/raid1/www/Hosts/bankrupt/TCRLA_Public/180827.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
Monday, August 27, 2018, Vol. 19, No. 169
Headlines
A R G E N T I N A
PAMPA ENERGIA: S&P Affirms B+ Issuer Credit Rating, Outlook Stable
B R A Z I L
BANCO MERCANTIL: Moody's Confirms 'Caa1' LT Global Deposit Ratings
MARFRIG GLOBAL: Moody's Affirms 'B2' CFR & Sr. Unsec. Ratings
NATURA COSMETICOS: S&P Alters Outlook to Stable & Affirms 'BB' ICR
C H I L E
CHILE: S&P Alters Outlook on 10 Financial Institutions to Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Brazilian Pact Aims to Clear Hurdles to Trade
DOMINICAN REPUBLIC: High Court Rules Against Truckers' Monopoly
E C U A D O R
BANCO PICHINCHA: Fitch Cuts Long-Term Foreign Currency IDR to 'B-'
J A M A I C A
JAMAICA: Lee-Chin Welcomes Positive Economic Indicators
NOBLE GROUP: Deutsche Bank to Rescue Firm
P U E R T O R I C O
J & M SALES: Store Closing Sales Procedures Has Interim Approval
PUERTO RICO SALES: Moody's Affirms 'Ca' Bond Rating, Outlook Pos.
X X X X X X X X X
* BOND PRICING: For the Week August 20 to August 24, 2018
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A R G E N T I N A
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PAMPA ENERGIA: S&P Affirms B+ Issuer Credit Rating, Outlook Stable
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S&P Global Ratings affirmed its 'B+' issuer credit and issue-level
ratings on Pampa Energia S.A. (Pampa). The outlook remains stable.
The rating affirmation reflects that despite more challenging
market conditions and some uncertainty about future energy and gas
prices, Pampa's low leverage and strong cash position will allow
it to continue investing in power generation and tight gas
projects while maintaining its credit quality. S&P said, "The
ratings also incorporate our view that the sovereign limits
Pampa's credit quality, considering that the energy sector depends
on the regulatory framework and on government support or
intervention, and our belief that in a hypothetical sovereign
default scenario, high inflation, sharp local currency
devaluation, and overall economic conditions would undermine
Pampa's financial flexibility."
S&P said, "Our rating approach to Pampa uses its consolidated
financial figures, which include its oil and gas (O&G) and power
generation operations carried out directly by Pampa or by its
unrated consolidated subsidiaries. We also include its
consolidated electricity distribution operations conducted through
Empresa Distribuidora y Comercializadora Norte S.A. (Edenor,
B/Positive/--), as well as dividends coming from Transportadora de
Gas del Sur S.A. (TGS, B+/Stable/--) and Compa§°a de Transporte de
Energ°a ElÇctrica en Alta Tensi¢n Transener S.A. (Transener,
B+/Stable/--)."
-- Pampa holds a 51.54% stake in Edenor, which represents around
30%-35% of Pampa's consolidated EBITDA generation.
-- Pampa holds a minority stake (25.5%) in TGS.
-- Pampa holds a minority stake (26.3%) in Transener.
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B R A Z I L
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BANCO MERCANTIL: Moody's Confirms 'Caa1' LT Global Deposit Ratings
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Moody's Investors Service has confirmed all of Banco Mercantil do
Brasil S.A.'s long-term ratings and assessments, including its
Caa1 deposit ratings. The outlook was changed to negative. Banco
Mercantil's short term ratings were unaffected by this action.
This action concludes the review for downgrade which commenced on
May 24, 2018.
The following ratings and assessments of Banco Mercantil do Brasil
S.A. were confirmed:
- Long-term global local and foreign-currency deposit ratings of
Caa1, negative
- Long-term Brazilian national scale deposit rating of Caa1.br,
negative
- Long-term global local and foreign-currency counterparty risk
ratings of B3
- Long-term Brazilian national scale counterparty risk rating of
B2.br
- Long term foreign-currency senior unsecured medium-term note
program of (P)Caa1
- Long-term foreign currency subordinated debt rating of Caa2
- Baseline credit assessment of caa1
- Adjusted baseline credit assessment of caa1
- Long-term counterparty risk assessment of B3(cr)
Outlook, Negative from Rating Under Review
RATINGS RATIONALE
The confirmation of Banco Mercantil's ratings reflects the
Brazilian Central Bank's recent approval of a capital increase,
which should help ensure that its regulatory capitalization levels
remain above new regulatory minima, including buffers, in 2019.
The confirmation also considers the bank's large share of stable
yet short tenor deposit based funding, backed by moderate levels
of liquid assets. However, the negative outlook reflects the
heightened challenges the bank faces in generating sustainable
earnings, and the risk that it's still weak asset quality
could begin to deteriorate again, which could put downward
pressure on capital.
On August 17, 2018, the Brazilian Central Bank approved a BRL 60
million capital increase, which Moody's expects will raise the
bank's Tier 1 ratio by 94 basis points to 9.9%. This will provide
the bank an adequate cushion above Brazil's new regulatory
minimum, which is set to increase to 8.5% by 2019, including the
capital conservation buffer. However, the bank's ratio of tangible
common equity to risk weighted assets is considerably lower at
just 6.6% due to the bank's large holdings of deferred tax assets,
most of which Moody's deducts from capital due to their limited
loss absorption capacity.
In 2Q2018, Banco Mercantil's problem loan ratio, as calculated by
Moody's, was 9.3%, three times the banking system average.
