/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/181217.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, December 17, 2018, Vol. 19, No. 249 Headlines B A H A M A S BAHAMAS: Economy Continues to Recover, IMF Says B O L I V I A BISA SEGUROS: Moody's Affirms Ba3 Global Currency Rating LA BOLIVIANA: Moody's Affirms Ba3 Insurance Fin. Strength Rating B R A Z I L AVIANCA BRASIL: In Talks Since Before Bankruptcy for Cash Boost GERDAU SA: Moody's Raises CFR to Ba1, Outlook Positive RIO ENERGY: Moody's Confirms B3 Sec. Bond Rating, Outlook Neg. E C U A D O R ECUADOR: 1st Priority of Governments Should be The Poor ECUADOR: Moody's Alters Outlook on Issuer Rating to Negative M E X I C O MEXICO: Trust Sweetens Bond Buy-Back After Investors Snub Deal P U E R T O R I C O GIRARD MANUFACTURING: Feb. 5 Plan Confirmation Hearing FIRST BANCORP: Fitch Hikes Issuer Default Rating to B TOYS R US: Reaches Comprehensive Intercompany Settlement Deal T R I N I D A D & T O B A G O TRINIDAD & TOBAGO: Most Public Companies Fail Disclosure Standards U R U G U A Y CONSORCIO DEL URUGUAY: Moody's Hikes CFR to Ba3, Outlook Stable V E N E Z U E L A PETROLEOS DE VENEZUELA: Creditor Group Starts Legal Process X X X X X X X X X * BOND PRICING: For the Week December 10 to December 14, 2018 - - - - - ============= B A H A M A S ============= BAHAMAS: Economy Continues to Recover, IMF Says ----------------------------------------------- An International Monetary Fund (IMF) team led by Fabian Bornhorst visited The Bahamas during December 3 to 7, 2018 to review latest economic developments and prepare for the 2019 Article IV consultation (planned for April 2019). During the visit, discussions focused on the outlook and risks, fiscal developments, and the financial sector. At the conclusion of the visit, Mr. Bornhorst issued the following statement: "The Bahamian economy continues to recover, with real GDP growth projected to reach 2.3 percent in 2018 and 2.1 percent in 2019. Growth is driven by an increase in tourist arrivals, paired with an expansion of hotel room and airlift capacity, and against the backdrop of the continued expansion of the U.S. economy. This calls for maintaining strong fiscal and financial policies to bolster the Bahamian economy's resilience and build buffers should external conditions become less favorable, and for advancing reforms to achieve more inclusive growth over the medium term. "The enactment of the Fiscal Responsibility Law (FRL) is a welcome development that supports the government's efforts to secure fiscal sustainability and put debt on a downward path. Implementation of the FRL framework will also increase transparency and enhance policy credibility. The government's plan to establish a disaster relief fund as part of a broader strategy for preparedness and risk reduction policies is a welcomed step. "The government has narrowed the fiscal deficit from 5.5 percent of GDP in FY 2017 to an estimated 3.3 percent in FY 2018. In the budget for FY 2019 the government committed to further fiscal consolidation, targeting an overall deficit of 1.8 percent of GDP. This is supported by various revenue mobilization measures. As noted during the 2018 Article IV consultation, fiscal consolidation should also include decisive measures to contain expenditure growth in the short and medium term. The team welcomed the government's transparent recognition of accumulated arrears and the budgetary provisions to clearing them, as well as the plans to put in place robust expenditure control systems. "The banking system as a whole has strong capital and liquidity ratios, and banks have made progress towards improving asset quality. As of June 2018, the average capital to risk-weighted assets ratio across domestic institutions was 34 percent, above the regulatory target ratio of 17 percent, and non-performing loans declined to 9.6 percent of total loans, from 12.3 percent a year earlier. The mission recommended the speedy establishment of the credit bureau to enhance credit market efficiency, increase credit growth, and help financial inclusion. "The Central Bank of The Bahamas is preparing to pilot a digital central bank currency. The team recognized the role new financial technologies can play in fostering financial inclusion, and concurred that a gradual approach will help mitigate potential risks to the economy. "The mission welcomed the government's firm commitment to a well- regulated international financial and business sector, and recognized the significant steps taken to increase compliance with international standards on Anti-Money Laundering and Combating the Financing of Terrorism. The team made the case for sustaining efforts to fully implement the Action Plan agreed with the Financial Action Task Force, including to mitigate financial risks associated with the withdrawal of correspondent banking relationships. "The mission met with the Honorable K. Peter Turnquest, Deputy Prime Minister and Minister of Finance, Mr. John Rolle, Governor of the Central Bank of The Bahamas, other senior government officials, and representatives of the private sector. The mission would like to thank the authorities and other interlocutors for the open and productive discussions." ============= B O L I V I A ============= BISA SEGUROS: Moody's Affirms Ba3 Global Currency Rating -------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo S.A. has affirmed the Ba3 global local currency and the Aaa.bo national scale insurance financial strength ratings of BISA Seguros y Reaseguros S.A. The outlook of both ratings remains stable. RATINGS RATIONALE According to Moody's, the affirmation of BISA Seguros' Ba3 GLC and Aaa.bo NS IFS ratings with a stable outlook is based primarily on the company's strong history of underwriting results, its leading position in the Bolivian property and casualty insurance market, adequate capitalization, and well diversified product offering, including commercial lines, personal lines, health and personal accident. Counterbalancing these strengths are Bisa Seguros' significant investment risk, given its concentrations in local government bonds and domestic bank deposits which are below investment-grade, its above-average gross underwriting leverage, and country- specific systemic risk. The rating agency went on to say that the recent deterioration in the company's profitability and market share is offset by Bisa Seguros' ownership by and integration with its ultimate parent company, Grupo Financiero BISA (unrated), a leading Bolivian financial conglomerate. Among the factors that could lead to a rating upgrade for BISA Seguros are: 1) improvement in investment credit quality (i.e. investment-grade assets represent 30% or more of total cash and investments); 2) an improvement in Bolivia's operating environment and/or sovereign bond's rating; 3) improvement in its capital position, with gross underwriting leverage consistently below 3x shareholders' equity. Conversely, factors that could lead to a downgrade include one or more of the following: 1) gross underwriting leverage steadily above 7x shareholders' equity and/or failure to comply with local capital regulatory requirements; 2) significant reduction in company's market share; 3) sustained decline in profitability; 4) significant deterioration in Bolivia's government bond rating and/or the country's operating environment; and 5) Decrease in strategic commitment from BISA Financial Group. LA BOLIVIANA: Moody's Affirms Ba3 Insurance Fin. Strength Rating ---------------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo S.A. has affirmed the Ba3 global local currency insurance financial strength ratings of La Boliviana Ciacruz Seguros y Reaseguros and La Boliviana Ciacruz Seguros Personales. In the same rating action, Moody's has upgraded the national scale IFS ratings of both companies to Aaa.bo from Aa1.bo. All rating outlooks remain stable. RATINGS RATIONALE According to Moody's, the upgrade of La Boliviana Seguros and La Boliviana Personales' national scale IFS ratings to Aaa.bo from Aa1.bo, reflects consistent improvements on the companies' business and financial profiles, particularly in their profitability and market position, and our view that the companies' credit profiles are now better positioned at the higher end of possible NS ratings for Ba3-global scale rated Bolivian issuers. That said, while these were positive developments, they were not sufficient to lead to an upgrade of the global scale ratings. The affirmation of La Boliviana Seguros and La