/raid1/www/Hosts/bankrupt/TCRLA_Public/171107.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
Tuesday, November 7, 2017, Vol. 18, No. 221
Headlines
B A R B A D O S
GLOBAL SC II: S&P Cuts Series 2015-1 Cl. B-1 Notes Rating to BB+
B R A Z I L
MAGNESITA REFRATARIOS: S&P Affirms 'BB' Global Scale Rating
J A M A I C A
DIGICEL GROUP: In Direct Competition With America Movil
P U E R T O R I C O
PUERTO RICO: Fee Examiner Taps EDGE Legal as Local Counsel
PUERTO RICO: Fee Examiner Taps Godfrey & Kahn as Legal Counsel
U R U G U A Y
ZURICH SANTANDER: Moody's Ups Insurance Finc'l Strength From Ba1
V E N E Z U E L A
GRUPO IDESA: Fitch Cuts IDR to B- & Alters Outlook to Negative
VENEZUELA: Money Printing, Production Plunge Cause Hyperinflation
VENEZUELA: Denounces High Court's Measure vs. Guevara as Political
VENEZUELA: Fitch Lowers Long-Term Foreign Currency IDR to 'C'
V I R G I N I S L A N D S
FRANSHION BRILLIANT: S&P Rates USD-Denominated Sub. Securities BB
X X X X X X X X X
LATAM: 5.7 Magnitude Earthquake Shakes Parts of The Region
- - - - -
===============
B A R B A D O S
===============
GLOBAL SC II: S&P Cuts Series 2015-1 Cl. B-1 Notes Rating to BB+
-----------------------------------------------------------------
S&P Global Ratings lowered its ratings on Global SC Finance II
SRL's (Global SC II's) series 2013-1, 2013-2, and 2014-1 notes. At
the same time, S&P lowered its rating on Global SC Funding Two
Ltd.'s series 2015-1 B-1 notes.
Global SC II is an asset-backed securities (ABS) transaction
backed by a pool of dry cargo and specialized marine containers
(including refrigerated containers), along with the related lease
contracts, receivables, and the assets' associated sales proceeds.
Series 2012-1, 2013-1, 2013-2, and 2014-1 were issued out of the
same master trust, Global SC Finance II SRL, so they share the
collateral pool with any other series issued out of the same
trust. Series 2012-1 was redeemed in full in 2014.
Global SC Funding Two Ltd. is an ABS transaction backed by all
outstanding class A shares of Global SC II, which include the
rights to receive cash flows from available payments at the bottom
of the payment waterfalls in Global SC II.
The rating actions reflect changes in the performance of Global SC
II's portfolio since the last issuance in 2014. Specifically,
according to the Oct. 12, 2017, determination date report, the
average lease rate of the current portfolio of containers has
declined to $1.34 from $1.69 as of the Aug. 14, 2014,
determination date report. At the same time, the utilization rate
for the operating fleet has dropped to 91.8% from 96.3% over the
same period. The total number of containers has declined to
291,733 as of October 2017 from 443,188 as of August 2014. In
addition, the sale of container assets shortly after the issuance
of series 2014-2, along with the associated paydown of the then-
outstanding series 2012-1 notes, led to an increase in the
liabilities' average remaining maturity versus the assets'
remaining useful life. The classes are not able to withstand our
cash flow stress assumptions at their current rating levels.
All classes from the transactions are being paid principal
according to their original schedule. Global SC II's series 2013-1
has 55% of its original balance outstanding, while series 2013-2
and 2014-1 have 60% and 68% of their original balance outstanding,
respectively. Global SC Funding Two Ltd.'s series 2015-1 B-1 notes
have 60% outstanding.
S&P said, "We will continue to review whether, in our view, the
ratings currently assigned to the notes remain consistent with the
credit enhancement available to support them, and we will take
further rating actions as we deem necessary."
RATINGS LOWERED
Global SC Finance II SRL
Rating
Series/Class To From
2013-1 A- (sf) A (sf)
2013-2 A- (sf) A (sf)
2014-1 A-1 A- (sf) A (sf)
2014-1 A-2 A- (sf) A (sf)
Global SC Funding Two Ltd.
Rating
Series/Class To From
2015-1 B-1 BB+ (sf) BBB (sf)
===========
B R A Z I L
===========
MAGNESITA REFRATARIOS: S&P Affirms 'BB' Global Scale Rating
-----------------------------------------------------------
S&P Global Ratings has affirmed its 'BB' global scale and 'brAA'
national scale ratings on Magnesita Refratarios S.A. At the same
time, S&P has affirmed the 'BB' issue-level ratings on the
financing subsidiaries Magnesita Refractories Co.'s and Magnesita
Finance Ltd.'s, senior unsecured notes, which the parent fully and
unconditionally guarantees. The outlook on the corporate ratings
remains stable.
The ratings on the senior unsecured notes are at the same level as
the corporate credit rating on Magnesita, reflecting a recovery
rating of '3' given the expected meaningful recovery of 60%
(rounded).
