from (P)B1 -- Senior Secured Shelf, Upgraded to (P)Ba2 from (P)Ba3 -- Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 from B1 Issuer: Petroleo Brasileiro S.A. - PETROBRAS -- Corporate Family Rating, Upgraded to Ba3 from B1 -- Subordinate Shelf, Upgraded to (P)B1 from (P)B2 -- Senior Unsecured Shelf, Upgraded to (P)Ba3 from (P)B1 -- Senior Secured Shelf, Upgraded to (P)Ba3 from (P)B1 -- Pref Shelf, Upgraded to (P)B3 from (P)Caa1 Outlook Actions: Issuer: Petrobras Global Finance B.V. -- Outlook, Changed To Stable From Positive Issuer: Petrobras International Finance Company -- Outlook, Changed To Stable From Positive Issuer: Petroleo Brasileiro S.A. - PETROBRAS -- Outlook, Changed To Stable From Positive RATINGS RATIONALE The actions on Petrobras' ratings and BCA reflect the company's better credit metrics and material liquidity improvement, specifically related to a more comfortable debt maturity profile, derived from ongoing debt refinancing and solid cash generation. So far in 2017, Petrobras tapped the capital markets for USD19.2 billion in bonds, mostly global, proceeds from which were used to refinance debt maturities. The company also reduced debt by USD10 billion from June 2016 to June 2017, with proceeds from asset sales and cash generation, while keeping a robust amount of cash on hands of USD24.5 billion in June 2017. In addition, cash flow has become more predictable as a result of relatively stable crude oil prices, a clear domestic fuel price policy since late 2016, declining operating costs and disciplined capital investment that has supported increasing production and better Exploration and Production margins. Furthermore, "Petrobras is on track to reach by year end 2018 its own leverage target of 2.5x net debt debt/EBITDA, which Moody's estimates will be below 3 times at year end 2017", said Nymia Almeida, a VP-Sr. Credit Officer at Moody's. Asset sales, proceeds from which help reduce debt, has slowed in 2017 as a result of the federal audit office (TCU)'s review process. However, asset sales are less relevant now for Petrobras' liquidity position than 12 months ago given the company's smoother debt maturity profile, higher cash flow visibility, and robust and stable amount of cash on hands. There is still uncertainty around the SEC and DoJ bribery investigations and the resulting consequences for the company. However, the probability that Petrobras is fined an amount that will significantly and negatively affect its liquidity position has declined. Since Lava Jato's investigations started in early 2014, the company improved its corporate governance and managed to settle with 21 out of 27 individual investors on legal disputes related to corruption and bribery investigations. Moreover, solid operating result in the last couple of years, despite low oil prices, increases cash flow visibility in the medium term, which reduces the risk that the company's credit profile will be significantly negatively affected by fines. Petrobras' b1 BCA and Ba3 ratings are supported by the company's dominance in the Brazilian oil industry and its importance to the Brazilian economy. Furthermore, the ratings reflect the company's sizeable reserves at 9,592 Mboe as of December 31, 2016 (equivalent to over 10 years of life), its renown high technological offshore expertise and potential for continued growth in production over the long-term. However, Petrobras' ratings are constrained by high debt levels, business plan execution risk and, to a lesser extent, potential negative impact from fines related to Lava Jato. Petrobras' Ba3 ratings also consider Moody's joint-default analysis for the company as a government-related issuer. Petrobras' ratings reflect the assumption for moderate support and dependence from the Government of Brazil (Ba2 negative) based on Petrobras' demonstrated ability to lower its liquidity risk and thus reduce the potential need of support, as well as the government's resilient tight fiscal position. The stable outlook on Petrobras' ratings incorporates Moody's view that the company's credit profile will continue to improve gradually, which however is counterbalanced by the negative outlook on the government of Brazil's Ba2 rating. Positive rating actions could occur if Petrobras raises sufficient sums through asset sales to further reduce debt while also improving operating and cash flow performance. Accordingly, for a rating upgrade to occur, Petrobras' leverage as adjusted by Moody's should move sustainably below 3.5 times. In addition, because Petrobras is a sovereign owned enterprise, an upgrade of its ratings would consider Moody's expectations for the credit profile of Brazil's government. Negative actions on Petrobras' rating could result from a deterioration in operating performance or external factors that increase liquidity risk or debt leverage from current levels. Downgrades could also be prompted if negative developments from the litigations against Petrobras appear to have the potential to significantly affect the company's liquidity or financial profile. The methodologies used in these ratings were Global Integrated Oil & Gas Industry published in October 2016, and Government-Related Issuers published in August 2017. Petrobras is an integrated energy company, with total assets of USD244 billion as of June 30, 2017. Petrobras dominates Brazil's oil and natural gas production, as well as downstream refining and marketing. The company also holds a significant stake in petrochemicals and a position in sugar-based ethanol production and distribution. The Brazilian government directly and indirectly owns about 46% of Petrobras' outstanding capital stock and 60.5% of its voting shares. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Taxman to Meet Goal Collecting US$8BB in 2017 ----------------------------------------------------------------- Dominican Today reports that internal Taxes director Magin Diaz affirmed that for the first time in nine years, the agency will meet the goal of collecting the RD$384.0 billion (US$8.0 billion) which the 2018 Budget stipulates. He said as a result, that collection goal has jumped RD$43.0 billion, to RD$427.0 billion by 2018, according to Dominican Today. The official said this year's collection level reflects a growth of the tax pressure of 0.6%, "a target that the international organisms had established that the DGII would obtain in four years," the report notes. The report relays that Mr. Diaz added that revenue has grown 12% in October, "which is twice the growth of the economy," attributed to the administrative measures. 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. ====================== P U E R T O R I C O ====================== PR WIRELESS: Moody's Lowers CFR to Caa2; Outlook Negative --------------------------------------------------------- Moody's Investors Service has downgraded PR Wireless, Inc.'s corporate family rating (CFR) and senior secured rating to Caa2 from Caa1. This rating action reflects the effects from Hurricane Maria on Puerto Rico and PR Wireless' operations and concludes the review initiated on March 9, 2017. The outlook on the ratings is negative. Downgrades: Issuer: PR Wireless, Inc. -- Probability of Default Rating, Downgraded to Caa2-PD from Caa1-PD -- Corporate Family Rating, Downgraded to Caa2 from Caa1 -- Senior Secured Bank Credit Facility, Downgraded to Caa2 from Caa1 Outlook Actions: Issuer: PR Wireless, Inc. -- Outlook, Changed To Negative From Rating Under Review RATINGS RATIONALE The downgrade reflects the effects from Hurricane Maria, which caused material damages to wireless infrastructure in Puerto Rico, as well to the island's electric power network. This resulted in extended damages to PR Wireless's assets and prolonged revenue disruption. PR Wireless generates 100% of its revenues in Puerto Rico and has limited liquidity resources to cover for hurricane- related costs: its cash balance amounted to USD10 million at the end of June and it had access to a revolving credit facility of USD10 million. Moody's expects that the material effects from the hurricane will therefore put pressure on its liquidity profile. While Moody's expects the company to receive some advances from its insurers and the US Federal Communications Commission (FCC), this may not be sufficient to fully alleviate liquidity concerns. The negative outlook reflects the uncertainty regarding the exact extent of the costs related to the hurricane and length of the business interruption, which will depend to a large extent on the recovery of electric power to restore proper telecommunications equipment functioning. The negative outlook also considers the risk over the longer term for a reduction of the company's customer base. Puerto Rico's population has been declining for several years and an acceleration of this decline due to the hurricane would reduce telecom revenues. Considering current liquidity pressures and extended damages to PR Wireless's network, positive rating pressure is unlikely in the near term. Positive rating pressure could result from an improvement in the company's liquidity profile and from the establishment of a joint venture with Sprint Corporation (B2 stable) which would combine PR Wireless' operations with Sprint's business in Puerto Rico and the US Virgin Islands. Under the joint venture, which was announced in Q1 2017 and recently approved by the FCC, PR Wireless lenders would benefit from Sprint's larger scale and stronger credit profile, a more robust operation with the combined networks and subscriber bases of both companies in the region, as well as operating synergies and enhanced collateral from contributed assets. Further negative rating pressure could arise from additional liquidity challenges or the company entering in any distressed exchange through, for example, the renegotiation of its debt amortization schedule with lenders. PR Wireless is the fourth-largest wireless service provider in Puerto Rico with 3G and 4G networks. PR Wireless began operations in June 2007 after the bankruptcy and reorganization of its predecessor entity, MoviStar, Inc. During the last twelve months ended June 2017, the company generated revenues of $133 million. The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017 ================================ T R I N I D A D & T O B A G O ================================ TRINIDAD & TOBAGO: Foreign Reserves Decline ------------------------------------------- RJR News reports that Trinidad and Tobago's foreign reserves declined to US$8.5 billion at the end of September, comprising less than ten months of import cover. According to the Central Bank's data center, at that figure, the country's foreign reserves are at their lowest level since May 2008, the report notes. Between September 2016 and September 2017, T&T's foreign reserves declined by 15 per cent or by US$1.5 billion from US$10 billion, according