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/raid1/www/Hosts/bankrupt/TCRLA_Public/190529.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, May 29, 2019, Vol. 20, No. 107 Headlines A R G E N T I N A BANCO ITAU: Moody's Affirms Ba3 Global Scale Deposit Rating B R A Z I L OR EMPREENDIMENTOS: Fitch Withdraws C Rating on 1st Issue NCD PETROLEO BRASILEIRO: Sets June 5 Bid Deadline for 2 Oilfields USJ ACUCAR: Fitch Lowers Issuer Default Ratings to 'RD' USJ ACUCAR: S&P Raises ICR to CCC+' on End of Debt Exchange Offer C A Y M A N I S L A N D S RUSSELL INVESTMENTS: Fitch Affirms BB IDR, Alters Outlook to Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Industries Balks at Strong Unfair Competition G R E N A D A GRENADA: Outlook Promising But Subject to Downside Risks, IMF Says J A M A I C A JAMAICA: Vows to Continue Gains Made After IMF Arrangement Ends M E X I C O MEXICO: Cabinet Goes Through Revamp P U E R T O R I C O SEARS HOLDINGS: Santa Rosa Mall Objects to Disclosure Statement SEARS HOLDINGS: Winners Objects to Disclosure Statement V E N E Z U E L A VENEZUELA: Opposition Will Return to Norway For Talks, Oslo Says - - - - - ================= A R G E N T I N A ================= BANCO ITAU: Moody's Affirms Ba3 Global Scale Deposit Rating ----------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo (MLA) has affirmed the global and national scale local currency deposit ratings of Ba3 and Aaa.ar, the global and national scale local currency senior unsecured MTN debt ratings of (P)Ba3 and Aaa.ar of Banco Itau Argentina S.A. (BIA), as well as the bank's (P)B1 and Aa2.ar global and national scale foreign currency senior unsecured MTN debt ratings, following the affirmation of its b2 baseline credit assessment. In addition, Moody's affirmed BIA's ba3 adjusted baseline credit assessment and Ba3(cr) long-term counterparty risk assessment (CRA). At the same time, the global and national scale long-term foreign currency deposit ratings of B3 and Baa1.ar, the Not Prime global scale short-term deposit rating, and the NP(cr) short-term counterparty risk assessment (CRA) were all affirmed. The ratings have a stable outlook. RATINGS RATIONALE The affirmation of BIA's ratings acknowledges the bank's well-managed banking franchise as a commercial lender that is supported by disciplined risk management and governance, in line with its parent's Itau Unibanco S.A. (Ba2 stable, ba2). BIA's financial fundamentals, however, are likely to weaken as a result of the adverse market conditions in Argentina that have reduced business volumes and raised credit risks. The effects of the economic recession, rising interest rates and high inflation will primarily affect BIA's profitability and asset risk metrics, which however, remained better than rated Argentine bank peers'. BIA's loan portfolio expanded by more than 50% nominally in the last 12 months ended March 2019, but only 3% in real terms, while problem loans declined to 2.2% of gross loans, staying below the system average of almost 4% as of February 2019. However, as a lender to corporates and SMEs, the bank is more exposed to borrower concentration risk than its peers, with potential negative implication to earnings and asset quality in case of sudden losses. In order to address such risk, BIA has strengthened its reserve coverage over the past three quarters, to levels above minimum requirement and its peers'. In March 2019, reserves accounted for 2.8% of gross loans and 128.3% of 90-day past due loans. The main challenge for BIA is profitability, which is distorted by high inflation. In Q1 2019, net income to tangible assets increased to 6.0%, well above the bank's historical average of just below 3%. However, BIA's performance in the quarter was strongly influenced by one-off gains on the sale of half of the shares it had on credit card company Prisma, reducing its participation to 1.5% at Prisma's total shares. When normalizing the profitability ratio and adjusting it for inflation, BIA's profitability declines significantly. le. In addition, earnings are strongly reliant on gains from government securities, helping offset increasing credit costs. Nonetheless, BIA's short-term loan profile allows it to re-price its loans faster than deposits, supporting margins. BIA's funding structure relies on more expensive and volatile institutional resources than other similar rated banks, resulting in overall higher funding costs. However, over the past two years, BIA has been able to increase its footprint in retail banking, reducing deposit concentration and increasing the share of less expensive core deposits, a credit positive. As of March 2019, deposits accounted for about 80% of total funding, with more than half sourced from individuals. BIA's adequate capitalization, measured as Moody's tangible common equity relative to adjusted risk weighted assets, increased to 8.9% in 1Q2019 from 8.5%, reflecting moderation of loan growth as well as one-off earnings in the quarter. Though adequate, BIA's capital levels are vulnerable to foreign exchange volatility, reflecting the sizable volume of dollar denominated loans in its balance sheet. To support its capitalization in a volatile environment, BIA continues to retain earnings and has been selective in lending. The Ba3 global local-currency deposit rating assigned to BIA incorporates a very high level of support from its Brazilian parent, Itau Unibanco. Moody's support assumption reflects the parent's strong capacity and willingness to support the subsidiary in the event of stress and provides two notches of uplift from the b2 BCA to a ba3 Adjusted BCA. Because of parental support, the national scale deposit rating is Aaa.ar, indicating that BIA is strongly positioned compared with its domestic peers. WHAT COULD CHANGE THE RATINGS UP/DOWN BIA's BCA is at the same level of the sovereign bond rating in Argentina (B2 stable) and therefore, an upward movement is unlikely at this point. However, the BCA could be downgraded in the case of a sovereign rating downgrade, and its foreign currency deposit rating would also be downgraded if the respective country ceilings for Argentina were lowered. On a standalone basis, there could be negative pressures on BIA's ratings as a result of material deterioration in asset quality metrics and in profitability coming from higher provisions and increase in funding costs. A consistent decline in profitability could compromise the bank's capitalization, constraining its ability to absorb shocks related to market volatility, or sudden rise in risk weighted assets resulting from the US dollar appreciation. However, positive pressures on BIA's local currency deposit rating of Ba3 could come from an upgrade of its parent's Itau Unibanco's BCA, currently at ba2, which is constrained by Brazil's Ba2 sovereign debt rating with stable outlook. Banco Itau Argentina S.A. is headquartered in Buenos Aires, Argentina. As of December 31, 2018, BIA reported consolidated assets of ARS64,110 million and shareholders` equity of