Boliviana Personales Ba3 GLC IFS ratings reflects the companies' established presence in the Bolivian property and casualty (P&C) and life insurance sectors, as well as their overall favorable profitability, solid capitalization and well-diversified distribution channels. Offsetting these positive factors are the companies' significant investment risk, given their concentration in Bolivian government bonds (Ba3 stable) and domestic bank deposits, and Bolivia's limited insurance market development, as reflected in the low penetration of insurance products in Bolivia's economy. Moody's noted that La Boliviana Seguros and La Boliviana Personales' credit profiles are restrained primarily by Bolivia's high sovereign risk and poor operating environment. Among the factors that could lead to a rating upgrade to La Boliviana Seguros are: 1) improvement in investment credit quality (i.e. investment-grade assets represent 30% or more of total cash and investments); 2) an improvement in Bolivia's operating environment and/or sovereign bond's rating; 3) improvement in its capital position, with gross underwriting leverage consistently below 3x shareholders' equity; and 4) growth in the company's market share. Conversely, factors that could lead to a downgrade include one or more of the following: 1) gross underwriting leverage steadily above 6x shareholders' equity and/or failure to comply with local capital regulatory requirements; 2) significant reduction in company's market share; 3) sustained decline in profitability; 4) deterioration in company's investment credit quality; and 5) significant deterioration in Bolivia's government bond rating and/or the country's operating environment; Factors that could lead to an upgrade of La Boliviana Personales' rating include the following: 1) sustained track record of positive profitability; 2) improvement in investment credit quality (i.e. investment-grade assets represent 30% or more of total cash and investments); 3) improvement in Bolivia's operating environment and/or sovereign bond's rating; 4) growth in the company's market share to 20% of the industry's gross premiums. Among the factors that could lead to a downgrade are: 1) deterioration in company's investment credit quality; 2) sustained weakening of profitability; 3) significant deterioration in Bolivia's government bond rating and/or the country's operating environment; and 4) reduction in company's market share. The principal methodology used in rating La Boliviana Ciacruz Seguros y Reaseguros was Property and Casualty Insurers published in May 2018. The principal methodology used in rating La Boliviana Ciacruz Seguros Personales was Life Insurers published in May 2018. =========== B R A Z I L =========== AVIANCA BRASIL: In Talks Since Before Bankruptcy for Cash Boost --------------------------------------------------------------- Avianca Brasil has been in talks for a much-needed cash injection since before it filed for bankruptcy, German Efromovich, whose family controls the carrier, told Reuters. Tatiana Bautzer and Marcelo Rochabrun at Reuters report that Efromovich, the controlling shareholder of better-known airline Avianca Holdings said in a phone interview that he was negotiating with funds, which he declined to identify. He also declined to elaborate on the value and whether the transaction would be debt or equity, according to Reuters. Avianca Brasil had faced recurring losses and a series of airplane repossession lawsuits, the report notes. It lost four planes in the days leading up to its bankruptcy filing, according to a source with knowledge of the disputes, the report relays. At least 10 other planes are still under dispute, and a judge ruled that Avianca Brasil can hold on to them for 30 days in case the parties can reach a deal, the report relays. Otherwise, Avianca Brasil will lose the planes as the lessor already has a favorable court order, the report says. The source said that Avianca owes lessors some $100 million, the report discloses. The airline also has debts to suppliers, including airports, fuel and maintenance companies that court records show amounted to $125 million, the report relays. The airline announced a judge had granted it bankruptcy protection on its debts, the report says. Efromovich said he was discussing the cash boost for Avianca Brasil at the same time that he was negotiating for a loan from United Continental Holdings Inc, the report says. Although Avianca Brasil has in the past said it was owned by Efromovich's Synergy Group, he said that was not currently the case and that a separate holding company controlled by his brother Jose was now controlling shareholder, the report discloses. The United loan, finalized in late November, was negotiated for years and eventually went to Synergy, the report relays. Reportedly meant to repay another credit from investment firm Elliott Management, the loan will be secured by shares in Colombia-based Avianca Holdings, the report says. German Efromovich did not say whether he was now seeking a loan for Avianca Brazil or to sell an equity stake, the report relays. He praised a decree signed by outgoing Brazilian President Michel Temer that will eliminate a 20 percent ceiling on foreign investment in Brazilian airlines, the report relays. The lessors who have managed to reclaim planes include Singapore's BOC Aviation and Constitution Aircraft, a unit of Aircastle Ltd, the report notes. In a statement, Avianca Brasil blamed the leasing companies for their resistance "to reach a friendly deal," the report adds. GERDAU SA: Moody's Raises CFR to Ba1, Outlook Positive ------------------------------------------------------ Moody's Investors Service upgraded to Ba1 from Ba2 Gerdau S.A.'s corporate family rating and the ratings of the debt issues of Gerdau Trade Inc. (guaranteed by Gerdau S.A. and its operating subsidiaries in Brazil) and of GTL Trade Finance Inc. (guaranteed by Gerdau S.A. and its operating subsidiaries in Brazil), as well as the solid waste disposal bonds issued by St. Paul Port Authority, MN (guaranteed by Gerdau S.A.). The outlook for the ratings is positive. Ratings upgraded: Issuer: Gerdau S.A Corporate Family Rating: to Ba1 from Ba2 Issuer: Gerdau Trade Inc. USD750 million senior unsecured notes due 2023: to Ba1 from Ba2 Issuer: GTL Trade Finance Inc. USD1,250 million senior unsecured notes due 2024: to Ba1 from Ba2 USD500 million senior unsecured notes due 2044: to Ba1 from Ba2 Issuer: St. Paul Port Authority, MN USD51 million solid waste disposal revenue bonds due 2037: to Ba1 from Ba2 Outlook changed to positive from stable RATINGS RATIONALE The upgrade to Ba1 reflects Gerdau's better than anticipated operating performance in 2018, which, combined with assets sales and liability management initiatives, allowed the company to intensify its debt reduction efforts and consequently improve credit metrics within a very short timeframe. Moody's expects Gerdau's Moody's adjusted leverage to decline to 2.5 times at the end of 2018 from 5.1 times at the end of 2017. As well, Moody's estimates the company will continue to generate positive free cash flow and strong operating margins in the medium term as a result of its focus on higher-margin products and markets after asset sales carried out in the last four years, cost reduction efforts and financial discipline. Since the beginning of 2014, Gerdau sold BRL7.4 billion in assets and reduced reported debt by BRL8.2 billion. During 2018, the company raised BRL4.2 billion from asset sales and announced a $1.0 billion (BRL3.8 billion) tender offer for its outstanding 2020, 2021, 2023, 2024 and 2027 notes, which will contribute to additional debt reduction during the last quarter of the year. In addition to supporting a material debt reduction, the asset divestiture program allowed Gerdau to streamline its operations, focusing on the more profitable, core US and Brazilian markets, which will support the company's future profitability. With that, Moody's believes the company has built a significant amount of additional financial flexibility to withstand the cyclicality of the steel industry. Gerdau's Ba1 ratings are supported by the company's historically solid cash generation, which reflects its strong market position in the several markets where it operates, its good operational and geographic diversity, its cost-driven management, as well as its conservative financial policies. Despite volatile global operating environments and Brazil's economic recession, Gerdau has generated positive