/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/171130.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, November 30, 2017, Vol. 18, No. 238 Headlines A R G E N T I N A ARGENTINA: IDB Invest Finances La Castellana Wind Project PAMPA ENERGIA: Siemens to Expand Gas-Fired Power Station TECHO SA: S&P Assigns B- Corp Credit Rating, Outlook Stable TECPETROL INTERNACIONAL: Fitch to Rate US$500MM Debt Issuance BB+ B A R B A D O S BARBADOS: IMF Says Gov't Needs to Do More to Fix Economic Problems B R A Z I L CENTRAIS ELECTRICAS: To Get US$276MM-IDB Support JBS SA: Says It's Done With Asset Sales as Earnings Boost Outlook GOL LINHAS: S&P Puts Prelim 'B-' Issue Rating on Sr. Unsec. Notes ITAU UNIBANCO: Fitch Assigns B+ Rating to T1 Subordinated Notes M E X I C O CEMEX SAB: Discloses Offering of EUR-Denom. Senior Secured Notes CEMEX SAB: Fitch Rates Proposed EU400MM Sr. Secured Notes BB- CEMEX SAB: S&P Rates New Senior Secured Notes Due 2024 'BB' GRUPO POSADAS: S&P Alters Outlook to Pos., Affirms B+ CCR - - - - - ================= A R G E N T I N A ================= ARGENTINA: IDB Invest Finances La Castellana Wind Project --------------------------------------------------------- IDB Invest, a member of the Inter-American Development Bank (IDB) Group, has signed a $36 million loan with Central Puerto S.A. (CPSA) for the La Castellana wind project in Argentina. This is the first loan structured under the project finance modality of infrastructure and energy projects carried out in Argentina in the last decade. The project consists of the construction, operation and maintenance of a 99 MW wind farm and its associated facilities, including a 132 kV and 37 km long transmission line in the south of the province of Buenos Aires. The objective of the project is to contribute to the diversification of Argentina's energy matrix, which is dependent on thermoelectric and hydroelectric generation, and the sustainability of the country's electric power generation capacity. The installed capacity of renewable energy is expected to increase by 99 MW, which will help reduce the dependence on more polluting generation sources. During the 20 years' lifespan of the plant, 4,548,922 tons of carbon dioxide emissions will be displaced. The term of the loan is 15 years in total. The project will be co- financed with a loan of $64 million from the International Finance Corporation, and with a loan of $5 million from the Canadian Climate Fund for the Private Sector of the Americas (C2F), which also includes an incentive mechanism to promote gender equality in the sector. * * * As reported in the Troubled Company Reporter-Latin America, S&P Global Ratings, on Oct. 30, 2017, raised its long-term sovereign credit ratings on the Republic of Argentina to 'B+' from 'B'. The outlook on the long-term ratings is stable. S&P also affirmed its short-term sovereign credit ratings on Argentina at 'B'. At the same time, S&P raised its national scale ratings to 'raAA' from 'raA+'. In addition, S&P raised its transfer and convertibility assessment to 'BB-' from 'B+', in line with its assessment of sustained local access to foreign exchange. In May 2017, Fitch Ratings affirmed Argentina's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B' with a Stable Outlook. The issue ratings on Argentina's senior unsecured Foreign and Local Currency bonds are also affirmed at 'B'. The Country Ceiling is affirmed at 'B' and the Short-Term Foreign and Local Currency IDRs at 'B'. The Stable Outlook reflects Fitch's expectation that macroeconomic variables will improve gradually over the forecast horizon, but that the political environment continues to pose relevant risks, as the policy shift underway under the Macri administration does not count on broad-based social and political support to ensure its resilience through economic and electoral cycles. In January 2017, Moody's Investors Service assigned a B3 rating to the Government of Argentina's US$3.25 billion bond due 2022 and the US$3.75 billion bond due 2027. The outlook on the Government of Argentina's rating is stable. By March 2017, Moody's affirmed Argentina's B3 issuer rating and changed the ratings outlook to positive from stable. In a late September 2017 release, Moody's said it expects the Argentine economy to grow by 3% in 2017 and by 3.5% in 2018. PAMPA ENERGIA: Siemens to Expand Gas-Fired Power Station -------------------------------------------------------- Nathan Allen at Fox Business reports that Germany's Siemens AG said that it has won a contract with Argentina's Pampa Energia SA (PAMP.BA) to expand a gas-fired power station in Buenos Aires province. The company didn't disclose financial details of the contract. Siemens said it will work in collaboration with Techint SpA to increase the Genelba power plant's capacity to 364 megawatts from 168 megawatts, adding that it expects the plant to be commissioned in mid-2019, according to Fox Business. The contract encompasses engineering work as well as assistance with assembly and commissioning, Siemens said, while Techint will be responsible for overall installation, the report notes. Chief Executive Joe Kaeser said earlier this year that the company will seek to adapt its gas-and-power business to focus on Latin America, Asia and Africa as demand for large gas and coal turbines continues to dwindle in Europe and North America, the report relays. As reported in the Troubled Company Reporter- Latin America on June 26, 2017, S&P Global Ratings assigned its 'B' debt rating to Pampa Energia S.A.'s proposed $300 million five-year senior unsecured notes. The proposed notes will be denominated in Argentinean pesos but payable in dollars and will bear a fixed interest rate. The notes will have covenants that limit incurrence of debt. The covenants are the same as those on Pampa's $750 million senior unsecured notes and include a minimum EBITDA interest coverage of 2x and a maximum leverage defined as a debt-to-EBITDA ratio below 3.5x. TECHO SA: S&P Assigns B- Corp Credit Rating, Outlook Stable ----------------------------------------------------------- S&P Global Ratings assigned its 'B-' global scale corporate credit ratings to Techo S.A., Pahuichi S.R.L., and Techo En El Urubo S.R.L. The outlook on the three entities is stable. The ratings assigned to Techo, Techo en el Urubo, and Pahuichi reflect the companies' small scale compared with international peers, and the fact that the companies are concentrated in the city of Santa Cruz de la Sierra, despite their position as major players in the real estate industry in Bolivia. Their product mix is also concentrated in land plots for low-income families, which, in our