/raid1/www/Hosts/bankrupt/TCRLA_Public/190312.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, March 12, 2019, Vol. 20, No. 51
Headlines
A R G E N T I N A
ARGENTINA: IDB OKs $150MM Credit Line to Strengthen Provincial Mgmt
ARGENTINA: To Strengthen Digital Agenda With $300MM-IDB Support
B R A Z I L
OURO VERDE: Fitch Downgrades LT IDRs to 'C'
PARANA: Fitch Affirms Long-Term IDR at BB-, Outlook Stable
PETROLEO BRASILEIRO: Fitch Affirms LT IDR at BB-, Outlook Stable
D O M I N I C A N R E P U B L I C
AES ANDRES: Fitch Maintains BB- Long-Term FC IDR on Watch Neg.
DOMINICAN REPUBLIC: Govt. 'Encourages' a Salary Increase
EMPRESA GENERADORA: Fitch Maintains BB- Notes Rating on Watch Neg.
M E X I C O
JUST ONE MORE: Case Summary & 2 Unsecured Creditors
ORCHIDS PAPER: Obtains Waiver of Debt Covenant Noncompliance
P U E R T O R I C O
ALLIED FINANCIAL: Escobar Buying Two Aguadilla Properties for $81K
SAN JUAN ICE: Payment to Unsecureds Raised to 25% Under Plan
WESTERN HOST: Triangle Cayman Renews Bid to Prohibit Cash Use
V E N E Z U E L A
PETROLEOS DE VENEZUELA: Nicaragua OKs Buyout of Bank Tied to Firm
PETROLEOS DE VENEZUELA: Unit Seeks $1.2BB Loan Amid US Sanctions
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A R G E N T I N A
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ARGENTINA: IDB OKs $150MM Credit Line to Strengthen Provincial Mgmt
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The Inter-American Development Bank approved a Credit Line for
Investment Projects of USD450 million and a first individual
operation of USD150 million under this credit line, in support of
a program to strengthen provincial management in Argentina.
The program aims to contribute to provincial fiscal sustainability
to foster growth through improved management of revenues,
expenditure and public investments in the provinces, as well as the
design of the Argentine fiscal federalism and the implementation of
investment projects.
It is estimated that strengthening actions and public investment
projects will encourage improvements in fiscal management by
linking them to the financing of projects and ensuring that those
improvements in provincial investment management are indeed
implemented.
This is the second program Argentina will implement to improve
provincial management and the first individual operation under its
framework will benefit six provinces. The first, supported by the
IDB with US$120 million in financing, was approved in December 2016
and benefited Corrientes, Salta, Mendoza and Neuquén provinces.
The first individual operation's specific objectives under this
Credit Line are to increase the share of low-distorted revenues in
total revenues and improve the efficiency of public expenditure
management and public investment.
The provinces and citizens of Chaco, Entre Ríos, Jujuy, Misiones,
Río Negro, and Tierra del Fuego will be direct beneficiaries. In
addition, all other provinces will result benefited by
strengthening the design of Argentine federalism and supporting
fiscal sustainability.
Components of the program include the strengthening of tax and
financial administration, whose goal is to increase the share of
low-distorting revenues in total revenues and increase the
efficiency of public spending and investment, as well as support
for provincial fiscal sustainability.
The US$450 million Investment Projects Credit Line and the first
individual US$150 million loan operation have a 25-year repayment
term with a 5.5-year grace period and an interest rate based on
Libor. The first operation has a local counterpart of US$50
million.
As reported in the Troubled Company Reporter-Latin America on
Nov. 14, 2018, S&P Global Ratings lowered its long-term foreign
and local currency ratings on Argentina to 'B' from 'B+' and
affirmed its short-term foreign and local currency ratings at 'B'.
S&P said, "We also removed the long-term ratings from CreditWatch,
where we placed them on Aug. 31, 2018, with negative implications.
The outlook on the long-term ratings is stable. At the same time,
we lowered our national scale ratings to 'raAA-' from 'raAA'. We
also lowered our transfer and convertibility assessment to 'B+'
from 'BB-'."
S&P said, "The stable outlook reflects our expectation that the
government will implement difficult fiscal, monetary, and other
measures to stabilize the economy over the coming 18 months,
gradually staunching the deterioration in the sovereign's
financial profile and debt burden, reversing inflation dynamics,
and restoring investor confidence. The combination of lower
government financing needs, declining inflation and interest
rates, and expectations of continuity in key economic policies
after national elections in October 2019 could set the stage for
economic recovery and contain external vulnerability.
Fitch Ratings affirmed on May 8, 2018, Argentina's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'B' and revised
the Outlook to Stable from Positive.
On December 4, 2017, Moody's Investors Service upgraded the
Government of Argentina's local and foreign currency issuer and
senior unsecured ratings to B2 from B3. The senior unsecured
shelves were upgraded to (P)B2 from (P)B3. The outlook on the
ratings is stable. At the same time, Argentina's short-term
rating was affirmed at Not Prime (NP). The senior unsecured
ratings for unrestructured debt were affirmed at Ca and the
unrestructured senior unsecured shelf affirmed at (P)Ca.
As previously reported by the TCR-LA, Argentina defaulted on some
of its debt late July 30, 2014, after expiration of a 30- grace
period on a US$539 million interest payment. Earlier that ,
talks with a court-appointed mediator ended without resolving a
standoff between the country and a group of hedge funds seeking
full payment on bonds that the country had defaulted on in 2001.
A U.S. judge had ruled that the interest payment couldn't be made
unless the hedge funds led by Elliott Management Corp., got the
US$1.5 billion they claimed. The country hasn't been able to
access international credit markets since its US$95 billion
default 13 years ago. On March 30, 2016, Argentina's Congress
passed a bill that will allow the government to repay holders of
debt that the South American country defaulted on in 2001,
including a group of litigating hedge funds that won judgments
in a New York court. The bill passed by a vote of 54-16.
ARGENTINA: To Strengthen Digital Agenda With $300MM-IDB Support
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The Inter-American Development Bank approved a USD300 million loan
to improve the productivity of Argentina's economy through its
digitalization. The program will establish a Digital Agenda,
strengthen the connectivity's legal framework, expand the offer and
boost the quality of digital government services, and promote
regulatory measures for the digital productive transformation.
This is the first of two consecutive operations from a single
disbursement, both financed separately even though they are
technically linked to each other.
The Program for Strengthening of the Digital Agenda: Connectivity,
Electronic Government and Digital Productive Transformation will
benefit individuals and business, in particular small and
medium-size companies, through a substantial improvement in
productivity by digitalizing them and adopting digital
technologies.
The measures aim to strengthen the strategy of digitalizing the
public and private sectors, while the program supports a
comprehensive approach of intervention in diverse sectors aligned
with Argentina's Digital Agenda.
Among its components are actions to ensure the maintenance of a
macroeconomic context that is congruent with the objectives of the
program and the development of the Digital Agenda as an instrument
of coordination of public policies.
A third component is a strategic regulation for digital
connectivity, which includes the strengthening of the legal
framework for Information and Communication Technologies (ICTs),
the improvement of regulation of competition in the ICT market and
the infrastructure's development for digital inclusion.
In the same way, the fourth component is the development of
e-government, including the strengthening in the security of
critical infrastructures of personal data and good practices in the
use of ICTs, the development of digitalization and interoperability
in the public sector, the display of tools to enable secure
internet transactions between citizens and government, as well as
the promotion of the use of new technologies for the provision of
public services.
The fifth component consists of digital productive transformation,
which includes actions for the digital transformation of companies;
digital innovation; digital transformation in vertical sectors such
as knowledge-based services, the construction and finance sectors;
and the promotion of talent.
The US$ 300 million IDB loan has a 20-year repayment term, a 5.5
year grace period, and an interest rate based on Libor.
