/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/190410.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 Wednesday, April 10, 2019, Vol. 20, No. 72 Headlines A R G E N T I N A AES ARGENTINA: Fitch Affirms 'B' Long-Term IDRs, Outlook Negative NEUQUEN: Fitch Affirms Ratings at 'B', Outlook Still Negative B R A Z I L AVIANCA BRASIL: Court Rules in Favor of Lessors BRAZIL: Warns Venezuela of Guerrilla Warfare on Maduro Oust COMPANHIA SIDERURGICA: Fitch Affirms B- IDRs, Off Watch Negative COMPANHIA SIDERURGICA: S&P Puts 'CCC+' ICR on Watch Positive CSN RESOURCES: Moody's Rates New $750MM Sr. Unsec. Notes 'B3' FINANCIADORA DE ESTUDOS: Fitch Affirms BB- Rating, Outlook Stable QUEIROZ GALVAO: Files for Bankruptcy For Two Hydroelectric Units D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Agro Sector Not Given Importance, Rivero Says DOMINICAN REPUBLIC: First IPO Tops US$150 Million G U A T E M A L A BANCO AGROMERCANTIL: S&P Withdraws 'BB-/B' Issuer Credit Ratings M E X I C O ELEMENTIA SAB: Fitch Puts BB+ IDR on Watch Neg. on Spin-Off Deal P A N A M A AES PANAMA: S&P Affirms BB Issuer Credit rating, Outlook Negative P U E R T O R I C O CHARLOTTE RUSSE: Selling Peek Brand IP & Related Assets for $425K KONA GRILL: Delays Annual Report Due to CEO's Departure SKYTEC INC: LogiSYS Seeks Ch. 11 Trustee Appointment T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: WITCO Laments Decline in Consumer Confidence U R U G U A Y SANCOR SEGUROS: Fitch Affirms B+ IFS Rating, Outlook Stable V E N E Z U E L A VENEZUELA: Central Bank Sends Workers Home Amid Water Interruption - - - - - ================= A R G E N T I N A ================= AES ARGENTINA: Fitch Affirms 'B' Long-Term IDRs, Outlook Negative ----------------------------------------------------------------- Fitch Ratings has affirmed AES Argentina Generacion S.A.'s (AAG) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B'. The Rating Outlook is Negative. Fitch has also affirmed AES Argentina's 'B'/'RR4' ratings for the company's USD300 million senior unsecured notes due 2024. AAG's 'B' LT FC IDR is constrained by the Republic of Argentina's country ceiling at 'B', which limits the foreign currency rating of most Argentine corporates. Fitch's Country Ceilings are designed to reflect the risks associated with sovereigns placing restrictions upon private sector corporates, which may prevent them from converting local currency to any foreign currency under a stress scenario, and/or may not allow the transfer of foreign currency abroad to service foreign currency debt obligations. AAG's ratings reflect the Argentine electricity industry's regulatory risk, which is improving but remains high. Fitch also considers the company's counterparty risk with Compania Administradora del Mercado Mayorista Electrico (CAMMESA) and other market participants as the main off-takers, and its improving metrics supported by relatively stable and predictable cash flow generation. Finally, the ratings are constrained by the macro-economic environment, including high inflation and steep currency devaluation. The Negative Outlook reflects sharply weaker economic activity and uncertain prospects for multi-year fiscal consolidation and market financing availability as IMF funds are used up, posing risks to sovereign debt sustainability. Fitch assumes that in 2019 the Argentine government will achieve the fiscal adjustment targeted in the budget and that the recently renegotiated IMF program will help it fully cover its financing needs but sees downside risks amid a nascent economic recession and election cycle. After 2019, prospects for further fiscal consolidation, economic recovery and restoration of external market access are uncertain and are likely to be sensitive to the election outcome. The 'B'/'RR4' ratings on the USD300 million senior unsecured notes due 2024 is based on AAG's equal FC and LC IDRs. Fitch's "Country-Specific Treatment of Recovery Ratings" criteria no longer allows for a rating uplift for these obligations. AAG is capped at an average Recovery Rating of 'RR4' since Argentina, per the aforementioned criteria, is categorized within Group D with a soft cap of 'RR4'. This assumes a recovery in the range of 31% to 50%, although a bespoke recovery analysis for each of these companies yields a higher than 70% recovery given a default. Absent the constraint of Argentina's country ceiling for AAG's ratings, Fitch estimates the company's stand-alone credit profile is in line with the 'BB' rating category due to strong credits metrics, solid capital structure, adequate liquidity and a well-diversified asset portfolio both geographically and technologically. KEY RATING DRIVERS Strong Competitive Position: AAG owns a portfolio of diversified generation assets in terms of operational technologies and geographical presence, which lowers business risk. The company has a portfolio mix of 44% hydro and 56% thermal. This combines with a large generation capacity of close to 2.76 gigawatts and an 8% of installed capacity in Argentina and 6.8% of gross generation in the SADI. In addition, the company is undergoing an expansion phase of renewable project totalling 180MW of installed capacity under the Renovar program, which is expected to be completed by the end of first quarter 2020. Fitch views AAG as a competitive participant in the Argentine market. Heightened Counterparty Exposure: AAG, like all generation companies in Argentina, depends on payments from CAMMESA, which acts as an agent on behalf of an association representing agents of electricity generators, transmission, distribution and large consumers or the wholesale market participants (Mercado Mayorista Electrico or MEM). Although over the past 18 months CAMMESA's payment track record has been consistent and on time, historically, payments have been volatile given that the agency depends partially on the Argentine government for funds to make payments. The notable exception was a four-week delay in September 2018 in the FX portion of CAMMESA's payment to AES Argentina due to Argentina's currency crisis. On the supply side, fuels continue to be provided by CAMMESA, with the exception of coal, which is procured by AAG for its San Nicolas unit. Uncertain Regulatory Environment: Fitch believes Argentina's current economic and political environment increases the uncertainty that Mr. Macri's administration will be able to effectively implement the required electricity regulatory tariffs adjustments in order for the system to be self-sustainable. The companies operate in a highly strategic sector where the government both has a role as the price/tariff regulator and also controls subsidies for industry players. Electricity prices continue to remain sub-optimal compared with other countries in the region, and there is further uncertainty due to Argentina's current macroeconomic challenges. Fitch assumes the Macri administration continues to be committed to and prioritizes developing a long-term sustainable regulatory environment that is moving toward a more unregulated market and deficit reduction. Strong Credit Metrics: As of December 2018, the company's financial metrics were strong, with low leverage and strong interest coverage. AAG's total debt to EBITDA reached 2.5x, including debt with CAMMESA, while EBITDA/interest expense was 5.2x. Debt with CAMMESA is mostly related to loans provided by the government agency for maintenance and/or improvements of generation assets. Fitch anticipates a peak of 3.3x in gross leverage during 2019, explained by the incremental debt to complete the renewable projects. Going forward, Fitch estimates gross leverage below 2.5x. AAG also has a strong capital structure with its first debt maturity scheduled in 2024 and manageable interest expense. The company's ratings also reflect receivables from its FONINVEMEM investments of approximately USD72 million during 2019. From 2020 onwards, FONINVEMEM investments will be approximately USD60 million annually as AAG's approximately 10% equity stake in both units at Belgrano and San Martin are completed. Unlike CAMMESA, repayments of FONINVEMEM obligations have been made according to schedule. Structurally Negative FCF through Investment Cycle: Fitch anticipates a negative FCF for AAG during 2019 as the company carries the construction of 1800MW of install capacity awarded under Renovar Program. Going forward, Fitch estimates modest capex plans mostly concentrated on maintenance for current generation assets. Absent any additional projects increasing capex, extraordinary acquisitions or dividends exceeding the established pay-out ratio, Fitch estimates the company's FCF neutral to positive during 2020-2022, once the renewable expansion is completed. DERIVATION SUMMARY AAG's FC rating is constrained by the country ceiling of Argentina, which is similar to its peers: Pampa Energia (B/Negative), Genneia (B/Negative) and Capex (B/Negative). AAG's gross leverage as of December 2018 reached 2.5x compared to Pampa Energia at 2.2x, Genneia at 5.2x, and Capex at 2.8x. Fitch estimates that AAG's projected gross leverage is in the range of 2.5x - 2.7x, slightly below its Argentine peers median of 3.0x. Similarly to all its peers in the electric sector, AAG's working capital is vulnerable to delays in payments from CAMMESA. In terms of business