/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/190905.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 Thursday, September 5, 2019, Vol. 20, No. 178 Headlines A N T I G U A A N D B A R B U D A LIAT: Needs New Shareholders, Gonsalves Says A R G E N T I N A ARGENTINA: Fitch Upgrades LT Issuer Default Ratings to 'CC' ARGENTINA: Vulture Funds Circle, Waiting for Right Time to Buy BUENOS AIRES: Fitch Downgrades LT Issuer Default Rating to B- BUENOS AIRES: Moody's Downgrades Issuer Rating to Caa2 CAMUZZI GAS: Moody's Downgrades Corp. Family Rating to Caa1 CORDOBA: Moody's Cuts FC Debt Rating to Caa2 EMPRESA DISTRIBUIDORA: Moody's Lowers Corp. Family Rating to Caa1 PAMPA ENERGIA: Moody's Downgrades Sr. Unsec. Notes Rating to Caa1 TELECOM ARGENTINA: Moody's Downgrades Corp. Family Rating to Caa1 B R A Z I L BANCO DO ESTADO: Moody's Affirms Ba2 LC Deposit Rating, Outlook Neg COMPANHIA ENERGETICA: Moody's Affirms B1 CFR, Outlook Now Pos. OURO VERDE: Fitch Affirms 'B' LT IDR, Outlook Positive VALE SA: Moody's Affirms Ba1 CFR, Alters Outlook to Stable VALE SA: Moody's Affirms Ba1 Sr. Unsec Notes Rating, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Jan - July Revenue Jumps 10.1% to US$7.7BB DOMINICAN REPUBLIC: Power Companies Meet National Demand H A I T I HAITI: Crisis Deepens, Gas Shortage Result in Violent Protests M E X I C O METROFINANCIERA SAPI: Moody's Lowers Series A Certs Rating to Caa2 V E N E Z U E L A CITGO PETROLEUM: S&P Affirms 'B-' Long-Term ICR - - - - - ===================================== A N T I G U A A N D B A R B U D A ===================================== LIAT: Needs New Shareholders, Gonsalves Says -------------------------------------------- Marlon Madden at Barbados Today reports that one shareholder government in the cash-strapped regional airline, LIAT, has no confidence that the regional private sector will be willing to pump any money into its operations. And while Prime Minister of St Vincent and the Grenadines Dr. Ralph Gonsalves does not see the selling of the airline's shares making any difference to its operations, he believes it is time the regional carrier gets new shareholders, according to Barbados Today. His comments come amidst ongoing discussions between officials of majority shareholder Barbados and those of Antigua and Barbuda, as to how much the latter was willing to pay to acquire most of Barbados' shares in the airline, the report notes. Stopping short of entirely dismissing the notion of a sale of shares from one government to the next, Gonsalves described the discussions between Bridgetown and St John's as a "work in progress", but told Barbados Today in a brief interview that what the airline needed now were significant injections of capital from new sources, the report relays. "Even if Barbados sells significant portion of its shares and Antigua gets the majority, Barbados will remain a significant player because it will still be on the board. The truth is this, what LIAT needs is a heavy dose of new equity capital. That is the issue as I see it, rather than the buying of shares from one country by another--to have more money inside of LIAT to help it to do the necessary and desirable restructuring to serve the public better and improve LIAT's bottomline," the report quoted Mr. Gonsalves as saying. Bridgetown currently has a 49 per cent stake in the island-hopping airline, while St John's has a 34 per cent stake, the report relays. About three months ago it was made public that the Antigua government had put forward a proposal to purchase almost all of Barbados' shares, and about a month later Prime Minister Mia Mottley confirmed this, while announcing that she had agreed to sell, the report notes. Officials are still tight-lipped on the details of the proposal and how it would impact on Barbados' relationship with the carrier, but reports are that Antigua, where the airline is based, could acquire up to 47 per cent of Barbados' shares, making it the largest shareholder government of the airline, which has been undergoing some restructuring, the report notes. The other shareholders are Dominica, St Vincent and the Grenadines and Grenada, the report relays. Gonsalves told Barbados Today that although the airline was desperately in need of funding, which should also come from destinations that benefit from its service, he questioned their willingness to fund an operation that is inefficient. LIAT currently employs some 600 people and operates just over 490 flights per week to 15 destinations, the report notes. Gonsalves insisted that necessary funding of the struggling airline needs to come from a number of different sources, from all the existing shareholders, but more importantly, from "new shareholders," the report notes. "I don't see the private sector putting in money, although I am told that some of them want to, but I have been hearing that for quite a while. So other governments served by LIAT should put up some money," insisted Gonsalves, the report relays. "You provide support for that route, but the critical issue there is what is the extent of that support which you are asking; is the support to subsidize any inefficiency of LIAT or support to finance an optimal level of efficiency?" he said, the report discloses. Earlier this year, officials urged Caribbean countries to put up US$5.4 million under a minimum revenue guarantee scheme to keep the airline afloat, the report relays. While existing shareholding governments have so far agreed to the proposed contribution, it is not immediately clear if Barbados will go through with its US$1.614 million that was being asked considering the pending sale of its majority shares, the report notes. It is also not yet known if Guyana, St Kitts and Nevis and St Lucia have agreed to the minimum revenue guarantee proposal for them to contribute US$292,282, US$389,691 and US$584,536, respectively, the report discloses. Under the scheme St Vincent and the Grenadines would put up US$723,711, Grenada US$487,113 and Dominica US$347,938, figures calculated based on the number of weekly flights to the destinations, the report adds. About LIAT LIAT Ltd., formerly known as Leeward Islands Air Transport or LIAT, is an airline headquartered on the grounds of V. C. Bird International Airport in Antigua. It operates high-frequency inter-island scheduled services serving 15 destinations in the Caribbean. The airline's main base is VC Bird International Airport, Antigua and Barbuda, with bases at Grantley Adams International Airport, Barbados and Piarco International Airport, Trinidad and Tobago. The airline is owned by seven Caribbean governments, with three being the major shareholders: Barbados, Antigua & Barbuda and St. Vincent and the Grenadines along with Dominica(94.7 %); other Caribbean governments, private shareholders and employees (5.3%). In the last few years, LIAT has been challenged with financial difficulties, often needing additional funding as the airline dealt with the high cost of operations. In November 2016, the Barbados government defended LIAT's operations, even as opposition legislators called for a cessation of the business. In early 2015, LIAT offered early retirement packages to employees in efforts to downsize. In 2014, LIAT knew it had to deal with unprofitable routes to make operations viable. In the third quarter of 2013, the airline's top management was shaken, with news Chief Executive Officer Captain Ian Brunton's sudden resignation. LIAT's current chief executive officer is Julie Reifer-Jones, chairman is Jean Holder, and chief financial officer is Rojer Inglis. Dr. Ralph Gonsalves, prime minister of St. Vincent & the Grenadines, serves as chairman of LIAT shareholders. ================= A R G E N T I N A ================= ARGENTINA: Fitch Upgrades LT Issuer Default Ratings to 'CC' ----------------------------------------------------------- Fitch Ratings has upgraded Argentina's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'CC' from 'RD', and its Short-Term Foreign- and Local-Currency IDRs to 'C' from 'RD'. The issue ratings on Argentina's senior unsecured foreign-currency bonds remain at 'CC'. Fitch has downgraded the Country Ceiling to 'CCC' from 'B-'. KEY RATING DRIVERS Fitch has upgraded Argentina's Long-Term IDRs to 'CC' from 'RD' (Restricted Default) following the payment of short-term debt instruments on Aug. 30 under revised terms imposed via presidential decree, which effectively constitutes the conclusion of an exercise that Fitch categorized as a 'distressed debt exchange' (DDE). This marks the first payment on these peso- and USD-denominated short-term instruments (Letes, Lecaps, Lecer and Lelink) under a new schedule that extends upcoming repayments by six months through October 2020. Argentina's 'CC' Long-Term IDRs reflect Fitch's expectation that a further default or debt restructuring of some kind is probable. The government has announced plans to pursue a re-profiling of select long-term bonds issued under both local and foreign law. It has indicated that it has already started to engage holders of foreign-law bonds in a renegotiation process, and it will consult congress to pursue a similar course with holders of local-law bonds. Commencement of a default or default-like process would initially result in a downgrade to 'C'. Fitch expects such a re-profiling, should it occur, is likely to entail a material reduction in terms and be conducted to avoid a traditional payment default and thus would constitute a DDE. Risks of a traditional payment default also remain, however, given the government's constrained liquidity position and political and economic uncertainties that could complicate a timely debt renegotiation process. The downgrade of the Country Ceiling to 'CCC' reflects the recent imposition of capital controls as of September 2 and risks that these could be tightened further given the sovereign's limited foreign financing options, especially as the authorities attempt to prevent a continued decline in international reserves. Fitch believes the current controls and risks of further tightening could potentially impair the private sector's ability to access foreign exchange to meet debt service, in spite of exceptions that have been included in the controls for debt repayment. This rating action follows several weeks of extreme financial instability triggered by the adverse market reaction to the results of primary elections on August 11. This posed a major setback to macroeconomic stabilization efforts and sovereign financing conditions, which led Fitch to downgrade Argentina's ratings to 'CCC' on Aug. 16. Following the government's announcement on Aug. 28 that it would delay repayment on its short-term debt instruments to alleviate liquidity constraints and protect central bank international reserves, Fitch downgraded the ratings to 'RD' on Aug. 30 as the new repayment schedule took effect. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) In accordance with its rating criteria, for ratings of 'CCC' and below, Fitch's sovereign rating committee has not utilized the SRM and QO to explain the ratings, which are instead guided by the relevant ratings definitions for the CCC-D categories. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. RATING SENSITIVITIES The main factors that could, individually, or collectively, lead to a positive rating action include: - Developments that alleviate financing constraints and enable the government to meet its debt service obligations on a sustained basis. The main factors that could, individually, or collectively, lead to a negative rating action include: - Signs of imminent default on commercial debt obligations; for example, a formal launch of a debt exchange proposal involving a material reduction in terms and taken to avoid a traditional payment default. KEY ASSUMPTIONS Fitch expects growth of the global economy, and that of key trading partner Brazil, in line with the projections outlined in its latest Global Economic Outlook publication. ARGENTINA: Vulture Funds Circle, Waiting for Right Time to Buy -------------------------------------------------------------- Aline Oyamada and Sydney Maki at Bloomberg News report that the sell-off in Argentina bonds is so severe that it may soon attract distressed-debt investors betting that there's money to be made in a restructuring. With overseas notes trading at about 38 cents on the dollar, the vulture funds are probably still a ways from swooping in, according to Bloomberg News. Shops including Morgan Stanley and Merian Global Investors expect buyers with a strong appetite for risk will emerge at about 30 cents, Bloomberg News relates. "The market will go lower and distressed investors will step in at some point, even with the uncertainty," said Alain Nydegger, a money manager at Pala Assets in Switzerland, which focuses on emerging-market debt, Bloomberg News notes. Less than five years after settling with holdout creditors from a record default in 2001, Argentina is again looking like a ripe target for funds that specialize in wringing value out of distressed assets, Bloomberg News discloses. Following a market rout in the wake of a primary election that showed the populist opposition likely to win the presidency this year, the government said it will impose capital controls as an emergency measure to shore up the peso, Bloomberg News relates. Money managers and analysts had been saying that bondholders were likely to recoup 30 cents-to-40 cents on the dollar on Argentina's international notes if the country goes through with a restructuring, Bloomberg News notes. So far, the government has said it wants to delay payments on up to $101 billion of debt, Bloomberg News relays. Nydegger said that at 30 cents on the dollar the bonds start to look appealing, but some distressed funds would likely start adding at 35 cents, Bloomberg News says. He said he would start buying at between 25 and 30 cents, figuring he'd make a profit with a 50% haircut if negotiations take three years, notes the report. Argentina's century bonds, among the most traded, edged lower Sept. 3 to 37.7 cents on the dollar, according to Bloomberg News. Dollar notes due in 2048 changed hands at similar levels, while euro-denominated bonds due in 2028 and 2038 were slightly lower near 35 cents. Distressed debt investors will probably wait until Argentine bonds are well below expected recovery values before buying, said Eric Baurmeister, who helps manage $12 billion in emerging-market debt at Morgan Stanley Investment Management Inc. in New York, Bloomberg News relates. Prices could drop to 20 cents on the dollar or lower, he said in an interview. "What I fear--and what I think is likely--is that we're in the beginning of this," Baurmeister said, notes the report. "It's a little bit like the proverbial Pandora's Box, and once you say that we're going to restructure, then everything's on the table," he added. Bloomberg News notes that holders of Argentine bonds issued in the past few years are bound by collective-action clauses that will limit their ability to seek a settlement apart from the majority of investors. That means there won't be an exact repeat of what happened after the 2001 default, when a fund controlled by Paul Singer's Elliott Management took Argentina to court for full repayment instead of accepting the terms to which most creditors agreed, Bloomberg News relates. Argentine assets and foreign reserves have been plunging since the Aug. 11 primary election, the report says. Investors concerned that a government led by opposition candidate Alberto Fernandez would prioritize social spending over shoring up the budget has sent the peso down 19% since the vote, while reserves dropped $13 billion, or almost 20%, to $53.1 billion, notes Bloomberg News. Under the rules disclosed, companies in Argentina now need the central bank's authorization to buy dollars in the foreign-exchange market, except in cases of international trade, Bloomberg News relates. Individual Argentines, meanwhile, are limited to dollar purchases of no more than $10,000 a month, Bloomberg News says. Bonds may fall to the low 30-cents level before catching a bid, Morgan Stanley strategists led by James Lord wrote in a report. Delphine Arrighi, a London-based portfolio manager at Merian Global Investors, also cited the 30-cent level as potentially appealing to some investors, Bloomberg News says. That, however, depends on the policy signals given by the incoming administration, she said. Argentina's valuations are "certainly starting to look more attractive," even as investors search for clarity, said Graham Stock, a senior emerging-market sovereign strategist at BlueBay Asset Management in London, reports Bloomberg News. "At these kind of levels, I think not just distressed, but dedicated investors are going to start to look at adding positions again." About Argentina As reported in the Troubled Company Reporter-Latin America on Sept. 4, 2019, S&P Global Ratings raised on Aug. 30, 2019, its foreign and local currency sovereign credit ratings on Argentina to 'CCC-/C' from 'SD'. The outlook on the long-term ratings is negative. In addition, S&P raised its short-term issue ratings to 'C' from 'D'. S&P also raised the national scale rating to 'raCCC-' from 'SD'. S&P said, "The negative outlook reflects the prominent downside risks to payment of debt on time and in full per our criteria over the coming months amid very complex political, economic, and financial market dynamics. S&P previously lowered its sovereign credit ratings on Argentina to 'SD' from a long-term rating of 'B-' and a short-term rating of 'B' on Aug. 29, 2019. On Sept. 3, 2019, the TCRLA reported that Moody's Investors Service downgraded the Government of Argentina's foreign-currency and local-currency long-term issuer and senior unsecured ratings to Caa2 from B2. The senior unsecured ratings for shelf registrations were also downgraded to (P)Caa2 from (P)B2. The outlook on these ratings has been changed to ratings under review from negative. On Aug. 20, 2019, Fitch Ratings has downgraded the sovereign ratings of Argentina, including its Long-Term Foreign-Currency Issuer Default Rating to 'CCC' from 'B'. The downgrade reflects elevated policy uncertainty following the Aug. 11 primary elections, a severe tightening of financing conditions, and an expected deterioration in the macroeconomic environment that increase the likelihood of a sovereign default or restructuring of some kind. Back in July 2014, Argentina defaulted on some of its debt, after expiration of a 30-day grace period on a US$539 million interest payment. Earlier that day, talks with a court-appointed mediator ended without resolving a standoff between the country and a group of hedge funds seeking full payment on bonds that the country had defaulted on in 2001. A U.S. judge had ruled that the interest payment couldn't be made unless the hedge funds led by Elliott Management Corp., got the US$1.5 billion they claimed. The country hasn't been able to access international credit markets since its US$95 billion default 13 years ago. On March 30, 2016, Argentina's Congress passed a bill that will allow the government to repay holders of debt that the South American country defaulted on in 2001, including a group of litigating hedge funds that won judgments in a New York court. The bill passed by a vote of 54-16. BUENOS AIRES: Fitch Downgrades LT Issuer Default Rating to B- ------------------------------------------------------------- Fitch Ratings has downgraded 10 Argentine Local and Regional Governments (LRGs) following the downgrade of Argentina's sovereign rating to 'RD' from 'CCC' on Aug. 30, 2019. Buenos Aires, City of LT IDR; B- Downgrade; previously at B ST IDR; B Affirmed; previously at B LC LT IDR; B- Downgrade; previously at B LC ST IDR; B Affirmed; previously at B Sr. Unsec. LT; B- Downgrade; previously at B Cordoba, Province of LT IDR; B- Downgrade; previously at B LC LT IDR; B- Downgrade; previously at B Sr. Unsec. LT; B- Downgrade; previously at B Santa Fe, Province of LT IDR; B- Downgrade; previously at B LC LT IDR; B- Downgrade; previously at B Sr. Unsec. LT; B- Downgrade; previously at B Salta, Province of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Sec. LT; CCC Downgrade; previously at B Sr. Unsec. LT; CCC Downgrade; previously at B Chubut, Province of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Sec. LT; CCC Downgrade; previously at B Neuquen, Province of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Sec. LT; CCC Downgrade; previously at B Sr. Unsec. LT; CCC Downgrade; previously at B Cordoba, Municipality of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Unsec. LT; CCC Downgrade; previously at B Chaco, Province of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Unsec. LT; CCC Downgrade; previously at B Entre Rios, Province of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Unsec. LT; CCC Downgrade; previously at B La Rioja, Province of LT IDR; CCC Downgrade; previously at B LC LT IDR; CCC Downgrade; previously at B Sr. Unsec. LT; CCC Downgrade; previously at B KEY RATING DRIVERS The downgrade of Argentina's ratings to 'RD' follows the government's unilateral extension of repayment on certain debt obligations effective August 30, specifically on short-term T-bill instruments issued under local law and denominated in USD and pesos. In accordance with its criteria, Fitch believes Argentina is in default on its sovereign obligations and that this development constitutes a 'distressed debt exchange' (DDE). Fitch has downgraded the City of Buenos Aires, Province of Santa Fe, and Province of Cordoba Long-Term Local and Foreign Currency IDRs to 'B-'/Negative from 'B'/Negative, which is currently above Argentina's IDR of 'RD' but capped by the country ceiling of 'B-'. LRG ratings are typically capped by the sovereign rating, but the rating actions on these three issuers are according to Fitch's LRG criteria. The criteria states that when a sovereign is rated below 'B-' the LRG could still be rated 'B-' if it has the capacity to withstand a sovereign default due to a strong budget, has no need to undertake external refinancing of debt in the short term, and has sufficient liquidity for it not to face an imminent default. The Standalone Credit Profiles (SCPs) of these issuers are above the sovereign rating, with City of Buenos Aires' SCP at 'bb-', Province of Santa Fe at 'bb-', and Province of Cordoba at 'b+'. Fitch downgraded Province of Salta, Province of Neuquen, Municipality of Cordoba, Province of Chaco, Province of Chubut, Province of Entre Rios, and Province of La Rioja Long-Term Local and Foreign Currency IDRs to 'CCC' from 'B'/Negative as they do not meet the above conditions stipulated in Fitch's LRG criteria to be rated 'B-' when the sovereign is rated lower than that. The SCPs of these issuers are 'ccc'. Fitch relied on its rating definitions to position these ratings. Considering the current structural weaknesses of macroeconomic recession, structurally high inflation, sharp currency depreciation, and market uncertainty Fitch classifies the Risk Profile of Argentine LRGs as 'Vulnerable'. KEY ASSUMPTIONS Fitch's key assumptions within its base case for the issuer include: -- A sharp currency depreciation of the peso during 2019-2021. -- Interest expenditure and debt amortization projected payments consider Fitch's FX projections. -- A real term decrease in taxes and federal transfers. -- Real-term salary adjustments. RATING SENSITIVITIES A downgrade of Argentina's country ceiling rating would negatively impact the LRG's ratings. BUENOS AIRES: Moody's Downgrades Issuer Rating