S&P said, "The affirmation reflects our view that Magnesita's
credit quality remains unchanged following the merger with RHI AG
(not rated). We expect Magnesita's stand-alone credit profile
(SACP) to continue to reflect mild improvements in the company's
credit metrics over the next two years resulting from a slow
recovery in the Brazilian market and fairly stable demand in the
company's main other markets: Europe and North America. We
incorporate some potential synergy gains through more efficient
working capital management in the short term. We consider
Magnesita as a highly strategic subsidiary of RHI Magnesita. The
company may benefit from shared commercial strategies and debt
refinancing at the group level, which could further improve
consolidated financial metrics over the next few years."
Magnesita's stand-alone operations contribute about one-third of
the group's revenue stream. S&P said, "Given that Magnesita's
operations are complementary to those of RHI, we believe there's
little overlap. Therefore, we expect Magnesita to maintain similar
production capacity after the merger and overall revenue
contribution to remain stable. Also, we expect demand for
Magnesita's refractories to increase along with the recovery of
the steel and cement industries, especially in Brazil, although we
expect the latter to happen over the medium term due to the still
sluggish construction industry conditions in the country. We
believe the RHI Magnesita group to have a comparably stronger
business risk than Magnesita due to the former's significantly
larger scale and market position in international markets.
However, we believe that Magnesita bolsters the group's overall
operating efficiency, mainly due to its low-cost operations in
Brazil and production capacity close to its main markets. Also, we
expect the group's combined commercial efforts to result in a
stronger brand.
"We expect the RHI Magnesita group to focus on debt refinancing
over the next few quarters in order to optimize its capital
structure. This is likely to reduce cost of debt and improve
amortization profile for Magnesita, contributing to some
improvements in cash flow metrics. However, these factors are
beyond the horizon of our rating, and we will analyze the credit
impact stemming from group's financial policies, mainly in terms
of further target leverage and shareholders remuneration
initiatives."
=============
J A M A I C A
=============
DIGICEL GROUP: In Direct Competition With America Movil
-------------------------------------------------------
RJR News reports that Digicel Group Limited boss Denis O'Brien is
on course to enter into direct competition with his old rival
Mexican telecoms tycoon Carlos Slim, in the wholesale telecoms
market.
Deep Blue Cable, a company owned by Mr. O'Brien that is investing
more than US$350 million laying an undersea fibre-optic cable in
the Caribbean, is to extend its planned network to Panama and
Colombia, according to RJR News.
According to the Irish Times newspaper, the extension especially
into Colombia, will put Mr. O'Brien's project into direct
competition with Slim's America Movil company, which for years was
a major rival of Mr. O'Brien's Digicel business, the report notes.
The original plan was for Mr. O'Brien's cable to thread a large
number of island nations in the region over the next 2 and a half
years with fibre capable of delivering high-speed broadband, the
report relays.
The roll out will make landfall in Jamaica as well as other
markets such as the Cayman Islands, Curaáao, the Dominican
Republic, Haiti, Puerto Rico and Trinidad and Tobago, the report
notes.
Meanwhile, the Irish Times says Digicel has been weighing a second
phase of its undersea cable rollout, which could include bringing
services to Cuba Deep Blue confirmed the extension of the phase-
one rollout to include Panama and Colombia will push back the
completion date for the project until near the middle of 2020, the
report relays.
Mr. O'Brien had previously mooted an extension of the project,
which he said would push up the investment to US$450 million, the
report relays.
Deep Blue Cable also said that following the destruction wrought
in the Caribbean by Hurricane Irma, it might redesign parts of its
network to make it less susceptible to weather events, the report
adds.
As reported in the Troubled Company Reporter-Latin America on
May 26, 2017, Fitch Ratings has affirmed at 'B' the Long-term
Foreign-currency Issuer Default Ratings (IDR) of Digicel Group
Limited (DGL) and its subsidiaries, Digicel Limited (DL) and
Digicel International Finance Limited (DIFL), collectively
referred to as Digicel. The Rating Outlook is Stable. Fitch has
also affirmed all existing issue ratings of Digicel's debt
instruments.
======================
P U E R T O R I C O
======================
PUERTO RICO: Fee Examiner Taps EDGE Legal as Local Counsel
----------------------------------------------------------
Brady Williamson, the fee examiner appointed in the Commonwealth
of Puerto Rico's Title III case, seeks approval from the U.S.
District Court for the District of Puerto Rico to hire EDGE Legal
Strategies, P.S.C. as local counsel.
EDGE will provide whatever support is required by the fee
examiner's lead counsel Godfrey & Kahn, S.C. The firm will render
services at these discounted hourly rates:
Partners/Senior Counsel $200
Associates (with 5 years experience) $150
Associates $125
Paralegals/Law Clerks $70
Eyck Lugo, Esq., disclosed in a court filing that the firm does
not represent any interest adverse to the Debtor or its estate.
In accordance with Appendix B-Guidelines for reviewing fee
applications filed by attorneys in larger Chapter 11 cases, EDGE
disclosed that it will be providing services at a discounted
hourly rate and that no professional at the firm has varied his
rate based on the geographic location of the bankruptcy case.