profile compared with peers, AAG is concentrated only in the electricity generation sector, presenting a balanced portfolio between thermal and hydro assets. Pampa presents a more diversified business profile as a leading company in electricity generation, distribution, transmission, gas production and transportation. While Capex has an advantageous vertical integration in the thermoelectric generation with the flexibility of having its own natural gas reserves to supply its plants. Genneia is considered a relatively small player in the local power generation industry (2% of the system's installed capacity); the company is the leading wind power generation provider in the country, with an aggressive expansion plan in renewables, exposing the company to greater execution risk. MSU Energy (B-/Stable) and Albanesi (B-/Rating Watch Negative) are also concentrated in the thermoelectric generation sector; both are rated one notch below AAG. MSU Energy's ratings reflect a high amount of leverage combined with inherent execution risk in completing its 300 MW combined cycle expansion, while Albanesi's Negative Watch reflects the continued uncertainty to refinance short-term maturities and raise capital to fund its 275MW combined cycle expansion projects. In addition, both companies present a reputation risk associated to shareholders, as part of the involvement in the federal graft investigation. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- Increase Installed capacity of 180MW under Renovar during 2020, reaching 2,940MW through 2022; -- USD Revenues under Energia Base new scheme; -- Gross Generation of approximately 8,700GWh during 2019, increasing to 9,400GWh as Renovar projects come online during 2020; -- Maximum dividend pay-out to guarantee minimum cash balance of USD15 to USD20 million per year, with a higher cash balance maintained over the next few years reserved for strategic opportunities; -- USD99 million incremental debt to finance the construction of 180MW under Renovar Program; -- Maintenance capex of USD14 million during 2019, averaging USD22 million annually during 2020-2022; -- USD denominated flows related to FONINVEMEM of approximately USD 64 million per year, mainly associated to Guillermo Brown, and USD12 million per year related to Belgrano and San Martin. FONINVEMEM receivables are USD64 million, USD60 million and USD57 million during 2020, 2021 and 2022, respectively, all related to Guillermo Brown. Key Recovery Rating (RR) Assumptions: -- Going Concern approach uses a 4.0x EBITDA multiple, reflecting Fitch's estimate valuation for companies reorganizations in the utilities sector. The waterfall results in a 50% recovery corresponding to an 'RR4' for the senior unsecured notes (USD300 million). RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- An upgrade to the ratings of Argentina could result in a positive rating action. -- Given the issuer's high dependence on the subsidies from CAMMESA, any further regulatory developments leading to a more independent market less reliant on support from the Argentine government could positively impact the company's collections/cash flow. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- A significant deterioration of credit metrics and/or significant payment delays from CAMMESA; -- A reversal of government policies that result in a significant increase in subsidies coupled with a delay in payments for electricity sales; -- A downgrade of Argentina's ratings would result in a downgrade of the issuer's ratings, given that the ratings are constrained by the sovereign's credit quality; -- A significant deterioration of credit metrics measured as total debt/EBITDA consistently above 4.5x or more. LIQUIDITY Comfortable Liquidity: As of December 2018, AAG reported available cash of USD171 million covering approximately five years of interest expense, assuming no additional debt is raised. AAG has a strong capital structure with its first debt maturity scheduled in 2024, and the company does not face any significant financing needs over the foreseeable future. Fitch expects the company will maintain this strong cash position, as it looks to pursue opportunities in the Argentina, with a focus on renewable projects. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: AES Argentina Generacion S.A. -- Foreign Currency Long-Term IDR at 'B'; Outlook Negative; -- Local Currency Long-Term IDR at 'B'; Outlook Negative; -- Long-term senior unsecured notes due 2024 at 'B'/'RR4'. NEUQUEN: Fitch Affirms Ratings at 'B', Outlook Still Negative ------------------------------------------------------------- Fitch Ratings has affirmed the Province of Neuquen's (PN) ratings at 'B'. The Rating Outlook remains Negative due to Argentina's 'B'/Negative sovereign rating. KEY RATING DRIVERS The affirmation of Neuquen's ratings considers the province's economic weight in the national hydrocarbon sector, high fiscal autonomy, and moderate leverage. The rating's main limitations are its weak and volatile operating margins, which post weak debt sustainability metrics, economic concentration and high infrastructure needs in a context of scarce capital sources and market vulnerability. Institutional Framework: Weak, Stable Fitch considers Argentina's institutional framework weak given the country's complex and imbalanced fiscal regime with no equalization funding. Recent agreements between the nation and provinces tracked fiscal improvements for most Argentine subnational entities. Fitch believes the sustainability of fiscal improvements will depend on economic activity accompanying the process of fiscal convergence. Considering the Fiscal Pact's principles, Neuquen's ability to sustain its positive fiscal performance observed with 2018 provisory data will depend on economic variables and hydrocarbon sector performance. Economy: Weak, Stable Fitch views the economy as weak for all Argentine subnationals compared to international peers, because they operate in a macroeconomic context of volatility, high inflation and currency depreciation, structural characteristics of Argentina's weak economy. Neuquen is located in the southwestern region of Argentina at the northern end of the region known as the 'Patagonia' and borders western Chile. The province's economy is highly concentrated in the hydrocarbon sector, contributing to around 23% of national oil production (second after Chubut, 'B'/Negative, with 31%) and 52% of national gas production in 2018. In the same year, national gas production rose by around 5% and for the first time in more than a decade, and oil production increased by an estimated 1.6%. The positive cyclicality of hydrocarbons during 2018 translated into a 121.2% nominal increase in hydrocarbon royalties and 80% in 'Ingresos Brutos' ("turnover" tax, the main provincial local tax), which is also tightly linked to the local economy. Although the Fiscal Pact sets a gradual decrease for all provinces on the maximum rates imposed for this tax, hydrocarbon activities are exempt of the limits imposed in the stipulated timetable. Both of these revenue sources comprised around 57% of Neuquen's operating revenues in 2018. In addition, hydrocarbon royalties are linked to the USD, which in a context of significant currency depreciation influenced the high increase relative to previous years. Fiscal Performance: Weak, Stable During 2018, hydrocarbon performance tracked Neuquen's positive fiscal performance, which according to provisory information resulted in an operating margin of 13.64% up from an average of 1.5% during 2014-2017, and considering negative margins in 2015 and 2017. Albeit adequate fiscal autonomy, the entity's volatile fiscal performance is a weakness considered in the ratings. For 2019, Fitch estimates that the province's margins could be similar to 2018, and around 14%, considering a 1.8% increase in oil production and a 3.2% increase in gas production and close to inflation expenditure re-composition. However, the country's economic vulnerability could also pose risks to the hydrocarbon sector and its policies. Debt, Liabilities, and Liquidity: Weak, Stable In 2018 according to preliminary data debt totalled ARS47.7 billion. During the year, the percentage of direct debt in foreign currency rose to 82.4% from 64.4% in 2017 because of currency depreciation during the year. However, compared to other provinces, debt currency exposure is partially mitigated by the entity's revenues derived from hydrocarbon royalties, which are linked to the USD. Debt sustainability remained weak in 2018 the entity's operating balance was equivalent to 0.82x debt servicing, and was negative in some years of the period of analysis 2014-2017, due to weak margins in those years. However, leverage remained moderate at debt representing 62.14% of current revenues. Fitch estimates that if Neuquen's performance continues to be positive the operating margin/ debt servicing sustainability metric could be closer or slightly above 1x in the coming years. Regarding pensions, Neuquen is one of the provinces that did not transfer its social security scheme to the nation. However due to administrative measures regarding contributions and some national funding the weight of pension funding is low and has decreased, having a lower burden relative to other provinces. Fitch monitors