ARS7,872 million. LIST OF AFFECTED RATINGS AND ASSESSMENTS The following ratings and assessments assigned to Banco Itau Argentina S.A. were affirmed: -- Long-term global local currency deposit rating of Ba3; stable outlook -- Short-term global local currency deposit rating of Not Prime -- Long-term global foreign currency deposit rating of B3, stable outlook -- Short-term global foreign currency deposit rating of Not Prime -- Long-term Argentinean national scale local currency deposit rating of Aaa.ar, stable outlook -- Long-term Argentinean national scale foreign currency deposit rating of Baa1.ar, stable outlook -- Long-term global local currency senior unsecured MTN rating of (P)Ba3 -- Long-term global foreign currency senior unsecured MTN rating of (P)B1 -- Long-term Argentinean national scale local currency senior unsecured MTN rating of Aaa.ar -- Long-term Argentinean national scale foreign currency senior unsecured MTN rating of Aa2.ar -- Baseline credit assessment of b2 -- Adjusted baseline credit assessment of ba3 -- Long-term counterparty risk assessment of Ba3(cr) -- Short-term counterparty risk assessment of Not Prime(cr) -- Outlook, Stable =========== B R A Z I L =========== OR EMPREENDIMENTOS: Fitch Withdraws C Rating on 1st Issue NCD ------------------------------------------------------------- Fitch Ratings downgraded 'Csf (bra)', the National Long-Term Rating of the first issue of simple non-convertible debentures (NCD) with the real guarantee of OR Empreendimentos Imobiliarios e Participacoes SA (OR). The agency then withdrew its rating. MAIN RATING FOUNDATIONS The debentures were in renegotiation, with successive monthly maturity delays, which is considered a debt restructuring event by Fitch. The debenture holders decided not to postpone the maturity of the operation, scheduled for April 22, 2019. On April 30, 2019, after five days of the curing period established in the issue documents, the payment of the debentures was not carried out, which led to the downgrading of the rating to 'Dsf (bra)', 'Csf (bra) ', and the consequent withdrawal of the classification, once the debentures are in default. Accordingly, Fitch will no longer provide ratings or provide analytical coverage for this issue. PETROLEO BRASILEIRO: Sets June 5 Bid Deadline for 2 Oilfields ------------------------------------------------------------- Gram Slattery at Reuters reports that Brazil's Petroleo Brasileiro SA is nearing the sale of two oilfields in a process that could fetch around $1 billion and aid the state-run oil firm in its bid to reduce debt. Petrobras, as the company is known, has set a June 5 deadline to receive final binding offers for its Pampo and Enchova oilfields off the coast of Rio de Janeiro, said two sources with knowledge of the matter, who requested anonymity to discuss confidential matters, according to Reuters. Reuters notes that Trident Energy, an independent oil company backed by private equity firm Warburg Pincus, is in the pole position, though Petrobras has invited other firms to submit a final bid, including Rio de Janeiro-based Petro Rio SA and a consortium of EIG Global Energy Partners and local independent Ouro Preto Oleo e Gas, the sources said. Together, Pampo and Enchova produced almost 39,000 barrels of oil equivalent per day, according to July 2018 figures, making it the largest mature production asset in the company's divestment portfolio, the report says. Chief Executive Roberto Castello Branco, who took the reins in January, is overseeing the sale of dozens of assets in a bid to reduce debt and refocus the firm on deepwater exploration and production, the report discloses. In April, Petrobras disclosed the $8.6 billion sale of its TAG pipeline unit to Engie SA and detailed plans to sell eight refineries in a process it said could fetch some $15 billion, the report relays. The firm launched the sale process for 27 onshore oilfields in the coastal state of Rio de Janeiro. The Pampo and Enchova oilfields have been among the more challenging sales for Petrobras. In 2018, Petrobras entered into exclusive talks with the EIG consortium, the report recalls. However, under rules set by Brazil's federal audit court, Petrobras must carry out a final rebidding process after concluding bilateral negotiations, allowing third parties to submit new bids at any value as long as they have the same contractual terms as the bilateral offer, the report says. EIG took advantage of the rebidding round to reduce its offer, which caused Petrobras to walk away from the table, Reuters reported in January, the report notes. Petrobras then entered into exclusive talks with the Trident group, the report relays. The June deadline represents the second attempt at a final rebid. The sources warned that a short delay is possible, but not expected, the report discloses. The new contract has a so-called earn-out provision, in which the buyer could be required to pay up to $200 million more to Petrobras after the initial purchase, depending on crude prices, the sources said, the report adds. As reported in the Troubled Company Reporter-Latin America on Feb. 25, 2019, S&P Global Ratings raised the stand-alone credit profile (SACP) on Petrobras to 'bb' from 'bb-'. S&P also affirmed its global scale ratings on the company at 'BB-' and its Brazilian national scale rating at 'brAAA'. USJ ACUCAR: Fitch Lowers Issuer Default Ratings to 'RD' ------------------------------------------------------- Fitch Ratings has downgraded the Foreign and Local Currency Issuer Default Ratings (IDRs) of U.S.J. - Acucar e Alcool S.A. (USJ) to 'RD' from 'C' and the National Scale Rating to 'RD(bra)' from 'C(bra)'. At the same time, Fitch has affirmed USJ's outstanding USD248 million senior secured notes due 2021 and USD29 million senior unsecured notes due 2019 at 'C'/'RR4'. KEY RATING DRIVERS The downgrade follows the acceptance by the bondholders of a debt exchange offer of USJ's outstanding 9.875% senior unsecured notes due 2019 and 9.875%/12.0% senior secured PIK toggle notes due 2021 for newly issued 8.5%/9.875% senior secured PIK notes due 2023. All notes together, acceptance involved 95.15% adhesion, 69.95% adhesion for the 2019 notes, with the current outstanding amount of USD29 million, and 98.40% adhesion on the 2021 notes, with the current outstanding amount of USD248 million. Adhesion exceeded the minimum acceptance thresholds of 67% and 95% on the 2019 and 2021 notes, respectively. No haircut was involved. According to Fitch's methodology, this exchange proposal is viewed as a distressed debt exchange (DDE), as it weakens the original conditions for bondholders while the company tries to avoid a default. According to the terms of the new notes, USJ will have the option to defer coupon payments due in 2019 and pay accrued interest at maturity, which has been extended to 2023. Fitch will reposition the ratings once we have a clear view of the consequent improvements in the company's liquidity and capital structure that will follow the DDE. USJ's credit