/raid1/www/Hosts/bankrupt/TCRLA_Public/180417.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, April 17, 2018, Vol. 19, No. 75
Headlines
A R G E N T I N A
BANCO DE LA CIUDAD: Moody's Assigns B2 FC Sr. Unsec. Debt Rating
B R A Z I L
BANCO DO BRASIL: Posts Early Results of Tender Offers for Notes
BANCO DO BRASIL: Fitch to Rate New Sr. Notes Due 2023 'BB-(EXP)'
BANCO DO BRASIL: Moody's Rates New Sr. Unsecured Notes Ba2
BNDES: New CEO Appointment No Impact on Fitch Ratings
C O S T A R I C A
AUTOPISTAS DEL SOL: Fitch Affirms BB International Notes Rating
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: High Tolls on Road Hurts Tourism
DOMINICAN REPUBLIC: Agro Must Produce as Export, Tourism Demand Up
M E X I C O
GRUPO BIMBO: Fitch Assigns BB+ Rating to US$500MM Sub. Notes
GRUPO BIMBO: Moody's Rates New $500MM Sub. Perpetual Notes Ba1
P U E R T O R I C O
HME HOLDINGS: Court Approves Disclosure Statement
TOYS R US: MGA Entertainment Puts Bid to Buy U.S., Canada Stores
TOYS "R" US: Receives $80M in DIP Financing to Boost Liquidity
V E N E Z U E L A
ELECTRICIDAD DE CARACAS: In Default, Trustee Says
X X X X X X X X X
LATAM: ECLAC Wants Region to Reinvigorate Integration
- - - - -
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A R G E N T I N A
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BANCO DE LA CIUDAD: Moody's Assigns B2 FC Sr. Unsec. Debt Rating
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Moody's Investors Service (MIS) assigned a foreign currency debt
rating of B2 to the proposed senior unsecured notes to be issued
by Banco de la Ciudad de Buenos Aires (Ciudad) for a total amount
of up to USD500 million peso equivalent, which will be due in
2024. The notes are governed by New York law, and will be payable
in USD and denominated in Argentine pesos at specified fixed
exchange rate determined at closing, and sold in the local and
foreign capital markets. Investors will pay the subscription price
of the Notes in U.S. dollars and will bear the foreign exchange
risk on the notes.
The following rating was assigned to Banco de la Ciudad de Buenos
Aires's proposed senior unsecured notes:
* Foreign currency senior unsecured debt rating
-- B2; stable outlook
RATINGS RATIONALE
In Moody's view, the B2 rating assigned to Ciudad incorporates
Argentina's operating environment, which remains challenging
despite various market-friendly policy reforms implemented in
recent months by the current administration. These challenges
outweigh Ciudad's strong financial fundamentals, including good
capitalization, a diversified lending mix, and adequate liquidity
metrics.
While the B2 rating is constrained by Argentina's sovereign bond
rating, it also acknowledges Ciudad's well-established franchise
as financial agent of the City of Buenos Aires, a role that
provides the bank with a strong regional identity ensuring stable
and solid deposit position. Its diversified range of banking
services and access to low cost core deposits from its retail and
corporate customers result in recurring earnings generation.
Despite the still high inflation level in Argentina, net income to
tangible assets ratio was 1.95% in 2017 with a high net interest
margin of 10.42%, though still low compared with peers.
The bank's 1.5% nonperforming loan ratio in December 2017 was
below the system-average of 2%, and largely contained by the high
growth rate of the loan book. The loan loss reserve coverage ratio
remain tight at 102% of problem loans, at a time when the bank
continues to expand beyond the system's average. The risk to asset
quality is partially mitigated by the bank's portfolio composition
with nearly one-quarter of the loan book made of less riskier
mortgage loans. Capitalization remains sufficient to support
future portfolio expansion in a scenario of gradual economic
recovery in 2018, with tangible common equity of 9.8% of adjusted
risk-weighted assets in 2017.
WHAT COULD CHANGE THE RATING UP/DOWN
The B2 global rating, including the senior unsecured debt rating,
would face upward pressure if Argentina's sovereign rating were
upgraded. Conversely, the global and national scale ratings could
be lowered if the entity's capital base, and/or asset quality were
to deteriorate significantly in face of adverse selection in the
current strong growth cycle.
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B R A Z I L
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BANCO DO BRASIL: Posts Early Results of Tender Offers for Notes
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Banco do Brasil S.A., acting through its Grand Cayman branch, a
bank structured as a corporation (sociedade anonima) with mixed
capital (sociedade de economia mista) under the laws of the
Federative Republic of Brazil disclosed the early tender results
of its offers to purchase for cash up to US$600,000,000 aggregate
principal amount of Banco do Brasil's outstanding 8.500% Perpetual
Notes (CUSIP: 05959LAA1 and P3772WAA0; ISIN: US05959LAA17 and
USP3772WAA01) and up to US$100,000,000 aggregate principal amount
of Banco do Brasil's outstanding 9.250% Perpetual Notes (CUSIP:
05958A AG3 and P3772W AC6; ISIN: US05958AAG31 and USP3772WAC66)
(collectively, the "Notes," and each series, a "series of Notes"),
upon the terms and subject to the conditions described in the
Offer to Purchase dated March 19, 2018 (as it may be amended or
supplemented from time to time, the "Offer to Purchase") and the
accompanying Letter of Transmittal dated March 19, 2018 (as it may
be amended or supplemented from time to time, the "Letter of
Transmittal" and, together with the Offer to Purchase, the "Offer
Documents"). The Bank refers to the offers to purchase the Notes
as the "Tender Offers," and each individual offer as a "Tender
Offer." Capitalized terms used in this announcement, but not
defined herein, shall have the meanings given to such terms in the
Offer to Purchase.
The Bank hereby announces that, as of April 3, 2018, at 5:00 p.m.
New York City time (which was the Early Tender Date), it had
received valid tenders from the registered holders of the Notes
(individually, a "Holder" and collectively, the "Holders") of
US$771,101,000 in principal amount of 8.500% Notes (which exceeds
the Tender Cap applicable to the 8.500% Notes), and US$550,436,000
in principal amount of the 9.250% Notes (which exceeds the Tender
Cap applicable to the 9.250% Notes).
Withdrawal rights for the Tender Offers have expired and have not
been extended.
In accordance with the Offer Documents, the Early Settlement Date
for Notes validly tendered on or prior to the Early Tender Date
and accepted for purchase shall be on April 6, 2018 (the "Early
Settlement Date").
Pursuant to the Offer Documents, the Bank disclosed that validly
tendered (and not validly withdrawn or rejected) 8.500% Notes will
be accepted for purchase on the Early Settlement Date on a
prorated basis up to the amount of the applicable Tender Cap.
Pursuant to the Offer Documents, tendered 8.500% Notes that would
have resulted in a minimum denomination below U.S.$100,000 after
proration were accepted in their entirety. The 8.500% Notes
accepted for purchase on the Early Settlement Date represent
approximately 40.04% of the principal amount outstanding of 8.500%
Notes as of March 19, 2018. In accordance with the Offer
Documents, as the Tender Cap has been reached in respect of
tenders made on or prior to the Early Tender Date with respect to
the 8.500% Notes, no 8.500% Notes that are validly tendered after
the Early Tender Date will be accepted for purchase (subject to
the right of the Bank to increase the applicable Tender Cap at any
time, as referred to below).
Pursuant to the Offer Documents, the Bank hereby announces that
validly tendered (and not validly withdrawn or rejected) 9.250%
Notes will be accepted for purchase on the Early Settlement Date
on a prorated basis up to the amount of the applicable Tender Cap.
