/raid1/www/Hosts/bankrupt/TCRLA_Public/180628.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, June 28, 2018, Vol. 19, No. 128
Headlines
A R G E N T I N A
CHUBUT PROVINCE: Fitch Affirms 'B' LT IDRs, Outlook Stable
B R A Z I L
JBS SA: Prosecutors Charge Shareholder Batista With Corruption
D O M I N I C A N R E P U B L I C
* DOMINICAN REPUBLIC: Envoy Nominee Clears Another Hurdle
M E X I C O
GRUPO EMBOTELLADOR: Fitch Affirms B- IDRs & Alters Outlook to Pos.
P A R A G U A Y
PARAGUAY: S&P Affirms BB/B Sovereign Credit Ratings
T R I N I D A D & T O B A G O
PETROLEUM CO: Energy Minister Feel Great Pain Over State of Firm
TOYS R US: Taps Raider Hill as Real Estate Advisor
V E N E Z U E L A
VENEZUELA: Vice-President Banned from Travelling to European Union
VENEZUELA: Investors Will Oppose Unfair Debt Restructuring
- - - - -
=================
A R G E N T I N A
=================
CHUBUT PROVINCE: Fitch Affirms 'B' LT IDRs, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed the Province of Chubut's long-term,
foreign- and local-currency Issuer Default Ratings (IDRs) at 'B'
with a Stable Outlook. Fitch has also affirmed the 'B' long-term
ratings on Chubut's 7.75% senior secured notes for USD650 million.
KEY RATING DRIVERS
Chubut's ratings are supported by the province's above average
fiscal autonomy in comparison with other Argentinean provinces,
the economic potential based on oil industry, given that Chubut is
the largest oil-producing province in Argentina and relatively
lower contingent liabilities since the pension system has not
registered deficits. Chubut's main weaknesses include a weak
institutional framework, a weak liquidity position and a high
level of indebtedness with a high percentage denominated in
foreign currency, but backed by oil royalties.
According to Fitch's calculations, gas and oil royalties for the
bond's debt payment have provided average debt coverage of 3.6x
from October 2016 to January 2018, thus above the minimum of 1.35x
established in the transaction documents.
Institutional Framework: Weak, Stable
Fitch considers Argentina's institutional framework to be Weak,
given the country's structural weaknesses, including its complex
and unbalanced fiscal regime with weak equalization funding with
federal transfers being updated with much delays. Fitch will
monitor the implementation of several corrective measures on tax
and federal revenue distribution and their potential positive
impact on the province's public finances.
Fiscal Performance: Weak, Stable
According to Fitch's calculation, operating margins reached the
breakeven in 2017 (0.7%), denoting a slow recovery path. Fitch
does not expect Chubut to be able to generate balanced overall
results at least until 2020. It is worth mentioning that Chubut
approved some corrective measures in early 2018 to prevent
expenditure from growing much above inflation despite the high
level of personnel expenditure (Provincial Decree 1.338 and 170 as
of 2018).
Debt, Liabilities and Liquidity: Weak, Stable
In 2017, total outstanding consolidated debt reached ARS27.5
billion, with around 80% corresponding to public bonds issued by
the province; 10% was debt accrued with the federal government and
the rest was debt owed to banking entities. Most of the debt is
secured by hydrocarbon royalties, although there are no formal
hedge instruments as verified in other provinces in Argentina. The
main contingent liability relates to Banco del Chubut, which
deposits are guaranteed by the province.
The fast deteriorating trend observed in Chubut's operating
margins since 2015 has taken a toll on the province's liquidity
structure, thus leading to delays in commercial payments and
salaries since late 2017. Chubut is working on alternative
financing plans with the National Government to overcome the
liquidity pressure. Fitch believes there is a political commitment
by Argentina to provide assistance to the Province as evidenced by
the short-term financial loans offered in April and May 2018 to
amortize current bills.
Economy: Weak, Stable
Chubut is located in the Patagonian region of Argentina, where
social economic indicators tend to be better than the national
average. According to the 2010 national census, the province has
an estimated population of 509,108, roughly 1.3% of the country's
population. This implies a low GDP per capita of around USD7,900.
Chubut's unemployment rate is below the national average.
According to INDEC, as of first-quarter 2017, Chubut's
unemployment rate was 6.7%, more than two percentage points below
the national average of 9.2%.
With an economy based on services, Chubut is in a strategic
geographic position, with natural and tourist attractions,
including access to the Atlantic Ocean. The province contributes
less than 2% of Argentina's GDP. In line with the economy of
Argentina, Chubut has experienced significant economic volatility
in recent years and high and volatile levels of inflation and ARS
depreciation.