view could result in earnings volatility. Although the three entities are considered part of Grupo Lafuente, have the same ownership structure, and publish combined financial statements, S&P doesn't treat them as a group because there is no legal and contractual basis that would allow it to view them as one entity. Techo, Techo en el Urubo, and Pahuichi's have a high percentage of inventory already sold, representing 42%, 73%, and 61%, respectively, of total inventory as of Dec. 31, 2016, which should provide some earnings stability because customers pay in monthly installments. The companies' commercial strategy has been effective: they've historically sold land plots to around 200,000 low-income families over the past 22 years while keeping low default ratios of around 5% to 7% over the past five years. S&P said, "The stable outlook reflects our expectation that the companies will maintain stable operating performance, collecting receivables from clients as scheduled. After a peak in leverage in the next few months, we expect increasing cash flows to gradually reduce leverage from 2018 onward, reaching levels of 50% cash flow from operations to debt in 2019 for each company." TECPETROL INTERNACIONAL: Fitch to Rate US$500MM Debt Issuance BB+ ----------------------------------------------------------------- Fitch Ratings' publishes the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'BB+' to Tecpetrol Internacional S.L (Tecpint). The Rating Outlooks are Stable. Fitch also expects to assign a Long-Term 'BB+(EXP)' rating to the company's proposed five or seven-year senior unsecured debt issuance of up to US$500 million. The company's fully owned subsidiary Tecpetrol S.A.'s (Tecpetrol) will issue the notes, which Tecpint will fully guarantee. The company expects to use the proceeds from the issuance to finance a portion of its Argentine subsidiary's (Tecpetrol), development strategy for Fortin de Piedra within Vaca Muerta. Tecpint's ratings reflect its diversified geographic footprint of oil and gas operating assets throughout six Latin American countries, including a 10% ownership in two blocks within Camisea (Peru), moderate pro-forma leverage and the implicit support provided by its parent, the Techint Group (Techint). Techint is the majority owner of its sister companies, Tenaris S.A. (Fitch rated A-/Stable) and Ternium S.A.. Tecpint's ratings are consistent with a 'BB' rating on a standalone basis and have received a one notch uplift as a result of the implicit parent support. Tecpint's ratings also reflect the company's somewhat predictable cash flow generation from businesses outside of Argentina, namely cash flow generated from Peru, Colombia and Mexico. The company's production potential in Argentina with its Fortin de Piedra asset bodes well for future cash flow generation, although development of this asset will further increase the company's already high exposure to Argentina. Tecpint's 2016 production size of 86,000 boe/d is aligned with other 'BB' rated issuers while its reserve life of 16.5 years is consistent with the company's credit quality. Tecpint, on a pro- forma basis post issuance, has a moderate leverage below 1.5x, as measured by Total Debt/EBITDA. The expected issuance rating of 'BB+(EXP)' assumes that all future debt issued by Tecpint or any of its subsidiaries will rank at least equally in right of payments or be subordinated to the proposed issuance. Tecpint's foreign currency rating is not constrained by the Republic of Argentina's country ceiling, due to its cash flows diversification outside of Argentina, primarily from Peru and its Camisea investment. KEY RATING DRIVERS Diversified Asset Base: Fitch views Tecpint's diversified asset base as a credit positive. Tecpint has oil and gas exploration and production operations in six countries across Latin America (Argentina, Peru, Ecuador, Mexico, Colombia and Bolivia) as well as gas transportation and distribution in Argentina and Mexico and electricity generation in Mexico. The company's principal reserves are in Peru (45%), Argentina (35%), Bolivia (8%) and Ecuador (9%). Approximately 60% of E&P revenues come from exports and sales of oil & gas and services outside Argentina, and nearly 65% of equivalent proved reserves are located outside of Argentina. Camisea Stake: Tecpint's 10% ownership stake in blocks 88 and 56 within the Camisea natural gas field in Peru, which contributed approximately 30% of its 2016 revenue, provides stable and predictable revenue far beyond the maturities of the company's debt obligations. Fitch forecasts Camisea's contribution to Tecpint's EBITDA will alone be more than adequate to cover interest expense throughout the life of the proposed bond. Camisea's reserve life is estimated to extend for more than 25 years; although the license agreements for Camisea's two blocks, 88 and 56, expire in 2040 and 2044, respectively. As of June 2017, Tecpint's stake in Camisea's proved reserves for blocks 88 and 56 amounted to 185 million barrels of oil equivalent and 47 million barrels of oil equivalent. Tecpint's' participation was approximately 26,800 boe/d in 2016. Production levels have been stable for the past few years and have significantly increased since the Camisea field started producing. Small Production Profile and Strong Hydrocarbon Reserve Life: Tecpint's ratings reflect the company's relatively small production size compared with international peers and relatively strong reserve life of approximately 16.5 years compared to peers. As of June 2017, Tecpint's total owned and operated production amounted to approximately 86,000 boe/d (31.4 MM boe per year) and its total operated production yielded an average production of 68,000 boe/d. As of June 2017, Tecpint's had a proved reserves of 518.1 MM BOE (71% gas and 29% Liquids). Peru consists of 45% followed by Argentina (35%), Bolivia (8%) and Ecuador (9%). Increasing Production: Fitch expects the company will materially increase production with the launch of its Fortin de Piedra asset within Vaca Muerta, which began production in 2017 and will incrementally increase production to a peak of approximately 30MM boe per annum by either 2019 or 2020. This could increase production by approximately 200% when comparing with 2016 levels and will increase the company's cash flow exposure to Argentina. Production is also expected to increase slightly in 2017 with the expansion of the company's Ipati (Aquio Block) in Bolivia. Implicit Parent Support: Tecpint's rating ratings reflect an implicit support from its parent, The Techint group. Tecpint's ratings have received a one notch uplift from its standalone credit profile of 