free cash flows since 2013, and was able to reduce debt levels, partially with the proceeds from asset divestitures. Constraining the ratings is the company's exposure to the cyclicality of the steel industry, especially in Brazil and the US. Although Brazil's demand fundamentals remain weak, the company's adjusted EBITDA margins have recovered during 2018, reaching 12.2% in September 2018 (up from 10.9% in 2016). Moody's does not expect any material recovery in the long steel industry in Brazil at least until mid-2019. Construction and infra-structure, the main consuming segments for long steel, will continue to underperform until there are evidences of a sustained economic improvement that may attract investments. Still, economic stability should support a gradual recovery in the commercial construction and homebuilding segments when compared to 2015-16 levels, while the specialty steel segment will continue to post a solid performance due to stronger auto production in the country. In the US, Gerdau will continue to benefit from protectionist policies supporting higher steel prices, but also from its strategy of focusing in higher- margin products, following the sale of the rebar assets. Nevertheless, uncertainties regarding the continuity of such measures add uncertainties to the medium-term competitive landscape, which can impact Gerdau's future operating performance. The positive outlook reflects our expectations that Gerdau's credit metrics will remain strong in the next 12-18 months, and that the company will continue to strengthen its balance sheet, liquidity profile and financial policies to enhance its credit quality even further. The ratings could be further upgraded if Gerdau is able to sustain profitability, as measured by EBIT margin, at high single digit (8.0% in LTM ended September 2018), while maintaining strong liquidity and leverage, with total adjusted debt to Ebitda of around 2.5x (3.7x in the LTM ended in September 2018) and EBIT to interest expense above 4.0x (2.7x in the LTM ended in September 2018) on a sustained basis. The maintenance of conservative financial policies would also be required for a rating upgrade. Negative pressure on the rating or outlook could result from weaker liquidity or from persistently high leverage, with total debt to Ebitda above 3.5x on a sustainable basis over the long- term, and interest coverage (EBIT to interest expense) below 3x. A deterioration in volumes and margins in Gerdau's main markets (namely Brazil and the US), affecting its ability to generate positive free cash flow or limited flexibility for capex and dividend reduction could trigger a downgrade. A sharp deterioration in the controlling shareholders' financial position could also precipitate a downgrade. Based in Brazil, Gerdau S.A. is the leading producer of long steel in the Americas and one of the largest suppliers of special long steel in the world, with total capacity of over 21 million tons per year of crude steel and 17.5 million tons per year of rolled products. Its US subsidiary, Gerdau Ameristeel Corporation (Gerdau Ameristeel), is the second largest long steel producer in North America. In the last twelve months through September 30, 2018 Gerdau reported consolidated annual revenues of approximately BRL 45 billion (USD 12.9 billion converted by the average exchange rate). The group has operations in 10 countries with relevant market shares in many of them, among which are Brazil, USA, Canada, Peru, Uruguay, Argentina, Mexico and Venezuela, and joint ventures in Colombia, Mexico and the Dominican Republic. The principal methodology used in these ratings was Steel Industry published in September 2017. RIO ENERGY: Moody's Confirms B3 Sec. Bond Rating, Outlook Neg. -------------------------------------------------------------- Moody's Investors Service confirmed the B3 rating assigned to Rio Energy S.A. This rating action concludes the review for downgrade commenced on September 4, 2018. The rating outlook is negative. Outlook Actions: Issuer: Rio Energy S.A. Outlook, Changed To Negative From Rating Under Review Confirmations: Issuer: Rio Energy S.A. Senior Secured Regular Bond/Debenture, Confirmed at B3 RATING RATIONALE The rating confirmation follows the company's announcement of a Private Placement transaction for a total amount of $ 250 million senior secured notes due 2023. With this transaction MSU has sufficient liquidity to repay its upcoming short term debt maturities and also to complete the financing of its ongoing expansion plan, thus reducing significantly its immediate liquidity and financing risks. The rating confirmation takes into account MSU Energy's stable and predictable cash flow generation from fixed price, availability based long term contracts on its current installed capacity, that to date has shown solid operational performance and high availability levels. The B3 rating and negative outlook are reflective of an overall aggressive, highly leveraged financing structure that lacks the standard structural protections for a company with a limited operating history. The structure considers a six months debt reserve account (equal to next interest payment given the bullet amortization structure of the notes) that is comparably weak. Furthermore, the private placement notes pay interest at a floating rate of Libor plus 11.25%, which is costly and exposes MSU to market volatility, particularly during the completion of current construction works. The private placement notes have a 30- month grace period and will start amortizing 14-months after the COD of the combined cycle and fully amortize by November 2023, sooner than the rated $600 million senior secured notes due 2025, which will continue to be exposed to refinancing risk. MSU Energy's credit profile acknowledges the steps that the company undertook to reinforce its governance structure. Reputational risk notwithstanding, Moody's is not aware that the ongoing legal proceedings involving the company's former chairman have direct linkages with MSU's operations or existing contracts. As a result, MSU's credit profile primarily captures the company's exposure to CAMMESA (Argentina's electricity wholesale market administrator) as the sole off-taker under the PPA's and to the Government of Argentina's (B2, stable) and its evolving power markets. DEBT AND LIQUIDITY PROFILE MSU Energy's leverage is high and will remain elevated until the company completes its investment in the first half of 2020 and starts repaying debt in 2021. MSU's outstanding debt is comprised of the $ 600 million 2025 senior secured notes and the $ 250 million 2023 private placement notes, that have a 5-year tenor and will be repaid in eleven equal quarterly installments commencing on the 30-month anniversary of the closing date (or May 2021), 14-months after the combined cycle currently under construction is scheduled to become operational. The company does not have any other debt maturity until 2021. While MSU has secured sufficient funds to complete its expansion through the issuance of the private placement notes, the company's high cash needs will result in limited financial flexibility. RATING OUTLOOK The negative outlook reflects limited track record, overall weak credit metrics, high leverage and tight liquidity. These elements leave MSU with limited room of maneuver. While the company's limited financial flexibility will add risks to the execution of the current expansion, Moody's will follow up closely on construction progress to reassess the negative outlook in due course. WHAT COULD CHANGE THE RATING UP/DOWN Positive rating pressure will result as the company demonstrates consistent progress in its expansion works. Moody's could envision upward pressure should MSU Energy start generating cash flows from operations in relation to debt consistently above 15% and debt to EBITDA declining towards 5 times. The ratings could be downgraded further as a result of underperformance at the simple cycle plants, higher than anticipated construction costs or delays in construction that lead to lower than expected cash flows. Quantitatively, cash from operations (as per Moody's definition) below 6% or a DSCR below 1.4 times could result in a rating downgrade. Corporate Profile MSU Energy is an argentine, family owned conglomerate comprised by three special purpose vehicles or Sociedades Anonimas designed to participate in the power auctions performed by the Argentine Energy Ministry and the beneficiaries under the PPAs. Each of these companies, Rio Energy