to Caa2 ------------------------------------------------------ Moody's Latin America Agente de Calificacion de Riesgo downgraded the issuer and debt ratings on both Global/National scales and in Foreign and Local currencies of Argentine provinces and municipalities, and placed the ratings under review for downgrade. Moody's downgraded baseline credit assessments on all affected issuers that are in each case the same as their issuer rating. This portfolio-wide rating action on the Argentine sub-sovereigns follows Moody's recently announced downgrade of Argentina's local-currency and foreign-currency sovereign bond ratings to Caa2 from B2 on August 30, 2019. RATINGS RATIONALE The action follows a similar rating action on Argentina's sovereign bonds ratings --both in local and foreign currency- and reflects the very close economic and financial linkages that exist between Argentina's government and Argentine sub-sovereigns. Moody's considers that Argentine sub-sovereigns' credit quality will be negatively affected by the rise of significant systemic risks stemming from the sovereign. For the remainder of 2019, Moody's expects sub-sovereigns to see their credit quality deteriorate as a result of constrained market access, exchange rate pressures, increased financing costs and persistently high inflation. As a result, the liquidity position and fiscal flexibility of Argentine sub-sovereigns will deteriorate markedly while their debt service burden will increase. Moody's expects the review period to extend beyond the usual three-month horizon. The review will focus on the evolution of policy making at the sovereign level in the current context of market volatility. In addition, the review will focus on the specific liquidity pressures and fiscal strength of sub-sovereigns amidst the expected economic contraction and inflationary pressures. Moody's published an update to its National Scale Rating (NSR) map for Argentina to reflect the downgrade of the government's long-term issuer rating. Moody's NSRs are ordinal rankings of creditworthiness relative to other credits within a given country, which offer enhanced credit differentiation among local credits. NSRs are generated from Global Scale Ratings (GSRs) through correspondences, or maps, specific to each country. However, unlike GSRs, Moody's NSRs are not intended to rank credits across multiple countries. Instead, they provide a measure of relative creditworthiness within a single country. The full maps can be accessed through the "Index of Current and Superseded Compendia of National Scale Rating Maps by Country". As a result of the rating action on Argentina and the expected impact on other ratings, the NSR mapping was revised, from the previous map based on a Ba3 anchor point, to the one based on a B1 anchor point. Based on its rating methodology Mapping National Scale Ratings from Global Scale Ratings published in May 2016, the anchor point can never be lower than B1 even when the sovereign rating is lower as Argentina's is now. The map based on B1 provides ample ability to differentiate and rank order credits, even if some of the higher NSR ratings are no longer accessible. ISSUERS AND RATINGS AFFECTED The ratings of the following issuers were downgraded, and placed under review for downgrade: - Province of Buenos Aires: Issuer and debt ratings downgraded to Caa2/B3.ar from B2/A3.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Cordoba: Issuer and debt ratings downgraded to Caa2/B1.ar from B2/A1.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Chaco: Issuer and debt ratings downgraded to Caa2/B3.ar from B2/A3.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Chubut: Issuer and senior unsecured debt ratings downgraded to Caa3/ Caa1.ar from B3/Baa3.ar (on Global/Argentina's national scales, respectively). Senior secured debt ratings downgraded to Caa2/B2.ar from B2/A2.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Rio Negro: Issuer and debt ratings downgraded to Caa2/B3.ar from B2/A3.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Municipality of Cordoba: Issuer and debt ratings downgraded to Caa2/B2.ar from B2/A2.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - City of Buenos Aires: debt ratings downgraded to Caa2/B1.ar from B2/A1.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Formosa: Issuer and debt ratings downgraded to Caa2/B3.ar from B3/Baa3.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Misiones: Issuer and debt ratings downgraded to Caa2/B3.ar from B2/A3.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. - Province of Tucuman: Issuer ratings downgraded to Caa2/B3.ar from B2/A3.ar (on Global/Argentina's national scales, respectively). Ratings placed under review for downgrade. WHAT COULD CHANGE THE RATING UP/DOWN Given the strong macroeconomic and financial linkages between the Government of Argentina's and Sub-sovereigns, a downgrade in Argentina's bond ratings and/or further systemic deterioration could exert downward pressure on the ratings. Alternatively, increased idiosyncratic risks could translate into a downgrade. Moody's does not expect upward pressures in the rated Argentinean sub-sovereigns in the near to medium term. The principal methodology used in these ratings was Procedures Manual for Risk Rating of Sub-Sovereign Governments published in January 2017. CAMUZZI GAS: Moody's Downgrades Corp. Family Rating to Caa1 ----------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo downgraded the ratings on 10 utilities and infrastructure companies operating in Argentina and placed their ratings under review for downgrade. The rating action follows the downgrade of the Government of Argentina's senior unsecured ratings to Caa2 from B2, and placement of the ratings under review for downgrade and reflects the strong credit linkages and exposure these companies have to Argentina's regulations and operating environment. Issuers and ratings included in this action are as follows: 1) Camuzzi Gas Pampeana S.A. Corporate Family Rating downgraded to Caa1/Baa3.ar from B1/Aa3.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 2) Distribuidora De Gas Cuyana S.A. Corporate Family Rating downgraded to Caa1/Baa3.ar from B1/Aa3.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 3) NATURGY BAN S.A. Corporate Family Rating downgraded to Caa1/Baa3.ar from B1/Aa3.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 4) MetroGas S.A. Corporate Family Rating downgraded to Caa1/Ba1.ar from B1/Aa3.ar $600m Senior Unsecured EURO MTN PROGRAM ratings downgraded Caa1/Ba1.ar from B1/Aa3.ar Senior Unsecured MEDIUM TERM NOTES ratings downgraded to Caa1/Ba1.ar from B1/Aa3.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 5) Empresa Distribuidora de Electricidad Salta $65m Senior Unsecured EURO MEDIUM TERM NOTES due 2021 ratings downgraded to Ba2.ar from Aa3.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 6) Empresa Distribuidora Norte S.A. Corporate Family Rating downgraded to Baa3.ar from Aa3.ar $176m Senior Unsecured GLOBAL NOTES due 2022 ratings downgraded to Baa3.ar from Aa3.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 7) Empresa Provincial de Energiaa de Cordoba Corporate Family Rating downgraded to Caa2/B1.ar from B2/A1.ar $565m Senior Secured ARGENTINE BONDS and $100m Senior Secured NOTES ratings downgraded to Caa2/B1.ar from B2/A1.ar Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 8) Albanesi S.A. / Generacion Mediterranea S.A $336m Backed Senior Unsecured GTD GLOBAL NOTES due 2023 ratings downgraded to B2.ar from A3.ar Ratings placed under review for downgrade. 9) Transportadora de Gas del Sur S.A. Corporate Family Rating downgraded to Baa3.ar from Aa2.ar Ratings placed under review for downgrade. 10) YPF Energia Electrica S.A. Corporate Family Rating downgraded to Caa2/B1.ar from B2/A1.ar $100m Senior Unsecured NOTES ratings downgraded to Caa2/B1.ar from B2/A1.ar Ratings placed under review for downgrade. RATINGS RATIONALE The rating downgrade coupled with the placement under review for downgrade for the issuers listed above mainly reflects the downgrade and placement under review for downgrade of the sovereign, as all these companies remain subject to government regulations and local operating environment. Moody's considers that Argentine Utilities and Infrastructure companies' credit quality is negatively affected by Argentina's deteriorated operating environment. Furthermore, the regulated concessions ratings also incorporate uncertainties surrounding continuity of policies and the consistency of the regulatory frameworks and the sufficiency of rates going forward. Increased consumers' criticism, political opposition and the upcoming elections pressured the federal government to postpone a tariff adjustment expected for the second half of this year. Nevertheless, the downgrade of Argentina's regulated companies to Caa1, one notch above the sovereign rating, reflects their relatively strong credit metrics, low leverage and adequate liquidity combined with comfortable debt maturities' profiles. The downgrade of power companies reflects their exposure and reliance on the government controlled Cammesa (Compania Administradora del Mercado Electrico Argentino, the Argentine government's agency overseeing the wholesale electricity market) as their key off-taker. It also incorporates liquidity pressures and the challenges the companies in this sector face to fund their expansion plans in a more difficult economic environment, and possible lack of market access. Power companies also exhibit weaker credit profiles due to high leverage and tighter liquidity because of the financing needs arising from their investment programs. Empresa Provincial de Energia de Cordoba's (EPEC) ratings also reflect the application of Moody's Joint Default Analysis framework for Government-Related Issuers (GRI), which considers the rating of the Province of Cordoba (Caa2/B1.ar RUR Down). In addition, following this rating action, Moody's will withdraw Transportadora de Gas del Sur S.A. ratings in accordance with local regulatory requirements following the termination of the rating agreement at the request of the issuer. Moody's expects the review period to extend beyond the usual three-month horizon. The review will focus on the evolution of policy making at the sovereign level in the current context of market volatility. In addition, the review will focus on the specific liquidity pressures amidst the current macroeconomic conditions and inflationary pressures. WHAT COULD CHANGE THE RATING UP/DOWN A further downgrade of the sovereign or evidence of a significant negative shift in policies or regulations will likely result in negative rating actions for Argentine infrastructure companies. Liquidity deterioration in a more challenging operating environment could also create negative pressure on ratings for those companies in the power sector that show higher leverage and face significant investment needs in the next 12 to 18 months. Moody's does not expect upward pressures in the rated Argentinean infrastructure companies in the near to medium term. The principal methodology used in these ratings was Procedures Manual to Rate Companies and/or Securities Issued published in January 2017. CORDOBA: Moody's Cuts FC Debt Rating to Caa2 -------------------------------------------- Moody's Investors Service downgraded the issuer and debt ratings on Global Scale - foreign currency - of eight Argentine provinces and of two municipalities and placed their ratings under review for downgrade. Moody's downgraded baseline credit assessments on all affected issuers that are in each case the same as their issuer rating. This portfolio-wide rating action on the Argentine sub-sovereigns follows Moody's recently announced downgrade of Argentina's local-currency and foreign-currency sovereign bond ratings