'BB' as a result from its parent implicit support. Techint is a global industrial conglomerate that is the principal investor in Tenaris, Ternium, Techint Engineering & Construction, Tenova and Humantis. Techint's 2016 revenues were USD 15.3 billion with total assets of USD 29.1 billion. Techint has a very conservative capital structure with strong cash flow generation. Favorable Environment for Vaca Muerta: Fitch believes the price environment for natural gas (NG) in Argentina is favorable as subsidies will remain through 2021. On November 2017, the Argentine government agreed to extend existing natural gas (NG) subsidies for all unconventional gas production. Domestic prices for NG will remain high at USD7.50 per million Btu (MMBtu) for new production, more than twice the NG prices in the U.S. and then decrease by USD0.50 per MMBtu over the next three years and stabilize at USD6.00 per MMBtu in 2021. The Argentine government appears to remain committed to attracting major oil and gas companies to invest in exploration and production in Argentina's prolific Vaca Muerta shale basin. Strong Financial Profile: Tecpint reported approximately USD294 million of adjusted EBITDA at a 44% margin and USD 260 million of debt in year-end 2016. On a pro forma basis and taking into consideration the company's planned USD700 million financing plan, Fitch estimates the company's year-end 2017 leverage to be moderate at 1.8x. Leverage as measured by total proven reserves (1P) to pro forma total debt will be approximately USD1.64 of debt per barrel. DERIVATION SUMMARY Tecpint's IDR of 'BB+'/Stable reflects its diversified geographic footprint across the region with operations in six different countries, strong ownership structure, moderate pro-forma leverage, predictable cash flow generation and production potential in Argentina. Tecpint's production size of approximately 86,000 boe/d compares favorably to 'B' rated oil and gas E&P producers in the region. These peers include Frontera Energy with production of 72,000 boe/d, Kosmos Energy with ~30,000 boe/d, Geopark Limited with 22,346 boe/d and CGC with ~23,000 boe/d, but Tecpint production size is below some other 'BB' peers such as Murphy Oil Corporation with 176,000 boe/d and Newfield Exploration with 138,000 boe/d. Tecpint's reserves life of 16.5 years at 2016 production figures compares positively to its 'BB' rated peers Murphy Oil Corporation with 10.7 years and Newfield Exploration 9.7 years and exceeds its 'B' rated peers YPF with 8.7 years and Frontera Energy with 4.3 years. The ratings also reflect Fitch's expectation that the company will be able to increase production size by 2019 as the company will begin producing from its Fortin de Piedra Block in Vaca Muerta. Tecpetrol owns the second largest wet gas acreage after YPF and was second in drilling activity in Vaca Muerta in 2017. Production costs in Vaca Muerta remains a challenge to the market as the basin requires logistical and operational improvements to be more competitively regionally. In 2016, Tecpint had a lower Total Debt/EBITDAR of 0.8x compared to its peers YPF (B/Positive) of 2.6x, CGC (B/Negative) of 4.7x, Geopark Limited (B/Stable) at 4.8x, Murphy Oil Corporation (BB/Stable) at 3.2x and Newfield Exploration (BB+/Positive) at 2.7x and in line with Frontera Energy (B+/Stable) at 0.8x. Total debt to 2016 proven reserves is USD 1.64boe compared to USD8.70boe for YPF, USD 2.30boe for Frontera Energy, Compania General de Combustibles (CGC) 7.40boe, Geopark Limited USD 4.60boe, Murphy Oil Corporation USD 4.46 boe and Newfield Exploration at 5.64boe. Fitch expects leverage to moderately increase by 2018 as the company increases debt obligation to partially finance and expedite its Fortin de Piedra production expansion expected to peak in 2019. KEY ASSUMPTIONS Fitch's key assumptions within Fitch rating case for the issuer include: - Long-term oil prices converge with world prices over the next five years; - Daily BOE Production growth to double in 2019 when Fortin de Piedra reaches peak production; - Fixed unconventional Gas until 2021 (US$ 7.50 /MM BTU for 2017 and 2018, US$ 7.00/ MM BTU for 2019, US$ 6.50/ MM BTU in 2020, decreasing to US$ 6.00 in 2021); - EBITDA margins expected to grow as costs are maintained and revenues increase due to additional production; - Total Capex of USD 2.3B between 2017-2020 returning to historical levels; - Additional of USD 700 million in debt through a Syndicated Loan and proposed USD 500 million Senior Unsecured Bond. - Recovery analysis assuming that Tecpint would be considered a going-concern in bankruptcy and that the company would be reorganized rather than liquidated. In Fitch going-concern approach: - Tecpint's going-concern EBITDA estimate is based on 2016 capex and interest expense and reflects Fitch's view of a sustainable, post-reorganization EBITDA level. - Applying an EV multiple of 6.0x which is the 10 year historical take out multiple applied to energy companies. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action - An upgrade of Argentina, Bolivia and/or Ecuador's ratings and country ceilings may result in a positive rating action. - Production rising consistently to 170,000 boe/d on a sustained basis; - Reserve life stays robust, despite production growth, at approximately 10 years; - Company's ability to maintain a conservative financial profile with gross leverage of 2.0x or below; Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - The ratings could be negatively affected by a deterioration of Argentina, Bolivia and/or Ecuador's credit quality combined with a material increase in the government's interference in the sector. - An increase of sustained, after expansion, leverage above 3.5x coupled with a decrease in interest coverage below 4.5x also be negatively affect ratings. LIQUIDITY As of September 2017, Tecpint had a cash balance of USD227 million, which more than adequately covers the company's pro forma interest expense up to year end 2020. The company is projected to reach a max debt of USD792 million by 2019 consisting of a USD200 million bank loan and USD 500 million to 600 million five to seven years senior unsecured notes. FULL LIST OF RATING ACTIONS Tecpetrol Internacional S.L. -- Long-Term Foreign Currency Issuer Default Rating 'BB+'; -- Long-Term Local Currency Issuer Default Rating 'BB+' -- USD 500 million Senior Unsecured proposed bond issuance guaranteed by Tecpetrol Internacional S.L. 