Pursuant to the Offer Documents, tendered 9.250% Notes that would
have resulted in a minimum denomination below US$200,000 after
proration were accepted in their entirety. The 9.250% Notes
accepted for purchase on the Early Settlement Date represent
approximately 7.15% of the principal amount outstanding of 9.250%
Notes as of March 19, 2018. In accordance with the Offer
Documents, as the Tender Cap has been reached in respect of
tenders made on or prior to the Early Tender Date with respect to
the 9.250% Notes, no 9.250% Notes that are validly tendered after
the Early Tender Date will be accepted for purchase (subject to
the right of the Bank to increase the applicable Tender Cap at any
time, as referred to below).
In accordance with the Offer Documents, Holders of Notes that are
validly tendered (and not validly withdrawn) at or prior to the
Early Tender Date applicable to the series of Notes and accepted
for purchase pursuant to the Tender Offers will receive the
applicable Tender Offer Consideration plus the applicable Early
Tender Premium.
The Bank reserves the right, but is under no obligation, to
increase the 8.500% Notes Tender Cap and/or the 9.250% Notes
Tender Cap at any time, subject to compliance with applicable law,
which could result in the Bank purchasing a greater aggregate
principal amount of Notes in the Tender Offers. There can be no
assurance that the Bank will increase any or all Tender Caps. If
the Bank increases any or all Tender Caps, the Bank does not
expect to extend the applicable Withdrawal Deadline, subject to
applicable law.
BANCO DO BRASIL: Fitch to Rate New Sr. Notes Due 2023 'BB-(EXP)'
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Fitch Ratings has assigned an expected long-term foreign currency
rating of 'BB-(EXP)' to Banco do Brasil S.A.'s (BdB) proposed
senior unsecured notes due April 2023. Final amount and interest
will be defined upon book building. The bonds' proceeds will be
used for general corporate purposes. The final rating is
contingent upon the receipt of final documents conforming to the
information already received.
KEY RATING DRIVERS
The expected rating on the notes corresponds to BdB's Long-Term
Foreign Currency Issuer Default Rating (IDR; BB-/Stable) and ranks
equal to its other senior unsecured debt. BdB's IDRs are aligned
with the sovereign ratings of Brazil and reflect the federal
government control and the bank's systemic importance. The
probability of the Brazilian government providing support to BdB
is moderate, which explains its Support Rating of '3' and its
Support Rating Floor of 'BB-'.
RATING SENSITIVITIES
IDRS AND SENIOR DEBT
BdB's IDRs and its issuance ratings would be affected by potential
changes in the sovereign ratings of Brazil and/or in the
sovereign's willingness to provide support to the bank, should the
need arise.
Fitch currently rates BdB:
-- Long-Term Foreign and Local Currency IDRs 'BB-',
Outlook stable;
-- Short-Term Foreign and Local Currency IDRs 'B';
-- National long-term rating 'AA+(bra)', Outlook Negative;
-- National short-term rating 'F1+(bra)';
-- Support Rating '3';
-- Support Rating Floor 'BB-';
-- Senior unsecured notes due 2018, 2019, 2020, 2022 and 2025
'BB-';
-- Viability Rating 'bb-'.
BANCO DO BRASIL: Moody's Rates New Sr. Unsecured Notes Ba2
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Moody's Investors Service has assigned a Ba2 long-term foreign
currency senior unsecured debt rating to the proposed senior
unsecured notes of Banco do Brasil S.A. (BB), acting through its
Grand Cayman branch. The proposed senior unsecured notes takedown
will be denominated and settled in USD, and due in April 2023.
They are part of the USD20 billion senior unsecured EMTN Program.
The outlook on the senior unsecured debt rating is stable.
The notes will be senior unsecured obligations, and will rank pari
passu in right of payment with all of BB's existing and future
senior unsecured and unsubordinated liabilities.
The following ratings were assigned:
Issuer: Banco Do Brasil S.A. (Cayman)
-- Senior Unsecured Regular Bond/Debenture, Assigned Ba2, stable
RATINGS RATIONALE
The Ba2 rating on the notes incorporates BB's moderate
profitability, which has steadily improved in the last year, and
its strong, stable funding. However, the rating is constrained by
the bank's Moody's adjusted capital metrics, which remain
relatively modest by global standards despite a significant
enhancement since 2015.
BB has managed to contain asset risks and improve its portfolio
quality by limiting exposures to riskier borrowers and sectors,
while focusing growth on less risky asset classes, such as payroll
loans and mortgage. As a result, non-performing loans have
declined to 3.7% of gross loans in 4Q17, down by 40 basis points
from 2Q17. At the same time, loan loss reserves have continued to
climb, reaching 155% of non-performing loans as of December 2017.
The reduction in credit costs has supported the rebound in
profitability, with net income to tangible assets of 0.93% at the
year ended in 2017. Earnings generation has also been sustained by
ongoing efforts to improve cost efficiency and to widen credit
spreads, as a nascent loan demand takes hold.
The bank's tangible common equity to adjusted risk weighted
assets, Moody's preferred capitalization metric, has risen to
10.6% in December 2017, from just 6.8% two years before, due to a
slowdown in loan growth and an increased focus on low risk
weighting assets that consume less capital. Despite the notable
improvement in capital ratios, BB's metrics remain modest by both
regional and global standards.
BB has a low reliance on market funds given its substantial base
of core deposit collected through its nationwide branch network
and its access to stable funding from federal funds and judicial
deposits. As a result, market funds historically range around just
15% of tangible assets.
BB's rating is at the same level as Brazil's Ba2 sovereign rating
and the stable outlook on the bank's ratings is in line with the
stable outlook on the sovereign rating.
WHAT COULD CHANGE THE RATING UP OR DOWN
At the moment, there is limited upward pressure on BB's ratings
owing to the stable outlook on its ratings, which is in line with
the stable outlook on Brazil's sovereign rating.
Banco do Brasil S.A., is headquartered in Brasilia, Brasil, and
reported USD413.9 billion (BRL1,369 billion) in assets and USD29.8
billion (BRL98.7 billion) in shareholders' equity, as of December
2017.
BNDES: New CEO Appointment No Impact on Fitch Ratings
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Fitch Ratings does not expect the changes in the presidency of two
state-owned banks: Banco Nacional de Desenvolvimento Economico e
Social (BNDES, Long-Term Local and Foreign Currency Issuer Default
Ratings (IDR) BB-/Stable) and Caixa Economico Federal (Caixa,
Long-Term Local and Foreign Currency IDRs BB-/Stable) to change or
affect the two banks' strategic direction or ratings.
BNDES and Caixa's ratings are equalized with the Brazilian
sovereign, due to their full government ownership and their
importance as policy banks. Neither bank is assigned a Viability
Rating.
President Temer appointed the new CEOs at the same time as making
changes in some ministerial posts ahead of the October 2018
general elections. BNDES' new president is the former Minister of
Planning, while Caixa's new president is the bank's former
executive vice-president responsible for its mortgage segment.
Both banks' leadership went through changes following the
inauguration of President Temer's government in May 2016, which
led to a significant shift in the banks' strategic objectives. The
adjustment of the banks' strategies reflected the changes in the
political and economic landscape at the time. The new government's
objectives included reducing the banks' need for support and
relieving potential pressure on fiscal accounts and public debt.
Fitch believes the banks have already begun to see positive
results due to these changes.