Management and Administration: Neutral, Negative
The Negative trend is due to the deterioration in management
practices as expressed by a delay in salaries and the need to rely
on Federal support since early 2018. The main objective of the
current administration is to balance its public finances within a
period of two years. In addition, the province aims to increase
social investment in housing, drinking water, sewage, education
and health. Fitch notes that Chubut adhered to the nationwide
fiscal pact in March 2018.
RATING SENSITIVITIES
Negative Factors: A downgrade of Argentina's Issuer Default Rating
(IDR) or persistently weak operating margins coupled with a
persistent high refinance risk could lead to a negative rating
action. Fitch does not expect any improvement in the ratings in
the short term given that ratings factors are well balanced for
the current ratings. Any change in the rating of the province will
affect the bond rating in the same direction.
FULL LIST OF RATING ACTIONS
Long-term, foreign- and local-currency IDR affirmed at 'B';
Outlook Stable;
USD650 million 7.75% senior secured notes affirmed at 'B'.
===========
B R A Z I L
===========
JBS SA: Prosecutors Charge Shareholder Batista With Corruption
--------------------------------------------------------------
Ricardo Brito at Reuters reports that Brazilian federal
prosecutors charged JBS SA shareholder Joesley Batista, another
senior executive of the meatpacking company and a former federal
prosecutor with corruption.
The charges against Mr. Batista, former executive Francisco Assis
and former federal prosecutor Marcello Miller were filed before a
federal court in Brasilia, prosecutors said in a statement
obtained by the news agency. They would become defendants in a
criminal case if the court agrees to hear the charge, according to
Reuters.
Lawyers for Mr. Batista and Mr. Assis said in a statement their
clients were innocent and the charges unfounded, the report notes.
It was not immediately possible to locate a lawyer for Mr. Miller.
The charges, which are under seal, accuse Miller of being paid
BRL700,000 (US$185,415) by Batista to help him and Assis reach
plea deals while Miller was still a federal prosecutor, the report
says.
The testimony of Batista and other JBS executives included
allegations that they bribed nearly 2,000 politicians at all
levels of government in the past decade, including President
Michel Temer, the report notes.
The report relays that Mr. Temer faced corruption charges, but
they were blocked from going to trial by Brazil's Congress late
last year.
Under terms of their plea deal signed last year, Batista, who at
the time headed family holding firm J&F Investimentos SA, and
Assis confessed to bribery and were exempted from prosecution for
their cooperation, the report discloses.
Brazil's Supreme Court is weighing whether to annul the plea deal
of the J&F executives, which former prosecutor general Rodrigo
Janot requested they do last September, the report adds.
As reported in the Troubled Company Reporter-Latin America on
May 22, 2018, Moody's Investors Service upgraded JBS S.A. (JBS)'s
corporate family rating to B1 from B3. At the same time, the
senior unsecured ratings of its wholly-owned subsidiary JBS USA
Lux S.A. ("JBS USA") were upgraded to B1 from B2 and its senior
secured ratings to Ba3 from B1. The outlook for all ratings is
stable.
===================================
D O M I N I C A N R E P U B L I C
===================================
* DOMINICAN REPUBLIC: Envoy Nominee Clears Another Hurdle
---------------------------------------------------------
Dominican Today reports that the United States Senate Committee on
Foreign Relations approved the nomination of Robin Bernstein as
ambassador of the Dominican Republic, a decision that will now be
considered by the full House of the US Congress.
Mr. Bernstein was nominated by president Donald Trump in October
20. In making the announcement, the White House said that the
businesswoman "has been a business leader for four decades, the
Government and the non-profit communities of Florida."
Currently, it added, she is co-founder of Palm Beach Country
Cares, a Florida relief effort for the victims of Hurricane Maria
in Puerto Rico and the US Virgin Islands. "
As reported in the Troubled Company Reporter-Latin America on
April 23, 2018, S&P Global Ratings affirmed its 'BB-/B' long- and
short-term sovereign credit ratings on the Dominican Republic.
The outlook remains stable.
===========
M E X I C O
===========
GRUPO EMBOTELLADOR: Fitch Affirms B- IDRs & Alters Outlook to Pos.
------------------------------------------------------------------
Fitch Ratings has affirmed Grupo Embotellador Atic S.A.'s (Atic)
Issuer Default Ratings (IDRs) at 'B-' and Ajecorp B.V.'s senior
unsecured notes at 'B-'/'RR4'. The Rating Outlook has been revised
to Positive from Stable. The Outlook revision to Positive reflects
Atic's progress in its restructuring of noncore assets and the
expectation gross leverage will be below 4x by fiscal year end
2019 (FYE19).