'BB+(EXP)'. The Rating Outlook is Stable. =============== B A R B A D O S =============== BARBADOS: IMF Says Gov't Needs to Do More to Fix Economic Problems ------------------------------------------------------------------ Caribbean360.com reports that the International Monetary Fund is not bowled over by Barbados' economic progress or the Government's plans to fix the island's spiraling debt and falling international reserves. In fact, it has advised the Freundel Stuart administration to take "urgent" corrective action, according to Caribbean360.com. Following an IMF team's Article IV Consultation, head of the mission and Deputy Division Chief Judith Gold warned that despite the introduction of revenue generating measures, Government would not meet its targets, describing the program as simply "too ambitious," the report relays. The Fund has forecast that the Government was likely to fall short of its overall targets, even with the substantial hike in the National Social Responsibility Levy (NSRL) from two to ten per cent, an introduction of a new sales tax on foreign currency transactions, and a hike in the excise duty on fuel, the report notes. It specifically pointed to exemptions to the NSRL, lower- than-expected non-oil imports, shortfalls in some other revenues, and high transfers as being responsible for that likely shortfall, the report says. The Washington-based institution also warned that the country's international reserves, which stood well below the 12 weeks benchmark at just 8.6 weeks of import cover or US$549.7 million at the end of September, were likely to dip even further by yearend as Government continues to service its debt, and private foreign inflows remain weak, the report discloses. Against this backdrop, it advised that "substantial further fiscal effort is needed to decisively place the debt on a downward trajectory," the report relays. "Given the urgency in addressing funding, balance of payment risks, the high debt, and the limited policy options, the fiscal adjustment must continue, with a focus on accelerating [state- owned enterprises' reforms to facilitate a significant and durable reduction in transfers," Ms. Gold said, adding that structural reforms to support growth and improve the business climate for domestic and foreign investment were also critical, the report relays. "These reforms would aim to improve business processes, such as significantly reducing clearance times for immigration and customs, accelerating approval of building permits, and streamlining legal procedures," she added, the report notes. The report relays Ms. Gold also recommended that any adjustment strategy should focus on addressing the high transfers, containing other current expenditures and maintaining a strong revenue effort. "Reforms of state owned enterprises should include improved management, cost recovery, reduced services, mergers, closures, and privatization. Containing other current expenditures, including the wage bill, and Government pensions is also critical," she said, the report adds. As reported by the Troubled Company Reporter-Latin America, S&P Global Ratings lowered on Sept. 27, 2017, its long-term local currency sovereign credit rating on Barbados to 'CCC' from 'CCC+'. S&P also affirmed its long-term foreign currency sovereign rating at 'CCC+. The outlook on both long-term ratings is negative. S&P also affirmed the short-term ratings at 'C'. The transfer and convertibility assessment for Barbados remains 'CCC+'. =========== B R A Z I L =========== CENTRAIS ELECTRICAS: To Get US$276MM-IDB Support ------------------------------------------------ The Inter-American Development Bank (IDB) has approved a multiple- works investment loan in the amount of US$276.05 million to Centrais Eletricas de Santa Catarina-Distribuicao S.A. (CELESC-D), the electric power distribution utility serving Brazil's state of Santa Catarina. The program's overall objective is to help boost productivity throughout the state of Santa Catarina by providing a higher quality and more reliable supply of electric power. The program's implementation is expected to increase CELESC-D's capacity to meet projected demand by 2022, which is estimated to be 28,270 Gigawatt hours. The program will benefit 2.8 million consumers in CELESC-D's concession area of 6.5 million people, by enabling the company to meet future demand for electricity with better quality service indicators. Beneficiaries will include the industrial sector, which accounts for 41 percent of CELESC-D's demand. The state of Santa Catarina will experience fewer power outages, which should boost its productivity. The program will also make it possible to incorporate new clients in the concession area, while improving service continuity indicators up to the regulatory limits established in its concession contract. The program represents 60 percent of CELESC-D's planned investments over the next five years. The installation of new distribution lines, substations, and feeder lines is essential to meet the increase in electricity demand in Santa Catarina. This new infrastructure will help reduce the frequency and duration of outages by providing additional supply routes in the event of outages, thereby increasing service reliability. The loan also will support the expansion and improvement of the distribution network by installing new lines, substations, equipment, and feeder lines, expanding the low voltage network, replacing and installing new meters to satisfy growth in demand, and improving quality indicators. The program also provides for improvements to CELESC-D information management systems. The development of a gender promotion strategy -- to include updating the Young Apprentice program -- is expected to improve the company's management activities over the long term. The US$276,051,000 investment loan is for a 25-year term, including a 5.5-year grace period, at a LIBOR-based interest rate, and is funded through the IDB's Ordinary Capital. The borrower's financial obligations will be secured with the sovereign guarantee of the Federative Republic of Brazil, as well as the guarantee of the State of Santa Catarina on the borrower's performance obligations, which include the obligation to provide local counterpart resources. The program provides that CELESC-D will provide a counterpart contribution of US$101,230,000. As reported in the Troubled Company Reporter-Latin America on Nov. 14, 2017, Fitch Ratings has affirmed Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Negative Outlook. JBS SA: Says It's Done With Asset Sales as Earnings Boost Outlook ----------------------------------------------------------------- Gerson Freitas Jr. at Bloomberg News reports that JBS SA said it's done selling assets as record earnings and brighter prospects for its beef, chicken and pork businesses in the U.S. offset the fallout from