BNDES has made debt pre-payments to the National Treasury
(Treasury) of BRL100 billion in 2016 and BRL50 billion in 2017. In
the meantime, the bank reduced its loan exposure from BRL624
billion in 2016 to BRL561 billion in 2017, and posted BRL6.2
billion of net income in 2017, which was broadly unchanged from
2016. BNDES capitalization remains comfortable; common equity tier
1 (CET1) and total regulatory capital ratios reached 18.3% and
27.5%, respectively, at end-2017.
BNDES will have to pay a further BRL130 billion to the Treasury in
2018. This pre-payment is manageable; however, will result in a
further decline in BNDES's market share in lending and in its
standing as the country's largest long-term creditor. Fitch
expects this to lead to a gradual increase in the private banks'
market share in project and infrastructure finance and in debt
raised from capital markets in the medium term. In the meantime,
BNDES should continue to shift its lending focus to small and
medium enterprises from large corporates.
Caixa has also undergone a significant overhaul of its financial
objectives since 2016. The bank's main goal is to meet the Basel
III requirements, which will be fully in place in 2019, without
requiring any external support. To this end, Caixa has implemented
several measures, including establishing growth targets based on
risk adjusted return on capital (RAROC) and gradually reducing the
cost base to increase efficiency.
Caixa's 2017 earnings show that these measures have started
bearing fruit. The bank posted a record BRL12.5 billion net
income, up from BRL4.1 billion in 2016. A meaningful part of the
total pre-tax income came from non-recurring gains; however, Fitch
believes that the improvement in the recurring profitability is
likely to be sustained, as the bank's loan impairment charges and
other non-interest expenses should remain under control. The
bank's net interest margin should also remain solid, albeit a
possible gradual decline through 2018, as the reduction in funding
costs is gradually passed on the lending rates.
Caixa's loan growth turned negative for the first time in 2017,
with loans totaling BRL706 billion at year-end, down from BRL709
billion in 2016. Lower leverage and higher profitability resulted
in a solid increase in Caixa's capital adequacy figures. At year-
end 2017, Caixa's CET1 and total regulatory ratios stood at 11.2%
and 17.6%, respectively (up from 9.5% and 13.5%, respectively, at
end-2016). As a result, the probability of Caixa not meeting
capital requirements in 2019 has lessened; however, Caixa's
capitalization is still the lowest amongst the large Brazilian
private and public banks.
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C O S T A R I C A
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AUTOPISTAS DEL SOL: Fitch Affirms BB International Notes Rating
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Fitch Ratings has affirmed the 'BB' rating on the international
notes that Autopistas del Sol S.A. placed in the international
markets. The Rating Outlook is Negative. The notes are supported
by the cash flow generation of the Costa Rican toll road Ruta 27.
Fitch has also affirmed the 'AA(cri)' rating with a Stable Outlook
on the issuer's notes placed in the local market.
KEY RATING DRIVERS
Summary: Ruta 27 is an operational toll road with a length of 76.8
kilometers located in the capital of Costa Rica. The rating
reflects the asset's stable traffic and revenue profile, supported
by an adequate toll adjustment mechanism. Mostly used by
commuters, the project may face significant competition in the
short to medium term if the main competing road is substantially
improved and its tariff is significantly lower than that of the
project. Toll rates are adjusted quarterly to exchange rate and
annually to reflect changes in the U.S. Consumer Price Index
(CPI).
The rating also reflects fully amortizing senior debt with a fixed
interest rate and a net present value (NPV) cash trap mechanism
that protects noteholders in the event of early NPV-related
termination of the concession before debt is fully repaid. Fitch's
Rating Case average Debt Service Coverage Ratio of 1.2x is in line
with Fitch's criteria guidance for the rating category, although
somewhat weak. The presence of a Minimum Revenue Guarantee (MRG)
mechanism provides an additional layer of comfort to the rating.
The Negative Outlook reflects Fitch's view on the sovereign rating
of Costa Rica and the project's links to Costa Rica's sovereign
credit quality.
Mostly Commuter Traffic Base (Revenue Risk: Volume - Midrange):
Light vehicles account for approximately 90% of all users, which
have proved to be the most stable and resilient traffic base. The
road is used by commuters on workdays and by residents of San Jose
travelling to the beaches on the weekends. It could face
significant competition if major improvements to the existing and
congested San Jose-San Ramon route are made and the road is
untolled or materially cheaper than the project. The concession
agreement provides a MRG that compensates the Issuer if revenue is
below certain thresholds, alleviating this risk to a certain
extent.
Adequate Rate Adjustment Mechanism (Revenue Risk: Price:
Midrange): Toll rates are adjusted quarterly to reflect changes in
the Costa Rican Colon (CRC) to USD exchange rate and annually to
reflect changes in the U.S. CPI. Tolls may be adjusted prior to
the next adjustment date if the U.S. CPI or the CRC/USD exchange
rate varies by more than 5%. Historically, tariffs have been
updated appropriately.
Suitable Capital Improvement Program (Infrastructure &
Development: Midrange): The project is a brownfield asset operated
by an experienced global company with a higher than average
expense profile due to the geographical attributes of the project.
The majority of the investments required by the concession have
been made. The concession requires lane expansions when congestion
exceeds 70% of the ideal saturation flow, which triggers the need
for of further investments. However, the project would only be
required by the grantor to perform these investments to the extent
they do not represent a breach in the debt coverage ratios assumed
by the Issuer in the financing documents.
Structural Protections Against Shortened Concession (Debt
Structure: Midrange): Debt is senior secured, pari passu, fixed
rate and fully amortizing. The debt will be denominated in USD.
Nonetheless, no significant exchange rate risk exists due to the
tariff adjustment provisions set forth in the concession and to
the fact that CRC-denominated toll revenues will be converted to
USD on a daily basis.
The structure includes an NPV cash trap mechanism to prepay debt
if traffic outperforms the base case traffic indicated in the
issuer's financial model, which largely mitigates the risk of the
concession maturing before the debt is fully repaid. Typical
project finance features include six-month Debt Service Reserve
Account (DSRA), three-month O&M Reserve Account (OMRA), six-month
backward and forward looking 1.2x distribution trigger and
limitations on investments and additional debt.
Metrics: Under Fitch's Rating Case, the project yields minimum
debt service coverage ratio (DSCR) of 0.9x, an average DSCR and
Loan Life Coverage Ratio (LLCR) of 1.2x, and Net Debt to CFADS of
6.4x. The concession will expire in July 2031 under the Rating
Case, when the NPV reaches the value established in the
concession, which is one year after debt maturity and two before
concession maturity. It assumes payments under the MRG from 2024
to 2027, which totals an average 2% of annual revenues. Debt
repayment does not depend on the MRG payment, as should it not be
received, reserve funds would be sufficient to cover debt service.
The metrics are in line with Fitch's applicable criteria for the
rating category, although on its weaker side. Additional comfort
is provided by the presence of the MRG.
PEER GROUP
There are no peers rated locally by Fitch that are comparable with
the project.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action:
-- Revision of the Outlook for Costa Rica's sovereign ratings
back to Stable;
-- Given the uncertainty related to the degree of competition
posed by the Competition Route a positive rating action is
unlikely in the short term.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action:
-- A downgrade of Costa Rica's sovereign ratings could trigger a
corresponding negative action on the rated notes;
-- Traffic volumes below Fitch's base case over a prolonged
period;
-- Projected ADSCR profile below 1.2x under Fitch's rating case.