KEY RATING DRIVERS
Restructuring Program Progress: Fitch positively views Atic's
restructuring program, which consists of developing new product
categories, reducing corporate costs (USD4.4 million in 2017) and
divesting non-core assets. Atic made progress on its restructuring
plan with the divestment of loss-making activities in Brazil and
Venezuela. The company reintegrated its Mexican operations into
its core group, which was operating at breakeven in 2018 and
reported USD1.9million adjusted EBITDA in 1Q18. Atic's adjusted
EBITDA of its core operations (including Mexico) improved 29% year
on year to USD134 million in 2017, boosted by strong performance
of Peru and the turnaround of its Mexican activities. The company
intends to either discontinue or find a partner for two businesses
in Thailand and Indonesia; both are classified as assets to be
sold in the company's financial statements. Indonesia reported an
adjusted EBITDA of -USD1 million and Thailand and adjusted EBITDA
of USD1.5 million in 1Q18.
Improved FCF: Fitch expects Atic's FCF to improve in 2018 thanks
to a reduction of capex and steady EBITDA. Fitch expects total
capex to reach about EUR21 million compared to about EUR39million
in 2017. The company is migrating towards smaller bottles sized to
improve profitability, while Fitch expects revenues and volumes to
be pressured by a weak consumer environment in Latam America and
intense competition. In Peru, the government is implementing an
excise tax increase to 25% from 17% for sugary drinks that contain
six or more grams of sugar per 100ml, which is likely to hurt
consumption temporarily as 25% of Atic volumes in Peru are exposed
to this excise tax. The company aims to pass along the tax
increase through higher prices, as well as change product
formulation by reducing sugar content to mitigate this impact.
Geographic and Product Diversification: Atic is geographically
diversified in Latam America with Peru, Central America, Ecuador
and Colombia represented about 39%, 38%, 12% and 11%,
respectively, of total adjusted EBITDA. The most profitable
markets remain in Central America with about 25% adjusted EBITDA
margin in 2017. The company's strategy is to move its product mix
toward non-carbonated soft drink (CSD) products that have higher
potential growth in less mature markets than carbonated soft
drinks; about 47% of volumes consisted of soft drinks, and the
other 53% included juice, water, isotonic energy drinks and nectar
in 2017.
Gradual Deleveraging: Fitch expects Atic's adjusted debt/ EBITDAR
to trend below 4x by 2019 from 4.4x in FYE17, which is strong for
the 'B' rating category. Fitch expects the company to generate
positive FCF due to consistent EBITDA generation, lower capex, and
no dividend payments. The company remains exposed to currency
risks because its raw material and debt are in USD dollars (88% of
the debt).
DERIVATION SUMMARY
Atic's 'B-' rating is supported by the company's geographical
diversification in Latin America and its good position within the
'B' brand segment of most of the markets in which it operates. The
business profile is constrained by the moderate size compared to
its international peers, lower group EBITDAR margin than other
companies such as Arca Continental S.A. de C.V.(A/Stable), Coca-
Cola Femsa, S.A.B. de C.V. (A-/Stable) and exposure to low rated
countries such as Ecuador and mostly non-investment grade
countries within its Central America division (except Panama).
Leverage is strong for the 'B' rating category, but it is tempered
by the company's ongoing restructuring process, limited financial
flexibility due to the secured debt of its syndicated bank loan
and weak corporate governance because of its corporate structure
(privately-owned company) and the existence of related party
transactions.
KEY ASSUMPTIONS
Fitch's key assumptions within ITS rating case for the issuer
include:
-- EBITDA of about USD130 million;
-- Capex of about USD25 million;
-- No dividends;
-- Adjusted debt/EBITDAR below 4x by year-end fiscal 2019.
Recovery Analysis:
Fitch has performed a going concern recovery analysis that assumes
that the company would be reorganized rather than liquidated.
Fitch believes that the company will sell its brands in a
restructuring scenario.
A distressed multiple of 6.7x which is in line with other
companies in the beverage sector consistent with the company's
brands and its low cost position producer notably in its core
market.
Fitch assumes a conservative post-restructuring EBITDA of about
EUR68 million, which assumes 40% distressed value on the group
EBITDA of EUR114 million as of which give an Enterprise Value of
EUR412 million (post a discount of 10% for administrative costs).
The recovery performed under this scenario resulted in a recovery
level of 'RR2', which indicates superior recovery prospect. Atic's
Recovery Rating is capped at 'RR4' due to the location of the
group's operations; Fitch currently limits recovery ratings for
corporates located mainly in Peru and in most of South America
countries to 'RR4'. This recovery rating reflects average recovery
prospects.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action
-- Fitch could upgrade Atic's ratings if the company improve its
financial flexibility, maintains on a sustained basis adjusted
debt/EBITDAR below 4x, fixed interest coverage greater than 3x,
generates strong FCF and limits related parties transactions.
-- Completion of the restructuring.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action
-- Fitch is likely to downgrade Atic's ratings if the company
maintains on a sustained basis a total adjusted debt/ EBITDAR
above 5x, fixed interest coverage below 2.5x and the company
generating negative FCF. A stress in liquidity would put pressure
in the ratings.