Moreover, Moody's notes that loans classified as E-H, or those
deemed risky by the Central Bank, accounted for almost 17% of the
loan book, up 50 bps from six months earlier. The bank's asset
risk remains high despite that fact that the it charged off over
5% of its loans the first half of 2018. Notwithstanding the high
level of delinquencies, the bank's loan loss reserve coverage was
adequate at 135% as of June 2018, up from 127% in the previous
quarter.
Banco Mercantil's ratings are also supported by its funding, which
is over 80% deposit based and has been stable in recent quarters.
While the short tenor of the deposits nevertheless leaves the bank
potentially exposed to funding risk, this is somewhat offset by
the bank's sizeable holdings of liquid assets, which accounted for
25% of total assets as of June 2018.
However, the bank has and will continue to face challenges to its
profitability. In 2Q2018, Banco Mercantil reported net income of
just BRL 7.8 million, 60% lower than the BRL 19.8 million reported
in the first quarter, due to an 18% increase in credit costs which
offset a 10% drop in administrative expenses. Moody's expects
BMB's net income to continue to be pressured over the following 12
to 18 months.
Following its capital increase, the bank plans to start growing
its loan book again following a 7.3% contraction in 2017. If
successful, this could lead to a modest improvement in
profitability. However, it is uncertain whether it will be able to
grow its loan book and net income sustainably, particularly in
light of increased competition for payroll loans, which is the
bank's main product, and Brazil's current low interest rate
environment. Moreover, the bank's bottom line is very vulnerable
to further increases in its provisioning and operating expenses,
which are already elevated compared to similar banking
institutions in Brazil.
In such an event, the bank could potentially prop up earnings by
selling assets to third parties, but this could result in
significant further declines in its balance sheet, which could
become unsustainable.
WHAT COULD CHANGE THE RATINGS UP/DOWN
The ratings could move down if the bank's earnings continue to
decline, driven by a further increase in credit or operating
costs, leading to a deterioration in capital levels.
Given the negative outlook there is no positive pressure on the
bank's ratings at present. However, the outlook could stabilize if
the bank reports strong and sustainable growth in its
profitability over the next twelve months, sufficient to allow it
to maintain stable capital levels.
The principal methodology used in these ratings was Banks
published in August 2018.
MARFRIG GLOBAL: Moody's Affirms 'B2' CFR & Sr. Unsec. Ratings
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Moody's Investors Service affirmed all of Marfrig Global Foods
S.A.'s existing ratings, including its B2 Corporate Family rating
and the senior unsecured ratings of Marfrig Holdings (Europe) B.V.
The rating outlook is stable.
The following ratings were affirmed:
Marfrig Global Foods S.A.:
- Corporate Family Rating at B2
Marfrig Holdings (Europe) B.V.:
- USD 508.5 million guaranteed senior unsecured global notes due
2019 at B2;
- USD 27.8 million guaranteed senior unsecured global notes due
2021 at B2;
- USD 1,000 million guaranteed senior unsecured global notes due
2023 at B2.
The outlook for all ratings is stable
The affirmation of Marfrig's ratings follows the announcement that
the company has entered into a definitive agreement to sell
Keystone Foods, Inc. to Tyson Foods, Inc.'s for $2.16 billion in
cash. This transaction follows Marfrig's acquisition of a 51%
stake in US beef processor National Beef, announced in April 2018.
As net impact of these two transactions Moody's sees business
risks increasing moderately while financial risk should modestly
decline due to lower leverage.
Moody's believes the divestment of Keystone will weaken Marfrig's
portfolio mix by exiting the relatively stable business of selling
poultry and processed food products to quick service restaurants.
Conversely, the investment in National Beef increases its exposure
to the more volatile commodity beef processing business.
The acquisition of National Beef provides additional geographic
diversification in the beef segment, mitigating local event risks
including weather conditions, local production and price
volatility, animal disease and trade restrictions. Moreover,
Marfrig will increase its scale, from USD 5.8 billion in sales in
2017 to over USD 10 billion in 2019 by Moody's estimates.
On a pro-forma basis considering the proportional 51% stake that
Marfrig will hold in National Beef (and incorporating Moody's
standard adjustments), credit metrics will modestly improve, but
remain relatively weak. Moody's expects CFO/net debt to increase
to around 13% compared to -9.4% in 2017, EBITA/interest expense to
1.1x versus 0.74x 2017, and gross leverage declining to 6.2x from
7.8x in 2017 (On a reported basis, with National Beef fully
consolidated, Moody's expects CFO/net debt increasing to 19.4%,
EBITA/interest expense to 1.8x and debt/EBITDA dropping to 4.5x).
After deducting Keystone's debt and paying down the USD 900
million bridge loan used for the National Beef acquisition,
Moody's believes Marfrig will still have another USD450 million to
further reduce debt. Liquidity will remain adequate with a
sustained cash balance of USD 1.6 billion.
RATINGS RATIONALE
Marfrig's B2 ratings are constrained by a high gross leverage,
weak interest coverage and a considerable exposure to highly
volatile commodity related businesses. In 2018, Moody's expects
consistent results for both Marfrig Latin American operations and
the newly acquired National Beef operations, with EBITDA reaching
BRL 3.4 billion and 8.6% based on a pro-forma estimate of results
from Marfrig Beef and National Beef, ex-Keystone.
Marfrig's growth strategy became more aggressive in early in 2018
with the acquisition of National Beef. Prior to that the company
had focused on organic growth. Concomitant to the announcement
Marfrig also announced the sale of Keystone in order to raise cash
and reduce leverage. In August 20, Marfrig announced it had
reached an agreement to sell Keystone to Tyson Foods.