TRANSACTION SUMMARY
In 2017, Ruta 27's equivalent Weighted Average Annual Daily
Traffic (WAADT) reached 54,867 vehicles, representing a growth of
3.8%, which was lower than 2016's growth of 4.5% and Fitch's
expectation at 55,590 vehicles and 5.2% growth rate.
According to the concessionaire, the lower traffic growth rate in
2017 was due to the negative impact of a stronger and longer rainy
season, where precipitation was estimated to have been 20%-30%
higher than in previous years due to the occurrence of Hurricane
Nate in October, which was classified as one of the worst natural
disasters in the country. The latter resulted in landslides and
floods in the toll road leading to partial and total close of some
sections for certain hours in several days. Also, the
concessionaire opines higher gas prices and inflation in Costa
Rica could have negatively impacted traffic as well.
Although traffic maintains a strong concentration of 90% in light
vehicles, trucks increased its contribution, which grew 5% last
year. According to the issuer, this is explained by increased
activity in Puerto Caldera seaport and some real estate
developments along the toll road's service area.
In 2017 and 2018, tariffs were increased to reflect the last
year's US CPI variation and the quarterly variations in the
CRC/USD exchange rate, so no tariff lags exist.
During 2017 toll revenues were USD74.9 million, slightly below
Fitch's projection of USD75.9 million. Revenues were mainly driven
by traffic growth and a higher contribution of trucks to revenue.
In June 2017, the issuer made a coupon payment for both series,
which only considered interest payment, and in December 2017, the
international notes had their first principal payment.
Actual DSCR was 1.7x, higher than Fitch's expectation of 1.3x. The
difference is due to the collection of an insurance payment that
was due from previous years (USD0.4 million), the collection of a
non-consumed premium from an insurance policy with World Bank
Group's MIGA (USD2.8 million), lower than expected O&M and major
maintenance expenses, and also a smaller amount of revenues to be
transferred to the grantor as co-participation payment upon the
terms of the concession.
Fitch Cases:
Fitch's Base Case assumed traffic growth at a Compounded Annual
Growth Rate (CAGR) of 1.2% from 2018 to 2033, which considers,
amongst other, that the competing route will charge 50% of the
tariff initially stablished when the concession was granted. U.S.
CPI reflects Fitch's forecast of 2.2% from 2018 onwards. O&M and
capex were projected following the budget provided plus 5.0%.
Fitch's Base Case resulted in a minimum DSCR of 1.3x in 2018, an
average DSCR of 1.4x and LLCR of 1.5x. Net debt to CFADS in 2018
is 6.2x and decreases each year over the life of the notes. Under
this scenario, the concession will end in July 2031, earlier than
the contractual July 2033, due to the project yielding the NPV of
cumulative revenues specified in the concession agreement.
Fitch's Rating Case assumed traffic growth at a CAGR of 0.40% from
2018 to 2033, which considers, amongst others, that the competing
route will be untolled. U.S. CPI rates as utilized in Fitch's Base
Case. O&M and capex were projected following the budget provided
plus 7.5%. Fitch's Rating Case resulted in a minimum DSCR of 0.9x
in 2022, average DSCR and LLCR of 1.2x. Net debt to CFADS in 2018
is 6.4x and decreases each year over the life of the notes. Under
this scenario, the concession will also end in July 2031 due to
the project reaches its NPV according to the concession agreement.
Asset Description:
The asset serves as a connection between the city of San Jose and
its metropolitan area with Puerto Caldera, along the Pacific
coast. The asset is operated by Globalvia, one of the world
leaders in infrastructure concession management, which manages 28
concessions in seven countries. The company was established in
2007 by FCC Group and Bankia Group. In March 2016, Globalvia was
acquired by pension funds OPSEU Pension Plan Trust Fund (40%),
PGGM N.V. (40%) and Universities Superannuation Scheme Ltd (20%).
===================================
D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: High Tolls on Road Hurts Tourism
----------------------------------------------------
Dominican Today reports that community organizations and
neighborhood associations of the Northeast in The Dominican
Republic want a Chamber of Deputies legislation to reduce what
they say are high tolls charged on the Santo Domingo-Samana
highway.
In the legislative forums headed by lower Chamber president Ruben
Maldonado, in Maria Trinidad Sanchez and Samana provinces, the
community argued that the high tolls hurt the area's tourism,
according to Dominican Today.
Similar complaints were lodged by the drivers' unions, which warn
that they face bankruptcy, the report notes.
Another concern that emerged during the 29th Legislative Forum for
Development was over the squatters on lands along both sides of
the highway, the report relays.
The provincial representatives also asked the lawmakers'
intervention so the power companies lower the cost of energy,
which they say is too high, especially in Las Terrenas and El
Limon, the report adds.
As reported in the Troubled Company Reporter-Latin America on
Nov. 20, 2017, Fitch Ratings affirmed Dominican Republic's
Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook.
DOMINICAN REPUBLIC: Agro Must Produce as Export, Tourism Demand Up
------------------------------------------------------------------
Dominican Today reports that the Dominican Agribusiness Board
(JAD) urged producers to increase their exports and to meet the
tourism industry's growing domestic demand.
JAD president Jose Lopez praised the agro sector's growth, which
in 2017, of 5.9%, despite the onslaught of hurricanes Irma and
Maria, according to Dominican Today. He attributed its commitment
and its people to surmount the setback and move forward, the
report notes.
He praised the JAD's contributions and advice and counseling to
agro-producers of all segments even in the country's most remote
places of the, the report relays.
"One test was the celebration of Agroalimentaria 2017, which
generated 1,734 business meetings, involving projected sales worth
367.4 million dollars," the report quoted Mr. Lopez as saying.
"The Dominican agricultural sector should focus on improving its
competitiveness and productivity and export more," he added.
As reported in the Troubled Company Reporter-Latin America on
Nov. 20, 2017, Fitch Ratings affirmed Dominican Republic's
Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook.
===========
M E X I C O
===========
GRUPO BIMBO: Fitch Assigns BB+ Rating to US$500MM Sub. Notes
------------------------------------------------------------
Fitch Ratings has assigned a 'BB+' rating to the USD500 million
perpetual senior subordinated notes of Grupo Bimbo, S.A.B. de C.V.
(BBB/Stable). The proposed notes qualify for 50% equity credit.
Proceeds of the issuance will be used mainly to refinance current
indebtedness, pay the purchase price of recent acquisitions and
partially fund capital expenditures.
The proposed securities qualify for 50% equity credit as they meet
Fitch's criteria with regard to subordination, cross defaults, no
material covenants, effective maturity of at least five years,
ability to defer coupons for at least five years, and no look-back
provisions. As a result of these features, the 'BB+' rating is two
notches below Bimbo's Issuer Default Rating (IDR) as they reflect
higher loss severity and heightened risk of non-performance
relative to senior obligations. This approach is in accordance
with Fitch's criteria, "Non-financial Corporates Hybrids Treatment
and Notching Criteria" dated March 27, 2018.
The hybrid notes are expected to be deeply subordinated and rank
senior only to Bimbo's share capital, coupons payments can be
deferred at the discretion of the issuer, and there are limited
events of default and absence of material covenants and look back
provisions. The notes have no formal maturity date, and the issuer
has a call option to redeem them after five years of the issue
date. There will be a coupon step-up of 25bp after 10 years (the
initial step up date) and additional step-up of 75bp after 25
years (the second step up date). The first call date and the
coupon step-up date are not treated as effective maturity dates
under Fitch's criteria due to the cumulative amount of the step-
ups being lower or equal to 1% throughout the life of the
instruments. Deferrals of coupon payments are cumulative, and the
company will be obliged to make a mandatory settlement of deferred
interest payments under certain circumstances, including a
declaration or payment of a dividend.