LIQUIDITY
The liquidity is manageable. The company had EUR46.4 million of
cash and cash equivalent as of 1Q18, of which EUR13 million was
restricted due to a secured loan agreement and short-term debt
amounted to EUR37 million. Atic has a manageable debt amortization
program, with its USD450 million senior unsecured notes due in
2022. The amortizing debt over the next four years is related to
the secured loan that has a quarterly amortization schedule
starting on September 2017. The main source of liquidity is the
company's available cash and positive FCF.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings:
Grupo Embotellador Atic S.A.
-- Long-term Foreign Currency IDR at 'B-';
-- Long-term Local Currency IDR at 'B-'.
The Rating Outlook has been revised to Positive from Stable.
Ajecorp B.V.
-- Senior unsecured notes at 'B-'/'RR4'.
===============
P A R A G U A Y
===============
PARAGUAY: S&P Affirms BB/B Sovereign Credit Ratings
---------------------------------------------------
S&P Global Ratings, on June 25, 2018, affirmed its 'BB/B' long-
and short-term sovereign credit ratings on Paraguay. The outlook
remains stable. At the same time, S&P affirmed its 'BB+' transfer
and convertibility assessment on Paraguay.
OUTLOOK
S&P said, "The stable outlook reflects our expectations that
Paraguay's weak institutions of governance and evolving political
system will continue to limit the effectiveness of policymaking.
We expect these factors to be balanced by favorable economic
growth, which is likely to remain buoyant over the next three
years, and by Paraguay's strong external position, sustained by
small current account deficits. We expect continuity in key
economic policies following the transition in mid-August from
President Horacio Cartes to President-elect Mario Abdo Benitez. We
expect Paraguay to run moderate general government deficits in the
next three years, contributing to a low debt burden.
"We could raise our ratings over the next couple of years if we
see more effective policymaking and strengthening of public
institutions of governance, thereby reducing the risk of
instability or unexpected changes in economic policy that
undermine confidence. Stronger checks and balances between public
institutions and greater predictability and transparency of policy
decisions could improve our institutional assessment of Paraguay.
We could also raise our ratings if continued diversification of
the economy reduces its vulnerability to low commodity prices and
adverse weather conditions. Additionally, we could raise our
ratings if monetary policy credibility strengthens, contributing
to a sustained decline in dollarization in the economy,
strengthening the central bank's ability to conduct policy."
On the other hand, poor economic management or unexpected external
shocks could undermine GDP growth and reverse the recent
strengthening of Paraguay's financial profile. Higher-than-
expected fiscal deficits or unexpected currency weakness could
lead to larger-than-expected increases in net general government
debt over the next couple of years. Similarly, an unexpected
deterioration in the current account could weaken the country's
currently strong external liquidity position. The combination of
weaker public finances and external liquidity, along with
potentially growing contingent liabilities--from the financial
sector or public-private projects (PPP)--could result in a
downgrade.
RATIONALE
S&P's ratings on Paraguay reflect its weak institutions of
governance and evolving political system. Despite regular changes
of government in recent years and growing political participation,
we believe that Paraguay's institutional framework and its
polarized political landscape could lead to weakening investor
confidence and an unexpected worsening of economic outcomes.
The ratings also reflect limited monetary flexibility and a high
level of dollarization in the financial system. Paraguay's
economic exposure to adverse weather conditions and to volatile
commodity prices (despite recent economic diversification) also
constrains the ratings. At the same time, its net external
creditor position and its low debt burden, with only small fiscal
deficits, are rating strengths.
Institutional and economic profile: GDP will continue to expand at
high rates, but institutional bottlenecks could limit policymaking
effectiveness
-- S&P expects continuity in policies under the new
administration of President-elect Mario Abdo Benitez.
-- GDP growth should average 4.2% in 2018-2021, driven by the
agricultural sector.
-- Economic concentration in commodities will continue to expose
the economy to volatility.
Despite advances during President Horacio Cartes' administration,
the effectiveness of policymaking remains weak, in our opinion.
Limited institutional capacity continues to constrain Paraguay's
economic and human development despite improvements in its GDP per
capita in recent years. S&P estimates Paraguay's real GDP per
capita will be nearly $6,000 in 2018 and will grow at an average
rate of 2.4% in 2018-2021.
After taking office in 2013, President Cartes launched a set of
structural reforms, including a strategy to boost infrastructure
via PPP; measures to strengthen government transparency and
accountability; and a fiscal responsibility law (FRL), which came
into effect in 2015. Such policies helped sustain good GDP growth
and growing external integration of the economy. Nevertheless,
corruption perceptions remain relatively high (Paraguay's ranking
in Transparency International's 2017 Corruption Perception Index
is 135 out of 180 countries) and reflect challenges that are
embedded in the country's weak institutional fabric.