the financial performance of PN's main unconsolidated public companies, which are Banco Provincia del Neuquen S.A. (BPN) and Gas y Petroleo del Neuquen (GPN). To date, BPN and GPN do not pose contingent risks for the province's finances. In general, the province has no indirect or guaranteed debt. Management and Administration: Neutral, Stable Fitch evaluates this attribute as 'Neutral'. Neuquen's policies have consistently focused on encouraging local economic development and improving debt terms and conditions. PN has also successfully adhered to the Federal Fiscal Responsibility Law and to the Fiscal Consensus. During March 10, 2019, the local governor was re-elected for another four-year term. Thus, Fitch expects policy continuity, which could influence a more sustained fiscal performance towards the coming years, and will monitor expenditure policies. RATING SENSITIVITIES A downgrade of Argentina's sovereign rating would impact Neuquen's ratings, as per Fitch's criteria, which states that no subnational in Argentina can be rated above the sovereign. However, stabilization on the sovereign rating could also stabilize the ratings if Neuquen sustains a balanced fiscal performance that results in adequate debt sustainability metrics. Fitch has affirmed the following ratings: -- Long-Term Foreign-Currency IDR at 'B'; Outlook Negative; -- Long-Term Local-Currency IDR at 'B'; Outlook Negative; -- TICADE Series I, senior secured bond for USD348.69 million 8.625% due May 12, 2028, at 'B'; -- TIDENEU, senior unsecured bond for USD366 million 7.5% due April 27, 2025, at 'B. =========== B R A Z I L =========== AVIANCA BRASIL: Court Rules in Favor of Lessors ----------------------------------------------- Marcelo Rochabrun at Reuters reports that a Brazilian appeals court ruled in favor of several Avianca Brasil lessors, granting them the right to repossess over 15 planes, legal records show, amid a renewed push to retrieve the Airbus jets from the struggling airline. Avianca Brasil filed for bankruptcy in December after falling behind on airplane lease payments and has managed to hold on to most of its planes amid a dizzying number of court cases, according to Reuters. But while Brazilian judges had previously blocked repossession efforts pending a creditors meeting on the fate of Avianca Brasil's debts, that hurdle has now been cleared, the report says. Avianca Brasil's creditors met and approved a series of auctions to sell the carrier's airport slots. The airline declined to comment. The carrier had previously announced that it would progressively reduce the number of destinations it serves throughout April, the report relays. The lessors involved include Aircastle and Aviation Capital Group, which had leased Avianca Brasil a combined 18 planes, as of early this year, the report notes. The legal decisions were unanimous and issued orally by a panel of three appeal court judges, the report relays. They were confirmed by two sources with knowledge of the information, the report adds. About Avianca Brasil Avianca Brazil, officially Oceanair Linhas Aereas S/A, is a Brazilian airline based in Sao Paulo, Brazil. It operates passenger services from more than 20 destinations. It is hailed as the fourth largest airline in Brazil. Synergy Group is the parent company of Avianca Brazil. On December 10, 2018, Avianca Brazil filed for bankruptcy when three lessors took a move to gain possession of 30% of the airline's 50 all-Airbus fleet. The airline further blamed high fuel prices and a strong dollar for its troubles. The airline noted at that time that flights won't be affected. BRAZIL: Warns Venezuela of Guerrilla Warfare on Maduro Oust ----------------------------------------------------------- Clive Hammond at Express.co.uk reports that Brazil President Jair Bolsonaro issued a stark warning after claiming he was working with his counterparts in the U.S. to sow dissent within the Venezuelan Army. Venezuela is in turmoil after months of rowing between Maduro and opposition leader Juan Guaido, Express.co.uk relays. Mr. Guaido is seen by most in the world as the country's actual leader, with many alleging Maduro gained his presidency by fraudulent methods, the report notes. Mr. Guaido, the head of the National Assembly party, is now recognised by more than 450 nations as the country's legitimate leader, the report adds. During an interview with Jovem Pan radio, Mr. Bolsonaro said if there was a military invasion in Venezuela, he would ask Brazil's National Defence Council and Congress what action would need to be taken, the report relays. "We cannot allow Venezuela to become a new Cuba or North Korea," the report quoted Mr. Bolsonaro as saying. Maduro is getting backing from its international allies Russia and China, Express.co.uk states. However, Venezuelans are critical of the Maduro administration amidst ongoing blackouts and food shortages, the report cites. COMPANHIA SIDERURGICA: Fitch Affirms B- IDRs, Off Watch Negative ---------------------------------------------------------------- Fitch Ratings has affirmed Companhia Siderurgica Nacional's (CSN) existing ratings, including the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B-'. The ratings have been removed from Rating Watch Negative (RWN) and assigned a Stable Outlook. In addition, Fitch has assigned a 'B-'/'RR4(EXP)' rating to the proposed benchmark-sized senior unsecured notes to be issued by CSN Resources S.A.. The notes are unconditionally and irrevocably guaranteed by CSN. They will rank pari passu with CSN's existing unsecured debt. Net proceeds will be used to complete a tender offer for all of the company's remaining notes due September 2019 and a portion of its 2020 notes. CSN's Stable Outlook reflects the reduction in its short-term refinancing risks coupled with sufficient liquidity to meet its obligations over the near term following the receipt of cash from its USD500 million iron ore prepayment agreement with Glencore. The expected successful benchmark sized issuance will also refinance debt into the longer term, reducing more immediate liquidity concerns. Further factored into the Stable Outlook are the favourable iron ore industry fundamentals following supply disruptions from the world's largest seaborne iron ore producer, Vale S.A. (BBB-/RWN), after its tailings dam disaster in January 2019. Sustained higher iron ore prices of above USD70 per metric ton over the next 12-18 months will provide CSN an unexpected cash flow windfall to improve credit metrics. CSN is also expected to benefit from the continued improving domestic steel industry in Brazil following the company's announced 25% price increase for auto manufacturers and price increases for other customers, coupled with demand growth in the single high digits for 2019. These operational tailwinds, combined with the reduction of its short-term refinancing risks and assuaged liquidity pressures, provide CSN with additional headroom in order to reduce its heavy debt burden. CSN's 'B-' rating continues to reflect the company's dire need to sell additional assets and divert operating cash flow generation to gross debt reduction in order to improve the sustainability of its capital structure through future commodity cycles. CSN has been proactive in refinancing a significant portion of its debts in order to better manage its maturity ladder and maintain sufficient liquidity. The company delivered on the sale of Companhia Siderurgica Nacional, LLC (LLC), for USD400 million during May 2018 and the Glencore prepayment agreement for the delivery of 20 million metric tons of iron ore over the next five years in order to bring forward future sales. The company's leverage profile remains vulnerable to a decline in iron ore prices as the industry outlook remains challenging over the long term, coupled with increased capital expenditure outflows, and future dividends to fund obligations at the shareholder level. KEY RATING DRIVERS Relief from Short-Term Refinancing Risks: CSN's reduction in short-term refinancing risk through its upcoming benchmark bond issuance coupled with its USD500 million prepayment agreements provide the company with an improved amortization schedule and reduces the risks on its tight liquidity position. CSN's improving financial flexibility is a key factor in the removal of its RWN. Liquidity is projected to benefit from higher iron ore prices and improving domestic steel fundamentals. Leverage to Decline: Fitch's base case assumption indicates 2019's net leverage to fall below 5.0x in 2019 with a mid-cycle price assumption of USD75 per ton. This excludes any further asset sales which would further deleverage the business. Sustained iron ore prices over the next 12-18 months will allow for continued improvement in the company's credit metrics. Should CSN execute on its potential iron ore streaming transaction and sale of its German steel asset, net leverage would decline to below 4.0x, based on Fitch's assumptions and could lead to a upgrade of the rating should these funds be used for gross debt reduction. The company's capital structure remains unsustainable in Fitch's view, and gross debt reduction is paramount to repairing its balance sheet. Improvement in Sector Fundamentals: Higher global iron ore and steel prices correspond with an upward trend in domestic