EDGE also disclosed that it has not previously represented Mr.
Williamson as fee examiner for the Debtor and that he has already
approved the firm's prospective budget and staffing plan.
The firm can be reached through:
Eyck Lugo, Esq.
EDGE Legal Strategies, P.S.C.
252 Ponce de Leon Avenue, Suite 1200
San Juan, PR 00918
Tel: (787) 522-2000
Fax: (787) 522-2010
Email: elugo@edgelegalpr.com
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States that's facing a massive bond debt of $70
billion, a 68% debt-to-GDP ratio and negative economic growth in
nine of the last 10 years.
The Commonwealth of Puerto Rico has sought bankruptcy protection,
aiming to restructure its massive $74 billion debt-load and $49
billion in pension obligations.
The debt restructuring petition was filed by Puerto Rico's
financial oversight board in U.S. District Court in Puerto Rico
(Case No. 17-01578) on May 3, 2017, and was made under Title III
of 2016's U.S. Congressional rescue law known as the Puerto Rico
Oversight, Management, and Economic Stability Act ("PROMESA").
The Financial Oversight and Management Board later commenced Title
III cases for the Puerto Rico Sales Tax Financing Corporation
(COFINA) on May 5, 2017, and the Employees Retirement System (ERS)
and the Puerto Rico Highways and Transportation Authority (HTA) on
May 21, 2017. On July 2, 2017, a Title III case was commenced for
the Puerto Rico Electric Power Authority ("PREPA").
U.S. Chief Justice John Roberts has appointed U.S. District Judge
Laura Taylor Swain to oversee the Title III cases. The Honorable
Judith Dein, a United States Magistrate Judge for the District of
Massachusetts, has been designated to preside over matters that
may be referred to her by Judge Swain, including discovery
disputes, and management of other pretrial proceedings.
Joint administration of the Title III cases, under Lead Case No.
17-3283, was granted on June 29, 2017.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets, as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at
O'Neill & Borges are on-board as attorneys.
McKinsey & Co. is the Board's strategic consultant, Ernst & Young
is the Board's financial advisor, and Citigroup Global Markets
Inc. is the Board's municipal investment banker.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA,
and PREPA.
O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico
Fiscal Agency and Financial Advisory Authority (AAFAF), the agency
responsible for negotiations with bondholders.
The Oversight Board named Professor Nancy B. Rapoport as fee
examiner and to chair a committee to review professionals' fees.
Bondholders' Attorneys
Toro, Colon, Mullet, Rivera & Sifre, P.S.C. and Kramer Levin
Naftalis & Frankel LLP serve as counsel to the Mutual Fund Group,
comprised of mutual funds managed by Oppenheimer Funds, Inc.,
Franklin Advisers, Inc., and the First Puerto Rico Family of
Funds, which collectively hold over $3.5 billion in COFINA Bonds
and over $2.9 billion in other bonds issued by Puerto Rico and
other instrumentalities, including over $1.8 billion of Puerto
Rico general obligation bonds ("GO Bonds").
White & Case LLP and Lopez Sanchez & Pirillo LLC represent the UBS
Family of Funds and the Puerto Rico Family of Funds, which hold
$613.3 million in COFINA bonds.
Paul, Weiss, Rifkind, Wharton & Garrison LLP, Robbins, Russell,
Englert, Orseck, Untereiner & Sauber LLP, and Jimenez, Graffam &
Lausell are co-counsel to the ad hoc group of General Obligation
Bondholders, comprised of Aurelius Capital Management, LP,
Autonomy Capital (Jersey) LP, FCO Advisors LP, Franklin Mutual
Advisers LLC, Monarch Alternative Capital LP, Senator Investment
Group LP, and Stone Lion Capital Partners L.P.
Quinn Emanuel Urquhart & Sullivan, LLP and Reichard & Escalera are
co-counsel to the ad hoc coalition of holders of senior bonds
issued by COFINA, comprised of at least 30 institutional holders,
including Canyon Capital Advisors LLC and Varde Investment
Partners, L.P.
Correa Acevedo & Abesada Law Offices, P.S.C., is counsel to Canyon
Capital Advisors, LLC, River Canyon Fund Management, LLC, Davidson
Kempner Capital Management LP, OZ Management, LP, and OZ
Management II LP (the QTCB Noteholder Group).
Committees
The U.S. Trustee formed a nine-member official committee of
retirees and a seven-member of the official committee of unsecured
creditors of the Commonwealth. The retiree committee tapped
Jenner & Block LLP and Bennazar, Garcia & Milian, C.S.P., as its
attorneys. The creditors committee tapped Paul Hastings LLP and
O'Neill & Gilmore LLC as counsel.
The court appointed Brady Williamson as fee examiner.
PUERTO RICO: Fee Examiner Taps Godfrey & Kahn as Legal Counsel
--------------------------------------------------------------
Brady Williamson, the fee examiner appointed in the Commonwealth
of Puerto Rico's Title III case, seeks approval from the U.S.