Economic growth has been driven mainly by the agricultural sector,
chiefly the soybean supply chain. Paraguay is one of the largest
soybean exporters in the world, and its export base is
concentrated in this commodity and its subproducts. Despite
efforts to diversify, this structural feature adds some volatility
to the Paraguayan economy, in S&P's view, due to its exposure to
adverse weather conditions and commodities prices. Soybeans alone
account for nearly one-third of Paraguay's total exports, while
oil seeds (including soybeans), vegetable oils and fats, and
bovine meat products accounted for around 71% of total exports in
2017.
S&P said, "We expect stable and prudent macroeconomic policy to
continue with the change in political leadership in 2018. The
Colorado Party will have about the same balance of powers in
Congress under the new administration, with a majority in the
Chamber of Deputies and fewer seats in the Senate. We expect the
Liberal Party to continue to be the main opposition party to the
Colorado Party. The Cartes Administration had given priority to
attracting investment in the country to improve its poor
infrastructure. While progress has been made on investments funded
with traditional government resources, advances on the first
projects approved under the PPP legislation (passed at the end of
2013) have been delayed. We expect such projects and investments
in Paraguay's infrastructure to continue under President-elect
Mario Abdo Benitez's administration, given the country's
significant needs on this end.
"At the same time, our expectation is that President-elect Abdo
Benitez could advance pieces of legislation on health care and
education and, thus, reduce poverty rates and increase life
expectancy at birth. Currently, almost 29% of the Paraguayan
population lives in poverty while life expectancy at birth is
below the Latin American average, according to 2016 data from the
World Bank."
At the same time, reconciling the government's ambitious
investment plans with compliance with the FRL, without relying on
its escape clauses, will remain a challenge for the new
administration. S&P said, "We expect the government will
prioritize infrastructure development, even if it means
potentially falling out of full compliance with the FRL. Although
the government recognizes the weaknesses of the current fiscal law
and has considered modifications, we do not expect any amendments
to be implemented this year or next."
S&P said, "Under our baseline projections, we expect GDP growth to
be around 4.2% in the next three years. We expect strong results
from agriculture--and consequently from the external sector--and
ongoing investments of the private sector to continue driving
growth."
Flexibility and performance profile: Prudent macroeconomic
policies will keep debt low and support strong external results
-- The external sector remains strong with only moderate current
account deficits and stable gross external financing needs.
-- S&P expects fiscal deficits to remain in line with the FRL
and debt levels will remain low.
-- Inflation remains within the central bank's target but high
dollarization continues to limit monetary policy.
Paraguay's current account registered a deficit of 1% of GDP in
2017, mainly because of a weaker trade surplus (1.4% of GDP) and a
higher deficit in the services sector. Growth in exports primarily
stemmed from oilseeds, which increased by 14% in 2017 following
significant growth in 2016. The trade balance includes exports of
electricity from two large hydroelectric dams, Itaip£ Binational
and Yacyret† Binational. Such exports accounted for 24% of total
exports last year. A potentially severe drought would reduce these
export earnings, exacerbating the loss of revenue from lower
agricultural exports at the same time.
S&P said, "Between 2018 and 2021, we expect export demand to
moderately recover as Paraguay's main economic partners (Brazil,
Argentina, and Russia) gradually recover from recession while, at
the same time, soybean prices remain sluggish. We expect the trade
surplus to average 1.8% of GDP for 2018-2021.
"We expect the current account deficit to average 0.5% of GDP in
2018-2021 as demand for exports slowly picks up while export
prices remain lower than historically. Paraguay's external
liquidity remained stable in 2017, with gross external financing
representing 83% of current account receipts (CARs) plus usable
reserves. We define CAR as proceeds from exports of goods and
services plus factor income earned by residents from nonresidents
plus official and private transfers to residents from
nonresidents.
"We expect these financing needs to average 80% in 2018-2021, in
line with the average over the past decade. We expect the central
government to continue financing its deficit abroad and to
continue accessing international markets, albeit at a slower pace
than in previous years. We expect Paraguay to remain a net
external creditor in the next couple of years, with average narrow
net external debt of -10% of current account payments (CAP). We
define CAP as payments for imports of goods and services plus
factor income earned by nonresidents from residents plus official
and private transfers to nonresidents from residents."
Paraguay's external openness (CARs as percentage of GDP average
36%), along with its export concentration in both products and
destinations, makes it vulnerable to external shocks. Roughly two-
thirds of exports come from three agricultural sectors (soya,
beef, and grain), while about half of exports go to Brazil,
Russia, and Argentina. Another important sector for the Paraguayan
external sector is the Maquila Regime, established in 1967, which
gives exemptions of import duties for a number of inputs involved
in this production, as well as various tax benefits. This regime
is destined mainly to exports. There are currently 150 companies
operating under this regime that export mainly automotive parts,
clothing and textile articles, and plastics.