steel prices, and a solid recovery in volumes has benefited CSN's operating cash flow generation. Fitch projects that CSN's local steel sales volumes will increase by 9% in 2019, after growing 17% in 2018, mostly reflecting the strong rebound in automobile production in Brazil. CSN's margins are also expected to benefit from continued sales of higher valued added steel products. Local steel producers have been able to apply several price increases since the mid-2016 due to strong international prices. Fitch expects price increases of approximately 6%-8% during 2019, excluding a 25% increase to automakers. Risks to higher domestic steel prices are an appreciation in the BRL and an adverse change to steel import tariffs in Brazil, which currently are around 12%. Cash Flow Generation Recovery: CSN's sustained cash flow generation recovery relies on increasing steel sales, the ability to continue passing along price increases in the domestic steel segment, manageable coal costs, and sustained iron ore prices above USD60 per metric ton. CSN's cash flow generation has also benefited from its investments in its iron ore division, which has allowed the company to receive a $3 per metric ton premium for quality since the second half of 2018 with further investments expected to develop a higher proportion of premium ore products. Fitch's base case scenario projects CSN's EBITDA at approximately BRL5.5 billion, considering Fitch's iron ore price deck of USD75 per metric ton for 2019 and EBITDA of BRL6.3 billion considering iron ore price of USD70 per metric ton for 2020, and factors in continued mid/high-single-digit growth in steel volumes. This compares to Fitch adjusted EBITDA of BRL4.3 billion for 2018. Capital Allocation to Drive FCF Trend: Fitch expects FCF to revert to negative in 2019, driven by the resumption of dividends of around BRL900 million and higher business cash outflows under improved market conditions. Absent Fitch's dividend assumptions and considering capex of BRL1.5 billion, FCF would remain positive in 2019. Furthermore working capital requirements will return, as inventories are already at low levels, and accounts receivable are pressured in order to support continued sales expansion. Corporate Governance and Event Risks: CSN's delay in releasing audited financial statements during 2017, shareholder disputes and no clear strategy for the Transnordestina asset reflect weak corporate governance practices compared to other issuers in Fitch's corporate rated universe in Brazil. The probability of event risks for CSN is above average. While CSN's mining production has not been directly impacted by Vale's dam breach on Jan. 25, 2019, the mining industry in Brazil remains under intense scrutiny with uncertain and elevated political and regulatory risks. The company's sole operating tailings dam is of the downstream construction method, the company has all of its licenses in place, is moving toward 100% dry stacking by end of 2019 (currently around 60% of production dry stacking), and is in the process of already decommissioning its upstream inactive dams. Leverage, which is also believed to be high at the shareholder's level, is also a concern. Good Business Position: CSN's business position as an integrated steelmaker remains solid, underpinned by captive access to raw materials (iron ore/energy), high value-added portfolio of products and an important share in the flat steel industry in Brazil. The company has a diversified portfolio of assets with operations in the mining, steel, energy, cement and interests in railways and ports operations. The company has a poor cost competitive position in its iron ore segment, operating toward the high end of the iron ore cost curve as per CRU's busines. Given its integrated steel operations, CSN has a better position in the global HRC curve (1st quartile). DERIVATION SUMMARY CSN's 'B-'/Outlook Stable rating reflect its highly leveraged capital structure and need to divert growing cash flow generation and/or continue asset sales in order to reduce its high debt burden. CSN's more integrated business profile and diversified portfolio of assets compares well with Usinas Siderurgicas de Minas Gerais S.A.'s (Usiminas; B+/Positive). Both issuers are highly exposed to the local steel industry in Brazil. CSN and Usiminas show much weaker business position compared to the other Brazilian steel producer Gerdau S.A (Gerdau; BBB-/Stable), that has a diversified footprint of operations with important operating cash flow generated from its assets abroad, mainly in U.S., and flexible business model (mini-mills) that allow it to better withstand economic and commodities cycles. From a financial risk perspective, Usiminas and CSN are far weaker than Gerdau, which has been able to maintain positive FCF generation, strong liquidity and no refinancing risks over the last few years. CSN faces elevated refinancing risks in the short to medium term while it has the challenge to effectively rebalance its capital structure trough ongoing asset sales. In contrast, after concluding its debt restructuring, Usiminas has a more manageable debt schedule amortization and balanced capital structure. CSN's 1st quartile position on the hot rolled coil steel cost curve compares similarly to global peers such as PAO Severstal (BBB-/Stable) and U.S. Steel Corp. (BB-/Positive), as the company benefits from its vertical integration and as well as the weak BRL. CSN and Severstal both benefit from a significant share of high value-added products which make up their sales. CSN exhibits much weaker credit metrics when compared to Severstal (net debt/EBITDA less than 1.0x) and U.S. Steel Corp. (net debt/EBITDA less than 2.0x), and its significant refinancing risks reflect the differential between its rating and its global peers. KEY ASSUMPTIONS Fitch's Key Assumptions Within its Rating Case for the Issuer -- 9% increase in domestic steel volumes sold during 2019; -- Total steel sales around 5.2 million tons in 2019; -- Iron ore volumes of 30 million metric tons in 2019; -- Average iron ore price of USD75 per metric ton during 2019 and USD70 per metric ton in 2019, following Fitch's mid-price assumption; -- Repayment of September 2019 cross-border notes with cash and refinancing of 2020 cross-border notes by end of 2Q19; -- Dividends of BRL900 million to be distributed over 2019. KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that CSN would be considered a going concern in bankruptcy and that the company would be reorganised rather than liquidated. Fitch has assumed a 10% administrative claim. Going-Concern Approach: CSN's going-concern EBITDA is based on 2015 EBITDA. The going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch's bases the valuation of the company. The going-concern EBITDA is based on 2015 EBITDA that reflects a scenario of intense volatilities in the steel industry, in terms of volume and prices, and on the iron price fundamentals. The EV/EBITDA multiple applied is 5.5x, reflecting CSN's strong market share in the flat steel market and it also reflects a midcycle multiple. Fitch applies a waterfall analysis to the post-default enterprise value (EV) based on the relative claims of the debt in the capital structure. Its debt waterfall assumptions take into account debt at Dec. 31, 2018. The waterfall results in a 42%/'RR4' Recovery Rating for senior unsecured debt. Therefore, the senior unsecured notes due 2019, 2020 and perpetual are 'B'/'RR4'. Recovery Ratings in Brazil are subject to the country soft cap of 'RR4'. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Continued improvement in domestic steel environment coupled with sustained iron ore prices, allowing the company to reduce its gross debt quantum; -- Delivery of additional asset sales in order to support gross debt reduction coupled with maintenance of adequate liquidity position; -- Sustained adjusted net debt/EBITDA ratio below 5.0x. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- Unsuccessful issuance of the benchmark bond that elevates CSN's refinancing risk to the immediate term will result in a downgrade of the company's ratings; -- Inability or unwillingness to reduce gross debt levels with cash proceeds from additional asset sales and/or cash generation from operations in order to improve capital structure; -- Adverse regulatory changes in Brazil's mining industry leading to reduce output and/or materially higher production costs at its Casa de Pedra mine; -- Reversion of adjusted net debt/EBITDA ratio to above 6.0x; -- Sustained liquidity pressures driven by persistent negative FCF generation. LIQUIDITY CSN reported BRL3.1 billion of cash and marketable securities as of Dec. 31, 2018, a very tight position compared to its short-term debt of BRL5.7 billion and total debt of BRL28.8 billion, per Fitch's calculation. Inclusive of the cash received from the iron ore payment agreement with Glencore on March 29, 2019, liquidity was BRL5.0 billion. Following the issuance of its benchmark sized bond and refinancing its 2019 and 2020 notes, CSN's maturity ladder extension will provide the company with additional cushion to maintain liquidity and service its obligations. CSN's debt primarily consists of prepayment export financings (19%), local bank loans (31%), senior notes (23%) and perpetual bonds (13%). The leverage at the shareholder level, which is believed to be high, is a concern for Fitch. FULL LIST OF RATING ACTIONS Fitch has affirmed and removed the following ratings from Rating Watch Negative: -- CSN Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B-'; -- CSN National Long-Term rating at 'BB-(bra)'; -- CSN Islands XI Corp. senior unsecured long-term rating guaranteed by CSN at 'B-'/'RR4'; -- CSN Islands XII Corp. senior unsecured Long-Term rating guaranteed by CSN at 'B-'/'RR4'. The Rating Outlook is Stable. Fitch has assigned the following rating: CSN Resources S.A. -- Senior unsecured USD note long-term rating guaranteed by CSN 'B-'/'RR4(EXP)' COMPANHIA SIDERURGICA: S&P Puts 'CCC+' ICR on Watch Positive ------------------------------------------------------------ S&P Global Ratings related that Brazil-based integrated steel producer Companhia Siderurgica Nacional (CSN) has announced the issuance of $750 million in notes to tender the outstanding amounts of its 2019 and 2020 bonds. If the company is successful in placing the notes and use the proceeds to pay down debt due 2019 and 2020, liquidity pressures will diminish sharply, S&P noted. On April 5, 2019, S&P Global ratings placed its ratings on Brazil-based integrated steel producer Companhia Siderurgica Nacional (CSN) on CreditWatch with positive implications, including its 'CCC+' global scale and 'brBB+' national scale ratings. The positive CreditWatch listing reflects a potential one-notch upgrade if the company successfully places the proposed notes and use the proceeds to prepay short-term debt maturities, alleviating liquidity pressures and strengthening its capital structure, enabling CSN to address the vast majority of its obligations until the end of 2020. The CreditWatch placement reflects S&P's view that the issuance of the proposed notes, along with the currently stronger operating performance, will improve the company's capital structure and relieve liquidity pressures for at least the next 18-24 months. This comes along with CSN's recent bilateral debt refinancing through Brazilian banks, as well as the sale of CSN LLC in the U.S. and the prepayment transaction with Glencore, which brought about R$3.5 billion of cash to meet the company's 2019 obligations. The gradual recovery in the domestic steel demand and the price adjustments the company was able to apply, combined with the spike in iron ore prices in the past few months, will help to boost its cash generation in 2019. S&P believes CSN continues focusing on deleveraging, including asset sales to strengthen its liquidity and capital structure on a sustainable basis. According to S&P's calculations, there would still remain a liquidity gap of R$1 billion – R$2 billion (depending on the proposed issuance amount) until the end of 2020. The company could address the gap through further debt refinancing or a combination of the sale of its German operations, the sale of Usiminas' preferred shares, or an iron ore streaming transaction in the upcoming months. CSN could also meet the liquidity gap if iron ore prices remain above $80 per ton and steel volumes in the domestic market increase faster than expected. In S&P's view, the upgrade potential is limited to one notch. S&P understands CSN has significant maturities at its holding companies (Vicunha Acos and Rio Iaco) that require dividend payments to meet amortization schedules. Conservative financial policies and the maintenance of smoother debt amortization profile will be main rating drivers. CSN RESOURCES: Moody's Rates New $750MM Sr. Unsec. Notes 'B3' ------------------------------------------------------------- Moody's Investors Service assigned a B3 rating to the $750 million proposed senior unsecured notes due up to 7 years to be issued by CSN Resources S.A. and unconditionally guaranteed by Companhia Siderurgica Nacional (CSN) (B3 stable). The outlook is stable. The proposed issuance is part of CSN's liability management strategy and proceeds will be used to fund a tender offer of $750 million for CSN's notes maturing in 2019 and 2020. The rating of the proposed notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date and assume that these agreements are legally valid, binding and enforceable. Ratings Assigned: Issuer: CSN Resources S.A. - $750 million Gtd Senior Unsecured Notes due up to 7 years: B3 (global scale) The outlook is stable. RATINGS RATIONALE CSN's B3 ratings reflect the company's position as a leading manufacturer of flat-rolled steel in Brazil, with a favorable product mix focused on value-added products. Historically, the company has reported a strong Moody's adjusted EBITDA margin at 20%-30% (20% in 2018), supported by its solid domestic market position, wide range of products through different segments and globally competitive production costs in both steel and iron ore. However, the ratings are constrained by the company's unsustainable capital structure and weakened credit metrics, namely, high leverage, low interest coverage and deteriorated cash flow metrics. Despite the company's debt refinancing efforts that addressed short to medium-term maturities and the expected improvement in cash flows, gross debt to EBITDA will remain in the 4.5x to 5.5x range until 2019 (6.3x in 2018). Accordingly, CSN relies on asset sales or a capital increase to be able to reduce debt levels in a more meaningful magnitude. Since the beginning of 2018, CSN has pursued several initiatives to address its short-term debt and improve liquidity, including (i) debt renegotiations with Banco do Brasil S.A. and Caixa Economica Federal (CAIXA) — collectively BRL14 billion and equal to 47% of CSN's total reported debt; (ii) a $350 million bond issuance; (iii) the refinancing of BRL1.0 billion in debt due in 2019 with Banco Santander (Brasil) S.A.; (iv) a BRL1.95 billion issuance of debentures due in 2023; and (v) an iron ore prepayment deal of $500 million. The proposed transaction is part of CSN's liability management strategy and proceeds will be used in a tender offer mainly for CSN's outstanding notes due 2019 and 2020, thus lengthening the company's debt amortization schedule. Pro forma to the proposed transaction and to the iron ore prepayment deal concluded in February 2019, CSN's cash position of BRL5.0 billion will cover short term debt maturities of BRL3.3 billion by 1.5 time, compared to a 1.0 time coverage at the end of 2018 (considering only the iron ore prepayment). Despite the improvement, CSN will still have sizeable debt maturities of approximately BRL9 billion in 2020-21. Accordingly, the company will need to keep pursuing additional alternatives to reduce liquidity pressures and leverage. Besides all the transactions announced by CSN to date, the company is also contemplating additional liquidity events such as a roughly $1 billion iron ore stream deal and the sale of assets, namely its long steel assets in Germany. If the company is able to refinance the majority of its notes due 2019 and 2020 with the proposed issuance, and announces any of these additional liquidity events, CSN would achieve a material gross debt reduction and a sustainably enhanced liquidity profile, which would support an improvement in its credit quality. The stable outlook reflects the expectations that CSN's liquidity will remain adequate to service its debt obligations. It also reflects its expectation that market conditions for steel producers in Brazil will gradually recover, allowing CSN to direct cash flows from operations to reduce debt levels. An upward rating movement would require additional improvements in liquidity profile and recovery in operating performance. An upgrade would also be dependent on further adjustments in CSN's capital structure, with total leverage trending towards 4.5x total adjusted debt to Ebitda and interest coverage ratios (measured by EBIT to Interest expenses) above 2.0x on a sustainable basis (1.4x in 2018). The ratings would suffer additional negative pressure if the company's liquidity position deteriorates, reducing CSN's ability to address upcoming debt maturities, in particular the 2019 and 2020 bonds. The ratings could be downgraded if performance over the next 12 to 18 months does not improve such that leverage does not moderate to at least 5.5x and EBIT/interest remains below 1.5x. With an annual capacity of 5.9 million tons of crude steel, Companhia Siderurgica Nacional (CSN) is a vertically integrated, low cost producer of flat-rolled steel, including slabs, hot and cold rolled steel, and a wide range of value-added steel products, such as galvanized sheet and tinplate. In addition, the company has downstream operations to produce customized products, pre-painted steel and steel packaging. CSN sells its products to a broad array of industries, including the automotive, capital goods, packaging, construction and home appliance sectors. CSN owns and operates cold rolling and galvanizing facilities in Portugal, along with long steel assets in Germany through its subsidiary Stahlwerk Thüringen GmbH (SWT). The company also has a long steel line (500,000 tons capacity) in the Volta Redonda plant. CSN reported revenues of BRL 22.9 billion ($6.3 billion) in 2018. FINANCIADORA DE ESTUDOS: Fitch Affirms BB- Rating, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed the Brazilian public sector entity Financiadora de Estudos e Projetos (FINEP) at 'BB-' with a Stable Outlook. Fitch also affirmed national long-term rating at 'AA(bra)' with a Stable Outlook. KEY RATING DRIVERS The affirmation of FINEP's ratings reflects the application of Fitch's Government-Related Entities Rating Criteria (GRE criteria). FINEP is considered to be a GRE due to its public sector mandate in financing research and development on behalf of the Federal Government. As of 2018, FINEP's debt is composed of Federal Government's funds, directly and indirectly and an external debt with a multilateral entity, which is fully guaranteed by the Federal Government. Under the criteria there are four key factors that Fitch assesses: strength of linkage includes status, ownership and control, as well as support track record and expectations. Incentive to support covers the socio-political implications of a GRE default and the financial implications of a GRE's default. Ownership and Control - Very Strong: FINEP is a 100% federally owned company and is part of the Brazilian ministry of science, technology, innovation and communication, with the goal of promoting innovation in several areas including telecommunication, oil and gas, and healthcare. FINEP offers financing to Brazilian research institutes and companies engaged in research and development. Its activities are dictated by the Brazilian constitution. Support Track Record and Expectations - Very Strong: Fitch expects support to come in the form of credit subsides (equalization). The equalization mechanism is the coverage of the difference between the costs arising from the funding and operating costs and the credit risk incurred by FINEP, and the costs accountable to the development of technological innovation projects. It is an instrument that allows access to financing with lower interest rates, similar to those on the international market. Socio-Political Implications of Default - Very Strong: In Fitch's opinion, FINEP holds a relevant and mandatory responsibility to the government and is the preferred government company aimed at fostering whole chain of innovation. Financial Implications of Default -- Moderate: Although FINEP is a federal financial arm of the ministry of science & technology focused on innovation, Fitch does not believe FINEP to be a proxy funding vehicle for the government. Also, unlikely given the longer term nature of FINEP's liabilities, Fitch believes the default of FINEP to have limited negative consequences for the creditworthiness of the federal government. As such, with an outcome of 45 points under the Government-Related Entities Criteria, FINEP's ratings are equalized with the Brazil's IDRs, as per Fitch's approach. RATING SENSITIVITIES Any rating action affecting the Federative Republic of Brazil (BB-/Stable) will result in a similar action for FINEP. KEY ASSUMPTIONS Fitch assumes a high level of sovereign support for FINEP even considering the weak institutional framework given the federal government's full ownership and ongoing subsidized credit lines via other federal institutions and federal funds. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings of FINEP: -- Long-Term Foreign Currency IDR at 'BB-'; Stable Outlook; -- Short-Term Foreign Currency IDR at 'B'; -- Long-Term Local Currency IDR at 'BB-'; Stable Outlook; -- Short-Term Local Currency IDR at 'B'; -- National Long-Term rating at 'AA(bra)'; Stable Outlook; -- National Short-Term rating at 'F1+(bra)'. QUEIROZ GALVAO: Files for Bankruptcy For Two Hydroelectric Units ---------------------------------------------------------------- Tatiana Bautzer at Reuters reports that Brazilian construction conglomerate Queiroz Galvao filed for bankruptcy protection for two energy units that manage hydroelectric dams in the states of Minas Gerais and Mato Grosso. Creditors in March rejected a request to renegotiate the debt out of court for the two units, Jauru and Santa Clara, according to Reuters. Queiroz Galvao is still asking creditors to work outside of court on the debt of two other units, Queiroz Galvao Energia and Queiroz Galvao Energia Renovaveis, the report relays. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Agro Sector Not Given Importance, Rivero Says ----------------------------------------------------------------- Dominican Today reports that National Agricultural Confederation (Confenagro) president Eric Rivero has affirmed that the Dominican Republic government lacks commitment for the country's agricultural sector. Mr. Rivero maintained that the country lacks lasting initiatives and works only on the basis of emergencies, the report notes. "The entities that collaborate to propel the local agricultural industry do not have clear and definite goals, which foresee the onslaught of climate change that affects production so much," the report quotes Mr. Rivero as saying. He told El Dia that the State must have goals not as a duty officer, but for timely follow-up to materialize proposed plans until they are achieved, the report cites. According to the report, Mr. Rivero said said that lack of follow-up has affected the increase in imports of dairy products, posing a "discouraging panorama" for the country's producers. 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. DOMINICAN REPUBLIC: First IPO Tops US$150 Million ------------------------------------------------- Dominican Today reports that securities superintendent, Gabriel Castro, related the approval of Dominican Republic's first initial public offering (IPO), which he labeled as a milestone for the country's securities market. The instrument of public offering, Fideicomiso de Oferta Publica de Valores Accionario Rica 03 -- FU, will be up to RD$8.0 billion (US$150 million) to be managed by Universal Trustee, according to Dominican Today. "The assets that make up the trust's assets are common shares of the share capital of Pasteurizadora Rica, S.A. The shares will be transferred to the trust in successive contributions by the trustees until reaching a limit of 40% of the shareholding property of Rica," Dominican Today quoted Mr. Castro as saying. The trustees that will transfer the assets to the trust will be Pasteurizadora Rica, S.A. and Consorcio Citricos Dominicanos, S.A., represented by Pedro Brache, the Superintendence said in a statement, Dominican Today adds. According to analysis by consultant Deloitte, the value of the shares to be contributed to the trust total RD$9.1 billion. The shares to be transferred to the trust will participate in the results of the transactions of Pasteurizadora Rica, S.A, the report discloses. "The securities to be issued will have a maturity of 30 years from the date of issue of the securities. They grant to those who acquire them equity interest in the trust pro rata of the investment, and will have a variable yield based on the profits or losses of the trust. The return on investment is medium to long term," 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. ================= G U A T E M A L A ================= BANCO AGROMERCANTIL: S&P Withdraws 'BB-/B' Issuer Credit Ratings ---------------------------------------------------------------- S&P Global Ratings withdrew at issuer's request its 'BB-' long- and 'B' short-term global scale issuer credit ratings (ICRs) on Banco Agromercantil de Guatemala S.A. (BAM). At the same time, S&P withdrew its 'BB-' issue-level rating on Intertrust SPV (Cayman) Ltd.'s $300 million senior notes due April 10, 2019. Intertrust SPV acts as trustee of the Agromercantil Senior Trust. BAM fully guarantees the notes, so the rating on them was the same as the long-term ICR on the bank. At the time of the withdrawal, the outlook was stable. At the time of the withdrawal, the global scale rating on BAM reflected S&P's view of it as a core subsidiary of Grupo Bancolombia. This was because of BAM's integration with the overall group strategy and its business risk similar to that of its parent group. The rating on BAM also incorporated its large market share in Guatemala, particularly in the corporate lending segment, which helps the bank to maintain operating revenue stability. Despite the uncertain economic and political conditions, the bank's deposit-based funding is one of its main strengths, and it provides BAM with enough liquidity to face short-term obligations. Additionally, BAM's quality of capital has remained sound due to a high-quality capital base that consists of paid-in capital, reserves, and retained earnings. On the other hand, the high share of dollar-denominated loans in the portfolio is a significant vulnerability for the bank if the Guatemalan quetzal weakens against the dollar. Nonetheless, the quetzal-dollar exchange rate has remained stable during the past few years. =========== M E X I C O =========== ELEMENTIA SAB: Fitch Puts BB+ IDR on Watch Neg. on Spin-Off Deal ---------------------------------------------------------------- Fitch Ratings has placed Elementia, S.A.B. de C.V.'s Foreign- and Local-Currency Long-Term Issuer Default Ratings (IDRs) of 'BB+' on Rating Watch Negative (RWN). The RWN follows Elementia's proposal to spin-off all of the assets that comprise the Metals and Building Systems segments into a newly-created spun-off entity. The cement segment would remain part of Elementia. Should