Fitch does not anticipate relevant changes in the capital
structure of Bimbo after including as debt the 50% of hybrid
notes. Fitch projects Bimbo's leverage to slightly improve in 2018
with total adjusted debt-to-EBITDAR and total adjusted net debt-
to-EBITDAR around 3.5x and 3.4x, respectively, from 3.8x and 3.6x
in 2017,on a comparable basis calculated by Fitch.
KEY RATING DRIVERS
Strong Business Position: Bimbo's ratings incorporate its solid
business position as a global leading producer of baked goods with
operations in Mexico, the U.S., Canada, Latin America, Europe and
in a lesser extent in Asia and Africa. The company has a product
portfolio of well-known brands with leading positions in markets
in which it participates. Bimbo has maintained relatively stable
market positions across its territories despite strong competition
in markets such as the U.S., Canada and Iberia. The company's
competitive advantages include its position as a low-cost producer
and an extensive distribution network among its main markets.
Geographic Diversification: Bimbo has a good geographic
diversification with around 69% of its total revenues and 48% of
its total EBITDA generated from operations outside Mexico. Its
acquisitions in the U.S., Canada and Europe have provided access
to hard currency revenue and EBITDA generation. This has helped
the company to counterbalance the exposure between mature and
emerging economies. In 2017, the company acquired small producers
of baked goods in Canada, Morocco, India and the U.S and concluded
the acquisition of East Balt Bakeries. In 2018, Bimbo announced
the signing of an agreement to acquire Mankattan Group, a key
player in the baking industry in China, and concluded the
acquisition of a bakery plant in the U.S.
Recovery in Profitability: Fitch expects Bimbo's revenue growth
and profitability to improve in 2018, as a result of its recent
acquisitions and organic growth in key markets, lower integration
costs, and internal efficiencies associated to its capex programs.
For 2018, Fitch projects revenue increase of around 7% driven
volume and prices in most of its markets and the full year
integration of acquisitions. Its EBITDA margin in 2018 should
improve to around 11% as a result of lower costs pressure in
Mexico, lower restructuring charges, internal efficiencies and
pricing actions. In 2017, Bimbo's decline in profitability with an
EBITDA margin of around 10% was mainly due to higher raw material
costs in Mexico and integration costs in Europe.
Stable Leverage: Fitch projects Bimbo's total adjusted debt-to-
EBITDAR and total adjusted net debt-to-EBITDAR will be around 3.5x
and 3.4x, respectively, by year-end 2018 and then gradually
decline to 3.4x and 3.2x, respectively, by year-end 2019. These
metrics include the effect of the hybrid debt. A strengthening in
the company's leverage in the next two years is expected to be
associated mainly to higher EBITDA generation. Considering the
current leverage metrics, Fitch believes that Bimbo's flexibility
to incorporate further M&A transactions funded with debt is
limited, as the company's deleverage trend has been below Fitch
previous expectations.
Neutral to Negative FCF in 2018: Bimbo's capacity to generate
positive free cash flow (FCF) is expected to be affected by a
lower cash flow from operations (CFFO). For 2018, Bimbo's higher
interest costs and taxes in absolute terms, despite a lower
effective tax rate, is projected by Fitch to result in a decrease
of CFFO to MXN17.7 billion compared to MXN18.4 billion in 2017.
This reduction combined with higher capex of MXN16.2 billion
(USD850 million) and dividends at similar levels than last year
should result in neutral to slightly negative FCF. Fitch estimates
that positive FCF to resume in the mid-term. In 2017, Bimbo's
Fitch-calculated FCF was MXN2.5 billion.
DERIVATION SUMMARY
Bimbo's ratings reflect its solid business position as a global
leader producer of baked goods with a portfolio of well recognized
brands and geographically diversified operations in Mexico, the
U.S., Canada, Latin America, Europe and to a lesser extent Asia
and Africa. Bimbo's ratings are in line with other peers in the
region such as Flower Foods (BBB/Stable), which has a smaller size
and scale and weaker geographic diversification but higher
expected profitability in the U.S. (EBITDA margin close to 13%)
and lower leverage metrics (adjusted net leverage around 2.7x).
When compared to other global food companies such as Mondelez
International (BBB/Stable), Bimbo's lower size and scale as well
as profitability, have been partially offset by relatively lower
leverage metrics across the business cycle. Other food companies
in the investment grade category are Sigma Alimentos, S.A. de C.V.
(BBB/Stable), which is comparable in terms of leverage,
profitability, geographic diversification and brand portfolio with
Bimbo, and Gruma, S.A.B. de C.V. (BBB/Stable), which has a weaker
position in brands and product portfolio but a stronger financial
profile with lower leverage and higher profitability.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Fitch Rating Case for the Issuer
-- Revenue increase of 7% in 2018 and 4% in 2019;
-- EBITDA margin around 11% in 2018 and 2019;
-- Neutral to negative FCF in 2018 and close to MXN1 billion in
2019;
-- Total adjusted debt-to-EBITDAR and total adjusted debt-to-
EBITDAR at around 3.4x and 3.2x, respectively, by 2019.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
-- Debt reduction above Fitch's expectation,
-- Higher EBITDA margin above 15%,
-- Strong FCF margin above 3.5% on a sustained basis;
-- Improvement in total net debt-to-EBITDA and total adjusted net
debt-to-EBITDAR below to 2.0x and 2.5x, respectively.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
-- Sustained deterioration in its revenue growth and
profitability margins;
-- Negative FCF margin over the business cycle;
-- Significant debt-financed acquisitions;
-- Total net debt-to-EBITDA and a total adjusted net debt-to-
EBITDAR above 3.0x and 3.5x, respectively.
LIQUIDITY
Ample liquidity: As of Dec. 31, 2017, Bimbo had MXN7.2 billion of
cash and cash equivalents and MXN2.8 billion of short-term debt.
Its liquidity is also supported by an undrawn committed credit
facility of around USD2.3 billion that expires in 2021. Fitch
believes Bimbo's liquidity position will be maintained in 2018
despite the expected neutral to negative FCF as a portion of the
hybrid senior subordinated notes will be kept in its cash balance
after paying debt and financing capex. The company's total debt as
of Dec. 31, 2017 was MXN94.3 billion and its next significant debt
amortization is until 2020 related to its USD800 million senior
unsecured notes.
FULL LIST OF RATING ACTIONS
Fitch currently rates Bimbo:
-- Long-Term Foreign Currency IDR 'BBB';
-- Long-Term Local Currency IDR 'BBB';
-- National Scale long-term rating 'AA+(mex)';
-- USD800 million senior notes due 2020 'BBB';
-- USD800 million senior notes due 2022 'BBB';
-- USD800 million senior notes due 2024 'BBB';
-- USD500 million senior notes due 2044 'BBB';
-- USD650 million senior notes due 2047 'BBB';
-- Local Certificados Bursatiles Issuances 'AA+(mex)'.
GRUPO BIMBO: Moody's Rates New $500MM Sub. Perpetual Notes Ba1
--------------------------------------------------------------
Moody's Investors Service assigned a Ba1 rating to Grupo Bimbo,
S.A.B. de C.V.'s (Bimbo) proposed $500 million subordinated
perpetual notes (the "hybrid"). Bimbo's Baa2 issuer and senior
unsecured ratings remain unchanged. The outlook is stable.