the scandal that has engulfed its controlling family. The meat giant said it cut net debt to BRL45.5 billion in the third quarter, or 3.42 times earnings before interest, taxes, depreciation and amortization, below the company's year-end target multiple of 3.5. Further deleveraging is expected as proceeds from some deals that were completed last month are used to pay down borrowings, said Andre Nogueira, JBS USA's chief executive officer, according to Bloomberg News. The world's largest meat producer has raised BRL6 billion ($1.8 billion) over the past few months after offloading some beef operations in South America, U.K. chicken producer Moy Park and a stake in dairy producer Vigor Alimentos SA, Bloomberg News notes. It's also close to selling its Five Rivers Cattle Feeding division, people familiar with the matter told Bloomberg last month. Some of those assets were included in a divestment plan announced in June after JBS was plunged into crisis following the revelation that Wesley and Joesley Batista, the brothers who control the company, confessed to bribing more than 1,800 politicians, Bloomberg News relays. 'No Need' "There is no need of further divestment," Mr. Nogueira said by phone, notes the report. JBS's foreign businesses, which account for about 75 percent of total sales, should perform even better next year amid near-full employment conditions in the U.S. and ample supplies of cattle and feed, boosting cash generation and allowing the company to quickly reduce debt levels, he said, Bloomberg News relays. "Our leverage is already the lowest among Brazilian peers," he added. Meat operations in the U.S., which account for more than two- thirds of JBS's revenues, have benefited from rising demand both at home and abroad, while the cost of feeding livestock and poultry remains low after farmers harvested back-to-back bumper corn crops, Bloomberg News says. JBS and peers including Tyson Foods Inc. have had profitable margins on beef and pork-processing for much of the year, HedgersEdge data show. JBS will likely maintain its cattle slaughtering capacity in Brazil while seeking to boost volumes after a steep decline in the past quarter, Chief Operating Officer Gilberto Tomazoni said by phone, Bloomberg News notes. The unit, which accounts for about 12 percent of total sales, posted the worst results among all JBS businesses in the third quarter, with an Ebitda margin of 1.4 percent, Bloomberg News says. As reported in the Troubled Company Reporter-Latin America on Nov. 22, 2017, Fitch Ratings has downgraded JBS S.A.'s (JBS) Long-term Foreign and Local Currency Issuer Default Ratings (IDRs). The senior unsecured notes guaranteed by JBS S.A. were downgraded to 'BB-' from 'BB.' GOL LINHAS: S&P Puts Prelim 'B-' Issue Rating on Sr. Unsec. Notes ------------------------------------------------------------------ S&P Global Ratings assigned a preliminary 'B-' issue rating to the senior unsecured notes to be issued by Gol Finance, the subsidiary of Brazilian airline Gol Linhas Aereas Inteligentes S.A. (Gol), which will unconditionally guarantee the notes. The preliminary recovery rating on the notes is '3', indicating meaningful recovery prospects (50%-70%; rounded estimate 60%). S&P said, "At the same time, we placed our 'CCC+' long-term global scale corporate credit rating, our 'brB' Brazil national scale long-term rating on Gol, and our 'CCC+' issue ratings on Gol's existing senior unsecured notes due 2020, 2022, and 2023 on CreditWatch with positive implications. "We revised the recovery rating on the senior unsecured notes to '3' from '4'. We now expect meaningful recovery prospects (50%- 70%; rounded estimate 60%). "The CreditWatch placement and the preliminary rating on Gol's senior unsecured bonds reflect our view that we may upgrade Gol by one notch if it succeeds in placing the new notes, since this would allow the company to advance with its liability-management strategy by prepaying debts for a combined amount of about $200 million. Furthermore, the notes' proceeds would strengthen the company's cash position by about $150 million and reduce liquidity pressures from maturities over the next 12 months. We also believe Gol's liquidity would further benefit from the reduced interest burden, because we expect the target coupon to be reasonably lower than the company's current interest on the prepaid debts, along with lower interest rates in Brazil. "Furthermore, we believe that Gol's liquidity will benefit from the notes' placement not only in quantitative terms but also qualitatively, since it shows that market perception of Gol is improving, as indicated by the majority of its notes trading at or above par." In addition to its capacity to access capital markets, Gol also continues to enjoy increasing operating margins stemming from its strategy of focusing on more efficient routes and resizing its operations to optimize the use of its assets. S&P believes that the company will deliver strong cash generation in 2017, mainly supported by improving demand and operating efficiency, increasing ancillary revenues such as luggage fees and in-flight catering, and working capital gains. S&P said, "Despite the expected benefits from the placement of new notes, we continue to view the company's capital structure as negative because the combination of Gol's high debt and exposure to foreign currency in its debts and cost base could increase the volatility of its financial metrics and cash consumption. Even though Gol has U.S. dollar-denominated assets on its balance sheet (such as aircraft), has been generating some cash in foreign currency, and has a hedging position for part of its fuel needs and short-term interest, the company remains exposed to exchange rates volatility in its lease obligations and unhedged debt principal. "Nevertheless, we believe Gol's financial flexibility will improve once it successfully issues new debt and gradually increases operating cash flows, with rising demand and profitability. These factors will also support the company's deleveraging and improve the capital structure in the long term, which in our view would allow us to rate Gol higher than our current 'CCC+' rating. "The CreditWatch with positive implications reflects our view that we could upgrade Gol by one notch if the company succeeds in placing its senior unsecured notes due 2024 and uses the proceeds for liability-management purposes. We understand that under this scenario Gol will strengthen its liquidity position by gradually reducing interest burden, and increasing its cash position ahead of debt maturities in the next 12-24 months. At the same time, the placement of new notes