Bankruptcy Court for the District of Puerto Rico to hire Godfrey &
Kahn, S.C. as his legal counsel.
Godfrey & Kahn will provide legal, technical and administrative
support services to Brady Williamson, the court-appointed fee
examiner. These services include monitoring and reviewing
applications for fees and expenses filed by bankruptcy
professionals; resolving objections to fee applications;
conducting discovery; and presenting periodic reports with respect
to the fee examiner's review of the fee applications.
The firm's current hourly rates range from $225 to $645 for
attorneys and from $250 to $300 for paralegals. Godfrey & Kahn
has agreed to provide services at a discounted hourly rate ranging
from $219 to $537.
Katherine Stadler, shareholder of Godfrey & Kahn, disclosed in a
court filing that she and other members of the firm are
"disinterested persons" as defined in section 101(14) of the
Bankruptcy Code.
In accordance with Appendix B-Guidelines for reviewing fee
applications filed by attorneys in larger Chapter 11 cases, Ms.
Stadler disclosed that her firm will be providing services at a
discounted hourly rate and that no Godfrey & Kahn professional has
varied its rate based on the geographic location of the bankruptcy
case.
Ms. Stadler also disclosed that her firm has not previously
represented Mr. Williamson as fee examiner for the Debtor and that
he has already approved the firm's prospective budget and staffing
plan.
Godfrey & Kahn can be reached through:
Katherine Stadler, Esq.
Godfrey & Kahn, S.C.
One East Main Street
Madison, WI 53703
Tel: (608) 257-3911
Fax: (608) 257-0609
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States that's facing a massive bond debt of $70
billion, a 68% debt-to-GDP ratio and negative economic growth in
nine of the last 10 years.
The Commonwealth of Puerto Rico has sought bankruptcy protection,
aiming to restructure its massive $74 billion debt-load and $49
billion in pension obligations.
The debt restructuring petition was filed by Puerto Rico's
financial oversight board in U.S. District Court in Puerto Rico
(Case No. 17-01578) on May 3, 2017, and was made under Title III
of 2016's U.S. Congressional rescue law known as the Puerto Rico
Oversight, Management, and Economic Stability Act ("PROMESA").
The Financial Oversight and Management Board later commenced Title
III cases for the Puerto Rico Sales Tax Financing Corporation
(COFINA) on May 5, 2017, and the Employees Retirement System (ERS)
and the Puerto Rico Highways and Transportation Authority (HTA) on
May 21, 2017. On July 2, 2017, a Title III case was commenced for
the Puerto Rico Electric Power Authority ("PREPA").
U.S. Chief Justice John Roberts has appointed U.S. District Judge
Laura Taylor Swain to oversee the Title III cases. The Honorable
Judith Dein, a United States Magistrate Judge for the District of
Massachusetts, has been designated to preside over matters that
may be referred to her by Judge Swain, including discovery
disputes, and management of other pretrial proceedings.
Joint administration of the Title III cases, under Lead Case No.
17-3283, was granted on June 29, 2017.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets, as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at
O'Neill & Borges are on-board as attorneys.
McKinsey & Co. is the Board's strategic consultant, Ernst & Young
is the Board's financial advisor, and Citigroup Global Markets
Inc. is the Board's municipal investment banker.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA,
and PREPA.
O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico
Fiscal Agency and Financial Advisory Authority (AAFAF), the agency
responsible for negotiations with bondholders.
The Oversight Board named Professor Nancy B. Rapoport as fee
examiner and to chair a committee to review professionals' fees.
Bondholders' Attorneys
Toro, Colon, Mullet, Rivera & Sifre, P.S.C. and Kramer Levin
Naftalis & Frankel LLP serve as counsel to the Mutual Fund Group,
comprised of mutual funds managed by Oppenheimer Funds, Inc.,
Franklin Advisers, Inc., and the First Puerto Rico Family of
Funds, which collectively hold over $3.5 billion in COFINA Bonds
and over $2.9 billion in other bonds issued by Puerto Rico and
other instrumentalities, including over $1.8 billion of Puerto
Rico general obligation bonds ("GO Bonds").
White & Case LLP and Lopez Sanchez & Pirillo LLC represent the UBS
Family of Funds and the Puerto Rico Family of Funds, which hold
$613.3 million in COFINA bonds.
Paul, Weiss, Rifkind, Wharton & Garrison LLP, Robbins, Russell,
Englert, Orseck, Untereiner & Sauber LLP, and Jimenez, Graffam &
Lausell are co-counsel to the ad hoc group of General Obligation
Bondholders, comprised of Aurelius Capital Management, LP,
Autonomy Capital (Jersey) LP, FCO Advisors LP, Franklin Mutual
Advisers LLC, Monarch Alternative Capital LP, Senator Investment
Group LP, and Stone Lion Capital Partners L.P.
Quinn Emanuel Urquhart & Sullivan, LLP and Reichard & Escalera are
co-counsel to the ad hoc coalition of holders of senior bonds
issued by COFINA, comprised of at least 30 institutional holders,
including Canyon Capital Advisors LLC and Varde Investment
Partners, L.P.