Bimbo will use the proceeds of the issuance for general corporate
purposes, including to repay existing debt, to pay purchase price
of recent acquisitions and to partially fund capital expenditures.
RATINGS RATIONALE
"The Ba1 rating assigned to the hybrid instrument is two notches
below Bimbo's Baa2 senior unsecured rating, reflecting the
characteristics of the proposed notes. Accordingly, the hybrid is
a perpetual, deeply subordinated debt instrument that is treated
as a preferred equivalent under Moody's rating methodology and
allows Bimbo to opt for coupon deferral on a cumulative basis"
said Alonso Sanchez, a Vice President at Moody's.
In Moody's view, the hybrid has equity-like features which allow
it to receive a basket "C" treatment (i.e. 50% equity and 50%
debt) for the purpose of adjusting financial statements.
As the hybrid note's rating is positioned relative to Bimbo's
senior unsecured ratings, a change in either (1) Moody's relative
notching practice or (2) the Baa2 senior unsecured rating of Bimbo
could affect the hybrid's rating.
"Bimbo's Baa2 senior unsecured rating is supported by its position
as the largest baked-goods company in the world, with an ample
distribution infrastructure in its key markets; sustained free
cash flow generation; and ample geographic diversification." added
Sanchez. On the other hand, the rating reflects Bimbo's growth
through acquisitions which increases its leverage and execution
risk. Nevertheless, execution risk is mitigated by Bimbo's
management team good track record integrating acquisitions while
capturing synergies. Also considered in the rating is the
competitive nature of the markets where Bimbo operates.
The proceeds from the new notes will be used to refinance existing
debt, to pay the purchase price of recent acquisitions and to
partly finance capital expenditures. While 50% of the hybrid is
treated as debt, the transaction will add only $80 million in debt
to Bimbo's balance sheet, as the company will refinance existing
debt at the holding and subsidiary levels. Pro-forma for the
issuance, Bimbo's adj. debt/EBITDA would be 3.72x in 2017;
essentially at the same level it closed 2017 (adj. debt/EBITDA of
3.68x in 2017). Going forward, Bimbo's leverage will improve from
a combination of higher EBITDA and reduction in debt. Moody's
estimate Bimbo's adj. debt/EBITDA will decline below 3.5x by year-
end 2018 and below 3.0x by year-end 2019.
Bimbo has a strong liquidity position. As of December 31, 2017 its
reported cash on hand of MXN7,216 million can cover 2.6x its short
term debt. Bimbo's liquidity is additionally supported by its $2.1
billion committed credit facilities maturing in 2021-2022, which
will be 100% available following the issuance of the new notes
(currently is 95% available), and its strong free cash flow
generation. Pro-forma for the issuance of the notes and debt
refinancing, Bimbo will continue to have a comfortable long-term
debt maturity profile including $800 million due 2020, $800
million due 2022, $800 million due 2024, and $2,062 million due
beyond 2026.
The stable outlook reflects Moody's expectation that Bimbo will be
able to reduce its leverage and maintain strong credit metrics, in
line with its rating category, and that it will continue to post
solid profitability.
The ratings could be upgraded if credit metrics were to improve
such that Moody's adjusted debt/EBITDA falls close to or below 2
times and Retained Cash Flow/Net Debt solidly exceed 30% on a
sustainable basis. An upgrade would also require several quarters
of favorable performance and the maintenance of a strong liquidity
profile.
A downgrade could be triggered if operating performance weakens.
Also a deterioration in credit metrics such that Moody's adjusted
Retained Cash Flow/Net Debt declines below 15%, adjusted
debt/EBITDA remains above 3.5 times on a sustained basis or if the
company posts negative free cash flow. A deterioration in
liquidity or in its credit profile or profitability, for example
from an acquisition that is not accretive to the company, could
also lead to a downgrade.
The principal methodology used in this rating was Global Packaged
Goods published in January 2017.
Based in Mexico City, Mexico, Grupo Bimbo, S.A.B. de C.V. is the
world's largest baked-goods producer. In Mexico, it is the largest
producer of packaged bread and sweet baked-goods, and the second
largest player in the salty snack and confectionary categories.
The company also operates in the U.S., where it is the largest
baked-goods company, in Canada where it holds a leading position
in buns and rolls, and has a leading presence in Latin America,
the UK, Spain, and Portugal. Bimbo reported revenues of around
$14.1 billion in 2017.
======================
P U E R T O R I C O
======================
HME HOLDINGS: Court Approves Disclosure Statement
-------------------------------------------------
Judge Enrique S. Lamoutte Inclan of the U.S. Bankruptcy Court for
the District of Puerto Rico has approved the disclosure statement
explaining the joint plan of reorganization filed by HME Holdings,
Inc., P.J. Rosaly Enterprises, Inc., and Islandwide Logistics,
Inc.
The Bankruptcy Court convened a hearing to consider confirmation
of the Plan on March 28.
About HME Holdings,
P.J. Rosaly & Islandwide Logistics
HME Holdings, Inc.; P.J. Rosaly Enterprises, Inc. dba Islandwide
Express; and Islandwide Logistics, Inc., filed separate chapter 11
petitions (Bankr. D.P.R. Case Nos. 16-07686, 16-07690 and 16-
07693) on Sept. 28, 2016. The petitions were signed by Ivan
Marin, president and authorized representative for each Debtor.
The cases are jointly administered.
The Debtors are represented by Carmen D. Conde Torres, Esq., and
Luisa S. Valle Castro, Esq., at C. Conde & Associates.
Together, the three entities form the Islandwide Group. HME
provides management services for its two related parties:
Islandwide Logistics, Inc., and P.J. Rosaly Enterprises, Inc. It
runs the human resources, business development, information and
technology, finance and accounting departments for both P.J. Rosay
Enterprises and Islandwide Logistics.
PJ Rosaly specializes in providing next day, same day delivery
services to its clients, as well as temperature controlled
deliveries. It is also engaged by the main banks in the island
and provide internal messenger and clearing house services to
these institutions.
Islandwide Logistics operates more than 300,000 square feet of
warehouse space dedicated to providing its clients with inventory
management that includes full inventory systems integration,
electronic order processing, RF capability and retail time
sensitive delivery service. Logistics' distribution center is
designed to ensure the uninterrupted flow of the supply-chain RF
Capable Warehouses.
HME estimated assets at $100,000 to $500,000 and liabilities at $1
million to $10 million at the time of the filing. PJ Rosaly
estimated assets and liabilities at $1 million to $10 million.
Islandwide Logistics estimated assets and liabilities at $1
million to $10 million at the time of the filing.
No official committee of unsecured creditors has been appointed in
the cases.
TOYS R US: MGA Entertainment Puts Bid to Buy U.S., Canada Stores
-----------------------------------------------------------------
Isaac Larian, CEO of MGA Entertainment, Inc. (MGAE), one of the
world's leading privately held toy and entertainment companies and
creator of family favorite brands including Little Tikes(R) and
L.O.L. Surprise!(TM), put in a formal bid of $675 million to buy
both the U.S stores as well as $215 million to buy the Toys "R" Us
stores in Canada. The funds to purchase both the U.S. and
Canadian stores will come from Larian's own coffers, additional
investors and bank financing.
Mr. Larian recently led the biggest crowdfunding effort to date,
aiming to raise $1 billion via GoFundMe in an effort to rally the
community around the cause. Bid amounts were determined after
careful due diligence by Larian, speaking with multiple investors
and 3rd party experts. "The time is now. Everyday that goes by,
the value of Toys"R"Us declines and more people lose their jobs. I
did my part and now it's up to the other side to accept this
offer.