to Caa2 from B2 on August 30, 2019. RATINGS RATIONALE The action follows a similar rating action on Argentina's sovereign bond ratings--both in local and foreign currency--and reflects the very close economic and financial linkages that exist between Argentina's government and Argentine sub-sovereigns. Moody's considers that Argentine sub-sovereigns' credit quality will be negatively affected by the rise of significant systemic risks stemming from the sovereign. For the remainder of 2019, Moody's expects sub-sovereigns to see their credit quality deteriorate as a result of constrained market access, exchange rate pressures, increased financing costs and persistently high inflation. As a result, the liquidity position and fiscal flexibility of Argentine sub-sovereigns will deteriorate markedly while their debt service burden will increase. Moody's expects the review period to extend beyond the usual three-month horizon. The review will focus on the evolution of policy making at the sovereign level in the current context of market volatility. In addition, the review will focus on the specific liquidity pressures and fiscal strength of sub-sovereigns amidst the expected economic contraction and inflationary pressures. ISSUERS AND RATINGS AFFECTED The ratings of the following issuers were downgraded, and placed under review for downgrade: - Province of Buenos Aires: foreign currency debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Cordoba: foreign and local currency issuer and foreign currency debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Mendoza: foreign and local currency issuer and foreign currency debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Santa Fe: foreign currency issuer and debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Chaco: foreign currency issuer and debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Chubut: foreign currency issuer rating downgraded to Caa3 from B3 (on Global Scale) and foreign currency debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Rio Negro: foreign currency issuer and debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Province of Tierra del Fuego: foreign currency issuer rating downgraded to Caa3 from B3 (on Global Scale) and foreign currency debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - Municipality of Cordoba: foreign currency issuer and debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. - City of Buenos Aires: foreign and local currency senior unsecured debt ratings downgraded to Caa2 from B2 (on Global Scale). Ratings placed under review for downgrade. WHAT COULD CHANGE THE RATING UP/DOWN Given the strong macroeconomic and financial linkages between the Government of Argentina's and Sub-sovereigns, a downgrade in Argentina's bond ratings and/or further systemic deterioration could exert downward pressure on the ratings. Alternatively, increased idiosyncratic risks could translate into a downgrade. Moody's does not expect upward pressures in the rated Argentinean sub-sovereigns in the near to medium term. The principal methodology used in these ratings was Regional and Local Governments published in January 2018. EMPRESA DISTRIBUIDORA: Moody's Lowers Corp. Family Rating to Caa1 ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings on 11 utilities and infrastructure companies operating in Argentina and placed their ratings under review for downgrade. The rating action follows the downgrade of the Government of Argentina's senior unsecured ratings to Caa2 from B2, and placement of the ratings under review for downgrade and reflects the strong credit linkages and exposure these companies have to Argentina's regulations and operating environment. At the same time, Moody's has downgraded Agua y Saneamientos Argentinos S.A.'s (AYSA) baseline credit assessment (BCA) to caa2 from b3, while downgrading its B2 rating to Caa2 and placing the ratings under review for downgrade. Issuers and ratings included in this action are as follows: 1) Empresa Distribuidora de Electricidad Salta Corporate Family Rating downgraded to Caa1 from B1 $65m Senior Unsecured EURO MEDIUM TERM NOTES due 2021 rating downgraded to Caa1 from B1. Ratings placed under review for downgrade. 2) Empresa Distribuidora Norte S.A. Corporate Family Rating downgraded to Caa1 from B1 $176m Senior Unsecured GLOBAL NOTES due 2022 rating downgraded to Caa1 from B1 Ratings placed under review for downgrade. 3) Albanesi S.A. / Generacion Mediterranea S.A, respectively Corporate Family Rating downgraded to Caa2 from B2 $336m Backed Senior Unsecured GLOBAL NOTES due 2023 rating downgraded to Caa2 from B2 Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 4) Transportadora de Gas del Sur S.A. Corporate Family Rating downgraded to Caa1 from B1 $500m Senior Unsecured Notes due 2025 rating downgraded to Caa1 from B1 Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 5) Aeropuertos Argentina 2000 S.A. Corporate Family Rating downgraded to Caa1 from B1 $400m Senior Secured GLOBAL NOTES due 2027 rating downgraded to Caa1 from B1 Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 6) Agua y Saneamientos Argentinos S.A. Corporate Family Rating downgraded to Caa2 from B2 $500m Senior Unsecured EURONOTES due 2023 rating downgraded to Caa2 from B2 Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 7) Genneia S.A. Corporate Family Rating downgraded to Caa2 from B2 $500m Senior Unsecured GLOBAL NOTES due 2022 rating downgraded to Caa2 from B2 Ratings placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 8) MSU Energy S.A. $600m Senior Secured GLOBAL NOTES due 2025 rating downgraded to Caa2 from B3 Rating placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative 9) Stoneway Capital Corporation $665m Senior Secured GLOBAL NOTES due 2027 rating downgraded to Caa2 from B3 Rating placed under review for downgrade. Outlook, Changed To Rating Under Review From Positve 10) YPF Energia Electrica S.A. $400m Senior Unsecured GLOBAL NOTES due 2026 rating downgraded to Caa2 from B2 Rating placed under review for downgrade. Outlook, Changed To Rating Under Review From Negative RATINGS RATIONALE The rating downgrade coupled with the placement under review for downgrade for the issuers listed above mainly reflects the downgrade and placement under review for downgrade of the sovereign, as all these companies remain subject to government regulations and local operating environment. Moody's considers that Argentine Utilities and Infrastructure companies' credit quality is negatively affected by Argentina's deteriorated operating environment. Furthermore, the regulated concessions ratings also incorporate uncertainties surrounding continuity of policies and the consistency of the regulatory frameworks and the sufficiency of rates going forward. Increased consumers' criticism, political opposition and the upcoming elections pressured the federal government to postpone a tariff adjustment expected for the second half of this year. Nevertheless, the downgrade of Argentina's regulated companies to Caa1, one notch above the sovereign rating, reflects their relatively strong credit metrics, low leverage and adequate liquidity combined with comfortable debt maturities' profiles. The downgrade of power companies and power projects reflects their exposure and reliance on the government controlled Cammesa (Compania Administradora del Mercado Electrico Argentino, the Argentine government's agency overseeing the wholesale electricity market) as their key off-taker. It also incorporates liquidity pressures and the challenges the companies in this sector face to fund their expansion plans in a more difficult economic environment, and possible lack of market access. Power companies also exhibit weaker credit profiles due to high leverage and tighter liquidity because of the financing needs arising from their investment programs. The downgrade of AYSA's BCA to caa2 from b3 reflects the rapidly deteriorating environment for future tariff adjustments and its expectation of weakened standalone cash flows, which are currently insufficient to carry out the company's demanding investment plan and service debt, relying instead on its support provider, the Government of Argentina. AYSA's ratings were downgraded to Caa2 from B2 reflecting the application of Moody's joint default analysis (JDA) framework for Government Related Issuer (GRI), which incorporates the following factors: i) a BCA of caa2 as a measure for the rated entity's standalone creditworthiness, ii) the Caa2 rating of the Government of Argentina as the support provider, as well as iii) Moody's estimates of a high degree of implied government support in the case of financial distress and iv) a very high default dependence between AYSA and the Government of Argentina. Moody's expects the review period to extend beyond the usual three-month horizon. The review will focus on the evolution of policy making at the sovereign level in the current context of market volatility. In addition, the review will focus on the specific liquidity pressures amidst the current macroeconomic conditions and inflationary pressures. WHAT COULD CHANGE THE RATING UP/DOWN A further downgrade of the sovereign or evidence of a significant negative shift in policies or regulations will likely result in negative rating actions for Argentine infrastructure companies. Liquidity deterioration in a more challenging operating environment could also create negative pressure on ratings for those companies in the power sector that show higher leverage and face significant investment needs in the next 12 to 18 months. Moody's does not expect upward pressures in the rated Argentinean infrastructure companies in the near to medium term. The principal methodology used in rating Aeropuertos Argentina 2000 S.A. was Privately Managed Airports and Related Issuers published in September 2017. The principal methodologies used in rating Agua y Saneamientos Argentinos S.A. were Regulated Water Utilities published in June 2018, and Government-Related Issuers published in June 2018. The principal methodology used in rating Albanesi S.A., Genneia S.A., YPF Energia Electrica S.A. and Generacion Mediterranea S.A was Unregulated Utilities and Unregulated Power Companies published in May 2017. The principal methodology used in rating Transportadora de Gas del Sur S.A. was Natural Gas Pipelines published in July 2018. The principal methodology used in rating Empresa Distribuidora de Electricidad Salta and Empresa Distribuidora Norte S.A. was Regulated Electric and Gas Utilities published in June 2017. The principal methodology used in rating MSU Energy S.A. and Stoneway Capital Corporation was Power Generation Projects published in June 2018. PAMPA ENERGIA: Moody's Downgrades Sr. Unsec. Notes Rating to Caa1 ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings for several non-financial companies operating in Argentina, and all ratings were placed under review for downgrade. The actions follow the downgrade of the Argentine government's bond rating to Caa2 from B2, also placed on review for downgrade, on August 30, 2019. ISSUERS AND RATINGS DOWNGRADED AND PLACED UNDER REVIEW FOR DOWNGRADE Arcor S.A.I.C.'s Corporate Family Rating (CFR) and senior unsecured global notes' ratings were downgraded to B3 from Ba3. All ratings were placed under review for downgrade. Pampa Energia S.A.'s CFR and senior unsecured notes' ratings were downgraded to Caa1 from B2. The rating of the senior unsecured notes originally issued by Petrobras Argentina S.A. now assumed by Pampa Energia S.A. was also downgraded to Caa1 from B2. All ratings were placed under review for downgrade. Pan American Energy, S.L.'s CFR was downgraded to B2 from Ba3. The rating was placed under review for downgrade. Pan American Energy, S.L., Argentine Branch's backed senior unsecured global