Paraguay's flexible exchange rate has helped to absorb negative
external shocks, containing the risk emanating from export
concentration. The guaran° depreciated about 3% in 2017 relative
to the U.S. dollar, helping to maintain the competitiveness of the
country's external sector.
S&P said, "We do not expect changes to the current tax structure
in the next two to three years. Under this scenario, general
government revenues should remain around 19% of GDP while expenses
will continue at around 20%, partly reflecting the rigidities in
the government's budget. We expect that, over the next two years,
the government will continue to focus on expanding the tax base
and strengthening collection. We expect fiscal deficits to remain
broadly in line with the FRL, averaging 1.1% of GDP between 2018
and 2021. The FRL provides for somewhat limited scope to control
fiscal outcomes given that it only addresses Paraguay's budget
approval process. The administration has presented, though,
budgets consistent with the FRL in recent years. We estimate that
in 2017 the general government deficit was around 0.8% of GDP,
below the FRL's limit.
"We expect that infrastructure needs will continue to limit the
government's fiscal flexibility over the next several years and
that it will be challenging to reconcile the government's
investment plans with fiscal consolidation, as reflected in the
FRL. Paraguay still ranks relatively low compared with regional
neighbors on its infrastructure quality, according to the World
Economic Forum, while the U.N. Development Programme categorizes
the country as having "medium" human development, reflecting
citizens' life expectancy, education, and standards of living.
Addressing these needs will remain a key issue for the next
administration.
"Nevertheless, we expect the government to pursue a fiscal policy
that results in a moderate deficit. As a consequence, we think
that changes in net general government debt over the next three
years should average a modest 1.5% of GDP. We anticipate that net
general government debt will reach 11% of GDP by year-end 2018 and
will continue to rise to almost 13% by 2021, still low by Latin
American standards. We expect general government interest payments
will average roughly 3% of general government revenues between
2018-2021."
In recent years, a growing portion of the government's financing
needs has been covered by bond issuances, including the US$530
million issuance in international capital markets in March 2018 to
finance infrastructure projects and capital expenditures, as well
as to meet its debt service needs. The government's growing
issuance of bonds has also increased its exposure to exchange-rate
movements, given that about 79% of the public sector's debt stock
is denominated in foreign currency (though the government does
receive some dollar-denominated revenues, which somewhat
counterbalances this exposure).
Debt is distributed primarily across multilateral and bilateral
creditors (35%), domestic creditors (11.5%), and international
bondholders (44.5%), as well as the perpetual bond (9%) issued by
the government in December 2012 to capitalize the central bank.
Paraguay's main multilateral creditors are Inter-American
Development Bank, World Bank, and Corporaci¢n Andina de Fomento at
concessional terms. Paraguay's debt structure has changed after
the international issuances, given that before public debt was
concentrated mainly with multilaterals.
The government faces limited contingent liabilities based on our
BICRA group '8' (which reflects economic and industry risks) and
Paraguay's ratio of gross assets of other depository corporations
to GDP of 53%. (Banking Industry Country Risk Assessments, or
BICRAs, are grouped on a scale from '1' to '10', ranging from what
we view as the lowest-risk banking systems [group '1'] to the
highest-risk [group '10'].) Domestic capital markets are still in
an early stage of development, with very little secondary market
trading of government securities. Strong credit growth has slowed
recently, and we expect mild growth in line with the nominal GDP.
The overall financial system has remained healthy over the past
few years, with nonperforming loans accounting for 3% of total
loans in March 2018. Credit quality in the banking system has
remained healthy.
Additionally, Paraguay has nine public-sector enterprises. The
largest ones are Administracion Nacional de Electricidad (ANDE),
Administracion Nacional de Navegaci¢n y Puertos, Direccion
Nacional de Aeronautica Civil, Industria Nacional del Cemento
(INC), and Petroleos Paraguayos. Some proceeds from both sovereign
bond issuances went into financing investments in the main public-
sector enterprises, such as ANDE and INC.
Since the adoption of the inflation-targeting regime, Paraguay has
been able to keep inflation in line with the central bank target
and has been slowly strengthening its supervision of the financial
system. S&P expects inflation to average 4% through 2021,
suggesting a credible policy commitment and well-anchored
inflation expectations.
S&P said, "However, these strengths are weighed against what we
view as still-high dollarization in the economy and lack of a
track record in managing financial risks, particularly stemming
from currency mismatches. The highly dollarized Paraguayan economy
reflects its economic structure that's tightly linked to the
external sector. While the risks are somewhat counterbalanced by
revenues also denominated in U.S. dollars from the export sector,
we believe that such levels of dollarization continue to limit
monetary flexibility. Foreign currency loans represented 47% of
bank loans as of April 2018, and our base case for this year
assumes this could be above 50%, especially if agricultural
exports keep growing. At the same time, such dollarization levels
expose banks' balance sheets to sudden spikes in the Paraguayan
guaran°."