If they do, the real work will begin. We will make Toys"R"Us an
experience in and of itself; a fun and engaging place where
families can spend an entire day. Imagine a mini-Disneyland in
each neighborhood," shared Mr. Larian. The entrepreneur is
putting forth his best effort to save the retailer, knowing the
void it will leave if Toys"R"Us ceases to exist. "The liquidation
of Toys"R"Us is going to have a long-term effect on the toy
business.
The industry will truly suffer. The prospect of bringing the
Toys"R"Us experience to a new generation, my new grandson's
generation, is enough to motivate me to Save Toys"R"Us."
Toys"R"Us is an American icon with global relevance and Mr. Larian
is devoted to saving the retail chain. For over 65 years,
Toys"R"Us has played a vital role in the growth, education and
creative development of millions of children, giving Mr. Larian
his first break when he entered the business more than 30 years
ago.
MGA Entertainment's own Little Tikes brand, the maker of the
famous Cozy Coup is made right here in the USA for the past 50
years. The consummate entrepreneur, Mr. Larian won the Ernst &
Young Entrepreneur of the Year award in 2007. Toys"R"Us is
embedded in our American culture, and as Larian puts it, "There is
nothing quite like the joy and awe of a child walking through the
aisles of a Toys"R"Us store. I want to preserve that innocent
experience for future generations." Mr. Larian believes that
everyone deserves to be a Toys"R"Us kid.
About Toys "R" Us
Toys "R" Us, Inc., is an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area. Merchandise is sold in
880 Toys "R" Us and Babies "R" Us stores in the United States,
Puerto Rico and Guam, and in more than 780 international stores
and more than 245 licensed stores in 37 countries and
jurisdictions. Merchandise is also sold at e-commerce sites
including Toysrus.com and Babiesrus.com.
On July 21, 2005, a consortium of Bain Capital Partners LLC,
Kohlberg Kravis Roberts and Vornado Realty Trust invested $1.3
billion to complete a $6.6 billion leveraged buyout of the
company.
Toys "R" Us is a privately owned entity but still files with the
Securities and Exchange Commission as required by its debt
agreements.
The Company's consolidated balance sheet showed $6.572 billion in
assets, $7.891 billion in liabilities, and a stockholders' deficit
of $1.319 billion as of April 29, 2017.
Toys "R" Us, Inc., and certain of its U.S. subsidiaries and its
Canadian subsidiary voluntarily filed for relief under Chapter 11
of the Bankruptcy Code (Bankr. E.D. Va. Lead Case No. Case No.
17-34665) on Sept. 19, 2017. In addition, the Company's Canadian
subsidiary voluntarily commenced parallel proceedings under the
Companies' Creditors Arrangement Act ("CCAA") in Canada in the
Ontario Superior Court of Justice. The Company's operations
outside of the U.S. and Canada, including its 255 licensed stores
and joint venture partnership in Asia, which are separate
entities, are not part of the Chapter 11 filing and CCAA
proceedings.
Grant Thornton is the monitor appointed in the CCAA case.
Judge Keith L. Phillips presides over the Chapter 11 cases.
In the Chapter 11 cases, Kirkland & Ellis LLP and Kirkland & Ellis
International LLP serve as the Debtors' legal counsel. Kutak Rock
LLP serves as co-counsel. Toys "R" Us employed Alvarez & Marsal
North America, LLC as its restructuring advisor; and Lazard Freres
& Co. LLC as its investment banker. It hired Prime Clerk LLC as
claims and noticing agent. A&G Realty Partners, LLC, serves as
its real estate advisor.
On Sept. 26, 2017, the U.S. Trustee for Region 4 appointed an
official committee of unsecured creditors. The Committee retained
Kramer Levin Naftalis & Frankel LLP as its legal counsel; Wolcott
Rivers, P.C. as local counsel; FTI Consulting, Inc. as financial
advisor; and Moelis & Company LLC as investment banker.
Toys "R" Us UK
Toys "R" Us Limited, Toys "R" Us, Inc.'s UK arm with 105 stores
and 3,000 employees, was sent into administration in the United
Kingdom in February 2018.
Arron Kendall and Simon Thomas of Moorfields Advisory Limited, 88
Wood Street, London, EC2V 7QF were appointed Joint Administrators
on Feb. 28, 2018. The Administrators now manage the affairs,
business and property of the Company. The Administrators act as
agents only and without personal liability.
The Administrators said they will make every effort to secure a
buyer for all or part of the business.
Liquidation of U.S. Stores
Toys "R" Us, Inc., on March 15, 2018, filed with the U.S.
Bankruptcy Court a motion seeking Bankruptcy Court approval to
start the process of conducting an orderly wind-down of its U.S.
business and liquidation of inventory in all 735 of the Company's
U.S. stores, including stores in Puerto Rico.
TOYS "R" US: Receives $80M in DIP Financing to Boost Liquidity
--------------------------------------------------------------
Toys "R" Us, Inc. on April 11, 2018, disclosed that it has
received a commitment from its Taj Noteholders for $80 million in
incremental debtor-in-possession ("DIP") financing to augment
liquidity as well as support the working capital needs of the
Company's operations in Asia and Central Europe. While the
Company believes its Asian and Central European operations have
sufficient liquidity to fund their current operations based on
historical trends, this financing provides these operations
greater flexibility to operate, grow their footprint and build
inventory for the important 2018 holiday season. The Company's
operations in Asia and Central Europe continue to provide their
customers the high level of service and well stocked product
offerings that they expect. The Taj Noteholders providing this
financing remain supportive of these businesses and excited about
their long-term growth prospects.
As of period one ended March 3, 2018, the Company's Asia
operations had approximately $230 million in liquidity comprised
of cash and available lines of credit and Central Europe had
approximately $28 million of cash.
Dave Brandon, Chairman and Chief Executive Officer, said, "This
additional financing further positions our Asian and Central
European operations for continued success. We appreciate the
ongoing financial support and look forward to continued positive
relationships with our vendors."
The Company has received interim approval of the incremental DIP
financing from the United States Bankruptcy Court for the Eastern
District of Virginia (the "Bankruptcy Court"). Final approval by
the Bankruptcy Court is scheduled for April 27, 2018.
Kirkland & Ellis LLP is serving as principal legal counsel to
Toys"R"Us, Alvarez & Marsal is serving as restructuring advisor
and Lazard is serving as financial advisor.
About Toys "R" Us
Toys "R" Us, Inc., is an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area. Merchandise is sold in
880 Toys "R" Us and Babies "R" Us stores in the United States,
Puerto Rico and Guam, and in more than 780 international stores
and more than 245 licensed stores in 37 countries and
jurisdictions. Merchandise is also sold at e-commerce sites
including Toysrus.com and Babiesrus.com.
On July 21, 2005, a consortium of Bain Capital Partners LLC,
Kohlberg Kravis Roberts and Vornado Realty Trust invested $1.3
billion to complete a $6.6 billion leveraged buyout of the
company.
Toys "R" Us is a privately owned entity but still files with the
Securities and Exchange Commission as required by its debt
agreements.
The Company's consolidated balance sheet showed $6.572 billion in
assets, $7.891 billion in liabilities, and a stockholders' deficit
of $1.319 billion as of April 29, 2017.
Toys "R" Us, Inc., and certain of its U.S. subsidiaries and its
Canadian subsidiary voluntarily filed for relief under Chapter 11
of the Bankruptcy Code (Bankr. E.D. Va. Lead Case No. Case No.