Ratings are supported by Marfrig's scale as the second largest
beef producer, its good geographic footprint and distribution
capabilities. The company's diversity in terms of raw material
sourcing, in Latin America and the US, reduces risks related to
weather and animal diseases, and helps to mitigate some of the
volatility inherent in commodity cycles and supply-demand
conditions for each specific region.
The stable outlook reflects Moody's view that Marfrig will be able
to gradually reduce gross leverage while sustaining a good
liquidity profile.
The ratings could be upgraded, if the prospects for leverage
reduction and interest coverage improve. At the same time,
liquidity would need to remain adequate with cash in hand covering
at least in 1.0x short-term debt. Also, the company would need to
improve operating margins and maintain a consistent and
predictable financial policy. An upgrade would require CFO/net
debt approaching 15% and a total debt/EBITDA below 4.5x.
Marfrig's ratings could be downgraded if the company's operating
performance weakens, if financial policy becomes more aggressive,
or if its liquidity deteriorates. Quantitatively, ratings could be
downgraded total debt/EBITDA does not decline to approaching 6.0x
over the next 12 to 18 months, EBITA to gross interest expense
falls below 1.0x or if retained cash flow to net debt falls below
10%. All credit metrics incorporate Moody's standard adjustments.
The principal methodology used in these ratings was Global Protein
and Agriculture Industry published in June 2017.
Marfrig, headquartered in Sao Paulo, Brazil, is second the largest
beef producer globally, with consolidated revenues of BRL 22.4
billion (approximately USD 6.4 billion) in the last twelve months
period ended in June 2018. The company has relevant scale and is
diversified in terms of sales, raw materials and product
portfolio, with slaughtering plants in Brazil, Uruguay, and US. In
2018, Marfrig acquired the control of National Beef, the 4th
largest US beef processor. Headquartered in Kansas City, Missouri,
the company owns two slaughtering plants with 13% of the total
slaughtering capacity of the American market.
NATURA COSMETICOS: S&P Alters Outlook to Stable & Affirms 'BB' ICR
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S&P Global Ratings revised its outlook on Natura Cosmeticos S.A.
(Natura) to stable from negative. S&P said, "We also affirmed our
global scale issuer credit and issue-level ratings on the company
at 'BB'. In addition, we affirmed our national scale issuer credit
and issue-level ratings at 'brAAA'. We have also kept recovery
rating at '3' on Natura's unsecured debt rated, reflecting our
expectation of an average recovery of 50%, unchanged."
S&P said, "The outlook revision reflects our view of diminished
risks associated with the turnaround of TBS's operations. We
believe Natura's strategy for TBS has been assertive so far,
consisting of price adjustments, optimization of brick-and-mortar
stores, closure of 52 locations, and cost controls, with further
potential benefits stemming from a global procurement of raw
materials and other back-office synergies. These factors increased
TBS's reported EBITDA (excluding the overhaul expenses) to R$82
million in the first half of 2018 from a loss in the same period
of 2017. Reorganization is still ongoing, and should total about
R$125 million in additional expenses in 2018 and 2019.
"In addition, Natura's operations in other Latin American
countries and its Australian retail operation, Aesop, have posted
strong revenue growth and maintained resilient margins, which we
expect to persist over the next couple of years. The replication
of Natura's direct-sales model in Latin America and the continued
global expansion of Aesop's stores support our estimates of a
revenue increase of around 7% in 2019."
In Brazil, which is Natura's largest market, the company was able
to recapture market share through the restructuring of its direct-
sales channel by increasing the focus on key consultants and
improving productivity levels. It has also opened some retail
stores in key locations to promote the brand. Nevertheless, the
company has struggled to raise its margins due to depreciation of
the currency that increased input costs and due to still fierce
competition. The latter makes price adjustments to end products
more difficult, while competition tends to foster promotional
activities to support volumes and share. S&P said, "These factors
will restrain Natura's margins below 20% this year, in our view,
and they're likely to remain in that area for the next several
quarters due to Brazil's sluggish economic growth. On a
consolidated basis, we expect the company's adjusted EBITDA
margins to be around 18.5% in 2018 and improving gradually
afterwards."
Natura expects to reduce expenses by R$420 million in the next
three years through gains of scale on volumes purchased,
logistics, third parties services, packaging and inputs. S&P's
base-case forecast only considers a portion of these synergies,
which should allow the company to improve adjusted EBITDA margins
to around 20% as of 2020.
The company has maintained a more conservative approach to
shareholders' remuneration, and we expect its payout ratio to
remain at around 30%, down from 100%, of net income distribution
in recent past, contributing to the deleveraging. S&P expects
Natura to maintain this policy until the company returns to its
historical leverage of below 2x. It has also issued a $750 million
bond to fund TBS's acquisition and additional issuances to extend
the overall maturity profile."
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C H I L E
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CHILE: S&P Alters Outlook on 10 Financial Institutions to Stable
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S&P Global Ratings revised its outlook on the following entities
to outlook to stable from negative and affirmed its ratings:
-- Banco Santander-Chile S.A. (BSCh);
-- Banco de Credito e Inversiones;
-- Itau CorpBanca;
-- Banco BICE;
-- Banco Bilbao Vizcaya Argentaria Chile y Filiales (BBVA Chile);
-- Banco Security;
-- Cooperativa Del Personal de La Universidad de Chile Ltda-
Coopeuch Ltda (Coopeuch);
-- Tanner Servicios Financieros S.A. (Tanner);
-- LQ Inversiones Financieras S.A. (LQIF); and
-- Larrain Vial S.A. Corredora de Bolsa (LVCB).