Correa Acevedo & Abesada Law Offices, P.S.C., is counsel to Canyon
Capital Advisors, LLC, River Canyon Fund Management, LLC, Davidson
Kempner Capital Management LP, OZ Management, LP, and OZ
Management II LP (the QTCB Noteholder Group).
Committees
The U.S. Trustee formed a nine-member official committee of
retirees and a seven-member of the official committee of unsecured
creditors of the Commonwealth. The retiree committee tapped
Jenner & Block LLP and Bennazar, Garcia & Milian, C.S.P., as its
attorneys. The creditors committee tapped Paul Hastings LLP and
O'Neill & Gilmore LLC as counsel.
The court appointed Brady Williamson as fee examiner.
=============
U R U G U A Y
=============
ZURICH SANTANDER: Moody's Ups Insurance Finc'l Strength From Ba1
----------------------------------------------------------------
Moody's Investors Service has upgraded Zurich Santander Seguros
Uruguay S.A.'s (Zurich Santander Uruguay) global scale (GS)
insurance financial strength (IFS) rating to Baa3 from Ba1 and its
national scale (NS) IFS rating to Aa3.uy from A1.uy. The outlook
on the GS rating remains stable, while the outlook on the NS
rating was changed to positive from stable. The overall outlook on
Zurich Santander Uruguay ratings was changed to stable (multiple)
from stable.
RATINGS RATIONALE
According to Moody's, Zurich Santander Uruguay's ratings upgrade
primarily reflect the improvement on its credit profile after the
sale of its long-term annuity business, which has been in run-off
since 2004. This product is considered to be risky, given its
embedded guaranteed interest rates, significant asset and
liability management challenges given currency and maturity
mismatches, and important longevity and reinvestment risks. Also,
this portfolio used to increase the volatility of Zurich Santander
Uruguay's earnings. In addition, the upgrade is supported by the
implicit support provided by its shareholder Zurich Santander
Insurance America S.L., which is 51% owned by Zurich Insurance
Company Ltd (Aa3 stable) and 49% by Banco Santander S.A. (Spain)
(A3 stable, baa1). This support is evidenced by technical control
and oversight over this subsidiary, as well as by brand name
sharing and by the ultimate parent companies' significant
strategic interest in Latin America, as demonstrated by a solid
presence in the region.
Other important positive considerations include Zurich Santander
Uruguay's low product risk profile (mainly short-term credit-
related life coverage), its sound capitalization (shareholders'
equity represented 76% of total assets at June 2017), its strong
asset quality, mainly comprised of investment grade securities,
and the stability and strong control over its distribution
channels, considering the bancassurance agreement with Banco
Santander.
Among the company's key credit challenges. Moody's noted its small
size and weak market position, lack of an ample product
diversification and high asset concentration in Uruguayan
sovereign bonds.
The positive outlook on the Aa3.uy NS IFS rating is based on the
expectation that Zurich Santander Uruguay could continue
leveraging its relationship with Banco Santander to improve its
currently weak market presence in the Uruguayan insurance market.
Considering the large client base of both Banco Santander
(Uruguay) S.A., the largest private bank in Uruguay, and its
consumer finance subsidiaries, Zurich Santander Uruguay could
increase its market share substantially and also improve its
business diversification, which would in turn improve its overall
risk profile.
Factors that could result in an upgrade for the company's ratings
are the following: 1) a significant and sustained improvement in
the company's market share and product diversification; 2) an
upgrade of Uruguay's sovereign rating; and 3) a sustained
improvement in the company's profitability ratios (i.e.: return on
capital ratios consistently above 15%). Conversely,
Zurich Santander Uruguay's rating could be downgraded for the
following reasons: 1) a reduction on the support provided by the
company's shareholder or a reduction on the parent's strategic
interest on the subsidiary; 2) a significant deterioration in its
investment credit quality; 3) a significant decline in its
profitability trend (i.e.: with return on capital ratios
consistently below 6%); 4) a significant deterioration of the
company's capitalization levels (i.e.: with capital to assets
ratios consistently under 30%); and 5) a downgrade of Uruguay's
sovereign rating.
Based in Montevideo, Uruguay, Zurich Santander Uruguay reported a
net profit of UYU16.8 million, and gross premiums written of
UYU182.6 million at the six-month period ending at June 30, 2017.
As of that date, total assets were UYU389.1 million and
shareholders' equity was UYU299.6 million.
The principal methodology used in these ratings was Global Life
Insurers published in April 2016.
=================
V E N E Z U E L A
=================
GRUPO IDESA: Fitch Cuts IDR to B- & Alters Outlook to Negative
--------------------------------------------------------------
Fitch Ratings has downgraded the Long-Term Local and Foreign
Currency Issuer Default Ratings (IDRs) of Grupo IDESA, S.A. de
C.V. (IDESA) to 'B-' from 'B'. The Rating Outlook has been revised
to Negative from Stable.