medium-term notes program rating was downgraded to (P)B2 from (P)Ba3 and the rating of the backed senior unsecured global medium-term notes was downgraded to B2 from Ba3. All ratings were placed under review for downgrade. Raghsa S.A.'s CFR and senior unsecured notes ratings were downgraded to Caa1 from B2. All ratings were placed under review for downgrade. Tecpetrol Internacional S.L.U.'s CFR was downgraded to B2 from Ba3. The rating was placed under review for downgrade. TECPETROL S.A.'s backed senior unsecured notes' rating was downgraded to B2 from Ba3. The rating was placed under review for downgrade. Telecom Argentina S.A.'s senior unsecured notes' rating was downgraded to Caa1 from B1. The rating was placed under review for downgrade. YPF Sociedad Anonima's senior unsecured notes ratings was downgraded to Caa2 from B2. The rating of the medium-term notes program was downgraded to (P)Caa2 from (P)B2. YPF's Baseline Credit Assessment (BCA) was downgraded to caa2 from b2. All ratings were placed under review for downgrade. RATINGS RATIONALE The downgrade in ratings and placement under review for downgrade for these companies follow the downgrade of the Government of Argentina's ratings to Caa2 from B2 and placement of ratings on review for downgrade on August 30, 2019. The rating actions reflect Moody's view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentine government, and thus their ratings need to closely reflect the risk that they share with the sovereign. Moody's believes that a weaker sovereign has the potential to create a ratings drag on companies operating within its borders, and therefore it is appropriate to limit the extent to which these issuers can be rated higher than the sovereign, in line with Moody's cross-sector rating methodology "Assessing the Impact of Sovereign Credit Quality on Other Ratings " published in June 2019. Moody's decision to downgrade the Government of Argentina's ratings reflects the rising expectation of losses for investors as a consequence of mounting pressures on the government's finances, most recently reflected in the government's August 28 decision to delay repayment on over $8 billion of short-term debt and to signal its intent also to restructure portions of Argentina's medium and long term debt. Also, the decision to assign Caa2 ratings reflects Moody's current assessment of losses expected should any restructuring involve a relatively limited reprofiling of debt maturities. The decision to place the Caa2 ratings under review for downgrade reflects the strong downward risk bias, given the uncertainties associated with such restructurings. The principal methodology used in rating Pampa Energia S.A., TECPETROL S.A. and Tecpetrol Internacional S.L.U. was Independent Exploration and Production Industry published in May 2017. The principal methodology used in rating Pan American Energy, S.L. and Pan American Energy, S.L., Argentine Branch was Global Integrated Oil & Gas Industry published in October 2016. The principal methodology used in rating Arcor S.A.I.C. was Global Packaged Goods published in January 2017. The principal methodology used in rating Telecom Argentina S.A. was Telecommunications Service Providers published in January 2017. The principal methodology used in rating Raghsa S.A was REITs and Other Commercial Real Estate Firms published in September 2018. The methodologies used in rating YPF Sociedad Anonima were Global Integrated Oil & Gas Industry published in October 2016, and Government-Related Issuers published in June 2018. TELECOM ARGENTINA: Moody's Downgrades Corp. Family Rating to Caa1 ----------------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo S.A. downgraded the global scale and national scale ratings for several non-financial companies operating in Argentina, and ratings were placed under review for downgrade. In the case of Quickfood S.A., the national scale rating of its backed senior unsecured notes, fully guaranteed by its parent company Marfrig Global Foods S.A. (B1 stable), was upgraded to Aa2.ar from Aa3.ar, while the other ratings remained unchanged/affirmed. The actions follow the downgrade of the Argentine government's bond rating to Caa2 from B2, also placed on review for downgrade, on August 30, 2019. ISSUERS AND RATINGS DOWNGRADED AND PALCED UNDER REVIEW FOR DOWNGARDE Arcor S.A.I.C.'s global scale and national scale senior unsecured notes' rating was downgraded to B3/A3.ar from Ba3/Aa1.ar. At the same time, Moody's Investors Service has downgraded to B3 from Ba3 the company's global scale corporate family rating (CFR) and senior unsecured global notes' rating. All ratings were placed under review for downgrade. Asociacion de Cooperativas Argentinas Coop.'s CFR and senior unsecured bank credit facility ratings were downgraded to Caa1/Baa3.ar from B1/Aa2.ar. All ratings were placed under review for downgrade. Holcim (Argentina) S.A.'s CFR was downgraded to B3/Baa1.ar from B1/Aa2.ar. The rating was placed under review for downgrade. Mirgor S.A.C.I.F.I.A.'s CFR was downgraded to Caa1/Ba1.ar from B2/A2.ar. The rating was placed under review for downgrade. Raghsa S.A.'s national scale CFR and senior unsecured note ratings were downgraded to Ba2.ar from A3.ar. At the same time, Moody's Investors Service has downgraded to Caa1 from B2 Raghsa S.A.'s global scale CFR and senior unsecured notes' rating. All ratings were placed under review for downgrade. Sullair Argentina S.A.'s CFR was downgraded to Caa1/Ba1.ar from B2/A2.ar. The rating was placed under review for downgrade. Telecom Argentina S.A.'s CFR was downgraded to Caa1/Baa3.ar from B1/Aa2.ar and the senior unsecured notes' national scale rating was downgraded to Baa3.ar from Aa2.ar. At the same time, Moody's Investors Service has downgraded to Caa1 from B1 Telecom Argentina S.A.'s global scale senior unsecured notes' rating. All ratings were placed under review for downgrade. YPF Sociedad Anonima's issuer rating and senior unsecured bank credit facility ratings were downgraded to Caa2/B1.ar from B2/A1.ar. At the same time, Moody's Investors Service has downgraded to Caa2 from B2 the company's global scale senior unsecured notes' rating and to (P)Caa2 from (P)B2 the rating of the medium-term notes program. YPF's Baseline Credit Assessment (BCA) was lowered to caa2 from b2. All ratings were placed under review for downgrade. ISSUER AND RATINGS UNCHANGED IN THE GLOBAL SCALE AND AFFIRMED/UPGDRADED IN THE NATIONAL SCALE Quickfood S.A.'s B3 CFR in the global scale was unchanged and the Baa2.ar national scale CFR was affirmed. The rating of the company's backed senior unsecured notes, fully guaranteed by its parent company Marfrig Global Foods S.A. (B1 stable), was unchanged at B1 in the global scale and upgraded to Aa2.ar from Aa3.ar in the national scale. The outlook is stable. RATINGS RATIONALE Following the downgrade of the Government of Argentina's ratings to Caa2 from B2 and placement of ratings on review for downgrade on August 30, 2019. The rating actions reflect Moody's view that the creditworthiness of these companies cannot be completely de-linked from the credit quality of the Argentine government, and thus their ratings need to closely reflect the risk that they share with the sovereign. Moody's believes that a weaker sovereign has the potential to create a ratings drag on companies operating within its borders, and therefore it is appropriate to limit the extent to which these issuers can be rated higher than the sovereign, in line with Moody's cross-sector rating methodology "Assessing the Impact of Sovereign Credit Quality on Other Ratings " published in June 2019. Moody's decision to downgrade the Government of Argentina's ratings reflects the rising expectation of losses for investors as a consequence of mounting pressures on the government's finances, most recently reflected in the government's August 28 decision to delay repayment on over $8 billion of short-term debt and to signal its intent also to restructure portions of Argentina's medium and long term debt. Also, the decision to assign Caa2 ratings reflects Moody's current assessment of losses expected should any restructuring involve a relatively limited reprofiling of debt maturities. The decision to place the Caa2 ratings under review for downgrade reflects the strong downward risk bias, given the uncertainties associated with such restructurings. The principal methodology used in these ratings was Procedures Manual to Rate Companies and/or Securities Issued published in January 2019. =========== B R A Z I L =========== BANCO DO ESTADO: Moody's Affirms Ba2 LC Deposit Rating, Outlook Neg ------------------------------------------------------------------- Moody's Investors Service affirmed all ratings assigned to Banco do Estado de Sergipe S.A., including its ba2 Baseline Credit Assessment, as well as its Ba2 and Not Prime for long- and short-term local currency deposits and Ba3 and Not Prime for long- and short-term foreign currency deposits. At the same time, Moody's changed the outlook on the Ba2 local currency deposit rating to negative from stable. The outlook on the Ba3 long-term foreign currency deposit rating remains stable. RATINGS RATIONALE The negative outlook on Banese's local currency deposit rating reflects the recent decline in the bank's capitalization ratio, following a material negative adjustment on equity that reduced its Moody's tangible common equity to risk-weighted assets ratio (TCE/RWA) in 248 basis points, to 6.6% in 2Q 2019. The adjustment was caused by the need to account the actuarial liabilities at Banese-sponsored private pension fund Instituto Banese de Seguridade Social - Sergus, triggered by the decline of Brazil's basic interest rate (SELIC). A lower capital position reduces the bank's loss-absorption capacity and limits its growth perspective and competitive strength in its regional market, where the bank holds 41% of loan market share. The sizable decline in the capitalization ratio, in turn, has triggered Banese's capital contingency plan, and considers a reduction of private assets held in its securities portfolio, which amounted for 4% of risk-weighted assets. In addition, Banese intends to issue local currency subordinated notes to increase its regulatory capital, restoring capital to internal target defined by the board. However neither measures effect Moody's TCE ratio. Banese's management also plans to ask its shareholder to reduce future dividend payouts. Different interpretation of accounting standards between the bank's independent auditors, the pension fund regulators (PREVIC), the local Securities Exchange Commission (Comissao de Valores Mobiliarios, CVM) and the central bank of Brazil led to Banese being asked to account the full actuarial obligation of the pension fund, instead of a partial adjustment relative to a proportional contribution according to its 39.25% sponsorship. Sergus largely comprises a defined benefit post-retirement plan, which has been closed to new members since 2017. According to Banese's management, the central bank of Brazil is currently analyzing a request made by the bank that aims to consider the contributive parity between the fund's participants, assisted individuals and the sponsor, which would result in a lower adjustment corresponding to 39.25% of the fund's actuarial deficit, from 100%, equal to its financial responsibility as the sponsor. The bank expects a final decision from regulatory authorities in the 3Q19. In such a scenario, the adjustment effect on the TCE/RWA ratio would be a reduction of 180 basis points to levels above 8%. Based on its reported 2Q19 earnings, it would take Banese roughly two to three quarters for its TCE/RWA ratio to rise to 9% through internal earnings generation, therefore, reverting the pressure on its financial profile. In the second