At the same time, S&P affirmed the ratings and maintained a stable
outlook on the following entities:
-- Banco del Estado de Chile (Banco Estado);
-- Banco del Estado de Chile Sucursal New York; and
-- Banco de Chile.
S&P said, "The rating actions reflect our view of diminished risks
of potential cyclical credit fueled asset price bubbles. This
stems from continued moderate growth of credit, despite the higher
projected economic growth of Chile starting in 2018, and softer
increases in real estate property prices. These factors are partly
compensating for the sovereign's slightly lower capacity to face
external shocks, while reducing the risks of credit losses and
capital deterioration among domestic financial institutions. Also,
we believe the following one-off factors have influenced real
estate prices in the past few years that didn't result in higher
risks of asset bubbles: The earthquake in 2010 that raised
construction costs; The hike in properties' purchases in 2014-2016
before the implementation of value-added tax (VAT) on properties;
and Tax benefits that were removed after the last tax reform and
that incentivized the investment in real estate properties."
Nevertheless, dynamics in Chile's real estate prices depend on the
following factors: Inventories of available units; Interest rates
on mortgages, which are currently at historically low levels; The
number of unrealized house purchases; and Construction regulations
in Santiago, which is one of the biggest real estate markets in
the country.
In addition, other factors have influenced the domestic real
estate market such as the increased rental demand stemming from
the immigration wave in the past two years, the appreciation in
value of properties in areas near the extension of the metro in
Santiago, and the development of real estate funds. All these
factors have resulted in an average real estate price growth of
6.5% for the past five years (in real terms and based on the
central bank's figures and on new and used home prices at national
level). S&P said, "We expect credit to grow 8%-9% on nominal basis
and real estate prices to increase by around 4% in real terms for
the next two years, which in our view represents a manageable
risk. However, we will continue monitoring these factors and if
asset prices significantly rise above our expectations, we could
revise our economic risk accordingly. Moreover, banks have
remained resilient to the external conditions, posting relatively
stable asset quality metrics and operating performance."
S&P said, "We maintained our BICRA score on Chile at group '3',
which anchors banks operating in Chile at 'bbb+'. Our bank
criteria uses our BICRA economic risk and industry risk scores to
determine a bank's anchor, the starting point in assigning an
issuer credit rating. A BICRA is scored on a scale from '1' to
'10', ranging from the lowest-risk banking systems (group '1') to
the highest-risk (group '10'). We revised the economic risk trend
to stable from negative, while the industry risk trend remains
unchanged at stable."
Chile's resilient economy reflects many years of sound and
consistent economic policies, such as strong fiscal performance,
low inflation, and a healthy financial system. However, the
country's GDP per capita is still lower than those of more
developed countries and its BICRA peers. But at about $15,400 at
the end of 2017, it's among the highest in the region and
gradually rising. In this sense, better global copper prices than
in 2016 and renewed business confidence after the 2017 national
elections have boosted GDP growth prospects to about 4.0% in 2018
and 3.3% in 2019 from 1.6% in 2017. S&P said, "In addition, we're
seeing more moderate growth in credit and real estate prices than
historical levels, which stave off pressure on the sovereign's
slightly weaker capacity to face external shock, while reducing
the risks of cyclical credit-fueled asset bubbles. We expect the
Chilean banking industry's asset quality to remain adequate and in
line with those of its peers amid better economic and business
prospects."
S&P said, "In terms of industry risk, we believe that Chile has a
sound and comprehensive regulatory framework. The banking sector
has generated adequate profitability for the past five years, and
the absence of significant market distortions results in healthy
competitive dynamics. We also believe that Chile's financial
system has an adequate funding mix consisting of deposits,
domestically issued debt, and external debt (banks and capital
markets). However, institutional deposits have historically played
a significant role, especially for mid-size and smaller banks. In
June 2017, the government submitted a draft of a banking law that
aims to align the country with Basel III standards for capital and
to introduce tools such as an early regularization plan. At this
point, we don't see an impact on potential government support to
banks, but we'll monitor changes in the resolution framework.
"Chile's stable economic risk trend incorporates our view of
manageable risks of economic imbalances, given softer growth of
credit and real estate prices. However, if asset prices rise
sharply above our expectations, we could revise our economic risk
accordingly. On the other hand, we expect the country's sound
macroeconomic flexibility and manageable credit risk should
continue to support the financial system's adequate performance.
"In our view, the industry risk trend is stable. We believe that
the industry's funding structure and competitive dynamics will
remain adequate over the next few years. We also think that
Chile's institutional framework will continue to improve and that
the banking system will adopt Basel III capitalization rules after
the approval of the new banking law. We believe banks will
maintain a balanced funding profile based on core customer
deposits, the bulk of which are from institutional investors,
while maintaining their diversified funding sources. Apart from
the continued growth in the system's deposit base, we expect banks
in Chile to have easy access to international and domestic markets
to fund operations."
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Brazilian Pact Aims to Clear Hurdles to Trade
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Dominican Today reports that Dominican Republic and Brazil signed
an agreement aimed at eliminating hurdles that hinder trade and
investment between both countries.
Foreign minister Miguel Vargas said the agreement will promote
greater access opportunities for Dominican products to that South
American country, according to Dominican Today.
The commitment, which includes strengthening technical
cooperation, was signed by Mr. Vargas, and Brazil deputy Trade
minister Santiago Mourao, as part of the first meeting of the
Dominican Republic-Brazil Trade Council and Investment Group, held
in the Dominican Foreign Ministry, the report relays.