to RJR News. AS BRYDEN: Forex Problems Limiting Imports ------------------------------------------ Trinidad Express reports that popular yogurt brand Dannon has been missing from supermarket shelves. That's because local distributor AS Bryden's Trinidad Ltd no longer finds it feasible to import the international product due to challenges to access foreign exchange, according to Trinidad Express. The company discontinued importing the foreign brand last year, head of Bryden's Food and Grocery Division Stephen Welch told Express Business, the report notes. ================= V E N E Z U E L A ================= VENEZUELA: Bonds Fall After Contested Regional Election Result -------------------------------------------------------------- Daniel Cancel and Ben Bartenstein at Bloomberg News report that Venezuelan bonds tumbled after the government claimed a surprise victory in regional elections and the opposition cried fraud. The perceived foul play increases the risk of further sanctions against the oil producer, according to Bloomberg News. The extra yield investors demand to hold Venezuelan debt over U.S. Treasuries widened 116 basis points to 32.32 percentage points, the highest in the world, Bloomberg News notes. A dollar bond issued by state-run oil company Petroleos de Venezuela SA that matures in two weeks fell 1.6 cent to 92.3 cents on the dollar, Bloomberg News relays. "Doubts about the legitimacy of these results could generate backlash against the Venezuelan government domestically and abroad," Credit Suisse Group AG analysts led by Casey Reckman wrote in a report, Bloomberg News says. "The opposition had said that they would call on its supporters to take to the streets to defend democracy and the votes that were cast. It is probably even less likely to engage in talks with the Maduro administration following this outcome," he added. Investors are losing faith in the ability of Venezuela to continue to service its debts as cash savings dwindle and payments become ever more complex while U.S. sanctions prompt banks and intermediaries to shy away or scrutinize dealings with the government of Nicolas Maduro -- himself sanctioned by Donald Trump's administration, Bloomberg News says. The appearance of foul play in the election result will probably prompt more punitive action from Washington, Bloomberg News discloses. The European Union is also prepared to begin discussing a collective response to Venezuela's increasing authoritarian regime, Bloomberg News relays. The U.S. has already slapped individual government officials with sanctions that prevent them from traveling to the country and freezes any assets they may hold in the North American nation, Bloomberg News notes. The U.S. government also banned trading in any new securities that may be issued. For now, it's holding off on curbing oil imports or exports to Venezuela, Bloomberg News relays. "Though we still consider it hard for the U.S. to ban crude imports from Venezuela and trading in all the Venezuela and PDVSA bonds, if concerns about such possibilities rise, they can do significant damage to Venezuela and PDVSA bonds," Victor Fu, director of emerging market sovereign strategy at Stifel Nicolaus & Co. wrote in a note, Bloomberg News discloses. The election results and threat of new sanctions add to concerns the market already had with a delay in receiving coupon payments due on PDVSA and state utility Electricidad de Caracas bonds, according to several bondholders who aren't authorized to speak publicly on their holdings. PDVSA's finance department hasn't returned email or phone messages seeking comment on the status of the payments. PDVSA needs to pay $3.5 billion of coupons and principal in the coming weeks to remain current with its creditors, Bloomberg News relays. While PDVSA has decided to use grace periods in recent months to make interest payments, it won't have that luxury for the looming maturities, Bloomberg News notes. Credit default swap trading reflects an 81 percent probability of PDVSA failing to pay its debts over the next 12 months with that likelihood rising to 99 percent with the five-year swaps contracts, Bloomberg News adds. As reported in the Troubled Company Reporter-Latin America on Sept. 28, 2017, S&P Global Ratings suspended its 'CCC-' local currency issue ratings on four of the Bolivarian Republic of Venezuela's local currency-denominated debt issues. S&P said, "At the same time, S&P affirmed our 'CCC-' long-term foreign and local currency sovereign issuer credit ratings. The outlook on the long- term ratings is negative. In addition, we affirmed our 'C' short- term foreign and local currency sovereign issuer credit ratings. The transfer and convertibility assessment remains 'CCC-'." *********** Monday's edition of the TCR-LA delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-LA editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-LA constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-LA editor holds some position in the issuers' public debt and equity securities about which we report. Tuesday's edition of the TCR-LA features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Submissions about insolvency-related conferences are encouraged. Send announcements to conferences@bankrupt.com *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2017. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000 or Joseph Cardillo at 856-381-8268. * * * End of Transmission * * *