quarter, internal capital generation increased TCE by 25 basis points. In affirming Banese's ratings, Moody's acknowledges the bank's entrenched retail franchise in its regional market, which is supported by a stable 33% market share of core deposits, strong earnings recurrence and good asset quality metrics. Banese primarily targets the state's civil servants, which provides it a captive client base, allowing it to grow ahead of the system average, while maintaining adequate asset quality. In the first six months of 2019, the bank's loan book grew by 12%, supporting strong earnings generation, as suggested by net income 38.46% higher than one year prior, and an annualized 1.8% net income to tangible assets ratio, higher than 1.4% average in the last five quarters. Profitability benefited from loan growth, a rise fee income, declining provision expenses and relatively stable funding costs, which helped with steady margins amid declining interest rates. Despite the positive performance in recent quarters, Banese's earnings will likely be challenged by growing competition from large retail banks and slow operational growth. As the bank enters a new credit growth cycle, capital will be a key driver of its ability to remain competitive. WHAT COULD CHANGE THE RATING UP/DOWN Moody's could downgrade Banese's BCA and local currency deposit ratings if the bank is unable to restore its capitalization to levels between 8% and 9% in the next 12 to 18 months, which would weaken its loss absorption capacity. In addition, in case the bank materially increases its exposure to riskier loans, future earnings recurrence could be negatively affected because of higher credit costs as new loans will season under a still slow-growth economy in 2020. Banese's rating outlook could return to stable if the bank is able to maintain loan growth and preserve its profitability in its regional market, restoring capital position in less than 12 months and maintaining adequate asset risk and liquidity metrics. The principal methodology used in these ratings was Banks published in August 2018. Headquartered in Aracaju, Sergipe, Brazil, Banese reported total assets of BRL5,494.6 million ($1,433.6 million) and total shareholders' equity of BRL364.6 million ($95.13 million) as of June 30, 2019. LIST OF AFFCTED RATINGS Issuer: Banco do Estado de Sergipe S.A. Affirmations: Long-term local currency bank deposit rating, affirmed Ba2, outlook changed to negative from stable Short-term local currency bank deposit rating, affirmed Not Prime Long-term foreign currency bank deposit rating, affirmed Ba3, outlook stable Short-term foreign currency bank deposit rating, affirmed Not Prime Brazilian long-term bank deposit rating, affirmed Aa3.br Brazilian short-term bank deposit rating, affirmed BR-1 Long-term local currency counterparty risk rating, affirmed Ba1 Short-term local currency counterparty risk rating, affirmed Not Prime Long-term foreign currency counterparty risk rating, affirmed Ba1 Short-term foreign currency counterparty risk rating, affirmed Not Prime Brazilian long-term local currency counterparty risk rating, affirmed Aaa.br Brazilian short-term local currency counterparty risk rating, affirmed BR-1 Baseline credit assessment, affirmed ba2 Adjustment baseline credit assessment, affirmed ba2 Long-term counterparty risk assessment, affirmed Ba1(cr) Short-term counterparty risk assessment, affirmed Not Prime(cr) Outlook action: Outlook changed to negative(m) from stable COMPANHIA ENERGETICA: Moody's Affirms B1 CFR, Outlook Now Pos. --------------------------------------------------------------- Moody's America Latina affirmed the baseline credit assessment and global scale corporate family rating of Companhia Energetica de Minas Gerais - CEMIG of b1 and B1, respectively. The national scale CFR was upgraded to Baa1.br from Baa2.br. The outlook was changed to positive from stable. Concomitantly, Moody's has affirmed the B1 global scale issuer and senior unsecured ratings of Cemig Distribuicao S.A. (CEMIG D) and upgraded the national scale issuer and senior unsecured ratings to Baa1.br from Baa2.br. The outlook was changed to positive from stable. Moody's has also affirmed the global scale issuer, senior unsecured, and senior secured ratings of Cemig Geracao e Transmissao S.A. (CEMIG GT) of B1, and upgraded the national scale issuer, senior unsecured, and senior secured ratings to Baa1.br from Baa2.br. The outlook was changed to positive from stable. CEMIG is a government related issuer (GRI). The state of Minas Gerais (B2 stable) is the shareholder with majority control, with 50.96% ownership of common shares and 17.03% of overall shares. CEMIG's B1/Baa1.br ratings consider the following four input factors within Moody's GRI rating methodology: (i) a low-level probability of extraordinary support from the state should CEMIG face financial distress, (ii) Moody's estimates of a very high level of dependence between the company and the state, (iii) Moody's rating of the state of Minas Gerais, as well as (iv) CEMIG's intrinsic credit profile as captured in the baseline credit assessment of b1. RATINGS RATIONALE The rating actions reflect a perception of ongoing improvement in CEMIG's liquidity profile, and a more prudent liability management strategy and financial policy. Following refinancing transactions concluded in late-2017, when the company faced dire debt refinancing needs, the organization has been able to actively manage its debt maturity profile while also reducing average cost of debt in line with the decrease in Brazil's interest base rate. In July 2019, CEMIG D closed its 7th issuance of debentures amounting BRL3.7 billion with two series (BRL2.2 billion due 2024 and 1.5 billion due 2026) at an average annual cost of 108,61% of CDI. Proceeds of the issuance were used to prepay shorter and more expensive debt at CEMIG D, lengthening the company's average debt tenor, with pro-forma cash position after the issuance sufficient to cover short term debt maturities. The rating actions also reflect continued progress to the asset divestment plan, with the recent completion of the sale of around 1/3 of its stake at Light S.A. (Ba3/A3.br stable), raising BRL625 million. CEMIG's partial divestment in Light is credit positive because it demonstrates management's continued commitment to a BRL8 billion asset divestment program announced in mid-2017. Moody's estimates that after the conclusion of this transaction, CEMIG will have raised around BRL2.1 billion in asset divestitures, or around 26% of the initially envisioned amount. Although there has been a positive trend in assets sales, Moody's still considers CEMIG's leverage moderate and its base case does not take into account any additional deleveraging benefit from the divestment plan. However, credit metrics are expected to slightly improve on the back of decreased cost of debt and enhanced operational performance in the distribution business, with interest coverage exceeding 3.5x and CFO pre-W/C-to-Debt exceeding 23% over the next 12-18 months, compared to a three year average of 3.0x and 21%, respectively, between 2016 and 2018. Should the company close additional asset sales, Moody's expects leverage to further decrease. Moody's also incorporates an expectation that CEMIG's retained cash flow metrics and free cash flow will meaningfully decrease next year based on higher dividend distributions following recognition of BRL1.9 billion of tax gains in its income statement last quarter, related to the outcome of a judicial dispute for calculation and payment of PIS/COFINS with double taxation considering ICMS tax. This gain was partially offset by a write-down of BRL688 million of accounts receivable from one of its investees, Renova Energia S.A. As a result, CFO pre-W/C -- Dividends to Debt should decline to around 10-12% over the next 12-18 months from an average of 17% between 2016 and 2018, but Moody's considers that to be a one-off effect and that CEMIG will continue to prudently manage its cash position and dividend payout to stay in compliance with financial covenants. The rating actions further reflect its view that the company continues to benefit from the cash flow generation of CEMIG D following the substantial tariff review in May 2018 (+23% increase in distribution tariffs), mainly as a result of around BRL5.0 billion in investments made in the distribution network over the previous review cycle. Moody's expects an increase of around BRL500 million in CFO pre W/C for 2019 as result of the tariff review. Last year, CEMIG D suffered a significant working capital pressure due to higher non-manageable costs of energy purchases that take at least one year to be incorporated in tariffs. However Moody's takes in consideration the fact that hydrology conditions have improved in 2019, which is positive for CEMIG's consolidated free cash flow generation. The credit view continues to incorporate CEMIG GT's short and medium term commercial strategy, with maintenance of excess energy to cover exposure to hydrology risks. It does however reflect the large share of energy commercialization in the business, with energy commitments in excess of 200% of own generation. While the company has managed to be successful in its energy commercialization, it remains exposed to price risks in the long term, with high recontracting exposure particularly as of 2023, which is a risk to CEMIG GT in case if lower-than-expected energy prices. The upgrade and change in outlook also consider that the company's credit quality is less linked to that of its controlling shareholder, the State of Minas Gerais (B2 stable). The rating actions on CEMIG D and CEMIG GT reflect that of the consolidated profile of its parent company, CEMIG, given the corporate guarantees and cross default clauses embedded in the various debt instruments across the corporate family, as well as centralized cash management and use of intracompany lending. RATINGS OUTLOOK The positive outlook reflects Moody's expectations that the company's credit metrics will continue to be moderate going forward, driven by continuous deleveraging and prudent financial policy, in addition to an improved and more active liability management strategy and relatively stable operational performance. WHAT COULD MOVE THE RATINGS UP/DOWN The ratings could be upgraded should the company continue to build on a track record of improved financial policy and more active liability management, while at the same time, showing signs that CFO pre-WC/debt and CFO pre-WC + interest/interest will sustainably be above 18% and 2.5x, respectively. A successful privatization process would also put positive pressure on the ratings, as the consolidated credit quality of CEMIG is delinked from that of the State of Minas Gerais. A rating downgrade, although unlikely at this time, could happen if Moody's believes that the company's liquidity risks are not being prudently managed or if there is a sustainable increase in leverage such that the company's consolidated CFO pre-WC/debt remains below 15% and/or Net debt/EBITDA, according to covenant definitions, exceeds 3.5x by December 2019. RATING METHODOLOGY The principal methodologies used in rating Companhia Energetica de Minas Gerais - CEMIG were Regulated Electric and Gas Utilities published in June 2017, and Government-Related Issuers published in June 2018. The principal methodology used in rating Cemig Geracao e Transmissao S.A. was Unregulated Utilities and Unregulated Power Companies published in May 2017. The principal methodology used in rating Cemig Distribuicao S.A. was Regulated Electric and Gas Utilities published in June 2017. COMPANY PROFILE Headquartered in Belo Horizonte in the State of Minas Gerais, CEMIG is a leading Brazilian integrated utility operating in the sectors of electricity