The downgrade reflects the continued pressure on IDESA's capital
structure resulting from a weakening of its standalone credit
profile as well as by its tight liquidity position. Weak ethylene
glycols and ethanol amine spreads and low production rates due to
feedstock shortages from Pemex have driven the company's latest 12
months (LTM) EBITDA to USD36 million. This figure compares
negatively with USD49 million one year prior. Cash flows from the
company's CyPlus joint venture (JV) are expected to be around USD2
million in 2017, which is also below Fitch's prior expectation of
USD8 million.
The company's financial profile is more consistent with 'CCC'
ratings. Between 2016 and 2017, IDESA has met its funding needs
with USD26 million of shareholder equity and a USD116 million PIK
loan from Inbursa, its second largest shareholder. Given the
strong incentives for these shareholders to continue to support
the company's cash needs until its Braskem-IDESA joint venture
starts distributing dividends, Fitch did not downgrade the
issuer's ratings to 'CCC'.
The stabilization of IDESA's credit profile rests upon IDESA
receiving much needed cash flows from Braskem-IDESA, as well as on
stabilizing its core EBITDA generation. Fitch's base case
incorporates expectations of IDESA's 2018 EBITDA at about USD30
million and no material dividends from Braskem-IDESA until 2019.
Dividends from this joint venture are restricted by project
financing until certain financial benchmarks are achieved.
Cash flows from JVs of around USD50 million in 2018 would result
in the Outlook being revised to Stable. Equity contributions from
current or new shareholders to support a stronger capital
structure would be viewed positively. The 'RR3' Recovery Rating
(RR) on the notes reflects good recovery prospects in event of
default. The above average recovery estimates reflect the value of
IDESA's 25% stake in Braskem-IDESA.
KEY RATING DRIVERS
High Leverage: IDESA's EBITDA declined from USD65 million in 2015
to USD40 million in 2016 mainly due to severely contracting
petrochemical spreads. As of the LTM ended June 30, 2017, IDESA's
EBITDA was USD36 million, resulting in a net leverage ratio of
12.2x. Leverage increased due to declining production volumes, a
result of declining feedstock from PEMEX. . Fitch's base case
suggests net leverage should remain elevated in 2018 at around
12x, as underlying petrochemical spreads in, ethylene glycols and
ethanol amines, remain fragile and ethylene oxide (EO) shortage
continues.
Joint Venture Investments: IDESA has contributed USD513 million to
Braskem-IDESA, and most of IDESA's current debt has been used to
support its 25% stake in this venture. IDESA's 25% stake should
represent about USD150 million of approximately USD600 million
projected EBITDA for the JV. This facility is capable of producing
1.0 million tons of polyethylene per year. Other IDESA investments
include USD65 million in CyPlus, a 50/50 JV with Evonik Industries
AG to build a sodium-cyanide production facility. This plant's
capacity is 40,000 mt and started operations in third-quarter
2016.
Distribution Core Business: IDESA generates about 55% of its
EBITDA from the distribution of solvents and chemicals within
Mexico and 38% from chemicals manufacturing, with most of the
remaining from chemical storage and handling services. IDESA's
distribution business has grown steadily due to Mexico's
industrialization. This segment has become IDESA's main cash flow
generating business as its petrochemical segment has significantly
contracted.
High Reliance on Commodity Chemicals: IDESA has limited pricing
power with its suppliers and customers, as the company's main
product prices are based on international reference prices and are
somewhat correlated to the price of oil. The price of ethane-based
EO, IDESA's main raw material, increased in 2016 and 2017 due
tight EO supply in Mexico. Fitch expects this tightness to
continue; modest upward pricing in reference prices of EO due to
higher demand for ethane in North America is also expected.
Country, Production Site and Supplier Concentration: About 90% of
IDESA's total revenues come from the Mexican domestic market.
Production capacity is heavily concentrated in its Coatzacoalcos
plant, which is dependent on smooth operations at Pemex Etileno,
IDESA's sole supplier of EO. IDESA's participation in Etileno XXI
should diversify IDESA's cash flow sources and is considered
positive for long-term credit quality.
DERIVATION SUMMARY
IDESA's vertical integration is limited and its product portfolio
is more dependent on feedstock and product price dynamics. This
more limited pricing power results in higher volatility of cash
flows when compared to peers such as Cydsa, S.A.B. de C.V. (BB+),
that have a predominantly domestic profile. IDESA's scale and cost
position mostly as a converter or distributor is consistent with
those of companies in the low 'BB' to 'B' rating categories.
Companies rated at those levels include Kronos Worldwide (B+) and
Shandong Yuhuang Chemical (B).
Weak product spreads and lack of feedstock combined with high debt
used to fund investments have significantly pressured IDESA's
financial profile and increased its reliance on expected cash
flows from Braskem-IDESA and in continued growth in chemical
distribution activities. IDESA's financial profile is
significantly pressured and consistent with that of a 'CCC' credit
on a standalone basis. IDESA's 25% stake in Braskem-IDESA is
supports its IDESA's credit profile due to the JVs strong EBITDA
generation. The value of this stake uplifts the unsecured debt by
one notch above IDESA's IDR of 'B'.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Revenues measured in U.S. dollars rise about 10% during 2017
and by low single digits in 2018 reflecting product pricing
and stronger sales volumes in distribution business.