As reported in the Troubled Company Reporter-Latin America on
Nov. 14, 2018, S&P Global Ratings lowered its long-term foreign
and local currency ratings on Argentina to 'B' from 'B+' and
affirmed its short-term foreign and local currency ratings at 'B'.
S&P said, "We also removed the long-term ratings from CreditWatch,
where we placed them on Aug. 31, 2018, with negative implications.
The outlook on the long-term ratings is stable. At the same time,
we lowered our national scale ratings to 'raAA-' from 'raAA'. We
also lowered our transfer and convertibility assessment to 'B+'
from 'BB-'."
S&P said, "The stable outlook reflects our expectation that the
government will implement difficult fiscal, monetary, and other
measures to stabilize the economy over the coming 18 months,
gradually staunching the deterioration in the sovereign's
financial profile and debt burden, reversing inflation dynamics,
and restoring investor confidence. The combination of lower
government financing needs, declining inflation and interest
rates, and expectations of continuity in key economic policies
after national elections in October 2019 could set the stage for
economic recovery and contain external vulnerability.
Fitch Ratings affirmed on May 8, 2018, Argentina's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'B' and revised
the Outlook to Stable from Positive.
On December 4, 2017, Moody's Investors Service upgraded the
Government of Argentina's local and foreign currency issuer and
senior unsecured ratings to B2 from B3. The senior unsecured
shelves were upgraded to (P)B2 from (P)B3. The outlook on the
ratings is stable. At the same time, Argentina's short-term
rating was affirmed at Not Prime (NP). The senior unsecured
ratings for unrestructured debt were affirmed at Ca and the
unrestructured senior unsecured shelf affirmed at (P)Ca.
As previously reported by the TCR-LA, Argentina defaulted on some
of its debt late July 30, 2014, after expiration of a 30- grace
period on a US$539 million interest payment. Earlier that ,
talks with a court-appointed mediator ended without resolving a
standoff between the country and a group of hedge funds seeking
full payment on bonds that the country had defaulted on in 2001.
A U.S. judge had ruled that the interest payment couldn't be made
unless the hedge funds led by Elliott Management Corp., got the
US$1.5 billion they claimed. The country hasn't been able to
access international credit markets since its US$95 billion
default 13 years ago. On March 30, 2016, Argentina's Congress
passed a bill that will allow the government to repay holders of
debt that the South American country defaulted on in 2001,
including a group of litigating hedge funds that won judgments
in a New York court. The bill passed by a vote of 54-16.
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B R A Z I L
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OURO VERDE: Fitch Downgrades LT IDRs to 'C'
-------------------------------------------
Fitch Ratings has downgraded the National Scale Rating and local
debentures for Ouro Verde Locacao e Servico S.A. (Ouro Verde) to
'C(bra)' from 'CCC(bra)'. Fitch has also downgraded the company's
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
to 'C' from 'CCC'.
The downgrade reflects the fact that Ouro Verde has entered into
temporary negotiated waivers postponing interest and principal
payments on its 5th, 6th, 7th and 8th debentures issuances due to
its poor liquidity position and inability to obtain additional bank
financing to service its debt or renovate its contract base. The
company has been facing liquidity constrains since the arrest of
Mr. Celso Frare, the company's controlling shareholder. The arrest
was part of a state level investigation concerning alleged bribes
to Parana's former governor related to equipment contracts between
Parana's government and Ouro Verde. Default on the company's debt
is likely absent the timely receipt of funds from the sale of the
company or any other liquidity event.
Positively, Ouro Verde and all of its shareholders have recently
signed a new agreement by which Cedar Fundo de Investimento em
Participacoes Multiestrategia (Cedar), a Brookfield investment
vehicle in Brazil, will acquire 100% of Ouro Verde's shares.
Subsequent to the acquisition, Ouro Verde will issue new shares in
the amount of BRL500 million to be acquired by Cedar. The
transaction requires the fulfilment previous conditions, including
the approval of Brazilian antitrust authority (Conselho
Administrativo de Defesa Economica - CADE), the waiver of Ouro
Verde's existing debt holders and the BRL150 million payment from
Novo Oriente Participacoes Ltda (a company owned by Celso Frare) to
Ouro Verde - regarding the sale to Ouro Verde's stake in Martini
Meat S.A. in April of 2013.
Fitch considers that Ouro Verde's sale to a fund administered by
Brookfield may materially change the company's credit quality. In
this scenario, Ouro Verde should benefit from the capital increase
and a better financial flexibility. The strategy from the new
shareholder related to capital structure, liquidity, debt profile
and investments, as well as the company's capacity to resume its
businesses will be crucial to the potential repositioning of the
ratings.
KEY RATING DRIVERS
Interest and Principal Payments Postponement: Ouro Verde has
recently postponed interest and principal payments on its 5th, 6th,
7th and 8th debentures issuances. Fitch understands the company
will not have access to new funding to service its financial
obligations or to renovate its current contract base until the sale
of the company or any other liquidity event happens or until
prosecutors complete their investigation and Ouro Verde reaches a
full agreement with the authorities.
Ouro Verde Sale Not Incorporated: Following the arrest of Mr. Frare
there has been a high degree of uncertainty regarding if the
transaction with Brookfield will proceed. The company announced it
has recently signed a new investment agreement by which Cedar will
acquire 100% of Ouro Verde's shares, which is credit positive if
materializes. The BRL500 million in capital injection and a higher
financial flexibility will be crucial to the company to return to
its investments and improve its businesses. Fitch views Brookfield,
which has numerous investments in Brazil, as a strategic owner
because it has the financial wherewithal to make additional
acquisitions that would have increased the Ouro Verde's scale and
operating competitiveness.
Continued Legal Uncertainty: The investigation of corruption being
carried out by Parana's Attorney General has been focused solely on
Mr Frare. It remains uncertain when this investigation will be
closed and/or whether Ouro Verde will also be charge by the
Attorney General. These factors could result in some of the Ouro
Verde's clients' compliance departments restricting their business
activity with the company.
DERIVATION SUMMARY
Ouro Verde's ratings reflect the company's temporary negotiated
waivers postponing interest and principal payments on its 5th, 6th,
7th, and 8th debenture issuances. Ouro Verde also presents a weaker
competitive position compared with its bigger domestic peers, such
as Localiza Rent a Car S.A. (Local Currency IDR BBB-/Stable), JSL
S.A (Local Currency IDR BB/Stable) and Companhia de Locacao das
Americas -Locamerica (National Scale Rating AA[bra]). Compared with
those peers, Ouro Verde has consistently weaker liquidity, higher
funding costs, smaller scale and lower financial flexibility. All
these elements are key variables in an industry that demands
adequate prices for asset acquisitions, high capital investing and
an established network for asset disposal. Ouro Verde's leverage is
lower and its operating margins slightly higher margins than those
of JSL and Locamerica.
KEY ASSUMPTIONS
- Ouro Verde has very limited access to new funding.
- The sale of the company is not concluded yet.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to a
Positive Rating Action
- The conclusion of Ouro Verde's sale to Brookfield's investment
fund should result in a significant improvement on the company's
credit profile due to the capital injection, higher financial
flexibility and resume on its businesses.
Developments That May, Individually or Collectively, Lead to a
Negative Rating Action
- The ratings will be downgraded to 'D(bra)'/'D' in case Ouro
Verde requests for bankruptcy protection or to 'RD(bra)'/'RD' if
the company enters into a complete debt renegotiation process with
creditors.
LIQUIDITY
Weak Liquidity Position: Ouro Verde has recently postponed interest
and principal payments on its financial obligations. Historically,
the company operated with low level of cash relative to short-term
debt, using Brazilian banks to fund its working capital needs.