"We fulfill this commitment assumed in the MOU signed during my
official visit to Brasilia, on May 14, with my friend and
Secretary General of the Minister of Foreign Affairs of Brazil,
Marcos Bezerra Abbott Galvao," the report quoted Mr. Vargas as
saying.
As reported in the Troubled Company Reporter-Latin America on
July 19, 2018, Fitch Ratings assigned a 'BB-' rating to
Dominican Republic's USD1.3 billion bonds, maturing July 2028. The
notes have a coupon of 6%. Proceeds from the issuance will be
used for general purposes of the government, including the partial
financing of the 2018 budget.
DOMINICAN REPUBLIC: High Court Rules Against Truckers' Monopoly
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Dominican Today reports that the Constitutional Court upheld the
Superior Administrative Court ruling against a monopoly in the
cargo transport sector, which violated the right to free
enterprise, freedom of movement and work.
The Constitutional Court informs that the ruling partially
accepted the appeal for constitutional review filed by the Land
Transport Office (OTTT), the CONATRA and FENATRADO unions, among
other transport guilds, against the ruling for the National
Business Private Council (Conep), according to Dominican Today.
The report relays that the Administrative Superior ruled that the
Dominican State through the ministries of Labor, Industry and
Commerce, Defense, Interior and Police, and Tourism; The National
Police and the OTTT, violated the antitrust laws for the benefit
of private individuals in the work of loading or offloading ships
of any nature on the docks of the country.
The Conep said it's satisfied by the ruling, the report adds.
As reported in the Troubled Company Reporter-Latin America on
July 19, 2018, Fitch Ratings assigned a 'BB-' rating to
Dominican Republic's USD1.3 billion bonds, maturing July 2028. The
notes have a coupon of 6%. Proceeds from the issuance will be
used for general purposes of the government, including the partial
financing of the 2018 budget.
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E C U A D O R
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BANCO PICHINCHA: Fitch Cuts Long-Term Foreign Currency IDR to 'B-'
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Fitch Ratings has downgraded the Long-Term Issuer Default Ratings
(IDRs) to 'B-' from 'B' for the following banks:
-- Banco Pichincha C.A. y Subsidiarias (Pichincha)
-- Banco de la Produccion S.A. y Subsidiarias (Produbanco)
The Rating Outlooks have been revised to Stable from Negative.
These rating actions follow the recent downgrade of Ecuador's
Long-Term IDR to 'B-' from 'B'. As stated in Fitch's rating
criteria, banks are rarely rated above the sovereign. In Fitch's
view, the operating environment's high influence on the banks'
ratings, given its impact on potential growth and earnings
retention, as well as direct exposure to Ecuador through
investment portfolios, constrains bank ratings to the sovereign's
creditworthiness.
KEY RATING DRIVERS
IDRs AND VRs
The banks' Viability Ratings (VR), or standalone creditworthiness,
drive the IDRs of Pichincha and Produbanco. Ecuador's operating
environment and capital adequacy highly influence Pichincha and
Produbanco's VRs. Particularly, Fitch considers the sovereign's
high influence on these banks' VRs, given the impact of the
government's macroeconomic and regulatory policies on financial
performance. Ecuador's worsening economic conditions could limit
Pichincha and Produbanco's potential growth and earnings
retention, which could pressure capitalization over the next 12 -
24 months.
Pichincha's VR also factors in its strong local franchise and
diverse business model, solid liquidity for its market of
operation, sound capitalization, pressured loan quality and weak
profitability.
Produbanco's VR also considers, with moderate importance, the
bank's good asset quality, solid liquidity, strong local franchise
and stable business model. Fitch also considers the importance of
maintaining adequate underwriting standards and risk controls
under current economic conditions.
SUPPORT RATING AND SUPPORT RATING FLOOR
Fitch affirmed Pichincha and Produbanco's Support Rating (SR) at
'5' and Support Rating Floor (SRF) at 'NF', reflecting that
despite these banks' strong market share and local franchise,
Fitch believes that sovereign external support cannot be relied
upon due to Ecuador's limited funding flexibility as well as the
lack of a lender of last resort.
RATING SENSITIVITIES
IDRs AND VRs
Pichincha and Produbanco's IDRs and VRs are sensitive to changes
in the sovereign rating. Potential upgrades of the IDRs and VR are
unlikely in the foreseeable future. Conversely, a significant
reduction in the banks' earnings retention or an acceleration of
growth that leads to a decrease in FCC metrics consistently below
9%, along with a material decline in excess loan loss reserves
could also result in negative rating actions.
SUPPORT RATING AND SUPPORT RATING FLOOR
Ecuador's propensity or ability to provide timely support to these
banks is not likely to change given the sovereign's low sub-
investment-grade IDR. As such, the SR and SRF have no upgrade
potential.
Fitch has taken the following rating actions:
Banco Pichincha C.A. y Subsidiarias
-- Long-Term Foreign Currency IDR downgraded to 'B-' from 'B';
Outlook revised to Stable from Negative;
-- Short-Term Foreign Currency IDR affirmed at 'B';
-- Viability Rating downgraded to 'b-' from 'b';
-- Support Rating affirmed at '5';
-- Support Floor affirmed at 'No Floor'.
Banco de la Produccion S.A. y Subsidiarias
-- Long-Term Foreign Currency IDR downgraded to 'B-' from 'B';
Outlook revised to Stable from Negative;
-- Short-Term Foreign Currency IDR affirmed at 'B';
-- Viability Rating downgraded to 'b-' from 'b';
-- Support Rating affirmed at '5';
-- Support Floor affirmed at 'No Floor'.