Petrochemical prices trade modestly upwards with Fitch's Brent oil
price deck expectations of USD52.5 in 2018 and USD55 in 2019.
-- EBITDA under pressure during 2017-2018 reflecting weak
petrochemical spreads due to feedstock storage and higher EO
prices.
-- Cash flows received from Braskem-IDESA before mid-2019.
Recovery Assumptions:
-- Recovery reflects a hybrid going concern approach for IDESA at
a 4.5x multiple of estimated post-restructuring EBITDA of
USD31 million plus.
-- A value of IDESA's 25% stake in Braskem-IDESA resulting from
the USD513 million replacement value of IDESA's equity at a
50% advance rate.
-- The estimated recovered value after administrative claims and
concessions results in a 65% recovery to unsecured creditors.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action
-- Cash flows from Braskem IDESA in the amount of USD100 million
before year-end 2019 could result in an upgrade;
-- Capital infusions would be considered positive for credit
quality.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action
-- Failure to maintain Braskem-IDESA's capacity utilization
levels above 85%;
-- Cash flow contractions in Braskem-IDESA that result in
expectations of negligible cash flows to IDESA by year-end
2019.
LIQUIDITY
IDESA's intrinsic liquidity is tight. Funds from operations (FFO)
has declined from USD27 million in 2015 to USD2 million as of the
LTM to second-quarter 2017. FFO is expected to approach USD10
million in 2018. This estimate is based upon expectations from
cash flows from CyPlus of USD7 million in 2018. IDESA's Working
capital requirements have resulted in negative cash flow from
operations of USD17 million and in negative free cash flow (FCF)
of USD34 million during the LTM ended June 30, 2017.
Fitch expects continued pressure in IDESA's petrochemical business
will likely result in negative FCF over the next 12-18 months.
Negative FCF should be funded with USD26 million in cash and
marketable securities, USD14 million available undrawn from a
contracted USD130 million committed credit line with Banco
Inbursa, and uncommitted credit lines. Interest payments under
this loan are due at maturity in 2020. IDESA's cash to short-term
debt was 0.8x as of the second-quarter 2018. Short-term debt
consisted of USD31 million in revolving credit facilities.
FULL LIST OF RATING ACTIONS
Fitch has downgraded the following ratings:
IDESA
-- Long-Term Local Currency IDR to 'B-' from 'B';
-- Long-Term Foreign Currency IDR to 'B-' from 'B';
-- USD300 million senior unsecured notes due 2020 to 'B/RR3' from
'B+/RR3'.
The Rating Outlook has been revised to Negative from Stable.
VENEZUELA: Money Printing, Production Plunge Cause Hyperinflation
-----------------------------------------------------------------
EFE News reports that the uncontrolled printing of base money and
a dramatic decline in production in recent years have led
Venezuela down the road to hyperinflation, which became a reality
when consumer prices rose more than 50 percent in October relative
to the previous month.
"The government, to cover its expenses, what it does is create
base money," economist Henkel Garcia told EFE.
VENEZUELA: Denounces High Court's Measure vs. Guevara as Political
------------------------------------------------------------------
EFE News reports that the head of the opposition-controlled
Venezuelan Parliament, Julio Borges, called the Supreme Court's
ruling against the legislative body's first vice president, Freddy
Guevara, "absolutely political . . . arbitrary . . . outside the
law," adding that the move seeks to "continue weakening" the
chamber.
Mr. Borges made his remarks at a press conference to reject the
high court (TSJ) ruling to bring Guevara to withdraw his
parliamentary immunity from prosecution and bring him to trial,
according to EFE News.
VENEZUELA: Fitch Lowers Long-Term Foreign Currency IDR to 'C'
-------------------------------------------------------------
Fitch Ratings Fitch Ratings has downgraded Venezuela's Long-Term
Foreign Currency Issuer Default Rating (IDR) to 'C' from 'CC'.
KEY RATING DRIVERS
The downgrade of Venezuela's Long-Term Foreign Currency IDR to 'C'
reflects the announcement by the authorities on Nov. 3 that they
intend to pursue a renegotiation of its sovereign external debt
obligations. Coupled with the previously missed payments on
outstanding sovereign bonds that are currently within their 30-day
grace periods, in Fitch's view this makes a default event highly
probable.
Venezuela's external liquidity was weak before the announcement
with a liquidity ratio estimated at just 33% (the stock of central
bank international reserves plus the banking system's liquid
foreign assets relative to external debt with a residual maturity
of less than one year). Gross international reserves have declined
further in 2017, falling by nearly USD1 billion in the year
through November to USD10.1 billion. Venezuela has additional
foreign exchange (FX) liquidity in government-managed funds, but
these have likely declined and remain opaque in their
administration and execution. The sovereign faces external coupon
payments of USD619.6 million in the last two months of 2017 and
USD3,348 million in 2018, as well as external bond principal
maturities of USD2,052 million in 2018.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
As per Fitch's published sovereign criteria, for ratings of 'CCC'
and below, the committee has not utilised the SRM and QO to
explain the ratings, which are instead guided by rating
definitions.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three year centred
averages, including one year of forecasts, to produce a score
equivalent to a Long-Term Foreign Currency IDR. Fitch's QO is a
forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating,
reflecting factors within Fitch criteria that are not fully
quantifiable and/or not fully reflected in the SRM.