Given the uncertainty surrounding the investigation and the sale of
the company, banks have not been increasing their lending exposure
to Ouro Verde. This has hindered the ability of the company to
service its debt or to bid for new contracts. Further default on
the company's remaining debt is likely absent the timely receipt of
new funds from the sale of the company or any other liquidity
event. On Sept. 30, 2018, which is close to the corruption scandal,
the company had BRL1.6 billion of debt, of which all was classified
as short-term due to the breach of covenants. These figures compare
with BRL253 million of cash and marketable securities and BRL395
million of EBITDA.
FULL LIST OF RATING ACTIONS
Fitch has downgraded the following ratings:
Ouro Verde Locacao e Servico S.A
-- Long-Term Foreign and Local Currency IDRs to 'C' from 'CCC';
-- Long-Term National Scale Rating to 'C(bra)' from 'CCC(bra)';
-- 2019 and 2021 senior unsecured debenture issuances to 'C(bra)'
from 'CCC(bra)'.
PARANA: Fitch Affirms Long-Term IDR at BB-, Outlook Stable
----------------------------------------------------------
Fitch Rating has affirmed the Brazilian state of Parana's Long-Term
Issuer Default Rating (IDR) at 'BB-'. The Rating Outlook is Stable.
The Rating Outlook reflects Brazil's Stable Outlook. Fitch has also
affirmed Parana's National Long-Term rating at 'AA(bra)'/Stable
Outlook.
KEY RATING DRIVERS
Finances: Fitch believes Parana's finances are a neutral rating
factor and reflect a stable trend. According to Fitch's
calculation, operating margins have averaged 5.4% per year over the
last four years, which compared to other large states in Brazil, is
adequate and in line with international peers. In 2018, Parana
registered an overall fiscal surplus of 3.3% due to receipt of
extraordinary tax revenues. Excluding these events, the state would
register a small deficit.
Debt and Other Long-term Liabilities: Fitch considers Parana's debt
profile a strong rating factor with a stable trend. Parana's
consolidated debt of BRL20.5 billion in 2018 represented a moderate
45.8% of the entity's current revenues (45.6% in 2017). Parana has
also exhibited adequate debt sustainability as consolidated debt
service corresponded to 46% of operating balance in 2017 (51.8% in
2016). The state benefited from a renegotiation with the federal
government to postpone debt service in 2017 until June 2018. The
federal government remains the state's main creditor. Around 90% of
the debt is directly or indirectly related to the federal
government.
Economy: Fitch considers Parana's economy a neutral rating factor
with a stable trend. Parana's economy is highly influenced by the
services sector in addition to soft commodities. These activities
presented a slightly positive performance in 2018. The state's
contribution to Brazil's GDP has been fairly stable in the last
five years, posting an estimated GDP of BRL430 billion in 2018
(roughly 6% of the Brazilian GDP). Parana's population is 11.4
million, equal to approximately 5.0% of the Brazilian population,
implying a GDP per capita of USD10,350.
Management and Administration: Management is a neutral rating
factor with a stable trend. Information disclosure practices are
comparable to national and international peers since financial
information is fully available and is frequently updated. Parana's
reliance on non-recurring, non-operating revenue is below average.
Fitch believes the accuracy of fiscal forecasts is average, with
budgets and outturns diverging less than 5%. Financials are
analyzed by the regional court of account (TCE/PR) annually. Main
concerning points raised by the TCE/PR are related to accounting
practices. External parties are not auditing state financials at
this time.
Institutional Framework: Fitch considers the institutional
framework to be weak with a stable trend. This is mostly because of
very low fiscal flexibility stemming from subdued fiscal collection
coupled with rigid cost structure. Moreover, the federal government
has great influence over local and regional governments (LRGs), as
exhibited by the vertical issuance of laws, and, in many instances,
the federal government being the largest LRG creditor.
RATING SENSITIVITIES
Parana's IDRs are constrained by the sovereign; therefore, any
rating actions affecting Brazil should result in a similar action
for Parana. An increased cost structure may lead to further
downgrades in both national and international ratings.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the State of Parana's ratings as follows:
-- Long-Term Foreign and Local Currency IDRs at 'BB-'; Outlook
Stable;
-- Short-Term Foreign and Local Currency IDRs at 'B';
-- National Long-Term Rating at 'AA(bra)'; Outlook Stable;
-- National Short-Term Rating at 'F1+(bra)'.
PETROLEO BRASILEIRO: Fitch Affirms LT IDR at BB-, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed the long-term foreign currency and local
currency Issuer Default Ratings (IDRs) and outstanding debt ratings
of Petroleo Brasileiro S.A. (Petrobras) at 'BB-' and National Scale
rating at 'AA(bra)'. The Rating Outlook is Stable.
Fitch has also revised its assessment of Petrobras' stand-alone
credit profile (SCP) to 'BB+' from 'BB-'. The Stable Outlook for
Petrobras's foreign currency and local currency long-term IDRs
reflects the Stable Outlook for Brazil's sovereign rating.
Petrobras' ratings are capped by Brazil's sovereign ratings (IDR
'BB-'/Stable) due to government's strong ownership and potential
control, and the company's strategic importance to the country.
Petrobras' dominant market share in the supply of liquids fuels in
Brazil coupled with its large hydrocarbon production footprint in
the country exposes the company to government intervention through
pricing policies and investment strategies. Petrobras' ratings
reflect the very strong support incentives Brazil has toward the
company as a result of its strategic importance for the country.
This is supported by Petrobras' leadership position in the
Brazilian domestic energy market. Petrobras' ratings also reflect
the strong linkage between Petrobras and Brazil resulting from the
Brazilian government's majority ownership and strong support track
record.
KEY RATING DRIVERS
Linkage to the Sovereign: Petrobras' ratings are capped by Brazil's
sovereign ratings and reflect the government's very strong
incentive to support the company due to its strategic importance as
the largest supplier of liquid fuels in the country. Petrobras'
ratings also reflect its strong linkage with the sovereign of
Brazil, due to the government's control of the company. By law, the
federal government must hold at least a majority of Petrobras'
voting stock. The government owns 63.6% of Petrobras' voting
rights, directly and indirectly, and has a 46% overall economic
stake.
Improving SCP: Petrobras' SCP materially improved during 2018 as
the company used the proceeds from higher oil prices and asset
sales to significantly lower its debt by approximately USD25
billion, or 23%. Petrobras' SCP of 'BB+' reflects its capital
structure improvement reported over the past three years and
Fitch's expectation that the company will maintain or further
improve its capital structure going forward. As of the YE 2018,
Petrobras' leverage, as measured by net debt to EBITDA, had
decreased to approximately 2.2x from its peak of 5.1x at Dec. 31,
2015.
Strong Cash Flow Generation: Petrobras' improving SCP reflects its
decrease in debt and robust cash flow generation. During 2018, the
company reported an EBITDA of USD31 billion, up from an average of
approximately USD24 billion over the previous three years, while
total debt decrease by one third to USD84 billion as of YE18 from
USD126 billion as of YE15. Petrobras reported a positive
Fitch-defined FCF of USD8billion during 2018, while it invested
enough in its upstream business to replenish its reserves at rate
of 125%. Fitch expects Petrobras to continue reporting positive FCF
over the rating horizon while investing enough to replenish
reserves. The company reported a flat production of 2.6 million
boe/d, marginally lower than 2017, partially due to asset sales as
well as production depletions. Proved reserves stay relatively
unchanged at 9.6 billion boe, which gives the company a reserve
life of approximately 11 years.
Supportive Government: Petrobras' credit quality has materially
benefited from the Brazilian government indirect support during
times of distress. The government has provided liquidity through
government-controlled financial institutions, changed regulations
that negatively affected Petrobras' cash flow in the past and at
times allowed the company to implement beneficial pricing policies.
The government also allows the company to significantly reduce
dividends and curve downstream investments, which, together with
asset sales, allowed Petrobras to strengthen its capital structure
and improve its SCP. Fitch estimates the company will modestly
increase dividend payments as its capital structure approaches the
company's target of 1.5x net debt to adjusted EBITDA.