S.A, Uensa S.A. and Ugen S.A. own and operate a thermal simple cycle plant with 150 MW of nominal generation capacity each and all are joint obligors under the USD 600 million senior secured notes. It is expected that the three companies will be merged into one in early 2019. The company is currently developing an expansion plan to convert its operating simple cycle plants into combined cycle plants, with an expected start of operations in mid-2020. ============= E C U A D O R ============= ECUADOR: 1st Priority of Governments Should be The Poor ------------------------------------------------------- EFE News reports that the president of Ecuador said the first priority of governments is to pay attention to the poor. Lenin Moreno made his remarks during his speech at the opening of the Doha Forum, a conference organized by Qatar and attended by leaders from several countries and the United Nations and other world key figures, according to EFE News. As reported in the Troubled Company Reporter-Latin America on Aug. 22, 2018, Fitch Ratings has downgraded Ecuador's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B-' from 'B'. The Outlook has been revised to Stable from Negative. Additionally, Fitch has assigned the sovereign a 'B-' Long-Term Local-Currency IDR/Stable Outlook and a 'B' Short-Term Local-Currency IDR. ECUADOR: Moody's Alters Outlook on Issuer Rating to Negative ------------------------------------------------------------ Moody's Investors Service has changed the outlook on the Government of Ecuador's issuer rating to negative from stable and affirmed the long-term issuer and senior unsecured B3 ratings. The decision to change the outlook to negative reflects the risk that Ecuador's government liquidity position may remain constrained ahead of debt repayments in the coming years given the challenging market conditions it faces. In Moody's view, Ecuador's market access will remain challenged due to a combination of internal and external factors that have contributed to negative investor sentiment, which has led to very high sovereign spreads, elements that will likely keep market borrowing costs high. Moody's notes that even though increased access to official (multilateral) financing would ease funding pressures, in the absence of more forceful policies that effectively address macroeconomic imbalances that built up over the past decade, a large official lending program would not be sufficient on its own to materially reduce the tight liquidity conditions. Moody's decision to affirm the B3 ratings balances the sovereign's higher fiscal strength relative to similarly-rated peers, notwithstanding the sharp deterioration in Ecuador's government debt metrics over the last five years. The affirmation is also informed by weak but improving institutions and low economic growth as the economy transitions from a State-led economic model. The senior unsecured bond rating on the 2030 global bond was affirmed at C, reflecting the small amount of remaining claims on principal amounts owed to bondholders that did not participate in the debt exchange of 2009, following the 2008 default. Ecuador's long-term foreign-currency ceilings remain unchanged at B2 for bonds and Caa1 for bank deposits. The short-term foreign- currency ceilings remain NP. RATINGS RATIONALE RATIONALE FOR THE NEGATIVE OUTLOOK CURRENT POLICY RESPONSE LIKELY TO BE INSUFFICIENT TO IMPROVE INVESTOR SENTIMENT AMID LARGE FISCAL IMBALANCES AND LOW FOREIGN EXCHANGE RESERVES The authorities' gradualist approach toward macroeconomic adjustment will likely prove insufficient to improve investor sentiment and facilitate market access at more sustainable costs. The authorities have pursued a fiscal adjustment strategy that will reduce the government deficit to 4.0% of GDP this year from 5.9% in 2017, but consolidation efforts have been mostly focused on reductions in public investment. Other structural components of expenditure such as wages and transfers, which account for nearly 50% of total government spending, have been subject to only minimal reductions, while a rising interest burden is adding further rigidity to government spending. The 2019 budget incorporates a gradual fiscal adjustment over the coming years, reducing the deficit to 3.2% of GDP next year. Looking ahead, prospects of weak growth and less favorable external conditions will weigh on government revenue, complicating deficit reduction efforts in the absence of additional spending adjustments. Moody's expects the economy to remain weak over the coming years as it transitions from a model where public sector investment was the main growth driver -- increasingly dependent on external borrowing -- to one in which private investment and exports play a more prominent role. Continued reduction in public investment will weigh on growth while a transition toward a different economic model supported by policies put forward to incentivize investment in the country and increase trade openness will likely take years to materialize. Additionally, Ecuador's external reserve position has become increasingly reliant on public external borrowing as the main source of hard currency into the country. In the context of a dollarized economy, higher exports and stronger flows of foreign direct investment would ease pressures on the fiscal and external reserve positions. LIQUIDITY POSITION LIKELY TO REMAIN TIGHT GIVEN CHALLENGING MARKET ACCESS AHEAD OF A DEMANDING MATURITY SCHEDULE IN THE COMING YEARS Moody's believes that Ecuador's access to private sources of external financing could remain constrained in the coming years, reflecting market concerns regarding the country's weak fundamentals. As a consequence, and despite reporting lower gross borrowing requirements than B-rated sovereigns (8% of GDP in 2019 versus a 'B' median of 11%), the country's sovereign spreads are higher than those of similarly-rated peers, a condition that has consistently led to high borrowing costs for the government. Sovereign spreads have remained above 700 basis points over the past few months, and are over 275 basis points higher than in January 2018 when the government issued a $3 billion ten-year bond with a coupon of 7.875%. Relatively limited market funding has also made it more difficult for authorities to identify financing sources for 2019. Next year's budget incorporates an assumption of a market debt issuance of $1.75 billion. Moreover, funding sources for 56.5% ($4.6 billion) of its borrowing requirements next year have yet to be identified. Government gross borrowing requirements will decline in 2019, but starting in 2020 the external debt maturity profile will turn more demanding. Debt repayments will rise from $4.0 billion in 2019 to an average of $4.6 billion in 2020-24. These amortizations include the maturities of global bonds in 2020 and 2022-24 on average worth $1.7 billion -- overall Ecuador faces global bond maturities of almost $15 billion (15% of GDP) during 2020-28. If the government is unable to materially increase its market access, which would require improved investor sentiment, the government's debt repayment capacity will be restricted, introducing additional credit risk to the sovereign profile. Given the short track record of orthodox macroeconomic policies, stronger support from official creditors may provide additional credibility to the authorities' adjustment program, which would contribute to improving investor sentiment. Should this allow Ecuador to access market funding at lower borrowing costs, liquidity risks that would compromise debt repayment capabilities over the coming years could materially decrease. RATIONALE FOR THE RATING AFFIRMATION AT B3 HIGHER FISCAL STRENGTH RELATIVE TO B-RATED PEERS DESPITE WORSENING OF DEBT METRICS Ecuador's debt metrics have deteriorated over the past five years following the oil price shock, which in turn affected economic growth and the fiscal accounts. Government debt will rise to 47% of GDP in 2019 from 22% in 2013. Under a more conservative deficit reduction path, Moody's forecasts that the debt ratio would stabilize by 2022 around 50% of GDP. At this level, Ecuador's debt ratio would still compare favorably to other B-rated peers, with a category median at 60% of GDP -- the median for B2- and B3-rated peers that have experienced shocks caused by volatile commodity prices or shifting external financial conditions is 70%. However, Ecuador's debt affordability has worsened in recent years relative to peers. Due to a combination of lower revenue because of