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee by
the primary analyst had been distributed in a timely manner and
was sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
RATINGS LIST
Ratings Affirmed
Paraguay
Sovereign Credit Rating BB/Stable/B
Transfer & Convertibility Assessment BB+
Senior Unsecured BB
================================
T R I N I D A D & T O B A G O
================================
PETROLEUM CO: Energy Minister Feel Great Pain Over State of Firm
-----------------------------------------------------------------
Leah Sorias at Trinidad Express reports that Franklin Khan said
when he speaks about the state of Petrotrin he doesn't know
whether to laugh or cry.
"As a former employee of Petrotrin, I feel great pain to see the
current state of that company," he said, according to Trinidad
Express. But he boldly declared: "Under the watch of this
administration and under my personal watch, Petrotrin has to and
is going to change," he added.
The report notes that Mr. Khan was speaking at the opening
ceremony of the 2018 Energy Resources Conference and Exhibition.
He said one of the four components of turning around the State-
owned company was significant new capital injections.
As reported in the Troubled Company Reporter-Latin America on
May 3, 2018, S&P Global Ratings revised its outlook on Petroleum
Co. of Trinidad & Tobago Ltd (Petrotrin) to negative from stable.
S&P said, "We also affirmed our 'BB' long-term corporate credit
and senior unsecured debt ratings on the company. Additionally,
we're keeping its SACP unchanged at 'b-'."
TOYS R US: Taps Raider Hill as Real Estate Advisor
--------------------------------------------------
Toys R Us Property Company I, LLC, seeks approval from the U.S.
Bankruptcy Court for the Eastern District of Virginia to hire a
real estate advisor.
Toys R Us proposes to employ Raider Hill Advisors, LLC to prepare
for the company and its affiliates (Propco I Debtors) a business
plan and operating budget for each of their leases and fee-owned
properties; select property managers and leasing agents for each
of the properties; and provide other services as their real estate
advisor.
Raider Hill will be paid a monthly fee of $300,000 for the first
18 months, and $275,000 for each month thereafter.
The firm will be paid an incentive fee in accordance with these
terms:
(1) In no event should any incentive fee be paid or payable to
Raider Hill unless the "proceeds" exceed the minimum proceeds
($797 million, plus the "preferred return").
(2) To the extent that aggregate proceeds exceed the minimum
proceeds, 18% of that portion in excess of the minimum proceeds
should be paid to Raider Hill while the other 82% should be
retained by the Propco I Debtors.
The Propco I Debtors will receive a credit towards any incentive
fee otherwise payable to Raider Hill in an amount equal to the sum
of all monthly fees paid or payable to the firm. Any incentive
fee will be due and payable upon the Propco I Debtors' receipt of
applicable proceeds.
Raider Hill does not have any conflicts that would prevent the
firm from being considered a "disinterested person" as defined in
Section 101(14) of the Bankruptcy Code, according to court
filings.
The firm can be reached through:
Daniel B. Hurwitz
Raider Hill Advisors, LLC
780 Third Avenue, 18th Floor
New York, NY 10017
Phone: 212-223-9090
Email: info@raiderhill.com
About Toys R Us, Inc.
Toys "R" Us, Inc., was an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area. Merchandise was 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 was 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
U.S. 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,
were 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. Consensus Advisory Services LLC and
Consensus Securities LLC, serve as sale process investment banker.
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.
Propco I Debtors
Toys "R" Us Property Company I, LLC and its subsidiaries own fee
and leasehold interests in more than 300 properties in the United
States. The Debtors lease the properties on a triple-net basis
under a master lease to Toys-Delaware, the operating entity for
all of TRU's North American businesses, which operates the
majority of the properties as Toys "R" Us stores, Babies "R" Us
stores or side-by-side stores, or subleases them to alternative
retailers.
Toys "R" Us Property was founded in 2005 and is headquartered in
Wayne, New Jersey. Toys 'R' Us Property operates as a subsidiary
of Toys "R" Us Inc.
Company LLC, MAP Real Estate LLC, TRU 2005 RE I LLC, TRU 2005 RE
II Trust, and Wayne Real Estate Company LLC (collectively, "Propco
I Debtors") sought protection under Chapter 11 of the Bankruptcy
Code (Bankr. E.D. Va. Lead Case No. 18-31429) on March 20, 2018.
The Propco I Debtors sought and obtained procedural consolidation
and joint administration of their Chapter 11 cases, separate from
the Toys "R" Us Debtors' Chapter 11 cases.
The Propco I Debtors estimated assets of $500 million to $1
billion and liabilities of $500 million to $1 billion.
Judge Keith L. Phillips presides over the Propco I Debtors' cases.
The Propco I Debtors hired Klehr Harrison Harvey Branzburg, LLP;
and Crowley, Liberatore, Ryan & Brogan, P.C., as co-counsel. The
Debtors also tapped Kutak Rock LLP. They hired Goldin Associates,
LLC, as financial advisors.