Potential Political Meddling: The potential return of stronger
political meddling into Petrobras' strategy, noticeably through
interference in domestic gasoline and diesel pricing mechanisms,
would negatively affect the company's cash flow generation and
stand-alone credit profile. This is particularly relevant during
times of Brazilian real depreciation against the dollar, which
would increase domestic gasoline and diesel prices and heighten
interference risk. During 2018, the Brazilian government
established provisional measures to fix and subsidize diesel prices
in order to ease mounting social pressure over volatility in fuel
prices. This marginally increased the company's cash flow
generation exposure to receipt of government subsidies while the
program was in place until year-end.
Marginal Production Growth: Fitch's rating case assumes Petrobras'
gross production will increase to approximately 3.5 million barrels
of oil equivalent a day (boe/d) by 2022, in line with the company's
guidelines. Production growth is expected to remain driven by the
company's development of its pre-salt assets and planned capex for
the next five years of USD84.1 billion. Fitch estimates that more
than one-third of Petrobras' production of 2.6 million boe/d came
from pre-salt formation during 2018. Petrobras' marginal production
decline of 5% between 2017 and 2018 is primarily the result of
asset sales and production depletion. The company's production is
poised to increase in the short term as a result of the
commencement of operation of six new production platforms over the
past few months, with two more expected for the first half of
2019.
DERIVATION SUMMARY
Petrobras' linkage to the sovereign is similar in nature to its
peers, namely Petroleos Mexicanos (PEMEX) ('BBB-'/Negative),
Ecopetrol S.A. ('BBB'/Stable) and YPF ('B'/Negative). It also
compares with Empresa Nacional del Peru (ENAP) ('A'/Stable),
Petroleos del Peru - Petroperu ('BBB+'/Stable) and Petroleos de
Venezuela S.A. (PDVSA) ('RD'). All have strong linkages to their
respective sovereigns, given their strategic importance and the
potentially significant negative social-political and financial
implication a default by any of these entities could have for their
countries.
On a stand-alone basis, Petrobras' credit profile is commensurate
with a 'BB+' rating, which is materially higher than PEMEX's 'CCC'
stand-alone credit profile, as a result of Petrobras' positive
deleverage trajectory versus PEMEX's increasing leverage
trajectory. Furthermore, Petrobras has and is expected to continue
to report positive FCF and production growth, which Fitch expects
to stabilize at approximately 3.5 million boe/d in the next four to
five years. In contrast, PEMEX's production has declined in recent
years, reporting a decline of 12% between January 2018 and January
2019. These production trajectories further support the notching
differential between the two companies' stand-alone credit
profiles. Petrobras' stand-alone credit profile is two notches
lower than that of Ecopetrol at 'BBB' given Petrobras' higher
leverage level; Petrobras' gross leverage as of YE 2018 was 2.7x
versus Ecopetrol's leverage of 1.2x.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
-- Gross production to increase to approximately 3.5 million
boe/d over the next four years;
-- 10 production units come online during the next four years;
-- The company relies partially on external financing to meet
principal payments;
-- Brent Crude averages USD65/bbl in 2019; trends to USD57.5/bbl
by 2022;
-- Average FX rate trends toward BRL3.9/USD;
-- Dividends pay-out ratio of 33%, which is higher than Brazil
mandatory minimum rate of 25% of Net Income Starting in 2019;
-- Proceed from asset sales are not incorporated on Fitch's
rating case.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
A positive rating action on Brazil could lead to a positive rating
action on Petrobras.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
A negative rating action on Petrobras could result from a downgrade
of the sovereign and/or the perception of a lower linkage between
Petrobras and the government coupled with a material deterioration
of Petrobras' SCP.
LIQUIDITY
Adequate Liquidity: Petrobras' liquidity is strong and provides an
added comfort in an environment of strengthening credit metrics,
supported by approximately USD15.0 billion of cash and marketable
securities as of Dec. 31, 2018, compared with current debt
maturities of approximately USD3.7 billion. The majority of
Petrobras' available liquidity is composed of readily available
liquidity held abroad.
Petrobras demonstrates a solid ability to access the debt capital
markets to refinance debt. During 2018, estimated long-term debt
proceeds amounted to roughly USD11 billion, which the company used
to amortize debt. Petrobras' debt has decreased by USD23 billion
from 2017. During the last few years, Petrobras also entered into
financing agreements and other liabilities with China Development
Bank for approximately USD10 billion. As of Dec. 31, 2018, the
average maturity of outstanding debt was approximately 9.1 years
and 19% of the company's debt was in Brazilian reals.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings:
Petroleo Brasileiro S.A.
-- Long-Term Foreign Currency IDR at 'BB-'; Outlook Stable;
-- Long-Term Local Currency IDR at 'BB-'; Outlook Stable;
-- National Scale rating at 'AA(bra)'; Outlook Stable;
-- National Scale senior unsecured obligations at 'AA(bra)'.
Petrobras Global Finance B.V. (PGF)
-- International debt issuances at 'BB-'.
===================================
D O M I N I C A N R E P U B L I C
===================================
AES ANDRES: Fitch Maintains BB- Long-Term FC IDR on Watch Neg.
--------------------------------------------------------------
Fitch Ratings has maintained AES Andres B.V.'s (Andres) Long-Term
Foreign-Currency Issuer Default Rating (IDR) of 'BB-' and its
National Scale Long-Term Rating of 'AA(dom)' on Rating Watch
Negative. This rating action affects USD270 million of notes due
2026, rated 'BB-', which have also been maintained on Rating Watch
Negative.
Andres's ratings reflect the Dominican Republic's (DR) electricity
sector's high dependency on transfers from the central government
to service their financial obligations, a condition that links the
credit quality of the distribution companies and generation
companies to that of the sovereign. Low collections from end-users,
high electricity losses and subsidies have undermined distribution
companies' cash generation capacity, exacerbating generation
companies' dependence on public funds to cover the gap produced by
insufficient payments received from distribution companies. The
ratings also consider the companies' solid asset portfolio, strong
balance sheet, and well-structured purchase power agreements
(PPAs).
The rating of the notes considers the combined operating assets of
Andres and Dominican Power Partners (DPP) (jointly referred to as
AES Dominicana), which are joint obligors of Andres's USD270
million notes due 2026. These notes are attached to Empresa
Generadora de Electricidad Itabo's USD100 million notes, also rated
'BB-'.
The Negative Rating Watch on the notes reflects the uncertainty
surrounding the repairs to steam turbines at both Andres and DPP,
as well as the possible length of outage times. Fitch does not
anticipate that these issues will be resolved before the next six
to 12 months.
KEY RATING DRIVERS
Dependence on Government Transfers: High energy distribution losses
(nearly 30% in 2018), low level of collections and important
subsidies for end-users have created a strong dependence on
government transfers. This dependence has been exacerbated by the
country's exposure to fluctuations in fossil-fuel prices and strong
energy demand growth from distribution companies of 4% in 2018. The
regular delays in government transfers pressure working capital
needs of generators and add volatility to their cash flows. This
situation increases the risk of the sector, especially at a time of
rising fiscal vulnerabilities affecting the Central Government's
finances.
Strong Credit Metrics: The combined credit metrics for Andres and
DPP are strong for the rating category. Expected 2018 EBITDA of
USD205 million reflects the commencement of operations from DPP's
completed combined cycle unit, which is partially offset by the
steam turbine and generator outage at Andres. Fitch expects 2018
debt to EBITDA of 2.8x with a deleveraging trajectory toward 2.3x
over the medium term as Andres and DPP both return to full
capacity. While the 750MW Punta Catalina project will likely lower
prices in the near term for the system as a whole, Andres and DPP
are substantially contracted through 2022 and their lower leverage
provides a cushion against eventual PPA revaluations.