will prove that Gol is able to access capital markets, corroborating improving market perception of the company. We may affirm our 'CCC+' rating on Gol if the company is unable to issue the proposed notes, since an upgrade would depend on a longer record of improved operations and cash generation to soften liquidity pressures over the next 12-24 months." ITAU UNIBANCO: Fitch Assigns B+ Rating to T1 Subordinated Notes --------------------------------------------------------------- Fitch Ratings has assigned Itau Unibanco Holding S.A. (IUH) upcoming issuance of Tier I Unsecured Subordinated Notes an expected rating of 'B+(EXP)'. These Tier 1 Subordinated Notes will be direct, unsecured and subordinated obligations of the Issuer. The final rating is contingent on the receipt of final documents conforming to the information received to date. The notes will be issued by IUH's Grand Cayman branch for a principal amount and interest rate that will be determined at the time of the issuance. The notes will have no fixed maturity date as they are perpetual securities; however, the notes may be redeemed at IUH's option on or after the fifth year anniversary of this issuance. The payment of interest amounts due with respect to the Tier 1 Subordinated Notes shall be made solely with funds from profits and profit reserves available for distribution as of the latest date of determination, in accordance with Brazilian Corporate Law. Any interest amounts not paid as a result of the foregoing shall not accrue and shall not be deemed due and payable and shall not constitute a Payment Default. IUH is the largest private-sector financial conglomerate in Brazil and Latin America, and its Viability Rating (VR) of 'bb+' is one notch above Brazil's sovereign rating, reflecting the exceptionally strong business and financial profile of the bank relative to the operating environments in which it operates. For further details on the drivers and sensitivities of the VR and other of IUH's issuer ratings, please refer to Fitch's press release "Fitch Affirms Itau Unibanco Holding S.A.'s Ratings", dated August 29, 2017. KEY RATING DRIVERS SUBORDINATED PERPETUAL T1 NOTES Fitch uses IUH's VR as the anchor rating for the expected rating. Due to the high loss-absorbing features of this subordinated, perpetual and unsecured issuance, Fitch's baseline scenario is that these securities will be notched -4 from the VR anchor (-2 for loss severity, plus -2 for non-performance risk). However, Fitch's criteria factors in the compression issue where the VR is 'bb+' or lower, providing some room for a narrower notching. Therefore, the overall notching for these securities is -3, given that the current IUH's VR rating is non-investment grade. The notes have the option to defer coupon payments on a non- cumulative basis subject to certain conditions being met, and are subject to write-down if common equity Tier 1 (CET1) ratio falls below 5.125%. In Fitch's view, both the loss severity and the non- performance risk of these securities are relatively higher than the outstanding and legacy IUH's T2 hybrid securities. RATING SENSITIVITIES SUBORDINATED PERPETUAL T1 NOTES IUH's expected rating for the proposed T1 Perpetual Notes is sensitive to a change by Fitch to IUH's VR. The hybrid securities rating is likely to move in line with any potential changes in IUH's VR. However, if the latter eventually changes to become an investment grade VR (i.e. 'bbb-' or higher), then the notching of these notes will change to a rating level equivalent to -4 from the bank's VR, considering that the notching compression benefit would no longer apply in that scenario. Fitch assigns the following rating: Itau Unibanco Holding S.A. -- Long Term Rating on Tier I Subordinated Perpetual Notes 'B+(EXP)' =========== M E X I C O =========== CEMEX SAB: Discloses Offering of EUR-Denom. Senior Secured Notes ---------------------------------------------------------------- CEMEX, S.A.B. de C.V. disclosed its intention to offer senior secured notes denominated in Euros, subject to market and other conditions. CEMEX intends to use the net proceeds from the offering of the Notes to fund the redemption of all or a portion of (i) U.S.$610,660,000 outstanding aggregate principal amount of the 6.500% Senior Secured Notes due 2019 issued by CEMEX on August 12, 2013, and/or (ii) EUR400,000,000 outstanding aggregate principal amount of the 4.750% Senior Secured Notes due 2022 (the "January 2022 Euro Notes") issued by CEMEX on September 11, 2014, and the remainder, if any, for general corporate purposes, including to repay other indebtedness, all in accordance with CEMEX's facilities agreement, dated as of July 19, 2017 (the "2017 Credit Agreement"), entered into with several financial institutions. Pending such application, proceeds may also be applied to temporarily reduce amounts outstanding under the revolving credit facility tranche of the 2017 Credit Agreement or short-term bilateral facilities. The December 2019 U.S. Dollar Notes are redeemable at the option of CEMEX on and after December 10, 2017, at a redemption price of 103.250% of the principal amount thereof, plus accrued and unpaid interest through the redemption date, and the January 2022 Euro Notes are redeemable at the option of CEMEX on and after January 11, 2018, at a redemption price of 102.375% of the principal amount thereof, plus accrued and unpaid interest through the redemption date. The Notes would share in the collateral pledged for the benefit of the lenders under the 2017 Credit Agreement and other secured obligations having the benefit of such collateral, and would be guaranteed by CEMEX Mexico, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de MÇxico, S.A. de C.V., New Sunward Holding B.V., CEMEX Espa§a, S.A., Cemex Asia B.V., CEMEX Finance LLC, CEMEX Corp., Cemex Egyptian Investments B.V., CEMEX France Gestion (S.A.S.), Cemex Research Group AG and CEMEX UK. CEMEX SAB: Fitch Rates Proposed EU400MM Sr. Secured Notes BB- ------------------------------------------------------------- Fitch Ratings has assigned an expected rating of 'BB-(EXP)' to CEMEX S.A.B. de C.V.'s (CEMEX) proposed EU400 million senior secured notes. Proceeds from the notes will be used for general corporate purposes, including liability management. The guarantors for the notes will be CEMEX Mexico S.A. de C.V., CEMEX Espana S.A., New Sunward Holding BV, Cemex Asia B.V., Cemex Egyptian Investments B.V., CEMEX France Gestion (S.A.S.), Cemex Research Group AG, CEMEX UK, CEMEX Concretos S.A. de C.V., CEMEX Corp., Tolteca de Mexico, S.A. de C.V., and CEMEX Finance LLC. KEY RATING DRIVERS Strong Business Position: CEMEX's 