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J A M A I C A
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JAMAICA: Lee-Chin Welcomes Positive Economic Indicators
-------------------------------------------------------
RJR News reports that Chairman of the Economic Growth Council
(EGC) Michael Lee-Chin, has welcomed what he calls several key
positive economic indicators recorded at the end of the April to
June quarter.
He said, among these are an estimated 1.8 per cent economic
growth; Tax Administration Jamaica's $79.9 billion revenue intake,
which he notes is 9.2 per cent above target; and further reduction
in Jamaica's debt to gross domestic product ratio to 105 per cent,
according to RJR News.
The report notes that Mr. Lee-Chin says based on Tax
Administration's revenue inflow for the June quarter, it is on
track to exceed its 2018/19 fiscal year target of $320 billion .
He was speaking at the EGC's Sixth Quarterly Report at Jamaica
House, the report adds.
As reported in the Troubled Company Reporter-Latin America on
Feb. 5, 2018, Fitch Ratings affirmed Jamaica's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'B' and has
revised the Rating Outlook to Positive from Stable.
NOBLE GROUP: Deutsche Bank to Rescue Firm
-----------------------------------------
RJR News reports that German lender Deutsche Bank has come to the
rescue of troubled commodity trader Noble Group -- the co-owner of
the Jamalco alumina refinery.
Deutsche Bank is doubling down on a bet that Noble will be able to
rise from the ashes and deliver profits to creditors who back a
US$3.5 billion restructuring, according to RJR News.
With less than a week before Noble shareholders vote on the debt-
restructuring plan, the German lender's London office is offering
to buy the company's senior unsecured bonds for 45 per cent of
face value, the report notes.
Creditors who back the debt-for-equity swap and provide fresh
trade finance to Noble will get a more valuable package of new
securities in the restructuring than those who do not, the report
relays.
Noble is approaching the end game in its drawn-out restructuring
after years of crisis, public sparring with investors and billions
in losses that culminated with a March default on its debt, the
report adds.
About Noble Group
Hong Kong-based Noble Group Limited (SGX:N21) --
http://www.thisisnoble.com/-- engages in supply of agricultural,
industrial and energy products. The Company supplies agricultural
and energy products, metals, minerals and ores. Agriculture
products include grains, oilseeds and sugar to palm oil, coffee,
and cocoa. Energy business includes coal, gas and liquid energy
products. In metals, minerals and ores (MMO), it supplies iron
ore, aluminum, special ores and alloys. The Company operates
nearly in 140 locations. It supplies growth demand markets in
Asia and Middle East. Alcoa World Alumina and Chemicals is the
subsidiary of this company.
As reported in the Troubled Company Reporter-Asia Pacific on
March 23, 2018, S&P Global Ratings lowered its long-term issuer
credit rating on Noble Group to 'D' from 'CC'. S&P lowered the
ratings because Noble has missed the principal and coupon payment
for its 2018 notes due March 20, 2018. Noble also missed the
coupon payment on its 2022 notes due March 9, 2018. In addition,
the company said it would not make the payments despite being
given 30-day grace periods to meet both obligations. The failure
to make these payments will trigger cross-defaults on the
company's other obligations. S&P does not expect Noble to meet
any outstanding obligations as the company preserves its assets
during the restructuring process. Noble is undergoing a debt
restructuring and S&P will conduct another review the company's
credit profile after the restructuring is complete.
======================
P U E R T O R I C O
======================
J & M SALES: Store Closing Sales Procedures Has Interim Approval
----------------------------------------------------------------
Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court for
the District of Delware has entered an interim order authorizing
the conduct of store closing sales of J & M Sales, Inc. and
affiliates.
A final hearing on the Motion is set for Aug. 28, 2018 at 10:00
a.m. The objection deadline is Aug. 22, 2018 at 4:00 p.m. (ET).
No later than five days prior to the Final Hearing, Hilco Merchant
Resources, LLC will file a declaration of disinterestedness.
The Debtors are authorized to discontinue operations at the Stores
in accordance with the Interim Order and the Sale Guidelines.
The Agent will (i) honor gift cards and merchandise credits that
were issued by or on behalf the Debtors and (ii) accept a return
or exchange of Merchandise sold by the Debtors prior to the
Petition Date and in accordance with any other order entered by
the Court, provided that such return or exchange is otherwise in
compliance with the Debtors' applicable policies and procedures
that were in place at the time the Merchandise was purchased.
All sales of all Store Closing Assets will be "as is" and final.
Conspicuous signs stating that "all sales are final" and "as is"
will be posted at the cash register areas at all Stores.
The Debtors remain responsible for the payment of any and all
sales taxes. They'll remit all taxes accruing from the Store
Closing Sales to the applicable Governmental Units as and when
due, provided that in the case of a bona fide dispute, the Debtors
will only pay such taxes upon the resolution of the dispute, if
and to the extent that the dispute is decided in favor of the
applicable Governmental Unit.
In accordance with Section K of the Agreement, the Agent is
authorized to supplement the Merchandise in the Stores with
Additional Agent Goods. Sales of Additional Agent Goods will be
run through the Debtors' cash register systems.
The Agent and the respective Landlord of each Store are authorized
to enter into a side letter agreement to govern the conduct of the
Store Closing Sales at the applicable Store and such Side Letter
Agreements will control over the Sale Guidelines and the Interim
Order.
All amounts due to the Agent under the Agreement will be
calculated and paid from proceeds of the Store Closing Sales and
will not be reduced or capped by the terms or conditions of any
pre- or post-petition financing facilities.