High-Quality Asset Base: Andres has the Dominican Republic's most
efficient power plant, and ranks among the lowest-cost electricity
generators in the country. Andres's combined-cycle plant burns
natural gas and is expected to be fully dispatched as a base-load
unit as long as the liquefied natural gas (LNG) price is not more
than 15% higher than the price of imported fuel oil No. 6. In July
2017, the aggregate capacity of AES Dominicana increased by
approximately 122MW as result of the development of a combined
cycle facility in DPP's power plant. Fitch expects higher
medium-term margins, although generation may contract initially
when the Punta Catalina coal plant enters the dispatch curve.
Cash Flow Volatility Persists: Cash flow from operations (CFFO) for
AES Dominicana was USD189 million at 3Q18, compared with USD124
million at YE 2017. AES Dominicana saw its accounts receivable on
an LTM basis as of 3Q18 remain at 90 days. Factoring arrangements
have helped to keep this number in line with 2016 levels as the
government has continued to lag in its payments to the system. For
AES Andres, payment periods are currently experiencing a 2.5-month
lag while DPP is at six months. Fitch expects that receivable days
for generators will likely exceed 90 days without continued
factoring arrangements.
Expanding Natural Gas Business: Andres operates the country's sole
LNG port, offering regasification, storage, and transportation
infrastructure. In the medium term, the company is looking to
expand its transportation network and processing capacity for its
LNG operations as illustrated by the recent 10-year gas supply
agreement with Barrick. A 50-kilometer gas pipeline is also being
constructed from Andres's terminal to San Pedro de Macoris to
facilitate the conversion from heavy fuel oil to natural gas in
that region. For the first nine months of 2018, natural gas sales
and transportation comprised 41 percent of Andres's revenues.
DERIVATION SUMMARY
AES Andres B.V. 's ratings are linked to and constrained by the
ratings of the government of the Dominican Republic, from whom it
indirectly receives its revenues. As a result, Andres's capital
structure is strong relative to similarly rated, unconstrained
peers. Orazul Energy Peru S.A. (BB/Stable), whose ratings reflects
combined results that include its subsidiary, Aguaytia Energy del
Peru S.R.L., has similar installed capacity and is expected to
generate around USD100 million in EBITDA annually, with estimated
leverage of approximately 5.0x. Orazul Energy Peru benefits from
the stability conferred by its asset diversification and the
flexibility allowed by its vertical integration. By comparison, the
combined Andres/DPP operations are expected to generated
approximately USD250 million, with leverage of 2.2x in the medium
term.
Fenix Power Peru S.A. (BB/Rating Watch Negative) is considered
another operational peer to Andres. It shows high leverage, similar
to Orazul, but benefits from its strategic linkage to its parent
company, Colbun S.A. (BBB/Stable), resulting in a three-notch
uplift from its standalone credit quality. Additionally, its
capital structure benefits from a steady deleveraging trajectory in
the medium term as its international bond amortizes.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Demand growth in line with GDP growth;
- 100% of previous year's net income to be distributed as
dividends;
- Natural gas prices follow Fitch Price deck;
- 90 days of accounts receivable plus 60 days of receivables
factoring, 60% of which is outstanding;
- Insurance coverage for property and business interruption for
recent Andres and DPP events;
- Debt added as need to maintain adequate cash balance.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- A positive rating action could follow if the Dominican
Republic's sovereign ratings are upgraded or if the electricity
sector achieves financial sustainability through proper policy
implementation.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- A negative rating action to Andres would follow if the
Dominican Republic's sovereign ratings are downgraded, if there is
sustained deterioration in the reliability of government transfers,
or financial performance deteriorates to the point of increasing
the combined Andres/DPP ratio of debt-to-EBITDA to 4.5x for a
sustained period.
LIQUIDITY AND DEBT STRUCTURE
Well-spread Maturities: Andres and DPP have historically reported
very strong combined credit metrics for the rating category. Both
companies have financial profiles characterized by low to moderate
leverage and strong liquidity. Combined EBITDA as of YE 2017
totalled USD194 million (vs. USD149 million at YE 2016), with gross
leverage of 2.7x and gross interest coverage of 5.2x. The
companies' strong liquidity position is further supported by the
2026 international bond and a series of local bonds due 2027,
replacing all short- to medium-term debt.
DOMINICAN REPUBLIC: Govt. 'Encourages' a Salary Increase
--------------------------------------------------------
Dominican Today reports that Economy minister, Isidoro Santana,
said the Government encourages a salary increase, and that citizens
should be aware that the real wage was very low for years "unlike
the economy in general."
"When president Danilo Medina took office in 2012, salaries were
very low. Faced with this reality, the Government ceased to be a
neutral entity in wage negotiations and began to play a more active
role by increasing the salaries of a large part of its public
servants," the report quoted Mr. Santana as saying.
Mr. Santana also affirmed that the Government has exerted pressure
on the National Wages Committee to materialize an increase that
would reduce the downward trend since 2013, according to Dominican
Today.
From that government initiative, "the real salary has improved,
although it is still low if we take into account the level of
growth of the Dominican economy," he added.
He said that business, of large and small companies, has been
involved in the economic growth experienced in recent years, so "we
must promote is that also the worker sector is involved in that
growth," the report notes.
Mr. Santana spoke with reporters at the International Forum on
Human Rights and Business Development organized by the Economy
Ministry, the Dominican Institute for Integral Development and the
Cideal Foundation, the report adds.
As reported in the Troubled Company Reporter-Latin America on Sept.
24, 2018, Fitch Ratings affirmed Dominican Republic's Long-Term,
Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable
Outlook.
EMPRESA GENERADORA: Fitch Maintains BB- Notes Rating on Watch Neg.
------------------------------------------------------------------
Fitch Ratings has maintained Empresa Generadora de Electricidad
Itabo, S.A.'s (Itabo) 'BB-' senior unsecured notes on Rating Watch
Negative. Additionally, Fitch has affirmed the Long-Term Foreign-
and Local-Currency Issuer Default Ratings (IDRs) of Itabo at 'BB-'
with a Stable Outlook.
Itabo's ratings reflect the electricity sector's high dependency on
transfers from the central government to service its financial
obligations, a condition that links the credit quality of the
electric distribution companies (EDEs) and generation companies to
that of the sovereign. Low collections from end-users, high
electricity losses and subsidies have undermined distribution
companies' cash generation capacity, exacerbating generation
companies' dependence on public funds to cover the gap produced by
insufficient payments received from distribution companies. Itabo's
ratings also consider its low-cost generation portfolio, strong
balance sheet and well-structured PPAs, which contribute to strong
cash flow generation and bolster liquidity.
The Negative Rating Watch on the notes reflects the uncertainty
surrounding the repairs to steam turbines at both AES Andres and
Dominican Power Partners, as well as the possible length of outage
times. Itabo's 2026 notes were issued attached to the AES
Andres/Dominican Power Partners (Andres/DPP) issuance, although
there exist no cross-guarantees or cross-default clauses between
the Itabo notes and the Andres/DPP notes. The attached 2026
issuances consider several detachment events, at which point the
risk profiles of the two issuances would be assessed separately.
Until that time, however, the ratings are linked. Fitch does not
anticipate that these issues will be resolved before the next six
to 12 months.
KEY RATING DRIVERS
Dependence on Government Transfers: High energy distribution losses
(nearly 30% in 2018), low level of collections and important
subsidies for end-users have created a strong dependence on
government transfers. This dependence has been exacerbated by the
country's exposure to fluctuations in fossil-fuel prices and strong
energy demand growth from distribution companies of 4% in 2018. The
regular delays in government transfers pressure working capital
needs of generators and add volatility to their cash flows. This
situation increases the risk of the sector, especially at a time of
rising fiscal vulnerabilities affecting the Central Government's
finances.