=================
V E N E Z U E L A
=================
VENEZUELA: Vice-President Banned from Travelling to European Union
------------------------------------------------------------------
Caribbean360.com reports that the European Union (EU) Council
imposed sanctions on 11 Venezuelan officials, including Vice-
President Delcy Rodriguez, banning them from travelling to the EU
and freezing their assets.
The decision comes on the heels of last month's elections, which
the opposition boycotted and which resulted in Nicolas Maduro
being elected to a second six-year term in office, according to
Caribbean360.com. The EU said the elections "were neither free
nor fair and their outcome lacked any credibility as the electoral
process did not ensure the necessary guarantees for them to be
inclusive and democratic," the report notes.
In a statement announcing the decision, the EU said the 11
sanctioned officials "are responsible for human rights violations
and for undermining democracy and the rule of law in Venezuela,"
the report relays.
"This decision is a direct follow-up to the Council conclusions
adopted on 28 May 2018, which called for additional targeted and
reversible restrictive measures that do not harm the Venezuelan
population in response to the recent presidential elections held
in Venezuela," it said, the report notes.
But Venezuela has government condemned the move, describing it as
"the continued aggression and meddling by the EU," the report
discloses.
The EU specifically accused Ms. Rodriguez, in her role as a member
of the Presidential Commission and then as President of the
Constituent Assembly, of undermining democracy and the rule of law
in Venezuela, including usurping the powers of the National
Assembly and using them to target the opposition and prevent them
taking part in the political process, the report says.
In response to the sanctions, Ms. Rodriguez said the EU decision
was driven by "racist" and "warmongering" policies of the "old
imperial world," the report notes.
"The old imperial world or any foreign power will never bend my
determination as a Venezuelan to love the land where I was born!"
she tweeted in a "personal message" to the EU, the report relays.
The report notes that Ms. Rodriguez added that she would not be
distracted by any threat, extortion, arbitrary measure or
blackmail.
The other 10 sanctioned were:
-- Vice President of Economy and Minister for National Industry
and Production, Tareck El-Aissami;
-- Inspector General of the Bolivarian National Armed Forces,
Sergio Rivero;
-- General Commander of the Bolivarian Army, Jesus Suarez;
-- Head of Directorate General of Military Counter-
Intelligence, Ivan Hernandez;
-- Vice President of the National Electoral Council, Sandra
Ruzza;
-- Commissioner General of the Bolivarian National Intelligence
Service, Freddy Bernal;
-- Deputy Attorney General, Katherine Nayarith Harrington;
-- Member of the National Electoral Council, Socorro Hernandez;
and
-- Secretary-General of the National Electoral Council, Xavier
Moreno.
The EU Council's decision brings to 18 the total number of
individuals under sanctions in view of the situation in Venezuela,
the report says.
The Council had listed seven Venezuelan officials involved in the
non-respect of democratic principles or the rule of law as well as
in the violation of human rights on January 22 this year, the
report notes. It said the restrictive measures aim to help foster
democratic shared solutions that can bring political stability to
the country and allow it to address the pressing needs of the
population, the report adds.
As reported in the Troubled Company Reporter-Latin America on
June 1, 2018, S&P Global Ratings, on May 29, 2018, removed its
long- and short-term local currency sovereign credit ratings on
Venezuela from CreditWatch with negative implications and affirmed
them at 'CCC- /C'. The outlook on the long-term local currency
rating is negative. At the same time, S&P affirmed its 'SD/D'
long- and short-term foreign currency sovereign credit ratings on
Venezuela. Our transfer and convertibility assessment remains at
'CC'.
VENEZUELA: Investors Will Oppose Unfair Debt Restructuring
----------------------------------------------------------
RJR News reports that a group of institutional investors holding
roughly 13 per cent of Venezuela's foreign debt Monday said it
will not support any restructuring plan that does not imply equal
treatment for all creditors.
The government of President Nicolas Maduro has halted almost all
foreign debt payments, leaving Venezuela, which has a debt load of
around $60 billion in direct and subsidiary foreign bonds, in
default, according to RJR News.
In addition to holding sovereign debt, billions are owed to
creditors holding bonds issued by state oil company PDVSA and
state-run power utility Electricidad de Caracas, the report notes.
As reported in the Troubled Company Reporter-Latin America on
June 1, 2018, S&P Global Ratings, on May 29, 2018, removed its
long- and short-term local currency sovereign credit ratings on
Venezuela from CreditWatch with negative implications and affirmed
them at 'CCC- /C'. The outlook on the long-term local currency
rating is negative. At the same time, S&P affirmed its 'SD/D'
long- and short-term foreign currency sovereign credit ratings on
Venezuela. Our transfer and convertibility assessment remains at
'CC'.
***********
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 2018. 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.
.
* * * End of Transmission * * *