the spin-off be completed as planned, Elementia's credit profile would likely be inconsistent with a 'BB+' rating as pure cement regional companies rated at this level have stronger business profiles, larger scale and more robust credit metrics than Elementia, which currently benefits from broader product and geographic diversification with all its segments. The long-term national scale rating of 'A+(mex)' has also been placed on Rating Watch Negative. Fitch expects to resolve the RWN after the spin-off is approved and the effects on Elementia's capital structure can be determined. This would include the ultimate debt obligations of Elementia as well as any contingent implications for bondholders as currently the notes guarantors include Nacional de Cobre S.A. de C.V., Mexalit Industrial S.A. de C.V., and Frigocel S.A. de C.V., which would become part of the newly-formed spun-off entity. Should the transaction be approved as planned, the resulting rating action could be a downgrade of up to two notches from Elementia's 'BB+' ratings. Elementia's net debt to EBITDA of 3.5x as of YE 2018 is at the limit of the negative sensitivity trigger considered for the rating. Elementia's cement business, which consists mainly of three cement plants in Mexico capable of producing 3.5 million metric tons (MT) annually and a 55% stake in Giant Cement Holding, Inc. (Giant), which Elementia consolidates in its results. Giant's capacity is spread out among three U.S. plants with a total production capacity of 2.8MT. Elementia generated USD209 million (MXN4 billion) of EBITDA during 2018 of which 69% was generated by the cement segment. Elementia's debt as of YE 2018 of USD838 million (MXN16.4 billion) was held either at Elementia or a at Trituradora y Procesadora de Materiales Santa Anita, S.A. de C.V., which is a subsidiary within Elementia's Cement Segment. RATING SENSITIVITIES Fitch expects to resolve the Rating Watch Negative after the spin-off is approved and the effects on Elementia's capital structure can be determined. FULL LIST OF RATING ACTIONS Fitch has placed Elementia's ratings in Rating Watch Negative as follows: -- Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BB+'; -- Long-Term Local Currency IDR of 'BB+'; -- Long-Term national scale rating of 'A+(mex)'; -- Senior unsecured USD425 million notes of 'BB+'. =========== P A N A M A =========== AES PANAMA: S&P Affirms BB Issuer Credit rating, Outlook Negative ----------------------------------------------------------------- S&P Global Ratings affirmed its 'BB' issuer credit and debt ratings on the Panama-based power generator, AES Panama S.R.L. The outlook remains negative, which reflects the possibility of a downgrade in the next six months if hydrology conditions in Panama weaken further and/or if AES Changuinola's repair takes longer than expected, extending AES Panama's exposure to the spot market. S&P expects lower cash flows for AES Panama, given that it will be exposed to the spot market because of the nine-month repair stoppage of AES Changuinola due to a leakage in its water tunnel. As a result, the plant will be unable to deliver the contracted energy to AES Panama, while the latter has a long-term power purchase agreement (PPA) contracts with the power distribution companies. Therefore, the company will need to buy energy from the spot market. Moreover, the rainfall level was record low in December 2018, and S&P expects low hydrology in the first half of 2019. This has caused dispatch of thermal plants, pushing spot market prices to around $110 per megawatt per hour (MWh); S&P expects them to increase until May and to fall below $100 per MWh until July, when the rainy season begins. The 'BB' ratings continue to incorporate the company's competitive position as the largest power generator in Panama, offset by the historical volatility of profitability due to hydrological exposure. S&P said, "In addition, the ratings reflect our expectations that AES Panama's cash flow generation will remain in line with our expectations, with EBITDA margin of around 50% in the next three years. Moreover, ratings continue to incorporate our expectations of net debt to EBITDA below 5.0x and funds from operations (FFO) to debt around 13% for the next two years. Our base-case scenario assumes low hydrology in the first half of 2019 and normal hydrology afterwards, as well as no delays in AES Changuinola's repair. In our view, the company's thermal plants (including AES Colon) and the lower contract levels for the following years to around 80% mitigate the exposure to hydrology fluctuations." ===================== P U E R T O R I C O ===================== CHARLOTTE RUSSE: Selling Peek Brand IP & Related Assets for $425K ----------------------------------------------------------------- Charlotte Russe Holding, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to authorize the private sale of intellectual property related to the Debtors' Peek brand and related assets to Mamiye Brothers, Inc., and Mamiye Brothers IP Holdings, LLC for $425,000 plus specified cure amounts for the Purchaser Assumed Contracts, subject to any higher and better bids. The Debtors sought to sell the Assets by private sale free and clear of all encumbrances and interests for the purchase price. The Purchase Agreement does not address the use of proceeds generated from the proposed Sale. All proceeds will be distributed pursuant to the Final DIP Order or as otherwise ordered by the Court. The Debtors do not propose to sell the Purchased Assets free and clear of any unexpired leasehold interests or other rights. A copy of the APA attached to the Motion is available for free at: http://bankrupt.com/misc/Charlotte_Russe_367_Sales.pdf The Purchasers are: MAMIYE BROTHERS, INC. MAMIYE BROTHERS IP HOLDINGS, LLC 1385 Broadway, 18th Floor New York, NY 10018 Attn: Chuck M. Mamiye Gitta Kaplan E-mail: chuck@mambro.com gitta.kaplan@mambro.com The Purchasers are represented by: Janet M. Weiss, Esq. DORSEY & WHITNEY LLP 51 West 52nd Street New York, NY 10019-6119 E-mail: weiss.janet@dorsey.com About Charlotte Russe Holding Charlotte Russe Holding, Inc., is a specialty fashion retailer of young women's apparel and accessories comprised of seven entities. The company and its affiliates are headquartered in San Diego, California and have one distribution center located in Ontario, California. In addition, the companies lease office space in Los Angeles, California and San Francisco, California, where they primarily conduct merchandising, marketing, e-commerce and technology functions. The companies sell their merchandise to customers in the contiguous 48 states, Hawaii, and Puerto Rico through their online store and 512 Charlotte Russe brick-and-mortar stores located in various regional malls, outlet centers, and lifestyle centers. The bulk of the companies' apparel and accessory products are sold under the Charlotte Russe brand with ancillary brands for denim and perfume (Refuge), young women's plus-size apparel (Charlotte Russe Plus), and cosmetics (Charlotte by Charlotte Russe). Charlotte Russe Holding and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No. 19-10210) on Feb. 3, 2019. At the time of the filing, Charlotte Russe Holding estimated assets of $100 million to $500 million and liabilities of $100 million to $500 million. The cases are assigned to Judge Laurie Selber Silverstein. The Debtors tapped Bayard, P.A. and Cooley LLP as their bankruptcy counsel; Guggenheim Securities, LLC as their investment banker; A&G Realty Partners, LLC as lease disposition consultant and business broker; Gordon Brothers Retail Partners LLC, Hilco Merchant Resources LLC and Malfitano Advisors, LLC as liquidation consultant; and Donlin, Recano & Company, Inc., as claims and noticing agent. KONA GRILL: Delays Annual Report Due to CEO's Departure ------------------------------------------------------- Kona Grill, Inc. has filed with the U.S. Securities and Exchange Commission a Notification of Late Filing on Form 12b-25 with respect to its Annual Report on Form 10-K for its fiscal year ended Dec. 31, 2018. The Company said its Annual Report could not be filed within the prescribed time period because Marcus Jundt, the chief executive officer of the Company, resigned effective March 31, 2019. In accordance with Rule 12b-25 of the Securities Exchange Act of 1934, the Company intends to file its Form 10-K no later than the fifteenth calendar day following the prescribed due date. The Company's new principal executive officer will duly execute and certify the financial results. The changes in the Company's results of operations will be significant in that revenue has decreased 12.4% and the net loss increased to approximately $32 million, primarily because of a decline in same-store sales of 12.3% since the comparable period for 2017 and $18.3 million of non-cash asset impairment charges for certain underperforming restaurants. About Kona Grill Kona Grill, Inc., headquartered in Scottsdale, Arizona, Kona Grill, Inc. -- http://www.konagrill.com/-- currently owns and operates 44 restaurants in 22 states and Puerto Rico. Its restaurants feature a global menu of contemporary American favorites, award-winning sushi and craft cocktails. Additionally, Kona Grill has two restaurants that operate under a franchise agreement