Continued Working Capital Pressure: Instability in the company's
collection periods continues to result in operating cash flow
volatility. For the first nine months of 2018, Itabo reported
accounts receivable days of 180, in line with historical levels.
Fitch expects accounts receivable days of 150 for Itabo plus one
month of receivables factoring. The high receivable days can be
attributed to the Dominican Government's continued lag in paying
state-owned distribution companies, which in turn delays payments
to generation companies.
Low-Cost Asset Portfolio: Itabo's ratings incorporate its strong
competitive position as one of the lower cost thermoelectric
generators in the country, ensuring the company's consistent
dispatch of its generation units. The company operates two low-cost
coal-fired thermal generating units and a third peaking plant that
runs on Fuel Oil #2 and sells electricity to three distribution
companies in the country through long-term U.S. dollar denominated
PPAs. The company expects to remain a base load generator even
after a 752 MW coal generation project starts operations in 2019.
Solid Credit Metrics: Itabo presents strong credit metrics for the
rating category. Gross leverage of 1.2x is expected for 2018,
unchanged from the previous year. Similarly, EBITDA remained stable
at USD80 million across both years. Fitch expects gradual
deterioration in prices to negatively impact revenues and EBITDA
through the medium term, resulting in leverage potentially
increasing to above 1.5x after Itabo's current PPAs expire.
DERIVATION SUMMARY
Itabo's ratings are linked to and constrained by the ratings of the
government of the Dominican Republic, from whom it indirectly
receives its revenues. As a result, Itabo's capital structure is
strong relative to similarly rated, unconstrained peers. Orazul
Energy Peru S.A. (BB/Stable), whose ratings reflects combined
results that include its subsidiary, Aguaytia Energy del Peru
S.R.L., has similar installed capacity and is expected to generate
around USD100 million in EBITDA annually, with estimated leverage
of approximately 5.0x. Orazul Energy Peru benefits from the
stability conferred by its asset diversification and the
flexibility allowed by its vertical integration. By comparison,
Itabo is expected to generated approximately USD75 million, with
leverage around 1.5x through the medium term.
Fenix Power Peru S.A. (BB/Rating Watch Negative) is considered
another operational peer to Itabo. It shows high leverage, similar
to Orazul, but benefits from its strategic linkage to its parent
company, Colbun S.A. (BBB/Stable), resulting in a three-notch
uplift from its standalone credit quality. Additionally, its
capital structure benefits from a steady deleveraging trajectory in
the medium term as its international bond amortizes.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
-- Demand growth of approximately 2%;
-- Fuel prices to remain low in the near-to-medium term;
-- 100% of previous year's net income paid as dividends;
-- One month of account receivables factored over the rating
horizon.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- A positive rating action could follow if the Dominican
Republic's sovereign ratings are upgraded or if the electricity
sector achieves financial sustainability through proper policy
implementation.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- A negative rating action would follow if the Dominican
Republic's sovereign ratings are downgraded, if there is sustained
deterioration in the reliability of government transfers, or if
financial performance deteriorates to the point of increasing the
ratio of debt-to-EBITDA to 4.5x for a sustained amount of time.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: In May 2016, the company issued attached
10-year notes with its sister companies AES Andres and DPP to repay
existing debt and extend its maturity profile. The tranche assigned
to Itabo totaled USD99.9 million. Fitch expects that lower coal
prices (to which contract prices are indexed) coinciding with the
expiration of its existing PPAs to limit medium term growth
recovery prospects in Itabo's EBITDA. Nevertheless, the company's
conservative capital structure with total leverage of 1.2x and
coverage of 10.0x confers substantial cushion within its rating
category.
===========
M E X I C O
===========
JUST ONE MORE: Case Summary & 2 Unsecured Creditors
---------------------------------------------------
Two affiliates that have filed voluntary petitions seeking relief
under Chapter 11 of the Bankruptcy Code:
Debtor Case No.
------ --------
Just One More Restaurant Corp. (Lead Case) 19-01947
8955 Fontana Del Sol Way, 2nd Floor
Naples, FL 34109
Just One More Holding Corp. 19-01948
8955 Fontana Del Sol Way, 2nd Floor
Naples, FL 34109
Business Description: Just One More Restaurant holds the Palm
Restaurant steakhouse's intellectual
property -- a series of trademarks and
service marks, design elements of the Palm.
JOMR licenses the Palm IP to the Palm
Restaurants through individual licensing
agreements. Today, there are 24 Palm
Restaurants operating in the United States
and Mexico. The Debtors do not own any of
the Palm Restaurants.
Chapter 11 Petition Date: March 7, 2019
Court: United States Bankruptcy Court
Middle District of Florida (Ft. Myers)
Debtors' Counsel: Paul Steven Singerman, Esq.
BERGER SINGERMAN LLP
1450 Brickell Avenue, 19th Floor
Miami, FL 33131
Tel: 305-714-4341
Fax: 305-714-4340
Email: singerman@bergersingerman.com
- and -
Christopher A Jarvinen, Esq.
BERGER SINGERMAN, LLP
1450 Brickell Avenue, Suite 1900
Miami, FL 33131
Tel: 305-714-4363
Fax: (305) 714-4340
Email: cjarvinen@bergersingerman.com
Debtors'
Restructuring
Advisor: Jerry McHale
MCHALE, P.A.
Just One More Restaurant's
Estimated Assets: $100 million to $500 million
Just One More Restaurant's
Estimated Liabilities: $10 million to $50 million
Just One More Holding's
Estimated Assets: $1 million to $10 million
Just One More Holding's
Estimated Liabilities: $1 million to $10 million
The petitions were signed by Gerard A. McHale, chief restructuring
officer.
The full-text copies of the petitions are available for free at:
http://bankrupt.com/misc/flmb19-01947.pdf
http://bankrupt.com/misc/flmb19-01948.pdf
A. List of Just One More Restaurant's Two Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Palm Management Management $5,413,609
Corporation Agreement
1730 Rhode Island
Ave., N.W., Ste. 900
Washington, DC 20036
Cooley LLP Legal Fees $1,081,459
Attn: Alan Levine, Esq.
1114 Avenue of the Americas
16th Floor
New York, NY 10036
B. List of Just One More Holding's Two Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Cooley LLP Legal Fees $1,081,459
Attn: Alan Levine, Esq.
1114 Avenue of the Americas
46th Floor
New York, NY 10036
Palm Management Accounting $1,126
Corporation Fees
1730 Rhode Island
Avenue, NW Ste. 900
Washington, DC 20036
ORCHIDS PAPER: Obtains Waiver of Debt Covenant Noncompliance
------------------------------------------------------------
Orchids Paper Products Company has entered into Amendment No. 11 to
its Second Amended and Restated Credit Agreement dated June 25,
2015 by and among the Company, Black Diamond Commercial Finance,
L.L.C., as successor to U.S. Bank National Association, and Orchids
Investment LLC, as successor to the lenders.
The Credit Agreement Amendment, among other things:
(i) waives any existing non-compliance by the Company with any
covenant under the Credit Agreement;
(ii) sets the commitment fee rate at 3.55% and the base rate at
13.5%, in each case regardless of the then-current Leverage
Ratio (as defined in the Credit Agreement), and provides
that all outstanding loans under the Credit Agreement shall
be converted to, and any revolving loans made in the future
shall, bear interest at the base rate;
(iii) defers future interest and principal payments until May 1,
2019;
(iv) extends until March 1, 2019 the deadline for the Company to
deliver either (a) an executed purchase agreement for the
sale of the Company's equity or assets or (b) a binding
commitment from institutional lenders to refinance the
Company's debt obligations, in either case in an amount
sufficient to repay the Company's debt obligations to its
existing lenders in full, and extends until May 1, 2019 the
deadline for the Company to consummate such transaction;
(v) eliminates the obligation of the Lender to issue any
letters of credit to the Company;
(vi) provides that the Company will not permit Net Cash Flow (as
defined in the Credit Agreement) for any week to be more
than 10% less than the projected Net Cash Flow as set forth
in the cash flow forecast that includes such week; and
(vii) amends certain reporting and forecast requirements.