distribution, generation and transmission, with 4,800 megawatts (MW) in installed capacity and around 8,200 km of transmission lines across the country. The company also owns controlling equity participation in the electricity utility Light S.A. and the transmission company Transmissora Alianca de Energia Eletrica (TAESA, Ba1/Aaa.br stable). Cemig is controlled by the State of Minas Gerais, which owns 50.96% of the company's voting capital. For the 12 months ended March 2019, Cemig had net revenue of BRL22.2 billion and EBITDA of BRL4.4 billion, respectively (according to Moody's standard adjustments). OURO VERDE: Fitch Affirms 'B' LT IDR, Outlook Positive ------------------------------------------------------ Fitch Ratings has affirmed Ouro Verde Locacao e Servico S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings at 'B'. Fitch has also affirmed the company's national scale rating and its 7th debenture issuance at 'BBB(bra)'. The Outlook on both Long-Term ratings is Positive. The ratings reflect Ouro Verde's improved financial profile following Brookfield's acquisition of 100% of the issuer's shares and its BRL500 million capital injection, as well as the completion of the company's debt restructuring, which has led to lengthening of the company's debt maturities through 2034, and a lower interest rate. The Positive Outlook reflects Fitch's belief that Ouro Verde's recovery should occur within the next 12 to 24 months due to Brookfield's ownership of the company and its improved liquidity position. On July 8, 2019, Cedar Fundo de Investimento em Participacoes Multiestrategia (Cedar), a Brookfield investment vehicle in Brazil, acquired 100% of Ouro Verde's shares and voting rights. On the same date, the company received a BRL500 million cash injection and concluded the debt restructure of its 5th, 6th, 7th and 8th debenture issuance. The cash injection comprised a BRL365 million capital increase and a BRL135 million receivable pay down from the previous main shareholder. KEY RATING DRIVERS New-Ownership Strengthens Business Profile: Ouro Verde's business profile should improve in the medium term. The financial strength of its new controlling shareholder should help the company face competition from larger participants, with stronger financial profiles and to grow in the fragmented, incipient and capital-intensive Brazilian market of heavy vehicles and machinery rentals. Fitch views Brookfield, which has numerous investments in Brazil, as a strategic owner due to its ability to support an increase in Ouro Verde's scale and operating competitiveness. Improved Capital Structure: Fitch expects the recently concluded debt restructure and the BRL500 million cash injection to improve Ouro Verde's capital structure, helping the company to manage its growth while keeping leverage at moderate levels in the medium term, depending on the company's capex strategy. As of June 2019, on a pro forma basis, adding BRL300 million into Ouro Verde's cash position, assuming BRL200 million of the cash injection would support capex, the adjusted net debt-to-EBITDA ratio should be 3.8x, based on BRL274 million annualized EBITDA and BRL1.4 billion of pro-forma total debt. For 2019, Fitch forecasts EBITDA over BRL300 million and net debt-to-EBITDA around 3.0x. DERIVATION SUMMARY Ouro Verde's ratings reflect the company's better position to recover its operating performance and improved financial profile after the BRL500 million cash injection, but still weaker competitive position compared with its bigger domestic peers such as Localiza Rent a Car S.A. (Foreign-Currency IDR BB, Local-Currency IDR BBB-/Stable), JSL S.A. (Foreign-Currency and Local-Currency IDRs BB/Negative) and Companhia de Locacao das Americas - Locamerica (AA(bra)/Positive). Those comparable peers also have better financial profiles. After its debt restructuring, Ouro Verde has slightly lower leverage and higher rental margins than JSL. However, the company's access to new funding has yet to be tested. Additionally, compared with Localiza, JSL and Locamerica, Ouro Verde has smaller scale and lower bargain power within the industry, which are key variables in an industry that demands high capital investing and an established network for asset disposal. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Cash inflow of BRL500 million; - Lengthened debt maturity profile. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Improvement in Ouro Verde's business position and client base without jeopardizing its financial profile. Developments That May, Individually or Collectively, Lead to Negative Rating Action The Outlook may be revised to Stable in case of difficulty in achieving the triggers for the upgrade. The ratings may be downgraded in case of: - Further deterioration of the company's business position; - Deterioration of the liquidity profile, leading to refinancing risks; - Declining EBITDA and profitability levels. LIQUIDITY Improved Liquidity: The BRL500 million cash injection should support capex and strengthen the company's cash position, significantly improving the financial flexibility of Ouro Verde, which has a track record of weak liquidity. Additionally, expected lower funding cost and a better spread debt amortization schedule should improve Ouro Verde's financial profile. Fitch has yet to have a clear view on management growth strategy, which will help to better forecast liquidity and cash flow. After the debt restructure, total and short-term debt reached BRL1.4 billion and BRL150 million, respectively, with expected cash/short-term debt around 2.5x. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Ouro Verde Locacao e Servico S.A -- Long-Term Foreign and Local Currency IDRs at 'B'/Outlook Positive; -- Long-Term National Scale Rating at 'BBB(bra)'/Outlook Positive; -- Senior unsecured 7th debenture issuance at 'BBB(bra)'. VALE SA: Moody's Affirms Ba1 CFR, Alters Outlook to Stable ---------------------------------------------------------- Moody's America Latina Ltda. affirmed Vale S.A.'s Ba1 (global scale) and Aaa.br (national scale) corporate family rating and the Ba1/Aaa.br ratings on its senior unsecured local notes. The outlook changed to stable from negative. Ratings actions: Issuer: Vale S.A. LT Corporate Family Rating: affirmed at Ba1 (global scale)/ Aaa.br (national scale) Senior unsecured notes (Debentures de Infraestrutura): affirmed at Ba1/Aaa.br Outlook actions: Issuer: Vale S.A. Outlook, Changed to Stable from Negative RATINGS RATIONALE The change on the outlook to stable from negative is supported by the higher visibility on the costs and financial liabilities that Vale will incur as a result of the accident with the tailings dam at the Corrego do Feijao mine in Brumadinho, state of Minas Gerais. Accordingly, Vale has provisioned a total of $6 billion in 1H2019, which encompasses actions for socioeconomic and environmental recovery of the areas affected and will be disbursed mostly during 2019-2021. As Vale continues to generate positive free cash flows, Moody's does not expect any significant impact in the company's liquidity or leverage. The gradual return of operations that have been suspended after the accident is also a consideration for the stable outlook. Out of the 93 million tons lost or suspended after the accident, about 42 million tons has returned, 20 million tons could gradually return in late 2019/early 2020 and the remaining 30 million tons related to the decommissioning of upstream tailings dams will return in about 2-3 years. Vale's Ba1 ratings continue to be supported by the company's diversified product base and low cost position, and substantive portfolio of long lived assets of iron ore, nickel, copper and coal. The enhanced production profile with S11D and significant reduction in debt levels over the past few years are also important factors for the Ba1 ratings, which better position Vale to withstand volatility in the prices for its major products. Despite all the cash disbursements related to the accident, Vale has been to maintain a comfortable liquidity position, with $6 billion in cash and $5 billion in committed credit facilities at the end of June 2019, with total debt at $15.8 billion, similar to the debt level at the end of December 2018 ($15.5 billion). The ratings are constrained by the implications of the tailings dam accident in Brumadinho, in particular from an environmental, social and governance perspective. Moody's does expect material changes and higher scrutiny in the company's corporate governance practices, with a strong strategic focus on safety and operational excellence. As those initiatives are implemented over time, Moody's expects to see evidence of stricter risk management and oversight of all operations. Besides, Vale remains exposed to iron ore and base metals market fundamentals and to contingent liabilities related to Samarco. An upgrade of Vale's rating would require evidences of material enhancements in the company's corporate governance oversight and risk controls, while production gradually normalizes and there are no material additional provisions or cash disbursements related to the accident. An upgrade would also depend on the maintenance of a solid liquidity, credit profile and positive free cash flow generation, supported by leading market positioning in its main segments and low-cost operations. Quantitatively, an upgrade would also require Vale's adjusted total debt/EBITDA to remain below 2.5x and EBIT/interest expense above 5x on a sustainable basis. Conversely, Vale's ratings could be downgraded should the ultimate costs related to the disaster in Brumadinho be materially above the amounts already provisioned due to higher fines and settlements, litigations and class actions, or if operations do not fully recover within the expected timeframe, affecting cash costs and free cash flow generation. Quantitatively, the ratings or outlook could suffer negative pressure should conditions for iron ore and base metals deteriorate, leading to lower profitability, with leverage ratios (total debt to EBITDA) trending towards 3x or above and EBIT/Interest expense falling below 4x. A marked deterioration in the company's liquidity position would also precipitate a downgrade. The principal methodology used in these ratings was Mining published in September 2018. VALE SA: Moody's Affirms Ba1 Sr. Unsec Notes Rating, Outlook Stable ------------------------------------------------------------------- Moody's Investors Service affirmed Vale S.A.'s Ba1 senior unsecured ratings and the ratings on the debt issues of Vale Overseas Limited, fully and unconditionally guaranteed by Vale S.A. Moody's also affirmed the Ba2 senior unsecured ratings of Vale Canada Ltd. The outlook changed to stable from negative. At the same time, Moody's America Latina Ltda. affirmed Vale's Ba1/Aaa.br corporate family rating and the Ba1/Aaa.br ratings on its senior unsecured notes. The outlook changed to stable from negative. Ratings actions: Issuer: Vale S.A. senior unsecured notes due 2023: affirmed at Ba1 senior unsecured notes due 2042: affirmed at Ba1 Issuer: Vale Overseas Limited gtd senior unsecured notes due 2021: affirmed at Ba1 gtd senior unsecured notes due 2022: affirmed at Ba1 gtd senior unsecured notes due 2026: affirmed at Ba1 gtd senior unsecured notes due 2034: affirmed at Ba1 gtd senior unsecured notes due 2036: affirmed at Ba1 gtd senior unsecured notes due 2039: affirmed at Ba1 Issuer: Vale Canada Ltd. senior unsecured bonds due 2032: affirmed at Ba2 Outlook actions: Issuer: Vale Overseas Limited Outlook, Changed to Stable from Negative Issuer: Vale Canada Ltd. Outlook, Changed to Stable from Negative RATINGS RATIONALE The change on the outlook to stable from negative is supported by the higher visibility on the costs and financial liabilities that Vale