RATING SENSITIVITIES
The main risk factors that, individually or collectively, could
trigger a rating action are:
Negative:
-- A payment default or debt restructuring exercise by the
sovereign.
Positive:
-- Public announcement of the intention to continue servicing
sovereign debt obligations and the timely debt service in line
with the original maturity schedule for upcoming debt
obligations.
KEY ASSUMPTIONS
-- Fitch expects Brent oil prices to average USD52.5/b in 2017,
USD55/b in 2018 and USD60/b in 2019.
Fitch has taken the following actions:
-- Long-Term Foreign-Currency IDR downgraded to 'C' from 'CC';
-- Long-Term Local-Currency IDR affirmed at 'CC';
-- Short-Term Foreign-Currency IDR affirmed at 'C';
-- Short-Term Local-Currency IDR affirmed at 'C';
-- Country Ceiling affirmed at 'CC';
-- Issue ratings on long-term senior unsecured foreign-currency
bonds downgraded to 'C' from 'CC'.
===========================
V I R G I N I S L A N D S
===========================
FRANSHION BRILLIANT: S&P Rates USD-Denominated Sub. Securities BB
-----------------------------------------------------------------
S&P Global Ratings assigned its 'BB' long-term issue rating to
proposed U.S. dollar-denominated subordinated perpetual securities
that Franshion Brilliant Ltd. will issue. China Jinmao Holdings
Group Ltd. (BBB-/Stable/--) guarantees the securities. S&P said,
"We also view the issue to have intermediate equity content. We
will treat 50% of the principal of the securities as debt and 50%
of the distributions as interest. The rating is subject to our
review of final issuance documentation."
China Jinmao intends to use the proceeds for refinancing bank
loans due in 2018 and other general corporate purposes. The
ratings on China Jinmao and its outstanding senior notes are not
affected as S&P expects the company's leverage will remain under
control.
The securities will rank subordinated to other unsecured and
unsubordinated obligations of China Jinmao. Distributions are
optionally deferrable at the issuer's discretion. S&P rates the
securities two notches below China Jinmao's 'BBB-' issuer credit
rating, reflecting the subordinated status and optional
deferability.
The securities will pay a fixed distribution rate until the first
reset date in the sixth year. The distribution rate will be reset
in 2023 based on the prevailing U.S. five-year Treasury rate plus
an initial credit spread. The credit spread above the Treasury
rate will step up by 25 basis points on the second reset date in
2028 and by an additional 75 basis points in 2043. Therefore, S&P
expects the intermediate equity content to remain until 2023, or
earlier, should S&P reassesses management's intent as no longer
supportive.
S&P said, "While the issue does not have a legally binding
replacement provision, we believe management intends to replace
the perpetual securities with similar equity-like instruments. We
view China Jinmao's ongoing issuance of new hybrids as a sign of
management's commitment to maintain hybrid capital as a permanent
feature of the company's capital structure. We could lower our
assessment of the equity content on the proposed securities to
minimal if the company indicates any deviation from its
replacement intention. A minimal equity content means we would
treat the full principal of the securities as debt and all the
distributions as interest expenses."
=================
X X X X X X X X X
=================
LATAM: 5.7 Magnitude Earthquake Shakes Parts of The Region
----------------------------------------------------------
Caribbean360.com reports that people living in parts of Grenada,
Trinidad and Tobago, and St Vincent and the Grenadines reported
strong shaking when a 5.7 magnitude earthquake struck this
morning.
Shortly after the tremor, which occurred between Grenada and
Trinidad and Tobago around 11 a.m. on Nov. 5, reports began
flooding the University of the West Indies (UWI) Seismic Research
Centre's Facebook page from residents who felt the quake,
particularly in those two Caribbean countries, for several
seconds, according to Caribbean360.com.
And the National Emergency Management Organization (NEMO) in St
Vincent and the Grenadines also posted that the earthquake was
felt in that country as well, the report relays.
The Seismic Research Centre said the earthquake occurred about 68
kilometres northwest of Scarborough, Trinidad and Tobago; 118 km
north northeast of Arima, Trinidad and Tobago; and 84 kilometres
southeast of Grenada's capital, St George's, the report notes.
There were no reports of injuries or damages, the report adds.
***********
Monday's edition of the TCR-LA delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-LA editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Monday
Bond Pricing table is compiled on the Friday prior to publication.
Prices reported are not intended to reflect actual trades. Prices
for actual trades are probably different. Our objective is to
share information, not make markets in publicly traded securities.
Nothing in the TCR-LA constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR-LA editor holds some position in the
issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
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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
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Information contained herein is obtained from sources believed to
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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
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* * * End of Transmission * * *