lower oil prices and weak economic activity weighing on tax income, as well as an accumulation of debt with higher costs, the government's ratio of interest payments-to-revenue rose to 14% in 2017 from 6% in 2013. Moody's forecasts this ratio will stabilize around 16% over the coming years, compared with a B-category median of less than 12% -- the median for B2- and B3-rated peers that have experienced similar shocks is 17%. IMPROVING INSTITUTIONAL STRENGTH, SUPPORTING BETTER POLICYMAKING AND POTENTIAL FOR HIGHER PRIVATE INVESTMENT Ecuador's institutional strength is weak on a global comparative basis. That said, under President Lenin Moreno the country's institutional framework has improved, especially in issues related to control of corruption and rule of law. The administration has put forward changes that have increased the independence of various entities charged with government oversight, including the comptroller general's office. Authorities have also taken steps to bolster transparency and accountability by presenting more comprehensive government debt statistics. Additionally, measures have been put in place to support a more favorable business environment, a development that over time should contribute to the transition away from a State-led economic model to one driven by private investment and exports. Moody's considers that Ecuador's policymaking framework is shifting toward one associated with macroeconomic policies that, unlike those observed during the previous administration, are now directed toward addressing fiscal and external imbalances. However, given the gradual adjustment approach pursued by the authorities and given the relatively short track record, the government is still in the process of building up policy credibility. WHAT COULD CHANGE THE RATING UP The negative outlook signals that an upgrade is unlikely. Moody's would consider changing the outlook to stable should the government secure sufficient funding to fully cover Ecuador's 2019 and 2020 borrowing needs, including the $1.5 billion global bond maturity, and there is evidence that sustained improvement in economic management is leading to a material reduction in both fiscal and external imbalances. WHAT COULD CHANGE THE RATING DOWN Downward pressure on the rating would develop if Ecuador's ability to access market funding remains limited and alternate financing sources fail to materialize, compromising the government's external repayment capabilities and adding pressure on external reserves. GDP per capita (PPP basis, US$): 11,507 (2017 Actual) (also known as Per Capita Income) Real GDP growth (% change): 2.4% (2017 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): -0.2% (2017 Actual) Gen. Gov. Financial Balance/GDP: -5.9% (2017 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: -0.4% (2017 Actual) (also known as External Balance) External debt/GDP: 38.2% (2017 Actual) Level of economic development: Low level of economic resilience Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. On December 10, 2018, a rating committee was called to discuss the rating of the Ecuador, Government of. The main points raised during the discussion were: The issuer's institutional strength/framework, have increased. The issuer's fiscal or financial strength, including its debt profile, has decreased. The issuer has become increasingly susceptible to event risks. =========== M E X I C O =========== MEXICO: Trust Sweetens Bond Buy-Back After Investors Snub Deal -------------------------------------------------------------- Jude Webber at The Financial Times reports that the Mexico City Airport Trust -- the financial backer of a new Mexico City airport project that President Andres Manuel Lopez Obrador has vowed to scrap -- has boosted the terms of its bond buy-back offer to try to woo the approximately 50 per cent of bondholders who rejected the initial deal. The new deal offers to buy back $1.8 billion of the $6 billion in bonds as before, according to The Financial Times. But in a statement, the trust, known as Mexcat, said the price would be $1,000 per each $1,000 tendered by the early bird deadline, plus accrued and unpaid interest, the report relays. "The original tender offers used a reverse Dutch auction mechanism to determine the price, within a range that was capped at par," the statement said, the report discloses. Crucially, the new offer seeks to address bondholder concerns about the bond terms, or indentures, "which are meant to address concerns holders may have," the report says. They included changes to require Mexcat to put funds aside to fund repurchases, the report notes. The new conditions also include a default clause if any airport begins commercial operations within a 70 kilometre radius of the existing Mexico City airport, or if the Toluca airport generates passenger traffic above 5 million passengers per year and the debt service coverage ratio drops below 1.75:1, the report relays. Lopez Obrador wants to replace the part-built new airport project with upgrades to the existing airports in Mexico City and Toluca and the addition of two runways at the Santa Lucia military base, the report says. The new terms also "significantly limit" Mexcat's ability to incur new debt, the report notes. It also proposed to lift the threshold of passenger taxes below which a default would be triggered, the report relays. A new deadline of December 19 has been set for early tender and the offer expires on January 4, the report adds. ====================== P U E R T O R I C O ====================== GIRARD MANUFACTURING: Feb. 5 Plan Confirmation Hearing ------------------------------------------------------ The Bankruptcy Court has approved the disclosure statement explaining Girard Manufacturing, Inc.'s Amended Chapter 11 Plan. The hearing for the consideration of confirmation of the Plan and of those objections as may be made to the confirmation of the Plan will be held on February 5, 2019 at 10:00 AM at Jose V. Toledo Fed. Bldg. & U.S. Courthouse, Courtroom 2, 300 Recinto Sur Street, Old San Juan, Puerto Rico. The objections to claims must be filed forty-five (45) days prior to the hearing on confirmation. Any objection to confirmation of the plan shall be filed on/or before twenty-one (21) days prior to the date of the hearing on confirmation of the Plan. The Amended Plan increased the recovery of general unsecured creditors to 7%, from 4% in the previously filed Plan. Unsecured Claims of more than $5,000, classified in Class 5, is impaired. Holders of Class 5 Claims will be paid 7% of their claims in 60 monthly payments. The Estimated Aggregate Amount of Class 5 Claims is $1,320,456.50. Class 6 - Convenience Class Unsecured Claims of less than $5,000 is impaired. Holders of Class 6 Claims will be paid 7% of their claims on the Effective Date. Estimated aggregate amount of Class 5 claims is $41,416.45. The Plan is to be funded by Girard's income which is estimated to be $105,000 per month for a period of five (5) years. A full-text copy of the Disclosure Statement dated November 26, 2018, is available at: http://bankrupt.com/misc/prb18-1705975(ESL)-119.pdf About Girard Manufacturing, Inc. Girard Manufacturing Inc. provides office furniture in San Juan, Puerto Rico. The Company offers desks chairs, modular systems, bookshelves, filing systems, and accessories, as well as online service and support. Girard Manufacturing, Inc., based in San Juan, PR, filed a Chapter 11 petition (Bankr. D.P.R. Case No. 17-05975) on August 24, 2017. Alexis Fuentes-Hernandez, Esq., at Fuentes Law Offices, LLC, serves as bankruptcy counsel. In its petition, the Debtor estimated $2.36 million in assets and $3.83 million in liabilities. The petition was signed by Jose A. Casal Seibezzi, president. FIRST BANCORP: Fitch Hikes Issuer Default Rating to B ----------------------------------------------------- Fitch Ratings has upgraded First Bancorp's (FBP) Long-Term Issuer Default Rating (IDR) to 'B' from 'B-' with a Stable Outlook. Fitch has also upgraded FBP's Viability Rating (VR) to 'b' from 'b-'. Prior to Fitch's affirmation of FBP's ratings on May 9, 2018, FBP's ratings had been on Rating Watch Negative due to the uncertainty of the impact caused by Hurricanes Irma and Maria on Puerto Rico in September 2017. Prior to the hurricanes, FBP's ratings had a Positive Outlook since November 2016. KEY RATING DRIVERS IDRS and VRs The upgrade reflects improvements in FBP's financial profile; the company's asset quality metrics, operating performance, capital ratios, and