17-34665) on Sept. 19, 2017. In addition, the Company's Canadian
subsidiary voluntarily commenced parallel proceedings under the
Companies' Creditors Arrangement Act ("CCAA") in Canada in the
Ontario Superior Court of Justice. The Company's operations
outside of the U.S. and Canada, including its 255 licensed stores
and joint venture partnership in Asia, which are separate
entities, are not part of the Chapter 11 filing and CCAA
proceedings.
Grant Thornton is the monitor appointed in the CCAA case.
Judge Keith L. Phillips presides over the Chapter 11 cases.
In the Chapter 11 cases, Kirkland & Ellis LLP and Kirkland & Ellis
International LLP serve as the Debtors' legal counsel. Kutak Rock
LLP serves as co-counsel. Toys "R" Us employed Alvarez & Marsal
North America, LLC as its restructuring advisor; and Lazard Freres
& Co. LLC as its investment banker. It hired Prime Clerk LLC as
claims and noticing agent. A&G Realty Partners, LLC, serves as
its real estate advisor.
On Sept. 26, 2017, the U.S. Trustee for Region 4 appointed an
official committee of unsecured creditors. The Committee retained
Kramer Levin Naftalis & Frankel LLP as its legal
counsel; Wolcott Rivers, P.C. as local counsel; FTI Consulting,
Inc. as financial advisor; and Moelis & Company LLC as investment
banker.
Toys "R" Us UK
Toys "R" Us Limited, Toys "R" Us, Inc.'s UK arm with 105 stores
and 3,000 employees, was sent into administration in the United
Kingdom in February 2018.
Arron Kendall and Simon Thomas of Moorfields Advisory Limited, 88
Wood Street, London, EC2V 7QF were appointed Joint Administrators
on Feb. 28, 2018. The Administrators now manage the affairs,
business and property of the Company. The Administrators act as
agents only and without personal liability.
The Administrators said they will make every effort to secure a
buyer for all or part of the business.
Liquidation of U.S. Stores
Toys "R" Us, Inc., on March 15, 2018, filed with the U.S.
Bankruptcy Court a motion seeking Bankruptcy Court approval to
start the process of conducting an orderly wind-down of its U.S.
business and liquidation of inventory in all 735 of the Company's
U.S. stores, including stores in Puerto Rico.
=================
V E N E Z U E L A
=================
ELECTRICIDAD DE CARACAS: In Default, Trustee Says
-------------------------------------------------
Latin American Herald reports that the trustee of Venezuela's $650
million bond issue for state electric company Electricidad de
Caracas (Corpoelec) has declared the company in default after it
failed to pay the company's only dollar bond, which matured on
April 10.
Electricidad de Caracas (EleCar or EDC) Trustee Wilmington Trust
has declared an Event of Default on Venezuela's $650 million of
Electricidad de Caracas 8.50% bonds that matured April 10,
according to Latin American Herald.
The report notes that Wilmington Trust said the Paying Agent
notified them that neither the $650 million principal maturity nor
the $27.6 million coupon was received.
"The Paying Agent has notified the Trustee that the interest and
principal payments that were due on April 10, 2018 were not
received by the Paying Agent," Wilmington Trust wrote in declaring
the Event of Default. "As a result an Event of Default under the
indenture has occurred due to the failure to pay principal on the
Notes when it became due on April 10, 2018," it said, the report
relates.
The "Notice of Event of Default" goes on to advise bondholders of
their options, the report relays.
"Pursuant to Section 5.1(m) of the Indenture, the Required Holders
shall have the right to direct the Trustee as to the time, method,
and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Notes," Wilmington states, but then
goes on to warn that it will have to compensated for further
actions, the report discloses.
"Pursuant to Section 1.1(b)(F) of the Indenture, the Trustee is
under no obligation to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers if it has
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
reasonable assured to it," the report notes.
Wilmington invites holders to contact Peter Finkel at Wilmington
Trust in Minneapolis, Minnesota for further questions. It also
lists Gregg Bateman at law firm Seward & Kissel in New York as
Trustee Counsel.
"We can only account for only about 20% of the Electricidad de
Caracas (EDC) holders via a Bloomberg data search, with the
biggest known holder being Grantham, Mayo, Van Otterloo & Co. with
$111.5 million face in their GMO Emerging Country Debt Fund
(GMCDX) -- that is a little over 17% of the $650 million face
amount of the bond," notes Caracas Capital head Russ Dallen, who
reported the default notice over the weekend, the report relays.
The $4.15 billion GMCDX fund was reporting EDC as their 28th
largest holding as of November 30 at a price of 40, the report
adds.
=================
X X X X X X X X X
=================
LATAM: ECLAC Wants Region to Reinvigorate Integration
-----------------------------------------------------
Caribbean360.com reports that the Executive Secretary of the
Economic Commission for Latin America and the Caribbean (ECLAC),
Alicia Barcena, has called on the region's countries to
reinvigorate the process of integration and bolster intraregional
trade to confront new global challenges.
The most senior representative of the United Nations regional
organization says Latin America and the Caribbean has reacted to a
complex trade scenario by intensifying its ties with partners
outside the region, in particular with China and other economies
in Asia, highlighting for example the recent signing of the CPTPP,
which she described as positive, according to Caribbean360.com.
However, she said, reinvigorating integration and trade with
partners inside the region is much better, because it integrates
small and medium-sized enterprises in value and export chains,
even if this continues to be a pending matter, the report notes.
Ms. Barcena underscored the great potential of a regional market
with more than 630 million people, which nonetheless continues to
be underexploited. She recalled that, while some important
progress has been made, in particular the agreements reached
within MERCOSUR to define common systems for foreign investment,
in April 2017, and for public hiring, in December 2017, the region
still has much to do in terms of deepening its economic
integration, the report relays.
"Unfortunately, intraregional trade continues to be very low in
comparison with international standards, representing just 17 per
cent of the region's total exports," she specified, the report
discloses.
The report says that the ECLAC official indicated that these low
levels of intraregional trade can be explained by the region's
vast size, covering more than 20 million square kilometers, and
its difficult geography; by a deficient transportation
infrastructure; overlapping endowments of natural resources in
many South American countries; and the gravitational pull that the
United States' economy has on Mexico and Central America.
"However, all of these difficulties are aggravated by the great
fragmentation of the regional market. Several integration
agreements coexist, each one with its own rules on issues from
production standards to public procurement and the handling of
foreign direct investment. The integration schemes still lack
measures that favor the mobility of people, of their capacities,
talents and their insertion in labor markets from one country to
another," she stated, the report notes.
Ms. Barcena added that these regulatory discrepancies impose high
costs on companies, especially the small and medium-sized ones
that export or invest in regional markets, and also hinder the
development of regional value chains, the report relays.
"Latin America has to turn toward diversifying its trading
partners within this very region and strengthening initiatives for
trade facilitation and for the development of regional digital
markets. In this sense, the convergence between MERCOSUR and the
Pacific Alliance is very good news and we must continue fostering
it," she stated, the report notes.
She highlighted that 80 per cent of Latin America's exports come
from South America, but that they are basic products lacking much
value-added, the report discloses. For that reason, she said, "it
is very important that we see the complementarities between
countries, but also the capacities that we have to add value to
what we are doing, the incorporation of greater levels of
knowledge and technology," 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
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latest balance sheets publicly available a day prior to
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***********
S U B S C R I P T I O N I N F O R M A T I O N
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* * * End of Transmission * * *