The Company gives no assurance that it will be able to consummate
any sale, transaction, or refinancing on terms that are
satisfactory to it, or at all.
Fees of approximately $1.9 million will be paid to the lenders and
administrative agent in connection with the Credit Agreement
Amendment and the NMTC Loan Agreement.
In conjunction with the Credit Agreement Amendment, on Jan. 25,
2019 the Company also amended the loan agreement by and among the
Company's wholly owned subsidiaries and certain Community
Development Financial Institutions relating to the Company's
participation in the New Market Tax Credits program of the Internal
Revenue Code in order to align the NMTC Loan Agreement with the
Credit Agreement. The amendment to the NMTC Loan Agreement
incorporated the same substantive changes as the Credit Agreement
Amendment.
About Orchids Paper
Headquartered in Pryor, Oklahoma, Orchids Paper Products Company --
http://www.orchidspaper.com-- is a national supplier of consumer
tissue products primarily serving the at home private label
consumer market. The Company produces a full line of tissue
products, including paper towels, bathroom tissue and paper
napkins, to serve the value through ultra-premium quality market
segments from its operations in northeast Oklahoma, Barnwell, South
Carolina and Mexicali, Mexico. The Company provides these products
primarily to retail chains throughout the United States.
In its Quarterly Report on Form 10-Q for the period ended Sept. 30,
2018, the Company stated: "The Company has been subject to adverse
conditions that raise substantial doubt about the Company's ability
to continue as a going concern for one year following the issuance
of these unaudited interim financial statements, including negative
financial trends, specifically operating losses, working capital
deficiency, and other adverse key financial ratios; the Company's
covenant defaults under the Credit Agreement; and its inability to
meet the requirements established by the milestone dates.
Additionally, the impacts of unfavorable industry conditions and
significant debt service requirements on the Company's financial
position, results of operations, and cash flows give rise to
substantial doubt about the Company's ability to pay its
obligations as they come due. In consideration of the substantial
amount of long-term debt outstanding ... and the aforementioned
unfavorable industry conditions and covenant defaults which
required waivers or amendments to cure, the Company has engaged
advisors to assist with the evaluation, negotiation, and
consummation of strategic alternatives, which may include, but are
not limited, seeking a restructuring, amendment or refinancing of
existing debt through a private restructuring, a sale of a portion
or all of the Company or its assets, or reorganization under
Chapter 11 of the Bankruptcy Code. However, there can be no
assurances that the Company will be able to successfully
restructure its indebtedness, improve its financial position or
complete any strategic transactions. As a result of these
uncertainties and the likelihood of a restructuring or
reorganization, management has concluded that there is substantial
doubt regarding the Company's ability to continue as a going
concern.
"The Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its
obligations, to obtain additional financing, renegotiate the terms
of existing financing obligations and ultimately to attain
successful operations. The ability to successfully achieve those
items is uncertain."
On Nov. 20, 2018, the Company executed modifications to its credit
facilities to increase the amount available under its revolving
line of credit by $5.9 million and to defer future principal and
interest payments to Dec. 31, 2018. In addition, the amended
agreement extends the milestone dates to execute a transaction to
Dec. 31, 2018.
=====================
P U E R T O R I C O
=====================
ALLIED FINANCIAL: Escobar Buying Two Aguadilla Properties for $81K
------------------------------------------------------------------
Allied Financial, Inc., asks the U.S. Bankruptcy Court for the
District of Puerto Rico to authorize the sale to Sandro Escobar of
the following lots of land located at Barrio Aguacate Road No. 110
Km 5.1, Aguadilla, Puerto Rico: (a) Lot of Land Num. 30,064,
Registered at Vol. 588 of the "folio movil" in Aguadilla Property
Registry for $35,524; and (b) Lot of Land Num. 30,073, Registered
at Vol. 588 of the "folio movil" in Aguadilla Property Registry for
$45,000.
The Debtor listed in its Schedules an interest in the 30,064
Property and the 30,073 Property. It acquired the properties by
Judicial Sale before Notary Public Shariann Morales Feliciano, on
Dec. 4, 2013. Oriental Bank holds the 1st rank lien over the
properties.
The Debtor has identified the Purchaser as a potential buyer for
the Properties in the amount of: a) $35,524 for the 30,064 Property
and b) $45,000 for the 30,073 Property. The parties have executed
their Purchase Option Agreement.
Although there is no recent appraisal of the properties, the Debtor
is selling these Properties at current market values within the
area. The Purchaser is a willing and able purchaser. The sale of
the Property is in benefit of the estate and all parties in
interest. Oriental Bank has agreed to the sale and will be
receiving the net proceeds of the sale in the amount of
approximately $76,513.
The transfer of the Properties will be free and clear of liens, and
exempt from the payment of taxes, stamps and vouchers, if the
transaction for some reason is delayed and takes place after the
Plan of Reorganization is confirmed. Each of the parties to the
sale will assume its own payment of expenses under the provisions
of the Notary Law of Puerto Rico.
Furthermore, the Debtor received from Purchaser a check in the
amount of $5,000 as a good faith deposit under the purchase option,
which will be applied to the purchase price at the closing, if the
Purchaser exercises the option and buys the property as per the
terms and conditions of the agreement.
Properties 30,064 and 30,073, have property tax debt, in the amount
of $1,056 and $1,292 respectively. Any amounts owed to CRIM will
be paid with the proceeds of the sale. The Purchase Option
Agreement will expire 90 days from the date of the agreement or 10
days from the date the sale is approved by the Bankruptcy Court,
whichever is later.
There are no common maintenance fees or homeowners' association
dues in relation to the property, since such association does not
exist.
Objections, if any, must be filed within 21 days from the date the
Motion was served.
A copy of the Contract attached to the Motion is available for
free
at:
http://bankrupt.com/misc/ALLIED_FINANCIAL_315_Sales.pdf
About Allied Financial
Allied Financial, Inc., filed a Chapter 11 bankruptcy petition
(Bankr. D.P.R. Case No. 16-00180) on Jan. 15, 2016. In the
petition was signed by Rafael Portela, president of the Board of
Directors, the Debtor disclosed total assets of $10.3 million and
total debt of $9.14 million. Judge Mildred Caban Flores oversees
the case. C. Conde & Assoc. is counsel to the Debtor.
SAN JUAN ICE: Payment to Unsecureds Raised to 25% Under Plan
------------------------------------------------------------
San Juan Ice, Inc., filed with the U.S. Bankruptcy Court for the
District of Puerto Rico a small business amended disclosure
statement describing its proposed chapter 11 plan, which modifies
the treatment of general unsecured creditors.
Under the latest plan, general unsecured creditors will be paid 25%
over a period of 10 years after priority claims are paid. The
initial plan proposed to pay these creditors only 7%.
A copy of the Amended Disclosure Statement is available at
https://tinyurl.com/y3elwlg6 from Pacermonitor.com.
About San Juan Ice, Inc.
San Juan Ice Inc., based in San Juan, PR, filed a Chapter 11
petition (Bankr. D.P.R. Case No. 18-01784) on April 3, 2018. In
the petition signed by Ramiro Rodriguez Pena, president, the Debtor
disclosed $580,495 in assets and $1.17 million in liabilities. The
Hon. Mildred Caban Flores presides over the case. Robert Millan,
Esq., at Millan Law Offices, serves as bankruptcy counsel.
WESTERN HOST: Triangle Cayman Renews Bid to Prohibit Cash Use
-------------------------------------------------------------
Triangle Cayman Asset Company 2 filed a second motion asking the
U.S. Bankruptcy Court for the District of Puerto Rico to prohibit
any and all use of the cash collateral and direct Western Host
Associates, Inc. to deliver the cash collateral to Triangle.