The Debtors are authorized to issue postpetition checks, or to
effectuate postpetition fund transfer requests, in replacement of
any checks or fund transfer requests in respect of payments made
in accordance with the Interim Order that are dishonored or
rejected. Each of the Debtors' banks and financial intuitions is
authorized to honor checks presented for payment and all fund
transfer requests made by the Debtors, to the extent that
sufficient funds are on deposit in the applicable accounts, in
accordance with the Interim Order and any other order of the
Court.
Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions
of the Interim Order will be immediately effective and enforceable
upon its entry.
A copy of the Agency Agreement attached to the Order is available
for free at:
http://bankrupt.com/misc/J&M_Sales_89_Order.pdf
About National Stores
National Stores is a 344-store chain in 22 U.S. states and Puerto
Rico. National Stores currently does business as Fallas, Fallas
Paredes, Fallas Discount Stores, Factory 2-U, Anna's Linen's by
Fallas, and Falas (spelled with single "l" in Puerto Rico).
Fallas, which emplolys 9,800 people, is a discount retailer
offering value-priced merchandise, including apparel, bedding and
household supplies. The brands of National Stores are located in
retail plazas, specialty centers, and downtown areas to serve the
communities its customers and staff members call home.
National Stores, Inc., and its affiliates sought Chapter 11
protection and Aug. 6, 2018, and announced that Hilco Merchant
Resources, LLC, is conducting going-out-of-business sales for 74
stores. The lead case is In re J & M Sales Inc. (Bankr. D. Del.
Lead Case No. 18-11801). J & M Sales estimated assets and debt of
$100 million to $500
million as of the bankruptcy filing.
The Hon. Laurie Selber Silverstein is the case judge.
The Debtors tapped KATTEN MUCHIN ROSENMAN LLP as general
bankruptcy counsel, PACHULSKI STANG ZIEL & JONES LLP as bankruptcy
co-counsel, RETAIL CONSULTING SERVICES, INC., as real estate
advisor, IMPERIAL CAPITAL, LLC, as investment banker, and PRIME
CLERK LLC as the claims and noticing agent. SIERRACONSTELLATION
PARTNERS, LLC, is providing personnel to serve as chief
restructuring officer and
support staff.
PUERTO RICO SALES: Moody's Affirms 'Ca' Bond Rating, Outlook Pos.
-----------------------------------------------------------------
Moody's Investors Service has revised the outlook of the Puerto
Rico Sales Tax Financing Corporation's (COFINA) senior-lien sales
tax revenue bonds to positive and subordinate-lien bonds' outlook
to stable, removing both from negative outlook. Concurrently,
Moody's has affirmed the Ca ratings on both the senior and
subordinate-lien bonds.
RATINGS RATIONALE
On August 8, 2018, COFINA, certain of its creditors, the
Commonwealth and the Financial Oversight and Management Board
(FOMB), and the Puerto Rico Fiscal Agency and Financial Advisory
Authority announced an agreement in principle on a settlement that
would resolve the COFINA restructuring case. If implemented, the
settlement could lead to higher recoveries for senior-lien COFINA
creditors than the 35% to 65% range reflected in the current Ca
rating, and recoveries for subordinate lien creditors in line with
the Ca recovery range.
Affirmation of the Ca ratings, however, reflects the still-
substantial uncertainty surrounding ongoing negotiations. Final
terms have yet to be released and affordability of the settlement
remains an open question. In addition, other creditors, in
particular those holding general obligation bonds, might challenge
the settlement and the Title III court will need to sign off on
the final agreement before it can be enacted.
The Ca ratings also incorporate fundamental factors of the
underlying sales tax revenue pledge on the currently outstanding
debt, including a weak economic base, high revenue volatility and
high leverage based on a steeply escalating debt service structure
for the current bonds. These factors are outweighed by the bonds'
ongoing payment default status, restructuring discussions and
recovery expectations.
RATING OUTLOOK
Initial recovery estimates under the terms of the in-principle
COFINA restructuring, in concert with approval from key players in
the ongoing negotiations, support the revision of senior-lien
bonds' outlook to positive. Creditor recoveries could exceed the
current recovery range expected for a Ca-rating, which is 35% to
65% of original debt service.
Subordinate-lien creditors are expected to receive less than
senior creditors. The preliminary terms suggests their recoveries
will fall within the range consistent with the Ca rating,
supporting a stable outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE
- Any federal court rulings or actions by the US government or
the federal oversight board for Puerto Rico that materially
improve bondholder recovery prospects versus currently anticipated
levels
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Federal court actions that approve a plan of adjustment in
which bondholders would receive lower recoveries than anticipated
- Economic or revenue trends that will undermine the
creditworthiness of new securities that bondholders would receive
to effect a restructuring under a plan of adjustment
LEGAL SECURITY
COFINA bonds are backed by a pledge of sales tax revenue collected
in Puerto Rico. The bonds have been in default since July 1, 2017,
because of a court order that requires the trustee to withhold
payment of debt service.
USE OF PROCEEDS
Not applicable.
PROFILE
The Sales Tax Financing Corporation was created by statute in 2006
to issue securities backed by an allocation of sales tax collected
in Puerto Rico (Ca negative). Puerto Rico is the largest US
territory, with population estimated at 3.3 million as of July 1,
2017, and 2017 GDP of $77 billion.
METHODOLOGY
The principal methodology used in these ratings was US Public
Finance Special Tax Methodology published in July 2017.