funding profile have all improved meaningfully since 2012, when FBP was upgraded to 'B-'. When Fitch affirmed FBP's ratings with a Stable Outlook in May 2018, Fitch expected that asset quality could deteriorate from 1Q18 levels in the following few quarters. The press release that accompanied the affirmation highlighted stabilized credit quality measures as a key positive rating sensitivity. Net charge-offs for the two most recent quarters were in line with 1Q18 levels, and nonperforming assets (including accruing troubled debt restructures and adjusted for rebooked GNMA loans), while slightly elevated relative to 1Q18 levels, were below pre-hurricane levels. However, FBP's ratings remain constrained by poor asset quality relative to Puerto Rico peers and U.S. mainland banks. The company's asset quality has improved meaningfully over the last few years. Fitch believes that this is partially attributable to FBP's reduction in risk appetite as well as a relatively benign credit environment. FBP's nonperforming assets (including accruing troubled debt restructures and adjusted for rebooked GNMA loans) to loans held-for-investment and other real estate owned decreased to 11.9% at 3Q18 from 17.7% at year-end 2012, and net charge-offs of 127bps through 3Q18 YTD were below the 20-quarter average despite the recent hurricanes. FBP's earnings have improved meaningfully and have stabilized over the past few years. The company's return on average assets for 3Q18 YTD was 1.1% compared to the five-year average of 0.2%. Earnings improvement has been driven by lower credit provisions given the aforementioned asset quality stabilization along with higher interest rates and improvements in efficiency. Fitch expects that earnings could face headwinds going forward as FBP continues to work down its relatively high levels of nonperforming assets, although earnings should benefit from further rate hikes. FBP, along with the other Puerto Rican banks, have been able to lag deposit pricing more than banks in the U.S. mainland through the current rate hike cycle, although their deposit costs started from a higher absolute level. In Fitch's view, capital remains a rating strength and should provide an adequate buffer to potential losses stemming from credit quality deterioration. Based on a severe stress test incorporating reduced core earnings and significant increases in provisions, Fitch believes FBP's capital base is sufficient to withstand further credit deterioration and/or volatility. At 3Q18, FBP's TCE and CET1 stood at 15.0% and 20.1%, respectively, which are among the highest in Fitch's rated universe in the U.S. Given FBP's risk profile and uncertainties that remain regarding the Puerto Rico economy and hurricane impact, the company's higher capital ratios are viewed as prudent and supportive of the ratings. The company's capital ratios have increased by approximately 400 basis points over the last four years, although capital generation may decelerate going forward as FBP reinstated its common dividend. In November 2018, FBP announced that the Federal Reserve permitted the company to pay a common dividend to shareholders for the first time since 2009. FBP's funding profile is well situated for its current ratings. Fitch observes that there has been modest improvement over time with the company reducing its reliance on noncore funding sources, particularly brokered deposits. Moreover, a lack of loan growth as well as an inflow of deposits has reduced the bank's loan to deposit ratio to 96% at 3Q18. Fitch notes that FBP has benefited from the inflow of cash from federal aid and insurance payouts in the past few quarters. Fitch expects this trend to continue over the medium term. FBP's ratings continue to be constrained by a challenging and uncertain operating environment. The recent hurricanes have complicated the Commonwealth of Puerto Rico's efforts to reverse outward migration, generate sustainable economic growth, and address its fiscal and debt imbalances. Additionally, the reduction in the federal corporate tax rate in the U.S. makes Puerto Rico less attractive on a relative basis. Fitch notes that rebuilding efforts and federal aid from the U.S. government have had a positive effect on the island's economy, which is expected to continue over the medium term. Longer-term prospects for the islands economy, outside the current rating time horizon, depend heavily on the effectiveness of fiscal and structural reforms. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating of '5' and Support Ratings Floor of 'NF' reflect Fitch's view that FBP is not considered systemically important, and therefore the probability of support is unlikely. The IDRs and VRs do not incorporate any support. LONG- AND SHORT-TERM DEPOSIT RATINGS FBP's uninsured deposit ratings at its subsidiary bank are rated one notch higher than FBP's IDR and senior unsecured debt rating because U.S. uninsured deposits benefit from depositor preference. U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default. HOLDING COMPANY FBP has a bank holding company (BHC) structure with the bank as the main subsidiary. IDRs and VRs are equalized with those of the operating company and bank, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Double leverage is below 120% for the FBP parent company. RATING SENSITIVITIES IDRS and VRs With the upgrade, Fitch considers the likelihood for further upward rating momentum to be limited in the near term. FBP's operating environment is a higher influence on the ratings, and FBP's ratings are sensitive to changes in Fitch's view of Puerto Rico's operating environment. However, given FBP's low rating level relative to Fitch's assessment of the operating environment in Puerto Rico, Fitch believes that a modest degree of deterioration in the island's operating environment over the longer term is already captured in FBP's current ratings. Positive rating momentum could stem from an improved franchise indicated by loan and deposit market share on the island relative to the other Fitch-rated bank in Puerto Rico, Popular, Inc. (BPOP, rated BB-/Stable). FBP is currently the second largest bank on the island behind BPOP, although loan and deposit market share in Puerto Rico were 19% and 12%, respectively, as of 2Q18. This compares to BPOP's loan and deposit market shares of 49% and 58%, respectively. Negative ratings pressure could develop if Fitch believes that the potential benefits of the planned structural and fiscal reforms in the recently approved fiscal plan will not be realized, resulting in a sustained weaker operating environment. Conversely, positive rating action is possible if Fitch believes that the benefits from the planned structural and fiscal reforms will be effective resulting in a stronger operating environment. Fitch regards FBP's high capital levels as a rating strength; therefore, FBP's ratings would be sensitive to material reductions in capital levels, particularly if not accompanied by a commensurate reduction in problem loans. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need. LONG- AND SHORT-TERM DEPOSIT RATINGS The ratings of long- and short-term deposits issued by FBP subsidiaries are primarily sensitive to any change in the company's IDRs. Should the Long-Term IDR be upgraded or downgraded, the long-term deposit rating could be similarly affected. HOLDING COMPANY If FBP became undercapitalized or increased double leverage significantly, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of the operating companies. Fitch has upgraded the following ratings: First BanCorp -- Long-Term IDR to 'B' from 'B-'; Outlook Stable; -- Viability Rating to 'b' from 'b-'. FirstBank Puerto Rico -- Long-Term IDR to 'B' from 'B-'; Outlook Stable; -- Long-term deposit to 'B+'/'RR3' from 'B'/'RR3'; -- Viability Rating to 'b' from 'b-'. Fitch has affirmed the following ratings: First BanCorp -- Short-Term IDR at 'B'; -- Support at '5'; -- Support floor at 'NF'. FirstBank Puerto Rico -- Short-Term IDR at 'B'; -- Short-term Deposits at 'B'; -- Support at '5'; -- Support floor at 'NF'. TOYS R US: Reaches Comprehensive Intercompany Settlement Deal ------------------------------------------------------------- BankruptcyData.com reported that Toys "R" Us requested Court approval of a settlement agreement, dated December 11, 2018, amongst (i) the Debtors, (ii) Toys (Labuan) Holding Limited (the "Asia JV"), (iii) the TRU Non-Debtor Subsidiaries, (iv) the Ad Hoc Group of B-4 Lenders, (v) the Taj Holders Steering Group, and (vi) the