profile is pressured by its operations in the very volatile sugar and ethanol (S&E) sector, with above-average industry risks. The company also presents poor cash flow performance with cash flow from operations (CFFO) at break-even level and negative FCF of BRL156 million in the LTM ended on Dec. 31, 2018. USJ also presents high leverage, with total adjusted debt/EBITDAR and net adjusted debt/EBITDAR of 7.6x and 7.1x, respectively, at the end of the same period. DERIVATION SUMMARY USJ's ratings reflect the company's much weaker liquidity and capital structure than Jalles Machado S.A (Jalles, BB-/Stable) and Usina Santo Angelo S.A. (USA, A-(bra)/Stable) whose cash to short-term debt coverage ratios stand at above 1.0x and net adjusted leverage is below 2.0x. USJ's ratings also compare unfavorably with those of Biosev S.A (B+/Stable), which improved liquidity and brought leverage down to 2.9x in fiscal 2018 following a BRL3.5 billion (equivalent to USD1.1 billion) capital injection from the parent, Louis Dreyfus Commodity Holding group (LD). With USD-denominated debt accounting for over 80% of its total adjusted debt and focus on the domestic market, USJ is also more exposed to foreign exchange (FX) risks compared to all peers rated by Fitch. Operationally, USJ has a weaker business profile than Jalles, as the latter has higher product mix flexibility, above-average agricultural yields and presence of high value-added products in the mix, whereas USJ's high focus on sugar is a disadvantage in times of depressed commodity prices. USJ also lacks the scale and presence of a large shareholder like Biosev; and the high yields and low-cost structure of the USA. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- Crushed volumes at 3.4 million tons in fiscal 2019 and 3.5 million tons from fiscal 2020 onwards; -- Sugar prices of USD13 cents/pound for fiscal 2019 including polarization premiums. Fitch assumes that prices will be USD13.4/pound and USD14.2/pound in fiscal 2020 and 2021, respectively; -- The combination of oil prices and the FX rate will lead Petrobras to keep increasing domestic gasoline prices, paving the way for a gradual increase in hydrous ethanol prices; -- Average FX rate of BRL3.8/USD; -- Costs (harvesting and industrial) are forecasted to increase by 5% annually; -- CAPEX of BRL110 million in fiscal 2019 and BRL120 million in the following years; -- No dividends from SJC, the JV with Cargill. KEY RECOVERY RATING ASSUMPTIONS -- The recovery analysis assumes that USJ would be liquidated in bankruptcy. -- Fitch has assumed a 10% administrative claim. Liquidation Approach: -- The liquidation estimate reflects Fitch's view of the value of land properties and other assets that can be realized in a reorganization and distributed to creditors. -- The 80% advance rate for it's land and sugar cane plantations is typical for the sector and reflects the good location of such assets, near urban areas and other S&E players. -- The 20% advance rate for fixed assets like machinery, equipment and the mill itself reflects the low liquidity of such assets. -- Inventories have been discounted at 20% to reflect the above average liquidation prospects of S&E assets. -- The 50% stake into SJC's book value has been included in the calculations. -- The waterfall results in a 100% recovery corresponding to 'RR1' for the secured notes and 86% recovery corresponding to 'RR2' for the unsecured notes, but both are limited to 'RR4' given the soft cap on Brazilian issuers. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action An upgrade to the 'C' to 'CCC' range is plausible over the short term due to the expectation of improvements in the company's liquidity and capital structure that will follow the DDE. Upgrades to higher categories are not expected given the maintenance of above-average leverage indicators, high refinancing risks associated with weak cash flow generation and the operational and financial challenges surrounding the S&E sector. Developments That May, Individually or Collectively, Lead to Negative Rating Action USJ's IDRs and National Scale ratings will be downgraded to 'D' and 'D(bra)', respectively, if the company formally files for bankruptcy protection. USJ ACUCAR: S&P Raises ICR to CCC+' on End of Debt Exchange Offer ----------------------------------------------------------------- On May 27, 2019, S&P Global Ratings raised its global scale issuer credit rating on Brazil-based sugarcane processor USJ Acucar e Alcool S/A (USJ) to 'CCC+' from 'SD'. At the same time, S&P also raised the issue-level ratings on the company's unsecured debt to 'CCC-' from 'D', and assigned a recovery rating of '6'. The upgrade reflects the relief in the company's liquidity pressures following the conclusion of the debt exchange offer. The company exchanged 69.95% of the 2019 notes and 98.4% of the 2021 notes for new 2023 notes, amounting to $257.7 million. The new notes have a payment-in-kind (PIK) feature for the next coupon payment (November 2019), with a coupon rate of 10.5%, and a second payment with the option to pay a coupon of 4.2% in cash and the remaining 6.3% accrued. After the first two payments, the company will begin paying cash interest with a coupon rate of 9.875%. S&P said, "We continue to view USJ's capital structure as unsustainable in the medium term, reflected in the 'CCC+' issuer credit rating. However, in our view, the company will have enough funds to comply with its obligations for the next 12-18 months--which include the amortization of the outstanding amount of the 2019 bond ($8.7 million)--until the first full cash payment on its 2023 bond in November 2020. "We estimate that the company would have to reduce its total debt by about 40% to match its cash generation with its financial obligations. In our opinion, such debt reduction could only be achieved through external factors like considerable asset sales, a capital injection, or significantly more favorable industry fundamentals. Absent these factors, we believe USJ will face severe liquidity stress by fiscal 2021, when it starts to service the full amount of cash interest on its 2023 secured bond, which would increase its yearly cash interest burden by over $25 million." The negative outlook reflects that USJ's capital structure remains unsustainable in the long term, but the company will have enough funds to comply with its obligations in the next 12 months after the notes' exchange, which allows it to accrue interest payments until November 2020. S&P could downgrade the ratings in the next six months if the company isn't able to address its capital structure through external factors, such as asset sales or a capital injection, or if USJ struggles to continue rolling over its short-term maturities, pressuring its tight liquidity position. A positive rating action would only be possible if USJ's debt burden becomes commensurate with its cash generation capacity. This would only be feasible, in S&P's view, through external factors, such as significant land sales or an