will incur as a result of the accident with the tailings dam at the Corrego do Feijao mine in Brumadinho, state of Minas Gerais. Accordingly, Vale has provisioned a total of $6 billion in 1H2019, which encompasses actions for socioeconomic and environmental recovery of the areas affected and will be disbursed mostly during 2019-2021. As Vale continues to generate positive free cash flows, Moody's does not expect a significant impact in the company's liquidity or leverage. The gradual return of operations that have been suspended after the accident is also a consideration for the stable outlook. Out of the 93 million tons of iron ore lost or suspended after the accident, about 42 million tons has returned, 20 million tons could gradually return in late 2019/early 2020 and the remaining 30 million tons related to the decommissioning of upstream tailings dams will return in about 2-3 years. Vale's Ba1 ratings continue to be supported by the company's diversified product base and low cost position, and substantive portfolio of long lived assets of iron ore, nickel, copper and coal. The enhanced production profile with S11D and significant reduction in debt levels over the past few years are also important factors for the Ba1 ratings, which better position Vale to withstand volatility in the prices for its major products. Despite all the cash disbursements related to the accident, Vale has been able to maintain a comfortable liquidity position, with $6 billion in cash and $5 billion in committed credit facilities at the end of June 2019, and total debt of $15.8 billion, similar to the levels observed at the end of December 2018 ($15.5 billion). The ratings are constrained by the implications of the tailings dam accident in Brumadinho, in particular from an environmental, social and governance perspective. Moody's does expect material changes and higher scrutiny in the company's corporate governance practices, with a strong strategic focus on safety and operational excellence. As those initiatives are implemented over time, Moody's expects to see evidence of stricter risk management and oversight of all operations. Besides, Vale remains exposed to iron ore and base metals market fundamentals and to contingent liabilities related to Samarco. Vale Canada's Ba2 ratings reflect its weaker operating performance compared to Vale's and the fact that Vale S.A. does not guarantee its 2032 notes, while it continues to incorporate Vale's ability to support Vale Canada. The rating also considers this subsidiary's major position in the global nickel market, its large asset base and strategic importance to its parent. An upgrade of Vale's rating would require evidences of material enhancements in the company's corporate governance oversight and risk controls, while production gradually normalizes and there are no material additional provisions or cash disbursements related to the accident. An upgrade would also depend on the maintenance of a solid liquidity, credit profile and positive free cash flow generation, supported by leading market positioning in its main segments and low-cost operations. Quantitatively, an upgrade would also require Vale's adjusted total debt/EBITDA to remain below 2.5x and EBIT/interest expense above 5x on a sustainable basis. Conversely, Vale's ratings could be downgraded should the ultimate costs related to the disaster in Brumadinho be materially above the amounts already provisioned due to higher fines and settlements, litigations and class actions, or if operations do not fully recover within the expected timeframe, affecting cash costs and free cash flow generation. Quantitatively, the ratings or outlook could suffer negative pressure should conditions for iron ore and base metals deteriorate, leading to lower profitability, with leverage ratios (total debt to EBITDA) trending towards 3x or above and EBIT/Interest expense falling below 4x. A marked deterioration in the company's liquidity position would also precipitate a downgrade. The principal methodology used in these ratings was Mining published in September 2018. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Jan - July Revenue Jumps 10.1% to US$7.7BB -------------------------------------------------------------- Dominican Today reports that during the January-July 2019 period, govt. revenue reached RD$390.2 billion (US$7.7 billion), including RD$378 million in donations, a 10.1% jump over the same period of 2018, with an additional RD$35.8 billion. The General Directorate of Tax Policy and Legislation of the Ministry of Finance reported on this in a statement, where he detailed that the General Directorate of Internal Taxes raised 287,683 million pesos, representing an increase of 10.5% compared to 2018, according to Dominican Today. The General Directorate of Customs pocketed 80,366 million in tax revenue, that is, 6.3% more than in 2018; the National Treasury received 21,777 million pesos, which represents an additional 20% than in the first seven months of last year, the report relays. Standard & Poor's credit rating for Dominican Republic stands at BB- with stable outlook (2015). Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (2017). Fitch's credit rating for Dominican Republic was last reported at BB- with stable outlook (2016). DOMINICAN REPUBLIC: Power Companies Meet National Demand -------------------------------------------------------- Dominican Today reports that Dominican Republic's power companies grouped in Asociacion Dominicana de la Industria Electrica (ADIE) said the national electric grid currently has 2,970 megawatts available to meet all the demand of the electricity distribution companies. Based on the grid's performance in 2018, the ADIE revealed a surplus of available energy of 254 megawatts, if the country's maximum demand is taken into account, which reached 2,700 megawatts, according to Dominican Today. According to the ADIE, these 2,970 megawatts correspond to the installed capacity of both thermal and renewable and hydroelectric plants, which are available and operating in the system, the report relays. Standard & Poor's credit rating for Dominican Republic stands at BB- with stable outlook (2015). Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (2017). Fitch's credit rating for Dominican Republic was last reported at BB- with stable outlook (2016). ========= H A I T I ========= HAITI: Crisis Deepens, Gas Shortage Result in Violent Protests -------------------------------------------------------------- Dominican Today reports that at the gas station located on the road to Mal Passe, Haiti, vehicles await fuel as the shortage in Haiti has resulted in violent protests by the Haitian opposition that also demands that president Jovenel Moise step down, as to blame for the crisis. The only gas station in Jimani, Dominican Republic (west) on the border with Haiti, has run out of fuel due to a crunch in that country. The gas station supplies both local vehicles, as well as those from Haiti, according to the station managers, notes Dominican Today. Listin reports that Dominican authorities don't restrict the sale of fuels to drivers from Haiti, except in drums or large tanks, adds the report. =========== M E X I C O =========== METROFINANCIERA SAPI: Moody's Lowers Series A Certs Rating to Caa2 ------------------------------------------------------------------ Moody's de Mexico S.A. de C.V. downgraded Metrofinanciera - MFCB 05U Series A Certificates to Caa2 (sf) (Global Scale, Local Currency) and Caa1.mx (sf) (Mexican National Scale). The underlying collateral consists of first-lien, fixed-rate residential mortgage loans denominated in UDIS and granted primarily to low-income borrowers in Mexico. The rating actions are as follows: Servicer: Metrofinanciera, S.A.P.I de C.V SOFOM. E.R Issuer: CIBanco, S.A., Institucion de Banca Multiple, Fiduc. Metrofinanciera - MFCB 05U Series A Certificates -- Downgrade ratings to Caa2 (sf) (Global Scale, Local Currency) from Caa1 (sf) (Global Scale, Local Currency) and to Caa1.mx (sf) (Mexican National Scale) from B3.mx (sf) (Mexican National Scale). RATINGS RATIONALE The rating downgrade reflects the ongoing, weak performance of the underlying pool and Moody's updated loss expectation on the pool, together with its expected lifetime recoveries on the affected certificates given the available credit enhancement and the payments received to date. The downgrade also considers a severity of loss assumption of 100% and expected losses of 49% of the total pool balance for the pool associated with the MFCB 05U Series A Certificates. The securitization trust has received relatively low recoveries from sales of real estate owned associated with defaulted loans (REOs). Per performance reports, the deal has a reported overcollateralization level of -189% (excluding performing loans), compared to -167% one year ago. The period of time covered in the financial information used to determine MFCB 05U certificate's rating is between September 2005 and June 2019 (source: portfolio of underlying collateral, information provided by the originator; historical performance information on deals previously rated by Moody's, periodic collections and remittance reports from servicers, trustees and common representative agents.) Rating Methodology The principal methodology used in these ratings was "Moody's Approach to Rating RMBS Using the MILAN Framework" published in June 2019. Factors that would lead to an upgrade or downgrade of the ratings: FACTORS THAT COULD LEAD TO A DOWNGRADE: Factors that could lead to a rating downgrade include: a deterioration in the performance of the underlying collateral that results in higher expected losses, lower cash availability and further weakening of the certificates' available credit enhancement. FACTORS THAT COULD LEAD TO AN UPGRADE: - Improvement in the performance of the underlying collateral that results in lower expected losses, significant improvement in the level of recoveries on defaulted and REO loans, improved liquidity and strengthening of the certificates' available credit enhancement. ================= V E N E Z U E L A ================= CITGO PETROLEUM: S&P Affirms 'B-' Long-Term ICR ----------------------------------------------- S&P Global Ratings affirmed its 'B-' long-term issuer credit ratings on CITGO Holding Inc. and core subsidiary CITGO Petroleum Corp. The 'B+' issue-level rating on CITGO Petroleum's senior secured debt and 'B' issue-level rating on CITGO Holding's outstanding senior secured debt is unchanged. The recovery rating on CITGO Petroleum's debt remains '1', which indicates the likelihood of very high (90%-100%; rounded estimate: 95%) recovery following a default. The recovery rating for CITGO Holding's debt remains '2', reflecting its expectation for substantial (70%-90%; rounded estimate: 80%) recovery. The stable outlook reflects S&P's view that the rating on CITGO will continue to be constrained by parent PDVSA Petroleo S.A., which remains in selective default on most of its obligations. S&P does not foresee a near-term change in this group status. Since the interim (Guaido) Venezuelan government appointed a new board of directors at CITGO, the rating agency does not believe the Maduro government could take any action that harms the company's operational capability. Operationally, S&P expects the refineries to continue to run at high utilization and manage leverage between 2x-3x. "While we consider it unlikely, we could lower the rating if a PDVSA bankruptcy proceeding were to include CITGO Holding, such that assets could be sold to cover PDVSA's debts," S&P said. "We could raise the rating, possibly by multiple notches, if CITGO is sold to a company with a stronger credit profile than PDVSA," the rating agency said. ********* 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 * * *