Debtors' Official Committee of Unsecured Creditors (the "Intercompany Settlement Agreement"). The Debtors' motion states, "After more than a year of inter-silo disputes related to a multitude of issues, the Debtors, their key stakeholders, and the Official Committee of Unsecured Creditors (the 'Creditors' Committee') have reached a comprehensive agreement reflecting a balanced resolution of all issues, thereby paving the way for the conclusion of these cases. Among other things, the intercompany settlement agreement resolves all matters concerning licensing agreements between Toys (Labuan) Holding Limited (the 'Asia JV'), its subsidiaries, and Geoffrey, LLC ('Geoffrey'), source-code-ownership, private-label goods and trademarks, and all other intercompany issues (including professional-fee allocation). The Intercompany Settlement Agreement also establishes the framework of the various Debtors' go-forward business relationship -- and resolves significant ongoing disputes regarding that relationship -- as it addresses the provision of transition services to the Asia JV or its subsidiaries; the new licensing agreement between Geoffrey and the Asia JV and/or its subsidiaries; the private-label arrangements; and the ownership of the Source Code. Once this Court approves the Intercompany Settlement Agreement, the Debtors and the rest of the Settlement Parties will be able to allocate their resources toward resolving any remaining issues and expeditiously confirming and consummating the chapter 11 plans. All use of the Debtors' property contemplated by the Intercompany Settlement Agreement and any stipulations contemplated thereby is, in the Debtors' business judgment, appropriate given the circumstances." Key provisions of the Intercompany Settlement Agreement include: * Geoffrey will enter into new license agreements with the Asia JV and certain of its subsidiaries, as well as the French business. * The new license agreements will have a fixed 15-year term, subject to extension by the Asia JV after the 15-year term, and will have other amended terms as set forth in the Settlement Agreement. * The Asia JV and/or its subsidiaries will pay Geoffrey a 2% net royalty rate under the new licensing agreements. * The Asia JV will relinquish its rights to $26,279,192 it claims it is owed by Geoffrey under the Subsidy Agreement. * The Asia JV or its subsidiaries will pay $3,720,808 to Geoffrey on the effective date of the Plan. * The Asia JV and/or its subsidiaries will pay $6,000,000 to Toys 'R' Us - Delaware, Inc. ("Toys Delaware") on April 30, 2019. * The Taj Debtors will pay Toys Delaware $3 million in settlement of certain professional fee allocation disputes. * Toys Delaware will deliver the Source Code and Oracle Data to the Asia JV or its subsidiaries, which, following receipt of the Source Code and Oracle Data, will pay Toys Delaware $5 million, plus unpaid invoiced amounts under the ITASSA (which total approximately $7.6 million). * Toys Delaware will enter into a transition services agreement to provide existing IT services to the Asia JV or its subsidiaries, as well as transition and migration services set forth in the Settlement Agreement or appended Statement of Work, and the Asia JV or its subsidiaries will pay Toys Delaware a $1.5 million monthly fee payable as of December 1, 2018. * Geoffrey and the Asia JV will work in good faith to document their future private label relationship, including the Asia JV's ability to source private-label goods and use trademarks, based on certain agreed-upon principles set forth in the Settlement Agreement. * Funds of MAP 2005 Real Estate, LLC ("MAP 2005") will be used to resolve certain intercompany fee allocation disputes, including through payment to Toys Delaware of $1.25 million, as well as payment to the Taj Debtors of $1.25 million. * The Taj Debtors and Taj Noteholders will provide a $1.25 million payment to be contributed to TRU, Inc. as a fund for creditors of TRU Inc. (to be distributed in accordance with the Intercompany Settlement Agreement and Plan) (the "Taj Settlement Consideration"). * The Ad Hoc Group of B-4 Lenders and the Creditors' Committee will withdraw their objections to the Plan. * Each Debtor will mutually release each other Debtor of all intercompany claims and causes of action (except those explicitly reserved). * The Taj Debtors and the Asia JV and its direct and indirect subsidiaries will exchange mutual releases with the TRU Inc. Debtors, Toys Delaware Debtors, and Geoffrey Debtors. About Toys "R" Us 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. =============================== T R I N I D A D & T O B A G O =============================== TRINIDAD & TOBAGO: Most Public Companies Fail Disclosure Standards ------------------------------------------------------------------ Trinidad Express reports that eighteen out of twenty-seven, or two-thirds of companies publicly listed on the Trinidad and Tobago Stock Exchange (TTSE), have received a failing grade for corporate disclosure standards for annual reports. The failing companies received scores ranging from two to 13 out of 26, in a study done by the Arthur Lok Jack Global School of Business, according to Trinidad Express. ============= U R U G U A Y ============= CONSORCIO DEL URUGUAY: Moody's Hikes CFR to Ba3, Outlook Stable --------------------------------------------------------------- Moody's Investors Service has upgraded Consorcio del Uruguay S.A.'s global scale Corporate Family Rating (CFR) to Ba3 from B1 and Uruguayan national scale CFR to Baa2.uy from Ba1.uy. The ratings outlook is stable. This rating action follows the publication of Moody's new finance company rating methodology, which now is the primary methodology that Moody's uses to rate finance companies globally, except in jurisdictions where certain regulatory requirements must be fulfilled prior to the new methodology's implementation. Moody's has also withdrawn the outlooks on Consorcio's existing instrument ratings for its own business reasons. This has no impact on the issuer level rating outlooks for Consorcio. Over the course of the next year, Moody's will be withdrawing all instrument level outlooks for entities rated under the Finance Companies Rating Methodology. The following ratings of Consorcio del Uruguay S.A. were upgraded: Global Corporate Family Rating: to Ba3 from B1 Uruguayan national scale Corporate Family Rating: to Baa2.uy from Ba1.uy Outlook Actions: Outlook, Remains Stable RATINGS RATIONALE Moody's rating action on Consorcio follows the publication of Moody's new finance company rating methodology and was driven by revisions of its standalone profile as reflected by changes to the company's CFR, resulting from the significant changes and enhancements from Moody's previous rating methodology for rating this firm. These changes and enhancements for rating finance companies include the introduction of new financial ratios such as a net charge-offs ratio and a debt maturity coverage ratio, the dynamic weighting of operating environment conditions that can adversely influence firms' creditworthiness, and the incorporation of specific qualitative factors as direct notching adjustments to ratings. Moody's said Consorcio's CFR was upgraded to Ba3 as a result of the improved consolidated score for its Financial Profile in the new methodology, which more than offsets the greater weighting accorded to the operating environment. The improved Financial Profile score reflects Moody's revised assessment of Consorcio's asset and liquidity risk in line with the revised methodological framework. With regards to asset risk, the revised methodology explicitly considers Consorcio's very low level of charge-offs, which mitigate risks associated with its somewhat higher level of delinquent loans. However, Consorcio's problem loan ratio remains below the system's average ratio. The revised assessment of Consorcio's liquidity risk considers the long-term stability of its funding, which is derived entirely from members and offsets its low funds from operations and the absence of a market to raise additional funds by securitizing its assets. Consorcio focuses on providing the specialized administration of saving plans that are commercialized mainly to low- and middle- income class individuals. Local regulations preclude the company from offering additional products and services. Consorcio is regulated by the Uruguayan Central Bank, which also sets conservative capital requirements for the entity. Consorcio has access to stable funding in the form of savings plans, which the entity grants to its clients through an awards system, based mainly on raffles, auctions or predetermined dates. Under Consorcio's operating guidelines, fund contributors have no ability to withdraw their savings, unless they are awarded through the aforementioned system, therefore, the entity's liquidity risk is negligible. Moreover, regulations ensure that Consorcio is allowed to reduce or temporarily suspend clients' awards if liquidity gets to a low level. As of September 2018, Consorcio's problem loan ratio went up to 1.37% from 1.13% in December 2017 because of some individual borrowers that became delinquent. However, asset quality remains strong. Net charge-offs equaled just 0.05% of average gross loans during 2016-17, reflecting the fact that the large majority of delinquent loans are ultimately repaid in full. This results from Consorcio's policies and procedures to award funds, monitoring and recovering delinquencies. The high granularity of the entity's loan book also reduces risk, with the ten largest borrowers representing just 7% of total loans and 45% of tangible common equity (TCE). In addition, Consorcio awards funds to its clients predominantly in local currency, therefore, reducing risks of currency mismatches that are common among Uruguayan banks. Consoricio's ratings also consider its consistently strong profitability and capital metrics. Consorcio's ratio of net income to average managed assets was 2.35% in September 2018 and averaged 2.04% during the last three years. The entity's main source of income is fees from the administration of saving plans, which are deducted from clients' installment payments for savings plans. Consorcio's capitalization has improved steadily in the past three years, as measured by Moody's preferred ratio of TCE to total assets, which went up to 12.52% in September 2018, from 10.70% in December 2015. Consorcio's Uruguayan national scale CFR rating of Baa2.uy is the higher of two alternatives on the national scale corresponding to its Ba3 global scale rating (GSR) and reflects Moody's view that the entity's GSR is strongly positioned at that level under the revised methodological framework. WHAT COULD CHANGE THE RATING -- DOWN/UP Consorcio's ratings could face upward pressure if the entity reports improvement in asset quality, profitability and capitalization. An improvement in operating conditions could also be positive for the ratings. Conversely, a substantial deterioration of the entity's earning generation capacity and capitalization, or of the operating environment, could add negative pressure to the ratings. ================= V E N E Z U E L A ================= PETROLEOS DE VENEZUELA: Creditor Group Starts Legal Process ----------------------------------------------------------- The Venezuela Creditors Committee has hired Cleary Gottlieb Steen & Hamilton LLP to advise on strategic alternatives. The Committee was formed in April 2018 for the purpose of monitoring the economic, financial and legal condition of the government of Venezuela, Petroleos de Venezuela ("PDVSA") and C.A. La Electricidad de Caracas ("ELECAR"), respectively, to facilitate communication and coordinate actions among bondholders and other stakeholders, and to consider financing alternatives for Venezuela under an appropriate political and economic policy scenario. Its members include institutional investors holding approximately US$8 billion of bonds issued by the Republic of Venezuela, PDVSA and ELECAR. Venezuela, PDVSA and ELECAR together have approximately US$62 billion of unsecured bonds outstanding. As of December 13, 2018, interest and principal due and unpaid on these bonds is approximately US$9 billion. Neither Venezuela nor PDVSA or ELECAR has communicated publicly or to investors with regard to its failure to make these payments or its intentions to resume payments in the future. To date, bondholders have shown extraordinary patience, recognizing the financial difficulties that confront Venezuela, notwithstanding that these difficulties are in large part of the government's own making. Efforts by individual Venezuela and PDVSA creditors to satisfy their claims have skewed recoveries in their favor to the detriment of bondholders. Accordingly, the Venezuela Creditors Committee together with its advisors are exploring options to ensure that assets located outside Venezuela belonging to Venezuela, PDVSA or ELECAR are available to satisfy claims of all creditors. Guggenheim Securities, LLC is acting as financial advisor to the Committee. As reported in the Troubled Company Reporter-Latin America on Aug. 24, 2018, S&P Global Ratings affirmed its 'SD' global scale issuer credit rating and 'D' issue-level ratings on Petroleos de Venezuela S.A. (PDVSA). ================= X X X X X X X X X ================= * BOND PRICING: For the Week December 10 to December 14, 2018 -------------------------------------------------------------- Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- Banco do Brasil SA/Cayman 6.25 75.043 KY USD Rio Energy SA 6.875 71.638 2/1/2025 AR USD Cia Latinoamericana 9.5 60.447 7/20/2023 AR USD CSN Islands XII Corp 7 69.44 BR USD Agua y Saneamientos 6.625 71.982 2/1/2023 AR USD Odebrecht Finance Ltd 7.5 39.15 KY USD YPF SA 16.5 50.96 5/9/2022 AR ARS Odebrecht Finance Ltd 4.37 35.715 4/25/2025 KY USD Banco Macro SA 17.5 50 5/8/2022 AR ARS Odebrecht Finance Ltd 7.12 37.293 6/26/2042 KY USD China Huiyuan 6.5 75.1 8/16/2020 CN USD Odebrecht Finance 5.125 45.754 6/26/2022 KY USD Noble Holding 6.2 74.46 8/1/2040 KY USD Noble Holding 5.25 70.444 3/15/2042 KY USD Odebrecht Finance 7 58.985 4/21/2020 KY USD Noble Holding 6.05 73.508 3/1/2041 KY USD Odebrecht Finance 5.25 36.2 6/27/2029 KY USD Rio Energy SA 6.875 71.551 2/1/2025 AR USD BCP Finance Co 1.751 74.397 KY EUR Provincia del Chubut 4 10/21/2019 AR USD YPF SA 16.5 50.96 5/9/2022 AR ARS Argentina 7.125 76 6/28/2117 AR USD Automotores Gildemeister 6.75 62.759 1/15/2023 CL USD Odebrecht Finance 6 37.193 4/5/2023 KY USD Banco do Brasil 6.25 76.375 KY USD Cia Latinoamericana 9.5 60.621 7/20/2023 AR USD Polarcus Ltd 5.6 70 7/1/2022 AE USD Argentina 6.875 74.985 1/11/2048 AR USD Provincia del Chubut 7.75 72.304 7/26/2026 AR USD Banco Macro SA 17.5 50 5/8/2022 AR ARS CSN Islands XII Corp 7 74.375 BR USD Provincia de Rio Negro 7.75 70.153 12/7/2025 AR USD Provincia de Entre Rios 8.75 71.083 2/8/2025 AR USD Argentina 4.33 70 12/31/2033 AR JPY Provincia de Entre Rios 8.75 72.333 2/8/2025 AR USD Odebrecht Finance Ltd 4.375 35.242 4/25/2025 KY USD Ironshore Pharma 13 69.621 2/28/2024 KY USD Automotores Gildemeister 8.25 60.583 5/24/2021 CL USD Odebrecht Finance Ltd 7.125 38.674 6/26/2042 KY USD Odebrecht Finance Ltd 5.25 36.187 6/27/2029 KY USD Province of Santa Fe 6.9 74.177 11/1/2027 AR USD Provincia del Chubut 7.75 71.654 7/26/2026 AR USD Argentina 6.25 72.711 11/9/2047 AR EUR Cia Energetica 6.1827 1.105 1/15/2022 BR BRL Odebrecht Finance 7.5 43.5 KY USD Argentina 0.45 31.75 12/31/2038 AR JPY SACI Falabella 2 7/15/2020 CL CLP Province of Jujuy 8.625 72.788 9/20/2022 AR USD Province of Santa Fe 6.9 73.44 11/1/2027 AR USD Ironshore Pharma 13 69.621 2/28/2024 KY USD Tanner Servicios 3.8 52.42 4/1/2021 CL CLP AES Tiete Energia SA 6.78 1.06 4/15/2024 BR BRL Odebrecht Finance Ltd 6 37.19 4/5/2023 KY USD Provincia de Rio Negro 7.75 70.15 12/7/2025 AR USD Odebrecht Finance 7 59.466 4/21/2020 KY USD Odebrecht Finance Ltd 5.12 47.298 6/26/2022 KY USD Provincia de Cordoba 7.12 74.286 8/1/2027 AR USD Argentina 7.125 75.752 6/28/2117 AR USD Automotores Gildemeister 8.25 60.583 5/24/2021 CL USD Enlasa Generacion 3.558 11/15/2023 CL CLP Metrogas SA/Chile 645 8/1/2024 CL CLP Automotores Gildemeister 6.75 62.759 1/15/2023 CL USD Provincia del Chaco 9.375 72.315 8/18/2024 AR USD Fospar S/A 6.53 1.034 5/15/2026 BR BRL Sociedad Concesionaria 2.9547 6/30/2021 CL CLP Esval SA 3.453 3/15/2028 CL CLP Caja de Compensacion 7.75 35.23 3/27/2024 CL CLP Sociedad Austral 318.478 9/20/2019 CL CLP Provincia de Neuquen 7.5 74.753 4/27/2025 AR USD Caja de Compensacion 5.2 9/15/2018 CL CLP Empresa de Transporte 4.341 7/15/2020 CL CLP Corp Universidad 5.968 11/10/2021 CL CLP Provincia de Cordoba 7.125 74.802 8/1/2027 AR USD Provincia del Chaco 9.375 72.585 8/18/2024 AR USD Argentine Republic 7.125 75.322 6/28/2117 AR USD Sylph Ltd 2.367 61.194 9/25/2036 KY USD Banco Security SA 311 7/1/2019 CL CLP Sylph Ltd 2.657 73.081 3/25/2036 KY 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. . * * * End of Transmission * * *