equity injection, or amid significantly more favorable industry fundamentals. =========================== C A Y M A N I S L A N D S =========================== RUSSELL INVESTMENTS: Fitch Affirms BB IDR, Alters Outlook to Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Russell Investments Cayman Midco, Ltd., Russell Investments U.S. Institutional Holdco, Inc., and Russell Investments U.S. Retail Holdco, Inc.'s (collectively, Russell) Long-Term Issuer Default Ratings (IDRs) and senior secured debt ratings at 'BB'. The Rating Outlook has been revised to Stable from Negative. KEY RATING DRIVERS IDRs AND SENIOR DEBT The Outlook revision to Stable from Negative reflects a sustained track record of executing on cost reduction initiatives, maintenance of leverage at or below 4.0x, reasonable investment performance, and improvement of client flows supported by acquisitions of institutional mandates in 1Q19. The rating affirmations reflect Russell's strong franchise, AUM diversification across geographies and product sets, scalable business model, demonstrated a track record of delivering strong fund performance relative to benchmarks, and margin expansion as a result of solid realization of cost synergies. The ratings are constrained by the relatively high leverage, low interest and fixed-charge coverage, and lower margins relative to higher-rated peers, and a fully-secured wholesale funding profile. Ratings are also constrained by the sensitivity of the business model to changes in market conditions and investor appetite for actively managed investment products, limited operating history as a standalone entity and a continued degree of uncertainty over the company's future financial policies, including its leverage appetite, which are heavily influenced by Russell's private equity ownership. Fitch calculates that Russell's cash flow leverage (gross debt to adjusted EBITDA), would have been 3.9x for TTM ended March 31, 2019 (1Q19), including the additional run-rate cost synergies of $31.9 million that are already auctioned or identified, and are expected to be realized in 2019. Leverage of this magnitude is near the midpoint of Fitch's 'bb' category quantitative leverage benchmark range for traditional investment managers of 3.0x-5.0x. Leverage has remained relatively consistent since the re-leveraging transaction in May 2018 when Russell increased its secured term loan borrowing by $300 million. Absent any cost synergies, leverage would be 4.4x at TTM 1Q19. Fitch's calculation of EBITDA as adjusted for non-recurring items, non-cash incentive compensation and gives no credit to performance-based management fees. Fitch expects Russell to maintain its cash flow leverage at the current levels in the near term; however, a degree of uncertainty persists driven by Russell's private equity ownership. Fitch-calculated fixed-charge coverage, including the $37.5 million installment payment due in December 2019, 1% required amortization of term loan principal paid quarterly, and the run-rate and auctioned cost synergies were 2.6x for the TTM 1Q19, which is viewed as weak relative to the assigned ratings. EBITDA coverage of interest expenses was 4.3x for the same period. Absent any cost synergies, fixed-charge coverage would be 2.3x, and interest coverage would be 3.9x for the TTM 1Q19. Fitch does not expect interest coverage to improve materially, in light of the current interest rate environment. Hence, low coverage is expected to remain a rating constraint. Fitch believes Russell's liquidity profile is limited. At March 31, 2019, Russell maintained $225 million of balance sheet cash, of which only $38.2 million was available for corporate purposes. The remaining portion was held at the operating subsidiaries for regulatory/operational risk, working capital needs, accumulated deficit position, and other operational needs. Russell also maintained a $50 million in undrawn revolver capacity at end-1Q19. Fitch-calculated gross EBTIDA margin was 27.6% for the TTM 1Q19, which is at the high end of Fitch's 'bbb' category quantitative benchmark range of 20%-30%. This compares favorably with the firm's historical margins, which have been in the low-20% range. EBITDA margins could improve further depending on how well Russell continues to extract cost efficiencies through headcount reduction and system improvements and achieve scale efficiencies through AUM expansion. At March 31, 2019, Russell had $290.8 million of AUM, spread across single/multi-asset products and derivative overlay products offered to retail and institutional investors in the U.S., EMEA, APAC, and Canada. The company derives revenues primarily from traditional investment management activities, but also provides investment services (exposure management, transitions, etc.) and consulting services, which are moderate diversifiers of revenue. Net client flows improved significantly in 1Q19, measuring 6.4% of AUM from a year ago, driven by several institutional mandates wins. This compares favorably to an average outflows of 2.6% from 2015-2018. However, the firm's retail business continued to demonstrate net client outflows, similar to other active IM peers, which continue to face competitive headwinds from investor preference for passive products. Russell Investments Cayman Midco, Ltd.'s Long-Term IDR is equalized with the IDRs assigned to debt-issuing entities, Russell Investments U.S. Institutional Holdco, Inc. and Russell Investments Retail Holdco Inc., and reflects that all management fee streams flow into Russell Investments Cayman Midco, Ltd., which allows it to meet its guarantee obligations to its debt-issuing subsidiaries. The senior-secured debt is equalized with the IDRs of Russell Investments, reflecting Fitch's expectation of average recovery prospects for the instruments under a stress scenario. RATING SENSITIVITIES IDRs AND SENIOR DEBT An increase in leverage above 4.0x resulting from the issuance of incremental debt, particularly associated with a shareholder-friendly action, or deterioration in operating performance is expected to result in a rating downgrade. Negative rating action could also result from a decrease in interest coverage below 4.0x, inability to improve fixed charge coverage or execute on cost synergies, material decrease in EBITDA margins, sustained material investment underperformance and/or AUM outflows. Upward momentum is viewed as limited in the near term, in light of weak fixed charge coverage and uncertainty around the firm's financial policies, including leverage tolerance levels. Ratings could be positively influenced by Fitch-calculated gross leverage approaching or below 3.0x on a consistent basis, gross EBITDA margins steadily above 30%, improvement in coverage above 6.0x, and favorable investment performance and asset flows, on a sustained basis. Additional positive drivers could include an improvement in the diversity of the funding profile, including the issuance of a meaningful amount of unsecured debt. The senior secured debt rating is primarily sensitive to changes in the Russell's Long-Term IDR, and to a lesser extent, the recovery prospects of the instrument. Fitch has affirmed the following ratings: Russell Investments Cayman Midco, Ltd. (guarantor) Long-Term IDR at 'BB'. Russell Investments U.S. Institutional Holdco, Inc. (co-borrower) Russell Investments U.S. Retail Holdco, Inc. (co-borrower) Long-Term IDR at 'BB'; Senior-secured debt at 'BB'. The Rating Outlook has been revised to Stable from Negative. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Industries Balks at Strong Unfair Competition ----------------------------------------------------------------- Dominican Today reports that the Dominican Industries Association (AIRD) warned the authorities of a "strong unfair competition" from five Chinese businesses in the Dominican territory, who besides breach the 80/20 in terms of percentages of employees are putting at risk some buildings in the country. AIRD president Celso Juan Marranzini and executive vice president Circe Almanzar made the warning, accompanied by executives of the most affected sector, the Dominican Plastics Industry Association (Adiplast), according to Dominican Today. The business leaders told outlet Listin Diario that there are five Chinese plastic pipe-makers in the country without the required standards, the report notes. "Despite that the AIRD is working with the authorities on an international standard for hardware stores, the engineer and even the final consumer must know the specifications, the pipes manufactured by Asians in the country lack the quality required for the construction sector," the AIRD executives said, the report adds. As reported in the Troubled Company Reporter-Latin America in September 2018, Fitch Ratings affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. ============= G R E N A D A ============= GRENADA: Outlook Promising But Subject to Downside Risks, IMF Says ------------------------------------------------------------------ The International Monetary Fund issued a concluding statement on Grenada on May 28, 2019. The IMF noted these findings on Grenada: "Growth has remained strong, reflecting external tailwinds and the fruits of past reforms. The outlook is promising, but is subject to downside risks. The focus of policy should shift toward making growth more sustainable, resilient, and inclusive. Fiscal policy should balance further progress in debt reduction against a gradual use of well-earned fiscal space to close the country's infrastructure and resilience gaps, in tandem with capacity and efficiency improvements to bolster the impact on growth. Policies to enhance resilience to climate change and natural disasters should be fully integrated into a credible medium-term fiscal framework. Continued progress in financial sector oversight, structural reforms, economic governance, and data provision is necessary to support and enhance sustainable growth." Developments & Outlook 1. The Grenadian economy continues to grow robustly. GDP expanded by 4 1/4 percent in 2018, driven by strong activity in construction and tourism. Unemployment has been falling, but remains high at 21.7 percent as of mid-2018. Inflation has remained low. After trending down for several years, bank credit growth has turned positive with continued improvements in asset quality, while lending by credit unions has continued to expand rapidly. The external current account deficit likely narrowed in 2018 due to strong tourism receipts, but remains elevated at around 11 percent of GDP. Robust FDI flows, including from the citizenship-by-investment (CBI) program, are financing the external deficit while supporting economic growth. 2. Adherence to the fiscal responsibility framework has enabled further debt reduction. The key targets under the Fiscal Responsibility Law (FRL) are estimated to have been met. The fiscal surplus increased further in 2018, reflecting a combination of strong revenues and the FRL-mandated expenditure restraint. The public wage bill has been contained by the attrition policy, although several strategic exemptions and relaxations have recently been introduced to this policy. Low execution of grant financing and institutional bottlenecks in project execution combined to keep capital outlays subdued at 2 3/4 percent of GDP. Central government debt fell from 70 to 63 1/2 percent of GDP in 2018, but arrears to certain bilateral creditors remain to be regularized. This measure of debt excludes non-guaranteed debt of public enterprises of around 3.4 percent of GDP and the debt to Petrocaribe (some 11½ percent of GDP). The improved debt situation has helped lower interest rates and boost access to concessional financing. Robust CBI inflows have helped channel sizable resources to the contingency fund that could be used for mitigating the effects of natural disasters. 3. Economic prospects are promising, but risks are tilted to the downside. Growth is set to remain solid in 2019, but is projected to ease somewhat over the medium-term, consistent with a waning of FDI-driven construction. The fiscal position is projected to loosen in line with the FRL's provisions that take effect after public debt falls below 55 percent of GDP, and should provide some support to the economy. External risks are mainly on the downside, and are centered on prospects for U.S. growth and global financial conditions. Domestic risks are two-way. On the one hand, the use of the fiscal space for productive investment could improve growth. On the other hand, boosting public spending, without reforms aimed at improving efficiency and productivity, could undermine long-term growth. Other risks include the loss of corresponding banking relationships, damaging natural disasters, pension settlements or other spending that could breach the FRL, and regional risks due to spillovers from Venezuela. Fiscal Policy 4. The FRL has been successful in guiding fiscal policy to date, but its next phase of implementation should strike a proper balance between fiscal prudence and much-needed increases in productive spending. The government's 3-year medium-term fiscal framework charts a policy course of continued large primary surpluses through 2021. However, once the public debt ratio reaches 55 percent of GDP, the FRL allows scope for recalibrating the primary balance target to stabilize debt at that level. An effective and prudent use of fiscal space could maximize the economy's productive potential and resilience to shocks. However, if the fiscal space is used to finance unproductive spending, it could fuel debt sustainability concerns. 