'BB-' IDRs continue to reflect its strong and diversified business position. The company is one of the largest producers of cement, ready-mix, and aggregates in the world. CEMEX's main geographic areas, in terms of EBITDA before intercompany eliminations, include Mexico (38%), Central and South America (26%), the U.S. (17%), Europe (10%), and Asia, Middle East, and Africa (17%). The company's product and geographic diversification offset some of the volatility associated with the cyclical cement industry. Strengthening Credit Profile: Based on Fitch's calculations, net leverage improved to 4.3x as of the latestes-12-month (LTM) Sept. 30, 2017 from 4.8x in 2016 and 5.7x in 2015 driven by CEMEX's USD3.8 billion gross debt reduction since December 2015. Asset sales have been a key component of debt reduction. Fitch calculates net leverage for CEMEX to be around 4.0x for 2017 and declining further to 3.7x for 2018, illustrating CEMEX's improving capital structure. Improving Cash Flow Generation: CEMEX generated positive free cash flow (FCF) of USD1.3 billion based off Fitch's calculations during 2016, which compared favorably to USD587 million in 2015 and USD146 million in 2014. Keys to stronger cash flow generation have been volume growth, cost reduction measures, and improvement in working capital days. Fitch projects CEMEX's FCF will fall to around USD700 million in 2017, as working capital inflows will not matched those achieved during 2016. Reductions in gross debt, as well as a lower cost of debt, have lowered financial expenses and positively contribute to free cash flow generation. Challenges in Mexico: CEMEX has benefited from continued price increases in Mexico, despite slower construction activity mainly due to weak government spending and infrastructure investment. Residential construction is expected to remain volatile amid macro-economic uncertainty. High inflation fuelled by currency depreciation and higher gasoline prices has prompted higher interest rates. Somewhat offsetting has been Mexico's decreasing unemployment and strong remittance flows from U.S. workers. Infrastructure investment will likely find support in public spending tied to reconstruction of earthquake affected areas, the construction of Mexico City's airport and the wrap up of federal and local terms of office. U.S. Infrastructure Spending: CEMEX is poised to benefit from increased private and public infrastructure spending as the second largest U.S. producer with approximately 16 million metric tons of capacity. Highway spending should accelerate, driven by planned spending under the long-term highway bill and state initiatives to fund local highway projects. Government proposals to boost infrastructure spending would support positive, long-term cement demand and support additional price increases. FX Exposure: CEMEX reported 69% of total debt was denominated in U.S. dollars compared to a majority of its EBITDA generation in foreign currencies. Somewhat mitigating this risk is that a majority of CEMEX's cash is held in U.S. dollars, most debt is long-term with an average maturity of 5.1 years, and the company proactively manages its amortization schedule. Furthermore, CEMEX's U.S. dollar-generated EBITDA matches its U.S. dollar- interest expense and is expected to continue to going forward driven by improving EBITDA generation in the U.S. and lower interest expense due to CEMEX's refinancing activities and lower gross debt levels. DERIVATION SUMMARY CEMEX's ratings of 'BB-'/Positive reflect its diversified position across several large markets, notably the U.S. and Mexico. CEMEX benefits from pricing power across its key markets, which allows the company to have some flexibility in its profitability compared to its peers. The rating is tempered by CEMEX's high level of gross debt and weak credit metrics compared to other cement producers such as LafageHolcim Ltd (BBB/Stable) and HeidelbergCement AG (BBB-/Stable). KEY ASSUMPTIONS -- U.S. cement sales volumes increase low-single digits in 2017; -- Mexico cement sales volumes increase low-single digits in 2017; -- Consolidated sales volume growth of low-single digits in 2017; -- EBITDA margin above 20% for 2017; -- Capital expenditures of approximately USD750 million in 2017; -- Positive FCF generation in 2017 and 2018 used for debt reduction; -- Receipt of USD1.3 billion from completed asset sales used debt reduction; -- Mexican peso to U.S. dollar exchange rate to remain at 20.5 in 2017 and 2018; -- Fitch's pesos to U.S. dollar exchange rates used in 2016 were 20.7 spot rate and 18.7 average rate in 2016, and 17.2 spot rate and 15.9 average rate in 2015. RATING SENSITIVITIES Rating downgrades are not likely during 2017 as CEMEX's ability to reduce its gross debt through the proceeds of its asset sales coupled with continued free cash flow generation should continue throughout 2017. CEMEX's Outlook would likely be revised to Stable should a loss of positive momentum in the U.S. market occur or a material decline in volumes in its Mexico market resulting in net leverage reverting towards 5.0x. A significant loss in cash flow generation resulting in net leverage of around 5.5x and/or gross leverage around 6.0x on a sustained, could result in a negative rating action. Future developments that may, individually or collectively, lead to an upgrade of CEMEX's ratings include: -- CEMEX is close to Fitch's previous rating action triggers of net leverage at or less than 4.0x or gross leverage at or less than 4.5x based on 3Q17 results. An ability to maintain and improve these metrics over the coming quarters would likely result in an upgrade within the next 12 months. -- Fitch projects that CEMEX's EBITDA in its U.S. operations will grow to USD700 million during 2017 from USD619 million in 2016. This projection incorporates an expectation that single-family and multi-family housing starts in the U.S. will total 1.2 million in 2016. Growth beyond this figure would be positive for the company's U.S. business and would accelerate its deleveraging process. -- Cement demand in Mexico is likely to grow at a slower pace during 2017. Fitch currently projects EBITDA in this market to remain stable at around UDS1 billion in 2017 as CEMEX's 12% price increase during the year offsets lower volume growth and risks of higher inflation. Growth above Fitch's figures could result in higher deleveraging and would be factor into a possible positive rating action. LIQUIDITY CEMEX has a very manageable amortization schedule as a result of its continued aggressive refinancing efforts over the past few years with an average life of debt of 5.1 years. The company had USD449 