=================
X X X X X X X X X
=================
* BOND PRICING: For the Week August 20 to August 24, 2018
---------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
BA-CA Finance Cayman Lt 0.518 62.07 KY EUR
AES Tiete Energia SA 6.7842 1.109 4/15/2024 BR BRL
Argentina Bogar Bonds 2 39.36 2/4/2018 AR ARS
Automotores Gildemeister 8.25 73.25 5/24/2021 CL USD
Automotores Gildemeister 6.75 67 1/15/2023 CL USD
Automotores Gildemeister 8.25 73.25 5/24/2021 CL USD
Automotores Gildemeister 6.75 65.5 1/15/2023 CL USD
CA La Electricidad 8.5 63.664 4/10/2018 VE USD
Caixa Geral De Depositos 1.439 63.167 KY EUR
Caixa Geral De Depositos 1.469 KY EUR
CSN Islands XII Corp 7 68 BR USD
CSN Islands XII Corp 7 66.266 BR USD
Decimo Primer Fideicomiso 6 53.225 10/25/2041 PA USD
Decimo Primer 4.54 43.127 10/25/2041 PA USD
Dolomite Capital 13.217 73.108 12/20/2019 CN ZAR
Enel Americas SA 5.75 56.172 6/15/2022 CL CLP
Gol Linhas Aereas SA 10.75 35.861 2/12/2023 BR USD
Gol Linhas Aereas SA 10.75 35.601 2/12/2023 BR USD
Inversora Electrica 6.5 67.625 9/26/2017 AR USD
Inversora Electrica 6.5 67.625 9/26/2017 AR USD
MIE Holdings Corp 7.5 64.78 4/25/2019 HK USD
MIE Holdings Corp 7.5 64.982 4/25/2019 HK USD
NB Finance Ltd 3.88 61.816 2/7/2035 KY EUR
Noble Holding 7.7 74.433 4/1/2025 KY USD
Noble Holding 5.25 56.279 3/15/2042 KY USD
Noble Holding 8.7 71.881 4/1/2045 KY USD
Noble Holding 6.2 60.129 8/1/2040 KY USD
Noble Holding 6.05 58.38 3/1/2041 KY USD
Odebrecht Finance Ltd 7.5 42.5 KY USD
Odebrecht Finance Ltd 5.125 56.938 6/26/2022 KY USD
Odebrecht Finance Ltd 7 68.053 4/21/2020 KY USD
Odebrecht Finance Ltd 7.125 41.366 6/26/2042 KY USD
Odebrecht Finance Ltd 4.375 40.002 4/25/2025 KY USD
Odebrecht Finance Ltd 5.25 39.211 6/27/2029 KY USD
Odebrecht Finance Ltd 6 44.75 4/5/2023 KY USD
Odebrecht Finance Ltd 5.25 39.018 6/27/2029 KY USD
Odebrecht Finance Ltd 7.5 42.95 KY USD
Odebrecht Finance Ltd 4.375 40.363 4/25/2025 KY USD
Odebrecht Finance Ltd 7.125 41.635 6/26/2042 KY USD
Odebrecht Finance Ltd 6 52.625 4/5/2023 KY USD
Odebrecht Finance Ltd 5.125 55.873 6/26/2022 KY USD
Odebrecht Finance Ltd 7 67.368 4/21/2020 KY USD
Petroleos de Venezuela 8.5 74.5 10/27/2020 VE USD
Petroleos de Venezuela 6 30.458 5/16/2024 VE USD
Petroleos de Venezuela 6 30.517 11/15/2026 VE USD
Petroleos de Venezuela 9.75 35.677 5/17/2035 VE USD
Petroleos de Venezuela 9 39.279 11/17/2021 VE USD
Petroleos de Venezuela 5.375 30.267 4/12/2027 VE USD
Petroleos de Venezuela 8.5 72.5 10/27/2020 VE USD
Petroleos de Venezuela 12.75 45.278 2/17/2022 VE USD
Petroleos de Venezuela 6 30.367 5/16/2024 VE USD
Petroleos de Venezuela 6 30.387 11/15/2026 VE USD
Petroleos de Venezuela 9 39.316 11/17/2021 VE USD
Petroleos de Venezuela 9.75 35.893 5/17/2035 VE USD
Petroleos de Venezuela 6 28.346 10/28/2022 VE USD
Petroleos de Venezuela 5.5 30.123 4/12/2037 VE USD
Petroleos de Venezuela 12.75 45.23 2/17/2022 VE USD
Polarcus Ltd 5.6 75 3/30/2022 AE USD
Provincia del Chubut 4 10/21/2019 AR USD
Siem Offshore Inc 4.04527 69.5 10/30/2020 NO NOK
Siem Offshore 3.75176 65.75 12/28/2021 NO NOK
STB Finance 2.05771 56.243 KY JPY
Sylph Ltd 2.367 64.438 9/25/2036 KY USD
US Capital 1.63611 54.774 12/1/2039 KY USD
US Capital 1.63611 54.774 12/1/2039 KY USD
USJ Acucar 9.875 67 11/9/2019 BR USD
USJ Acucar 9.875 67 11/9/2019 BR USD
Venezuela 13.625 68.25 8/15/2018 VE USD
Venezuela 7.75 44.065 10/13/2019 VE USD
Venezuela 11.95 40.785 8/5/2031 VE USD
Venezuela 12.75 45.19 8/23/2022 VE USD
Venezuela 9.25 39.645 9/15/2027 VE USD
Venezuela 11.75 40.005 10/21/2026 VE USD
Venezuela 9 36.285 5/7/2023 VE USD
Venezuela 9.375 37.69 1/13/2034 VE USD
Venezuela 13.625 72.25 8/15/2018 VE USD
Venezuela 7 34.23 3/31/2038 VE USD
Venezuela 7 59.19 12/1/2018 VE USD
***********
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.
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* * * End of Transmission * * *