5. Grenada's infrastructure and resilience gaps are key priorities that need to be addressed with the increased resource envelope. Public capital spending has been particularly low in recent years. The authorities' assessments of infrastructure and maintenance needs call for substantially raising investment spending. In addition, significant advances are being made in understanding Grenada's resilience-building needs and benefits, in the context of large expected losses from climate change. The ongoing climate change policy assessment (CCPA) has documented progress to date and laid out a comprehensive approach to address climate risks. It has identified the need for additional resilience-related investment of up to 3 percent of GDP annually over the next 10 years, some of which will need to be financed by domestic resource mobilization to back-stop and catalyze external concessional financing. 6. A scaling-up of public productive spending should have a substantial payoff for sustained growth, if it is supported by capacity improvements. The outcomes would crucially depend on specific policies and absorptive capacity improvements in public spending. Pro-actively pursuing capacity improvements (including in hiring and training professional staff and project prioritization and screening) in parallel with using the fiscal space to address infrastructure and resilience-building objectives would improve the quality and resilience of the public capital stock. Staff analysis indicates a substantial payoff of this investment for economic growth, both due to higher production and reduced losses from natural disaster and climate change events. Such investment spending could be supported by moderate increases in essential current spending and well-targeted increases in expenditures for social protection. 7. Moderate changes to the FRL and other elements of the fiscal framework could facilitate high-quality spending while further improving debt sustainability. First, targeting a safer debt level of below the FRL's current ceiling (55 percent of GDP) and shifting to a broader coverage of public debt (to include non-guaranteed SOE debt) would support a proper balance between fiscal prudence and upscaling productive spending. Second, the analysis of fiscal risks in budget documents should be strengthened -- notably to analyze and internalize fully the impact of natural disasters, climate change, and long-term aging-along with a comprehensive assessment of public enterprises, public-private partnerships, and other contingent liabilities. Third, the primary expenditure rule could be re-framed to simplify its operation and facilitate resilience-building objectives. However, prior to making any changes to the fiscal rule, significant enhancements should be made to boost capacity to implement resilience-related spending and improve the classification criteria and institutional accountability framework. The provisions of the medium-term debt management strategy that public capital spending be financed only from concessional sources should be reinforced. The changes to the FRL should be carefully prepared to allow sufficient time for fully-consistent implementation. 8. Extensive "second-generation" reforms should anchor improvements in the spending structure and implementation capacity in the following areas. Public service and wage bill. The pace of implementation of the 2017-19 Public Management Reform Strategy has been slower than anticipated. Functional reviews, development of performance indicators, and payroll audits of ministries should be accelerated. Given the delays in these reforms, prudent wage setting parameters should be agreed for the new 2020-22 bargaining cycle. Public investment management. The new institutional structure for coordinating capital projects that was created in early-2019 has yet to be tested. In any case, planning and implementation of public investment projects should be improved across the board, through better screening and design of projects, enhanced project management capacity, fuller information on inventory and valuation of public assets, continued improvements in public procurement, and more rigorous project prioritization criteria. Public enterprises. The oversight committee for advising SOE operations should be re-activated and progress in adjusting tariffs to reflect cost recovery and investment needs should be followed through in the water sector and implemented in other sectors. Social assistance. Social protection programs should be strengthened and consolidated around the Support for Education, Empowerment, and Development (SEED) program. Pensions. The immediate costs of public pensions and health care initiatives should be contained and spillovers for increases in future spending limited through parametric reforms. The reforms to raise social security contribution rates initially from 9 to 11 percent and gradually increase general retirement age from 60 to 65 should be followed through as part of a package of measures to contain the costs of aging as well as insure the viability of the national insurance scheme and sustainability of pension benefits. Other policies 9. Financial sector policies need to monitor potential imbalances to solidify the sector's contribution to growth. In the banking sector, the impact on competition and corresponding banking relationships from the envisaged sale of Scotiabank should be analyzed and monitored. The rapid expansion of lending by credit unions should be matched by strengthening their oversight, data provision, and capital buffers. Growing property markets and proliferation of non-bank financial intermediaries raise the need for a full assessment of risks, including by monitoring systemic financial institutions, analyzing interconnectedness, and collecting better property market data. New accounting (IFRS9) and bank valuation and provisioning standards call for careful implementation strategies. The capacity of GARFIN and its coordination with ECCB and ECCU's peer regulators should be further strengthened, with a view to continually harmonizing oversight of non-banks. This is particularly important for the insurance sector, which has extensive cross-border linkages. Strict compliance with AML/CFT standards and due diligence requirements should help to forcefully pre-empt any related concerns, as well as risks to correspondent banking relationships. 10. Improving the business environment and labor market institutions should help make private sector growth more broad-based, resilient, and job-intensive. Grenada's Doing Business rankings continue to denote sizable gaps in the processing of construction permits, property and land registration, trading across borders, and investor protection. Ongoing efforts to close gaps through digitalization of procedures should be intensified. Further steps are needed, notably to reduce high port charges and other export/import costs and dismantle monopolies on export/import of certain products. Recent progress in promoting links between tourism and other sectors (agriculture) should be further enhanced and expanded by improving conditions for medical, sports, and educational tourism. The operationalization of the public utilities regulatory commission should be used as an opportunity to unlock investment in renewables. Improved labor market institutions are needed to match job opportunities with Grenada's still-young labor force. Upgrading education, existing training programs, and employment matching services (through well-functioning central depository of labor market data) should help tap this potential. 