in Dubai, United Arab Emirates, and Vaughan, Canada. Kona Grill incurred a net loss of $23.43 million in 2017 and a net loss of $21.62 million in 2016. As of Sept. 30, 2018, Kona Grill had $78.59 million in total assets, $75.74 million in total liabilities, and $2.84 million in total stockholders' equity. The Company has incurred losses resulting in an accumulated deficit of $88.5 million and outstanding borrowings under a credit facility of $33.5 million as of Sept. 30, 2018. As of Sept. 30, 2018, the Company has cash and cash equivalents and short-term investment balance totaling $4.0 million and net availability under the credit facility of $2.2 million, subject to compliance with certain covenants. The Company has implemented various initiatives to increase sales and reduce costs to increase profitability. "Management expects to utilize existing cash and cash equivalents and short-term investments, along with cash flow from operations, and the available amounts under the credit facility, to provide capital to support the business, to maintain and refurbish existing restaurants, and for general corporate purposes. Any reduction of cash flow from operations or an inability to draw on the credit facility may cause the Company to take appropriate measures to generate cash. The failure to raise capital when needed could impact the financial condition and results of operations. Additional equity financing, to the extent available, may result in dilution to current stockholders and additional debt financing, if available, may involve significant cash payment obligations or financial covenants and ratios that may restrict the Company's ability to operate the business. There can be no assurance that the Company will be successful in its plans to increase profitability or to obtain alternative capital and financing on acceptable terms, when required or if at all," the Company stated in its Quarterly Report for the period ended Sept. 30, 2018. SKYTEC INC: LogiSYS Seeks Ch. 11 Trustee Appointment ---------------------------------------------------- Creditor, LogiSYS Systems, Inc., asked the U.S. Bankruptcy Court for the District of Puerto Rico to order the appointment of a Chapter 11 trustee for Skytec, Inc. The Creditor's request was made following the Court's opinion that the Debtor's misconduct has been deliberate, and its withholding of crucial documents has severely prejudiced the Creditor. Further, the Creditor pointed out that an analysis of the Debtor's Statement of Financial Affairs, the Monthly Operating Reports and the proposed Disclosure Statement reveal that, before and after the Petition Date, the compensation granted to the Debtor's president, Mr. Henry Barreda, to the independent contractor acting as CFO Ms. Annie Astor, the spouse of the Debtor's only other shareholder, Mr. Miguel Carbonell, and to the Debtor's Sales Manager, Ms. Nadja Gonzalez, are excessive and burdensome for the operation of the business and have hindered and delayed the interests of the Debtor's creditors. Therefore, the Creditor believed that a Chapter 11 trustee is necessary to administer the operations of the business of Skytec Inc.'s estate and file collection proceedings against the affiliate companies, shareholders and debtors of substantial amounts to the Debtor. LogiSYS Systems is represented by: Carlos A. Rodriguez-Vidal, Esq. Solymar Castillo Morales, Esq. GOLDMAN ANTONETTI & CORDOVA, LLC San Juan, PR 00936-8364 Tel: (787) 759-4117 Fax: (787) 767-9177 Email: crodriguez-vidal@gaclaw.com scastillo@gaclaw.com -- and -- Bryan T. Glover, Esq. FOSTER PEPPER PLLC 1111 Third Avenue, Suite 3000 Seattle, WA 98101 Tel: (206) 447-4400 Fax: (206) 447-9700 Email: bryan.glover@foster.com About Skytec Inc. Skytec, Inc., is a privately-held company based in Puerto Rico that provides wireless telecommunication solutions. Skytec sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 18-05288) on Sept. 12, 2018. In the petition signed by Henry L. Barreda, president, the Debtor disclosed $2,119,734 in assets and $5,848,090 in liabilities. Judge Enrique S. Lamoutte Inclan presides over the case. The Debtor tapped Fuentes Law Offices, LLC as its legal counsel. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: WITCO Laments Decline in Consumer Confidence --------------------------------------------------------------- Trinidad Express reports that T&T-based producers of fast-moving consumer goods -- cigarette manufacturer WITCO and fast foods company, Prestige Holdings Ltd -- have complained that the slowdown in economic activity is causing a fall in consumer confidence and a decline in the disposal income of consumers. At the WITCO annual general meeting at the Hyatt hotel in Port of Spain, the cigarette producer's chief executive, Jean-Pierre du Coudray, said: "The economic environment for the T&T market showed some recovery for at least the first half of 2018, where revenues from the energy sector improved," according to Trinidad Express. ============= U R U G U A Y ============= SANCOR SEGUROS: Fitch Affirms B+ IFS Rating, Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Sancor Seguros S.A.'s Insurer Financial Strength (IFS) rating at 'B+'. The Rating Outlook is Stable. KEY RATING DRIVERS The rating reflects the company's moderate business profile, below average financial performance, and above average leverage metrics. Sancor operates in a narrow and highly concentrated Uruguayan insurance industry where the state-owned insurer writes 66% of the total premium (USD1,413 million). Sancor is the fifth largest insurer in Uruguay with a 3.0% market share. While participating in all business lines, approximately 78% of the company's premiums come from auto, traditional life, and agricultural insurance. In 2018, Sancor had an overall net loss due to elevated acquisition costs and a difficult operating environment. Combined ratio increased to 110.0% from 105.1% in 2018. The company has generated net losses in three of the last five years. Fitch expects operating results to improve in 2019. At year-end 2018, Sancor's net leverage increased to 5.4x from 4.6x due to an accounting change and overall growth. This places the company's net leverage in the upper range of the Uruguayan insurance industry. Fitch will be closely monitor leverage trends given the company's limited financial flexibility where the only funding sources available are earnings retention and potential contributions from Sancor's parent, Grupo Sancor, an Argentinian holding company. Over 98% of Sancor's investments are Uruguayan government instruments or other securities highly correlated to the sovereign. Fitch rates Uruguay 'BBB-'/Rating Outlook Negative. If the sovereign rating is downgraded, all the country related investments would become non-investment grade, pressuring the company's current investment and liquidity risk. RATING SENSITIVITIES The rating could be upgraded with improved business profile from enhanced operating scale and diversification, favorable sustained financial performance, and enhanced financial flexibility through backup or contingent well-balanced and diverse financing sources. The rating could be downgraded if current adverse financial performance persists and leverage continues to increase. ================= V E N E Z U E L A ================= VENEZUELA: Central Bank Sends Workers Home Amid Water Interruption ------------------------------------------------------------------ Patricia Laya and Alex Vasquez at Bloomberg News report that Venezuela's central bank has been operating with an emergency team of only about 100 workers since a power outage left its headquarters without running water, according to four people with direct knowledge of the situation. Most of the bank's 2,000 employees were sent home when the lights went off in Caracas on March 25 -- and haven't been able to return since, said the people on condition of anonymity, according to Bloomberg News. The emergency group has been working from a library with the help of water tanks, focused on vital tasks to keep operations going, such as transactions between local banks and reserves, they added, Bloomberg News relays. Bloomberg News discloses that the central bank's situation underscores the disarray inside President Nicolas Maduro's administration. Bathrooms have no water and the building has no air conditioning as a power crisis exacerbated water shortages in the Venezuelan capital amid a drought, Bloomberg News. Employees don't know when they will be able to return to work, Bloomberg News. While a power rationing announced by Maduro late last month has so far exempted the capital, electricity has been intermittent, keeping vital pumps from reservoirs off line, Bloomberg News notes. Caracas, 900 meters (2,950 feet) above sea level, gets its water from the Tuy system of reservoirs, whose pumping stations require a minimum of 600 megawatts to operate, Bloomberg News says. Venezuelans poured into the streets, demonstrating against the near-total breakdown in public services and rallying behind National Assembly leader Juan Guaido, who claims to be the country's rightful president, Bloomberg News adds. ********* 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 publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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