million of cash and marketable securities compared to minimal short term debt as of Sept. 30, 2017. Most of the company's marketable securities are held in U.S. and Mexican government bonds. CEMEX entered into a new facilities agreement for USD4.05 billion with a 5-year term and a revolving credit facility of USD1.1 billion, improving its previous bank facilities terms and conditions. FULL LIST OF RATING ACTIONS CEMEX S.A.B. de C.V. -- Senior Secured Notes at 'BB-(EXP)'. CEMEX SAB: S&P Rates New Senior Secured Notes Due 2024 'BB' ----------------------------------------------------------- S&P Global Ratings assigned its 'BB' issue-level rating and recovery rating of '3' to CEMEX S.A.B. de C.V.'s (global scale: BB/Stable/--; national scale: mxA/Stable/mxA-1) euro-denominated senior secured notes due 2024. The recovery rating of '3' indicates that bondholders can expect a meaningful (50%-70%, in the higher band of the range) recovery in the event of a payment default. CEMEX intends to use the net proceeds to fund the redemption of all or a portion of outstanding aggregate principal amount of the December 2019 dollar notes and/or January 2022 euro notes and the remainder, if any, for general corporate purposes, including repayment of other debt, all in accordance with the 2017 Credit Agreement. Pending such application, proceeds may also be applied to temporarily reduce amounts outstanding under the revolving credit facility tranche of the 2017 Credit Agreement or short-term bilateral facilities. The notes will be secured by a first-priority security interest over substantially all the shares of CEMEX MÇxico, S.A. de C.V., Cemex Operaciones MÇxico, S.A. de C.V., CEMEX TRADEMARKS HOLDING Ltd., New Sunward Holding B.V., and CEMEX Espa§a, S.A. (together, the Collateral) and all proceeds of such Collateral. The notes will be unconditionally guaranteed by CEMEX's main subsidiaries, under the same terms as all of the company's other senior capital markets debt. Recovery Analysis Key analytical factors S&P said, "We have valued CEMEX on a going concern basis, given our belief that it would continue to have a viable business model because of its leading market position in the markets where it operates. "We use an EBITDA multiple valuation approach, with a multiple of 6.0x given the company's stronger business risk profile than of its peers and an emergence EBITDA of $1.2 billion after a cyclicality adjustment of 10%." Simulated default assumptions S&P said, "Our hypothetical simulated default scenario for CEMEX assumes a sharp decline in cement demand, associated with continued weakness in residential and non-residential construction activities in the company's core markets, resulting in lower cash flow generation. Also, under this scenario, CEMEX would face restrictions in accessing the debt capital markets to refinance its short-term maturities. Under this scenario, we assume that the company would face a payment default in 2020, when its next sizeable debt amortization is due." Simplified waterfall -- S&P estimates CEMEX's unadjusted gross enterprise value at $7.3 billion and we deduct 7% in related administrative expenses, given the company's complex capital structure, leading to a net enterprise value of $6.8 billion. -- S&P believes that this value would provide meaningful (50%- 70%) recovery prospects for the senior secured note holders. This would lead to a negligible (0%-10%) recovery for the company's subordinated debt, including the mandatorily convertible securities holders, resulting in a two-notch rating differential relative to the company's corporate credit rating. RATINGS LIST CEMEX S.A.B. de C.V. Corporate credit rating Global scale BB/Stable/-- National scale mxA/Stable/mxA-1 Rating Assigned CEMEX S.A.B. de C.V. Senior secured BB Recovery rating 3(60%) GRUPO POSADAS: S&P Alters Outlook to Pos., Affirms B+ CCR --------------------------------------------------------- S&P Global Ratings revised its outlook on Grupo Posadas S.A.B. de C.V. (Posadas) to positive from stable. S&P said, "We also affirmed our 'B+' corporate credit and issue-level ratings on the company. The recovery rating on the notes remains at '3' (rounded estimate 65%), indicating our expectation of a meaningful recovery, for unsecured lenders in a hypothetical event of a payment default." Despite difficult conditions in Mexico's lodging industry during the third quarter of 2017, Posadas has posted a solid operating performance and stable cash flow generation throughout the year, while it has been executing its expansion plan without requiring external funding. Asset sales have contributed to a strengthening of the company's liquidity, which supports S&P's view that Posadas will continue funding its investment requirements with own resources. The outlook revision reflects the potential of an upgrade in the next 12 to 18 months once Posadas' debt to EBITDA trends below 4.0x and its EBITDA interest coverage is above 3.0x. This will allow the company to have greater flexibility to absorb foreign currency volatility despite its exposure to the dollar, given that most of its debt is denominated in this currency. Posadas' expansion plan incorporates the opening of more than 45 new developments by 2019 with remaining capital expenditures of about MXN4 billion throughout this period, which S&P expects the company to fund with own resources. Recently, the company reached an agreement with Fibra Hotel (FIHO; not rated) for the sale of its Condesa Cancun Hotel for a total of MXN2.9 billion, which will strengthen Posadas' liquidity and better position the company to pursue its growth plans. To support its expansion, the company benefits from having an effective loyalty program that incentivizes recurrent travel that will contribute to the stabilization of new properties. S&P said, "Historically, Posadas has maintained occupancy rates above 70%, which we expect to remain so amid an effective commercial strategy and the favorable location of its properties. Room refurbishments, coupled with dollar-referenced rates, will continue to boost the company's average daily rates (ADRs), in our view, and mitigate Posadas' exposure to currency fluctuations." S&P said, "Although Posadas' growth strategy will require significant investments in the next couple of years, we expect the company to fund them through the sale of its Condesa Cancun hotel. This will prevent external funding needs through the expansion phase. In accordance, we expect a solid operating performance and stable cash flow generation, which should contribute to a gradual deleveraging." *********** 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 * * *