11. Grenada could benefit from integrated strategies that leverage further improvements in operational planning, statistics, governance, and implementation capacity. Grenada's forthcoming 2020-35 development plan should be supported by successor medium-term plans to operationalize progress, secure financing, and ensure implementation. A national Disaster Resilience Strategy could target comprehensive improvements in resilient infrastructure, financial protection, and post-disaster response. The strategy could act as a platform for coordinated action and support from development partners. All these plans should rely on the development of strong monitoring and evaluation systems and improved statistics, with the overdue update of social data being essential to the design of inclusive growth policies. These steps require improved economic governance and better coordination between all government's agencies. ============= J A M A I C A ============= JAMAICA: Vows to Continue Gains Made After IMF Arrangement Ends --------------------------------------------------------------- RJR News reports that Finance Minister Dr Nigel Clarke has said the Jamaican government will continue to build on the gains made under the current Stand-By Arrangement with the International Monetary Fund (IMF) when the program formally comes to an end in November later this year. Addressing the 64th Annual Awards Ceremony of the St Ann Chamber of Commerce, Dr. Clarke disclosed that the Government has agreed with the IMF that the Fund will keep its office and staff in Jamaica, inclusive of the IMF Resident Representative, for two years after the end of the Stand-By Arrangement, according to RJR News. The report relays that Dr. Clarke emphasized that the IMF Resident Representative for Jamaica will be available, as obtains now, to provide views on relevant matters, participate in public fora and be available to any Jamaican group which may wish to consult. As reported in the Troubled Company Reporter-Latin America on Sept. 27, 2018, S&P Global Ratings revised its outlook on Jamaica to positive from stable. At the same time, S&P affirmed its 'B' long-and short-term foreign and local currency sovereign credit ratings, and its 'B+' transfer and convertibility assessment on the country. =========== M E X I C O =========== MEXICO: Cabinet Goes Through Revamp ----------------------------------- EFE News reports that Mexican President Andres Manuel Lopez Obrador said that he was not ruling out more changes to his Cabinet following the resignations of two officials in recent days. "If there's an imbalance, before there were eight women and eight men (in the Cabinet). But we're going to fix it because there may perhaps be other changes, and that will balance things," Lopez Obrador, the founder and leader of the leftist National Regeneration Movement (Morena), said during his daily press conference at the National Palace, according to EFE News. The report notes that Lopez Obrador said Victor Manuel Toledo would be the new head of the Environment and Natural Resources Secretariat, replacing Josefa Gonzalez Blanco, who resigned amid a controversy over an airline flight. Gonzalez Blanco submitted her resignation letter on Saturday to Lopez Obrador, popularly known as AMLO, the report relays. The former environment secretary said she was out of line for making a commercial airline flight wait for her after arriving at the airport late, the report says. Toledo is "a professional specialist in this area," AMLO said. With Toledo's appointment, the Cabinet will no longer have an equal number of men and women, the report discloses. AMLO named Sen. Ricardo Ahued as head of the customs service, replacing Ricardo Peralta, who was named government undersecretary. Peralta succeeds Zoe Robledo, who was named director of the Mexican Social Security Institute (IMSS). The former IMSS chief, German Martinez Cazares, resigned to protest budget cuts that he said made it difficult to serve the public, the report notes. Toledo, according to information provided by the Office of the President, holds a doctorate from the National Autonomous University of Mexico (UNAM), has published 200 papers and founded and ran a research network, the report relays. Ahued, for his part, served as a senator from Veracruz and was the mayor of Xalapa from 2005 to 2007, the report adds. The politician, who held a seat in the lower house of Congress from 2009 to 2012, was a member of the Senate Finance and Public Credit Committee, the Justice Committee and the Water Resources Committee, among others, the report relays. ===================== P U E R T O R I C O ===================== SEARS HOLDINGS: Santa Rosa Mall Objects to Disclosure Statement --------------------------------------------------------------- Santa Rosa Mall, LLC, objects to the Disclosure Statement explaining Sears Holdings Corporation's Chapter 11 Plan. Santa Rosa Mall points out that the Disclosure Statement does not mention and/or take into account Santa Rosa Mall's proposed scenario in which the Insurance Proceeds for the damages caused by Hurricanes Irma and Maria for Store No. 1915 are not part of the bankruptcy estate which is a matter pending resolution by this Honorable Court. Santa Rosa Mall further points out that the Disclosure Statement and/or its supplement exhibits do(es) not afford any information whatsoever as to the existence, status or whereabouts of Insurance Policy No.PTNAM1701557 Attorneys for Santa Rosa Mall, LLC: Sonia E. Colon Colon, Esq. Gustavo A. Chico-Barris, Esq. 221 Ponce de Leon Avenue, 5th Floor San Juan, PR 00917 Telephone: (787) 766-7000 Facsimile: (787) 766-7001 Email: scolon@ferraiuoli.com gchico@ferraiuoli.com About Sears Holdings Sears Holdings Corporation (NASDAQ: SHLD) -- http://www.searsholdings.com/-- began as a mail ordering catalog company in 1887 and became the world's largest retailer in the 1960s. At its peak, Sears was present in almost every big mall across the U.S., and sold everything from toys and auto parts to mail-order homes. Sears claims to be is a market leader in the appliance, tool, lawn and garden, fitness equipment, and automotive repair and maintenance retail sectors. Sears and Kmart merged to form Sears Holdings in 2005 when they had 3,500 US stores between them. Kmart emerged in 2005 from its own bankruptcy. Unable to keep up with online stores and other brick-and-mortar retailers, a long series of store closings has left it with 687 retail stores in 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands as of mid-October 2018. The Company employs 68,000 individuals, of whom 32,000 are full-time employees. As of Aug. 4, 2018, Sears Holdings had $6.93 billion in total assets, $11.33 billion in total liabilities and a total deficit of $4.40 billion. Unable to cover a $134 million debt payment due Oct. 15, 2018, Sears Holdings Corporation