Pre-petition, the Debtor entered into various loan agreements with
Triangle Cayman, pursuant to which Triangle Cayman provided certain
credit facilities to the Debtor, secured by, among other things, a
real estate collateral which operates as a hotel called Plaza de
Armas Hotel in Old San Juan. As part of the Loan Documents and
Collateral for the Loans, the Debtor granted Triangle Cayman a lien
over all the insurance proceeds generated by the Real Estate
Property.
The Debtor listed Capital Crossing Puerto Rico, LLC, the loan
servicer for Triangle Cayman, as a creditor in the total amount of
$3,900,000.
As a result, Triangle holds a perfected, first-priority Mortgage
Deed over the Real Estate Collateral which is extensive to all the
insurance proceeds for any damages sustained by the Real Estate. In
addition, the Debtor has recognized the extent of Triangle's lien
over the Cash Collateral, stating that "the Debtor acknowledges
that in the course of this case once a payment over the structural
damages has been received by Integrand, Debtor must move to the
Court and request permission to use the cash collateral and provide
adequate protection Capital Crossing."
Moreover, Triangle notes that in light of its security interest
over the insurance proceeds and status as loss payee of the
insurance policy covering the Real Estate Collateral, any check
issued for damages suffered by the Real Estate Collateral will be
issued in Triangle's name.
On Dec. 13, 2018, during the hearing held in the related Adversary
Proceeding No. 18-00058, the Court directed Integrand Assurance
Company LLC to consign the insurance proceeds in the total amount
of $721,111.92. In addition, the Court granted Capital Crossing and
the Debtor until Jan. 11, 2019 to inform the Court of the status of
negotiations between the parties for the use of the cash
collateral. Although the Parties met on Dec. 21, 2018 and conferred
to determine whether a consensual resolution was possible, Triangle
informs the Court that no agreement was reached between the parties
for Debtor's use of the cash collateral.
Also, as of Feb. 19, 2019, the Debtor has not requested an order
authorizing the use of any Cash Collateral. Triangle has not
consented and does not consent to the use of any of its Cash
Collateral. Moreover, the Debtor has failed to provide adequate
protection to Triangle. Thus, Triangle is justifiably concerned
that, unless explicitly and clearly prohibited by the Court, the
Debtor will use its Cash Collateral.
Accordingly, since the insurance proceeds were now consigned with
the Court, Triangle requests an order disbursing the insurance
proceeds consigned in the Court to Triangle.
About Western Host Associates
Western Host Associates, Inc., owns a four-story commercial hotel
building located at 202 San Jose Street, Old San Juan, Puerto
Rico.
The hotel is currently non-operational and is valued by the company
at $1.35 million.
The company previously sought bankruptcy protection on Nov. 14,
2012 (Bankr. D.P.R. Case No. 12-09093) and on May 19, 2011 (Bankr.
D.P.R. Case No. 11-04152).
Western Host Associates sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D.P.R. Case No. 18-02696) on May 15, 2018.
In the petition signed by Luis Alvarez, president, the Debtor
disclosed $1.36 million in assets and $4.82 million in
liabilities.
Judge Brian K. Tester oversees the case.
The Debtor tapped Gratacos Law Firm, PSC, as its legal counsel and
the Law Offices of Jose R. Olmo-Rodriguez, as special counsel.
=================
V E N E Z U E L A
=================
PETROLEOS DE VENEZUELA: Nicaragua OKs Buyout of Bank Tied to Firm
-----------------------------------------------------------------
Reuters reports that Nicaraguan lawmakers voted to authorize a $23
million government purchase of Bancorp, a financial institution
that has been sanctioned by the United States for its links to
Venezuelan state-owned oil company Petroleos de Venezuela S.A.
(PDVSA).
The acquisition is seen as a way to protect the bank from the tough
U.S. sanctions that were enacted in late January and aimed at
depriving embattled Venezuelan President Nicolas Maduro from
obtaining proceeds from PDVSA, especially its Houston-based
subsidiary Citgo Petroleum, according to Reuters.
The report notes that the government of President Daniel Ortega,
one of Maduro's few remaining allies in Latin America, formally
asked lawmakers to make the purchase, filing an "urgent" request to
do so.
Lawmakers from Ortega's ruling Sandinista National Liberation Front
(FSLN), who hold a majority in Congress, voted for the measure, the
report relays.
Bancorp was created in 2015 as a subsidiary of Alba de Nicaragua,
known locally as Albanisa, a joint venture between Venezuela's
PDVSA and Petroleos de Nicaragua, the country's state-owned oil
firm, according to statements from government officials at the time
of its creation, the report says.
Bancorp officials, however, deny that Albanisa or Petroleos de
Venezuela, as PDVSA is formally known, have stakes in the bank or
influence its operations, the report notes.
Last month, the U.S. assistant secretary of state for Western
Hemisphere affairs, Kimberly Breier, singled out both Albanisa and
Bancorp as falling under the new sanctions, the report discloses.
Ortega's domestic opposition in the Congress sharply criticized the
purchase, the report relays.
"Buying a bank that's contaminated by PDVSA money is a
wrong-headed, infuriating decision that exposes the state to U.S.
sanctions," said Azucena Castillo, a congresswoman with the
opposition Liberal Constitutionalist Party (PLC) during the heated
legislative debate, the report notes.
Lawmakers voted to finance the Bancorp purchase with a six-year
bond issuance, the report adds.
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).
PETROLEOS DE VENEZUELA: Unit Seeks $1.2BB Loan Amid US Sanctions
----------------------------------------------------------------
Sputnik News, citing Bloomberg News, reports that Houston-based
Citgo Petroleum Corporation, a subsidiary of Petroleos de Venezuela
SA (PDVSA), is seeking to obtain a $1.2 billion loan to fund its
daily operations in the US.
The report, citing a slide deck obtained by Bloomberg, notes that
Citgo Petroleum has already hired the independent investment bank
Houlihan Lokey to find lenders as "US sanctions cripple" Citgo's
parent company PDVSA, which is barred from getting Citgo
dividends.
Representatives for Houlihan Lokey, Citgo and Venezuela's Finance
Ministry declined to comment on the matter.
Earlier, Citgo had approved a new board of directors, appointed by
the Venezuelan opposition, and launched the process of searching
for a new company president, Sputnik News says.
In late February, media reports said that Citgo had officially
severed ties with PDVSA amid US sanctions, the report discloses.
In a separate development, the Treasury Department's Office of
Foreign Assets Control (OFAC) disclosed that the United States has
extended the March 11 deadline for investors to cut ties with PDVSA
until May 10, the report says.
The provisions allow for limited transactions with PDVSA before US
sanctions on the Venezuelan oil giant come into full effect, the
report relays. Companies that continue to do business with PDVSA
after the deadline risk facing restrictive measures within the US,
the report notes.
On January 28, the United States blocked $7 billion in PDVSA assets
in its jurisdiction and imposed a ban on deals with the entity, the
report discloses.
US Treasury Secretary Steven Mnuchin said at the time that by
blocking PDVSA assets, the United States was taking care of this
company in the interests of the Venezuelan people, the report
says.
Venezuela's President Nicolas Maduro responded by saying that the
restrictions were tantamount to an illegal seizure of the country's
sovereign assets, the report notes.
The report says that the political crisis in Venezuela escalated in
late January, when opposition leader Juan Guaido declared himself
the country's interim president. Mr. Maduro slammed Guaido's move
as an attempt to stage a coup orchestrated by Washington, the
report relays.
The United States immediately recognized Guaido, with many of its
allies following suit. Russia, China, Mexico, Turkey and a number
of other countries have stated that they recognize Maduro as
Venezuela's only legitimate president, the report adds.
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).
*********
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 2019. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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of the same firm for the term of the initial subscription or
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contact Peter A. Chapman at 215-945-7000.
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