and 49 subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 18-23538) on Oct. 15, 2018. The Hon. Robert D. Drain is the case judge. Weil, Gotshal & Manges LLP is serving as legal counsel and M-III Partners is serving as restructuring advisor. Aebersold, Managing Director, and Levi Quaintance, Vice President of Lazard Freres & Co. LLC serve as investment banker to Holdings. DLA Piper LLP is the real estate advisor. Prime Clerk is the claims and noticing agent. The U.S. Trustee for Region 2 appointed nine creditors, including the Pension Benefit Guaranty Corp., and landlord Simon Property Group, L.P., to serve on an official committee of unsecured creditors. Akin Gump Strauss Hauer & Feld LLP is counsel to the creditors' committee. FTI Consulting is financial advisor to the creditors' committee. Houlihan Lokey Capital, Inc., is providing investment banking services to the committee. SEARS HOLDINGS: Winners Objects to Disclosure Statement ------------------------------------------------------- Winners Industry Co., Ltd., an administrative expense claimant and a creditor, files a limited objection to Sears Holdings Corporation, et al.'s Motion For An Order Approving Disclosure Statement. Winners points out that the Debtors' estimate of Administrative Expense Claims (including, specifically, 503(b)(1)(A) & (b)(9) vendor Administrative Expense Claims) does not disclose the calculation method. Winners further points out that the difference in calculation method is far from trivial. According to Winners, it may cause further doubt on the Debtors' administrative solvency, and thus their ability to confirm a plan, as the Official Committee of Unsecured Creditors has noted. Counsel for Winners: H. Jeffrey Schwartz, Esq. James H. Smith, Esq. McKool Smith, P.C. One Bryant Park, 47th Floor New York, NY 10036 Tel: (212) 402-9400 Fax: (212) 402-9444 -- and -- Benjamin W. Hugon, Esq. McKool Smith, P.C. 600 Travis Street, Suite 7000 Houston, TX 77002 Tel: (713) 485-7300 Fax: (713) 485-7344 About Sears Holdings Sears Holdings Corporation (NASDAQ: SHLD) -- http://www.searsholdings.com/-- began as a mail ordering catalog company in 1887 and became the world's largest retailer in the 1960s. At its peak, Sears was present in almost every big mall across the U.S., and sold everything from toys and auto parts to mail-order homes. Sears claims to be is a market leader in the appliance, tool, lawn and garden, fitness equipment, and automotive repair and maintenance retail sectors. Sears and Kmart merged to form Sears Holdings in 2005 when they had 3,500 US stores between them. Kmart emerged in 2005 from its own bankruptcy. Unable to keep up with online stores and other brick-and-mortar retailers, a long series of store closings has left it with 687 retail stores in 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands as of mid-October 2018. The Company employs 68,000 individuals, of whom 32,000 are full-time employees. As of Aug. 4, 2018, Sears Holdings had $6.93 billion in total assets, $11.33 billion in total liabilities and a total deficit of $4.40 billion. Unable to cover a $134 million debt payment due Oct. 15, 2018, Sears Holdings Corporation and 49 subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 18-23538) on Oct. 15, 2018. The Hon. Robert D. Drain is the case judge. Weil, Gotshal & Manges LLP is serving as legal counsel and M-III Partners is serving as restructuring advisor. Aebersold, Managing Director, and Levi Quaintance, Vice President of Lazard Freres & Co. LLC serve as investment banker to Holdings. DLA Piper LLP is the real estate advisor. Prime Clerk is the claims and noticing agent. The U.S. Trustee for Region 2 appointed nine creditors, including the Pension Benefit Guaranty Corp., and landlord Simon Property Group, L.P., to serve on an official committee of unsecured creditors. Akin Gump Strauss Hauer & Feld LLP is counsel to the creditors' committee. FTI Consulting is financial advisor to the creditors' committee. Houlihan Lokey Capital, Inc., is providing investment banking services to the committee. ================= V E N E Z U E L A ================= VENEZUELA: Opposition Will Return to Norway For Talks, Oslo Says ---------------------------------------------------------------- Terje Solsvik at Reuters reports that representatives of Venezuela's government and the opposition will return to Norway for a second round of talks to help resolve their months-long conflict, the Norwegian Foreign Ministry said. "We announce that the representatives of the main political actors in Venezuela have decided to return to Oslo to continue a process facilitated by Norway," the ministry said in a statement obtained by Reuters. "We reiterate our commitment to continue supporting the search for an agreed-upon solution between the parties in Venezuela," it added, the report notes. Commenting on the initial talks earlier this month, Venezuelan President Nicolas Maduro said he hoped the discussions would help to "build a peaceful agenda," the report discloses. Tensions in the crisis-stricken South American country escalated after a failed uprising last month led by opposition leader Juan Guaido, who called on the military to oust Maduro, the report says. The report notes that Guaido has insisted that any agreement would require Maduro to step down. Many sectors of the opposition remain skeptical of talks, arguing that Maduro has in the past used dialogue as a stalling tactic to maintain his grip on power, the report discloses. Norway's foreign ministry has a tradition of mediation in countries and regions riven by conflict, the report relays. "Norway commends the parties for their efforts and appreciates their disposition," Foreign Minister Ine Eriksen Soereide said, the report notes. The report recalls that Venezuela was thrust into a deep power struggle in January when Guaido, the leader of the opposition-controlled National Assembly, invoked the constitution to assume an interim presidency, arguing Maduro's 2018 re-election was illegitimate. The United States and many European countries have recognized Guaido as Venezuela's rightful leader, but Maduro retains control of state functions and the support of the military, as well as allies like Russia, Cuba and China, the report relays. Economic collapse has driven more than 3 million Venezuelans to emigrate, fleeing hyperinflation and shortages of food and medicine, the report adds. As reported in the Troubled Company Reporter-Latin America, S&P Global Ratings in May 2018 removed its long- and short-term local currency sovereign credit ratings on Venezuela from CreditWatch with negative implications and affirmed them at 'CCC-/C'. The outlook on the long-term local currency rating is negative. At the same time, S&P affirmed its 'SD/D' long- and short-term foreign currency sovereign credit ratings on Venezuela. S&P's transfer and convertibility assessment remains at 'CC'. ********* 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. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *