/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/191030.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, October 30, 2019, Vol. 20, No. 217 Headlines B R A Z I L BANCO ORIGINAL: Fitch to Rate Proposed Sr. Unsec. Notes B+(EXP) BANCO ORIGINAL: S&P Assigns 'B' Issuer Credit Rating, Outlook Neg. BRAZIL: Bankers Cheer End of Pension Saga ODEBRECHT SA: Charges Filed vs "Finc'l. Intermediary" in Scandal C H I L E CHILE: President Overhauls Cabinet, Changes 8 Ministers on Protests ELECTRICA COCHRANE: Moody's Rates Proposed $430MM Sec. Notes 'Ba1' E C U A D O R BANCO GUAYAQUIL: Fitch Affirms B- LT IDR, Outlook Stable BANCO PICHINCHA: Fitch Affirms B- LT IDR, Outlook Stable PRODUBANCO: Fitch Affirms B- IDR, Outlook Stable P U E R T O R I C O STONEMOR PARTNERS: Will Hold a Special Meeting on Dec. 20 T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: Budgeted Money Not Being Paid Out V E N E Z U E L A VENEZUELA: Defaults on Last Bond, Setting Up Legal Showdown - - - - - =========== B R A Z I L =========== BANCO ORIGINAL: Fitch to Rate Proposed Sr. Unsec. Notes B+(EXP) --------------------------------------------------------------- Fitch Ratings assigned an expected long-term foreign currency rating of 'B+(EXP)'/'RR4' to Banco Original S.A.'s proposed U.S. dollar senior unsecured notes. The final amount, maturity and interest will be defined upon book building. The bonds' proceeds will be used for general corporate purposes. The final rating is contingent upon the receipt of final documents conforming to the information already received. KEY RATING DRIVERS The expected rating on the senior unsecured notes corresponds to Original's Long-Term Foreign Currency Issuer Default Rating (IDR; B+) as the likelihood of default of the notes is the same as that of Original. Original's IDRs are driven by the bank's Viability Rating (VR) and reflect its concentrated business model and relatively small franchise. The bank's LT IDRs' current Outlook is Negative, reflecting Original's negative operating results and mirroring Fitch's expectations for ongoing profitability weakness relative to the bank's peers. The Recovery Rating of 'RR4' reflects the average recovery prospects given default. RATING SENSITIVITIES The rating of this issue will remain aligned to the bank's Long-Term IDRs and, therefore, it would mirror any potential change on the latter. Original's IDRs could be negatively affected by the emergence of additional pressures on its business and financial profiles. The bank's ratings would also be negatively affected if the bank's recurring operating profit generation capacity does not improve during 2019, or if losses lead to a material decline in the bank's total regulatory capital ratio to below 12%. The Negative Outlook on the LT IDRs could be revised to Stable if the bank demonstrates that it is on track to reach and maintain positive operating earnings in 2019 and if contagion and reputational risks decline. Fitch currently rates Original as follows: -- Long-Term Foreign and Local Currency IDRs 'B+', Outlook Negative; -- Short-Term Foreign and Local Currency IDRs 'B'; -- Viability Rating 'b+'; -- National Long-Term Rating 'BBB(bra)', Outlook Negative; -- National Short-Term Rating 'F2(bra)'; -- Support Rating '5'; -- Support Rating Floor 'NF'. BANCO ORIGINAL: S&P Assigns 'B' Issuer Credit Rating, Outlook Neg. ------------------------------------------------------------------ S&P Global Ratings assigned its global scale 'B' issuer credit rating and 'b' stand-alone credit profile (SACP) on Banco Original S.A. The outlook is negative. In addition, S&P assigned a 'B' issue-level rating to the bank's proposed $200 million senior unsecured notes. S&P said, "Our rating analysis on Banco Original incorporates our view of its group, Conglomerado Financeiro Original (Original), which includes the bank and its sister entity, Banco Original do Agronegócio S.A. We determine the Group Credit Profile (GCP), which incorporates both entities on a consolidated basis. In our view, Banco Original plays a key role in the conglomerate's strategy and represents the majority of the group's capital and revenue. In this sense, we view the bank as a core subsidiary of the group. "Our assessment of Banco Original is based on its low market share in Brazil and narrow product range, despite the stability stemming from its operation of receivables discounting and the efforts to expand the retail segment through the digital platform. The latter has improved the bank's funding diversification, given that the retail funds raised through this channel already represent 15% of the entity's total funding. However, the bank continues to present a high concentration of its funding coming from a few independent brokers, which account for about 76% of the funds raised. At the same time, Banco Original has maintained capitalization levels in recent years, despite the investment needs to implement new strategy. Additionally, the bank's bottom-line results benefitted in recent years from non-recurring events, such as the selling of nonperforming loans (NPLs) in 2017 and 2018 to its minority shareholder, J&F Investimentos S.A. (J&F). This has curbed losses arising from such loans and reduced the delinquency rates in the past two years. The bank's bottom-line results also rose on about $178 million following the sale of Original Corretora de Seguros Ltda to J&F in 2018. Despite the support from J&F J&F in the past, we believe the lending concentration in more cyclical segments may continue to pressure the bank's credit quality if Brazil's economic recovery doesn't strengthen. "Our rating on the proposed notes reflects their pari passu ranking with the bank's other senior unsecured debt obligations. As a result, the rating is the same as the long-term issuer credit rating on Banco Original." BRAZIL: Bankers Cheer End of Pension Saga ----------------------------------------- Felipe Marques at Bloomberg News reports that Brazil's top banking executives were unanimous in cheering the approval of a long-delayed pension overhaul -- and quick to line up what they think should be the government's next priority. With the top item on their wish list now crossed off after years of debates, bankers from Itau Unibanco Holding SA to Banco BTG Pactual SA are now championing reforms to the rules governing civil servants' costly benefits, including changes to compensation, productivity metrics and dismissal policies, according to Bloomberg News. "The social security reform, now approved, together with the administrative reform which will be discussed next year, mark the final steps of financial stabilization which began in 1994," said Roberto Sallouti, chief executive officer at BTG. "The country can now focus on the productivity agenda, improving GDP per capita and the lives of Brazilians," he added. Bloomberg News notes that Brazil's Senate gave the final go-ahead to the legislation, which establishes a minimum retirement age and restricts access to some social benefits, seen as needed to fix the country's deteriorating fiscal accounts. The vote caps a tumultuous eight-month process marked by intense negotiations, fierce pushback and numerous concessions to assure the bill's passage, saving the cash-strapped government almost $200 billion over the next decade, Bloomberg News says. Though most investors said the approval was pretty much priced into Brazil assets, markets reacted positively to the news. The real is leading gains among emerging-market currencies this month, while bond risk measured by five-year credit default swaps is on its best run since 2003, Bloomberg News recalls. The next item on bankers' priority list is likely to be another uphill battle, Bloomberg News notes. Brazil spent around BRL725 billion ($182 billion) on its civil servants in 2017, according to a World Bank report, with monthly salaries that are usually 96% larger than an equivalent position in the private sector, the data show, Bloomberg News says. "It's crucial that the government and Congress continue to advance on other fronts, such as administrative and tax reforms, as well as measures that generate savings and increase competition," said Sergio Rial, Banco Santander SA's Brazil unit chief, Bloomberg News notes. Further reforms are seen by bankers as key to getting the economy growing faster, Bloomberg News relates. Candido Bracher, chief executive officer at Latin America's most valuable lender, Itau Unibanco Holding SA, said pension reform "was a necessary though insufficient step for Brazil to raise its growth potential," he added. Brazil's economy is expected to expand around just 1% for the third straight year, and at 2% in 2020, according to estimates compiled by Bloomberg. Economy Minister Paulo Guedes has an ambitious agenda to downsize the state -- very much in line with what finance executives say Brazil needs, Bloomberg News says. In an interview, Guedes said he would prioritize oversight of the country's public sector budget once the government had secured approval of the pension bill, Bloomberg News relays. The "state transformation agenda" includes establishing a so-called fiscal council of the republic, administrative reforms and a tax overhaul -- though the latter would be sent in a later time, Bloomberg News notes. Bloomberg News discloses that though most of bankers highlighted the need for more, some see the pension bill approval in itself as a catalyst for optimism. Guilherme Benchimol, chief executive officer at XP Investimentos SA, the nation's biggest retail brokerage, called it "a first fundamental step to demonstrate the level of commitment of the Brazilian government and congressmen to the public accounts," adding that the nation is entering "a long and solid economic growth cycle," Bloomberg News relates. In a government that often finds itself embroiled in controversies -- from political infighting to environmental issues -- the reform approval "allows for a constructive narrative in relation to a positive agenda for Brazil," said Octavio de Lazari, chief executive officer at the nation's second-biggest bank by market value, Banco Bradesco SA, Bloomberg News notes. "Brazil's growing reliability in global markets will have a noticeable effect on attracting more investment flows for the stock market and direct investments," he added.ODEBRECHT SA: Swiss File Their 1st Charges in Petrobras Scandal About Brazil The Federal Republic of Brazil is the largest country in Latin America. Sao Paulo is the most populated city and Brasilia is the capital. The federation is composed of the union of 26 states, the Federal District and more than 5,000 municipalities. Its government is headed by President Jair Bolsonaro. Among other things, Brazil's government is led by corruption allegations. Brazil has an advanced emerging economy. Amid growth in recent decades, the country entered an ongoing recession in 2014 amid a political corruption scandal and nationwide protests. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (January 2018). Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). Fitch's credit rating for Brazil was last reported at BB- with stable outlook (February 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). ODEBRECHT SA: Charges Filed vs "Finc'l. Intermediary" in Scandal ---------------------------------------------------------------- Voa News reports that Swiss prosecutors have filed their first indictment in investigations related to Brazilian construction company Odebrecht SA and state-run oil giant Petrobras, charging a suspect with complicity in the bribery of foreign public officials and with money laundering. The Swiss attorney general's office didn't identify the "financial intermediary" involved in a statement, saying only that he is a Swiss-Brazilian dual citizen, according to Voa News. It said that proceedings against him were opened in October 2015, and that it cooperated with Brazilian and Portuguese prosecutors, the report notes. Swiss authorities have been conducting investigations since April 2014 related to the sprawling corruption scandal involving Odebrecht and Petrobras, the report relays. The attorney general's office so far has seized assets in Switzerland worth over 620 million francs (US$629 million), and more than 390 million francs already has been returned to Brazilian authorities, the report says. The indictment was filed with Switzerland's Federal Criminal Court, the report notes. It wasn't immediately clear when it would consider the matter, the report adds. About Odebrecht SA Odebrecht S.A. -- www.odebrecht.com -- is a Brazilian conglomerate consisting of diversified businesses in the fields of engineering, construction, chemicals and petrochemicals. Odebrecht S.A. is a holding company for Construtora Norberto Odebrecht S.A., the biggest engineering and contracting company in Latin America, and Braskem S.A., the largest petrochemicals producer in Latin America and one of Brazil's five largest private-sector manufacturing companies. Odebrecht controls Braskem, which by revenue is the fourth largest petrochemical company in the Americas. On June 17, 2019, Odebrecht filed for bankruptcy protection, aiming to restructure BRL51 billion (US$13 billion) of debt. The bankruptcy filing comes after years of struggles for Odebrecht, the biggest of the Brazilian engineering groups caught in a sweeping political corruption investigation that has rippled across Latin America, Reuters relayed, as reported by The Troubled Company Reporter - Latin America. On August 28, 2019, the Troubled Company Reporter - Latin America, citing The Wall Street Journal, reported that Odebrecht and its affiliates filed for chapter 15 bankruptcy, seeking U.S. recognition of the largest-ever bankruptcy in Latin America. Odebrecht SA and several of its affiliates has filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York on Aug. 26. The case is assigned to Hon. Stuart M. Bernstein. ========= C H I L E ========= CHILE: President Overhauls Cabinet, Changes 8 Ministers on Protests ------------------------------------------------------------------- EFE News reports that Chilean President Sebastian Pinera said that he was overhauling his Cabinet, replacing eight ministers, including Interior Minister Andres Chadwick and Finance Minister Felipe Larrain. "This is not the same Chile we had a couple of weeks ago. Chile changed and we have to make changes in the government to deal with these new challenges and times," Pinera said, referring to the massive protests that lasted for 10 days and left about 20 people dead, according to EFE News. ELECTRICA COCHRANE: Moody's Rates Proposed $430MM Sec. Notes 'Ba1' ------------------------------------------------------------------ Moody's Investors Service assigned a Ba1 rating to Empresa Electrica Cochrane SpA's proposed issuance of up to US$430 million of 7.5 year senior secured notes due in 2027. The notes will fully amortize in 15 semiannual installments. This is the first time Moody's assigns ratings to Cochrane. The rating outlook is stable. Proceeds from the secured notes will be used largely to repay Cochrane's existing project finance debt of around $864 million. Cochrane will use the balance of the debt proceeds and around $37 million released from existing project finance reserve accounts for general corporates purposes and to fund the transaction's associated costs, including the termination of the existing hedging agreement of around $40 million. Concurrently, Cochrane will also enter a 15-year US$485 million senior secured bank credit facility due in 2034 that will also be fully amortizing. The notes and the bank credit facility will represent Cochrane's total outstanding senior debt. Cochrane owns and operates two coal-fired power units with an aggregate gross capacity of 550 MW as well as a 20 MW battery energy storage system. Cochrane has fully contracted its net capacity with Sierra Gorda SCM (SG; unrated; 251MW), Quebrada Blanca S.A. expansion (QB2; unrated, 122MW) and Sociedad Quimica y Minera de Chile S.A. (SQM; Baa1 stable; 110MW). Cochrane's indirect shareholders are AES Gener S.A. (60%; Baa3 negative) and Mitsubishi Corporation (A2 stable). RATINGS RATIONALE The Ba1 rating considers Cochrane's proven technology and anticipates a continuation of its satisfactory operational performance since its two units came online in 2016. The rating factors in the fully contracted nature of Cochrane's operations. It reflects the robust terms of its power purchase agreements (PPAs) with a weighted average life of around 15 years that enhance cash flow visibility. The remuneration under the contracts includes fixed charges that are sized to cover the generator's fixed costs, including its debt service. The PPAs are also subject to monthly indexation and energy allowances clauses that, subject to the specifics of each contract, allow the issuer to pass-through the marginal costs of procuring power in the spot market during the plant's annual maintenance and major overhaul periods, as well as during certain extended forced outages. The contracts are denominated in US dollars, the same currency as Cochrane's debt. The rating factors in a comprehensive insurance package coverage on the units. The Ba1 rating is tempered by the asset's high leverage. Its scheduled amortization payments will be sculpted for Cochrane to record a Debt Service Coverage Ratio over contracted cash flows of 1.4x. Cochrane's senior secured notes are fully amortizing maturing in 2027, well before the scheduled expiration of any of its PPAs. Cochrane's PPAs with SQM are scheduled to expire in December 2030 while the PPAs with Sierra Gorda SCM (SG; unrated) and Quebrada Blanca S.A. expansion (QB2) will expire in December 2034 and in November 2037, respectively. The issuer has access to the system's capacity payments and contracted cash flows with SQM, an offtaker with a solid credit quality that represents around 23% of Cochrane's contracted capacity that supports its ability to meet debt service. The combination of capacity payments and SQM's fixed charges amount to around 33% of Cochrane's total fixed revenues. The fixed charge obligations of Cochrane's other two mining off-takers: SG and QB will remain guaranteed by their respective shareholders at least over the medium term. The shareholders' corporate guarantees and letter of credits (LCs) with strong financial institutions aggregate around $730 million, enhancing the reliability of contracted cash flows. The rating, however, is further tempered by the uncertainty regarding the standalone credit profiles of SG and QB2 upon the release of their shareholders' corporate guarantees and/or Letters of Credit. The releases are contingent upon the mines achieving certain operational and financial requirements, which Moody's estimates could occur as early as 2020/2021 for SG's obligations as the mining company continues to report operational improvements and 2022 for QB2. Upon the release of the sponsor's corporate guarantees and/or LCs, Cochrane will not be able to call them back. Therefore, the long-term off-takers' credit quality on a standalone basis is an important rating consideration as they account for around 77% of Cochrane's contracted load during the tenor of the bonds. Uncertainties related to SG and QB2's future operational performance and SG's capital structure upon the maturity of its outstanding $1 billion shareholder loans in 2024, constrain its views as to these off-takers' future credit quality. That said, the rating incorporates the importance of these mining projects for their respective shareholders and anticipates that the projects' capital structure will reflect the financial policies that drive the shareholders' overall high credit quality. Nevertheless, these uncertainties cap the Ba1 rating, particularly in the absence of any strong liquidity arrangement that help to mitigate Cochrane's counterparty risk exposure in the long term. The rating is further tempered by its expectation of an aggressive dividend policy, reflected in management's decision to target liquidity levels around $20 million, a significant weakness. The draft documentation of the notes includes mandatory redemption of both the notes and bank loan , on a pro-rata basis, using any proceeds received from payments related to an early termination of the PPAs. The documents also include a Change of Control Clause which reduces, but does not fully eliminates, the uncertainty in the Cochrane's future ownership structure given Mitsubishi's, stated intention of selling its 40% ownership in the facility. The rating factors in its view that Cochrane's exposure to carbon transition risk is moderate considering the relatively short tenor of the notes (7.5 years) and its expectation that Cochrane will be able to pass-through under its PPAs the any de-carbonization related costs, including the $5/emitted Co2-ton tax that became effective in April 2018. Despite Chile's aggressive energy renewable targets of 50% of total energy by 2030 Moody's considers the coal-fired plant's relatively new vintage and low variable costs (that currently approximate $44/MWh), as well as its competitive position within the Chilean national electricity system's (SEN) dispatch curve. The stable outlook also considers its expectation that Cochrane has lower exposure for an early retirement than older and less efficient coal-fired facilities in the country, particularly as long as battery storage costs remain high and base-load is required to support the intermittent nature of the solar and wind resources. The stable outlook also assumes that Gener's implementation of its Greentegra strategy, particularly the Coal to Green product to its existing mining companies, will have limited impact on Cochrane's financial performance. Factors that could lead to an upgrade The uncertainties around the future standalone credit quality of SG and QB2 limit the prospects of an upgrade over the medium-term. However, the rating could experience positive momentum if, upon the release of the shareholder's guarantees and/or Letters of Credit, Moody's considers the credit profiles of SG and QB2 to be consistent with stronger off-taker profiles. Evidence of improved liquidity coupled with consistently strong operating and financial performance that leads to DSCR levels consistently above 1.5x would exert upward rating pressure. Factors that could lead to a downgrade A downgrade of the rating would be triggered if Cochrane's cash flows deteriorate due to a weakening of its operations for an extended period of time and/or upon a deterioration of the projects' cash flows. Weaker off-taker credit profiles would also exert downward pressure. A downgrade will likely result if the project fails to record a DSCR of at least 1.4x, on a sustainable basis, and/or following a change in Cochrane's ownership structure that Moody's considers to be detrimental to its credit quality. Elevated exposure to carbon transition risks will also exert negative pressure on the rating. The principal methodology used in this rating was Power Generation Projects published in June 2018. Profile Cochrane, is a privately held joint-stock special purpose vehicle organized under the laws of the Republic of Chile. Its indirect shareholders are AES Gener S.A. (60%; Baa3 negative) and Mitsubishi Corporation (A2 stable). Cochrane owns and operates a 550 MW (gross) coal-fired generation facility located in the northern part of the Chilean SEN. Cochrane's three off-takers are: (i) SQM (Baa1, stable; 110MW); (ii) SG (unrated; 251MW) and (iii) QB 2 (unrated: 122 MW). KGHM International Ltd (unrated, a wholly-owned subsidiary of the Polish state-owned company LGHM Polska Miedz S.A. (unrated) holds a 55% interest in SG while the other co-owners (45%) are Sumitomo Metal Mining (SMM; unrated) and its parent company Sumitomo Corporation (Baa1 stable). End of 2018, Teck Resources Limited (Baa3 stable) sold a 34% interest in QB2 to Sumitomo and SMM. ============= E C U A D O R ============= BANCO GUAYAQUIL: Fitch Affirms B- LT IDR, Outlook Stable -------------------------------------------------------- Fitch Ratings affirmed Banco Guayaquil S.A. Long-Term Foreign Issuer Default Ratings at 'B-'. The Rating Outlook is Stable. KEY RATING DRIVERS Banco Guayaquil's Viability Rating (VR), or standalone creditworthiness, drives its Long-Term IDR. The high influence of the operating environment and risk appetite of the bank drive Banco Guayaquil's VR. Fitch considers the sovereign's influence on the VRs to be high, given the impact of the government's macroeconomic and regulatory policies on the banks' financial performance. The banks' asset quality and other financial metrics could be pressured if the bank were to increase its risk appetite amid Ecuador's weak economic conditions. The bank's VR also considers its medium-size franchise, improved profitability and asset quality metrics as well as Banco Guayaquil's good loss absorption capacity. Guayaquil's resilient profitability outperforms its closest local peers as Operating Profit to Risk Weighted Assets (RWA) at June 2019 was 2.20%. The bank's profitability improved during 2018 and the first half of 2019 supported by loan growth, diverse revenue stream, sound efficiency and a relevant improvement in credit costs. Fitch expects Banco Guayaquil's profitability the ratio will remain above the system average; however, current operating environment challenges could limit performance. The bank's capitalization is stronger than similarly rated local and international banks as its Fitch Core Capital (FCC) to RWA was 14.10% at June 2019. The bank's FCC/RWA is bolstered by the banks resilient profitability and moderate dividend distribution policy, which is capped at 40% of net income. The bank's loss absorption capacity is further enhanced by the banks' reserve for impaired loans, which has been 204% since December 2018 and above the average reserves observed among most of similarly rated banks in Latin America. The bank's loan book impaired loans are low as they made up 1.60% of gross loans at June 2019, which compares favorably with the Ecuadorian banking system average of 2.95% during the same period. However, although manageable in light of reserves, charge offs were higher than peers at 2.57% as of June 2019, while loan concentrations are considered moderate by Fitch. Fitch expects Banco Guayaquil's impairments will continue to be lower than immediate peers subject to the banks risk appetite amid Ecuador's still weak economic condition. The agency's view the impact of the political unrest during October 2019, could result in slightly higher delinquency levels and reduced lending. Fitch highlights that local regulatory definitions of impaired loans are stricter than those in other markets. The bank's funding and liquidity are adequately handled and commensurate with the bank's current rating level. Total loans are funded mostly through customer deposits as loan to deposits at June 2019 was 84.49%. The bank's liquidity position liquid assets covered a sound 26% of deposits and short-term funding in the same period. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating and Support Floor are rated '5' and 'NF', reflecting that despite the bank's moderate systemic importance and local franchise, Fitch believes that sovereign external support cannot be relied upon due to Ecuador's limited funding flexibility as well as the lack of a lender of last resort. RATING SENSITIVITIES Ecuador's sovereign Rating Outlook is Stable although Guayaquil's IDR and VR are sensitive to changes in the sovereign rating and its Rating Outlook. Potential upgrades of the IDR and VR are limited in the foreseeable future. Conversely, a significant reduction in the banks' earnings retention or an acceleration of growth that leads to a decrease in FCC/RWA metric constantly below 9% could result in negative rating actions. SUPPORT RATING AND SUPPORT RATING FLOOR Ecuador's propensity or ability to provide timely support to Guayaquil is not likely to change given the sovereign's sub-investment-grade IDR. As such, the SR and SRF have no upgrade potential. BANCO PICHINCHA: Fitch Affirms B- LT IDR, Outlook Stable -------------------------------------------------------- Fitch Ratings affirmed Banco Pichincha C.A. y Subsidiarias' Long-Term Issuer Default Rating at 'B-' with a Stable Outlook and its Viability Rating at 'b-'. KEY RATING DRIVERS IDRS AND VR Pichincha's Viability Ratings or standalone creditworthiness, drive the bank's IDR. Ecuador's operating environment and risk appetite highly influence its VR. Particularly, Fitch considers the sovereign's influence on the VR to be high, given the impact of the government's macroeconomic and regulatory policies on the bank's financial performance. The bank's asset quality and other financial metrics could be pressured if the bank were to increase its risk appetite amid Ecuador's still-weak economic conditions. The bank's VR also considers its strong competitive position and diversified business model, its weaker-than-peers impairment ratios, and low but improving profitability that has also benefited capital metrics recently. Pichincha's loan quality is still weaker than the Ecuadorian financial system's and its closest peer's averages due to the higher retail segments' participation in the overall portfolio. The PDLs ratio slightly improved to 4.02% at first-half 2019 (1H19) from 4.4% at 1H18, but net charge-offs to average loans modestly increased to 0.65% from 0.25%. Fitch highlights that local regulatory definitions of impaired loans are stricter than those in other markets. Fitch's view the impact of the political unrest during October 2019 could result in slightly higher delinquency levels and reduced lending due to the bank's important exposures to retail loans. Pichincha reported improved performance at 1H19, with an operating profit over risk-weighted assets (RWA) of 1.5%, but is still weak compared with peers and the Ecuadorian financial system's average. This improvement reflects credit growth, lower credit costs and efficiency gains. The good net interest margin resulting from the bank's appetite for the retail segments also contributed to sustaining profitability. In spite of low economic growth prospects for 2019-2020, Fitch expects the bank's core profitability metric to be sustainable at a level above 1% over the rating horizon, supported by the lower cost of credit and gradual gains in efficiency. Pichincha's FCC ratio stood at 12.2% at the end of June 2019. Pichincha has one of the lowest levels of capitalization among the large financial groups in Ecuador. Nevertheless, the bank has been able to sustain FCC metrics above 12% over the past three years and its cushion against unexpected losses is viewed as sound, and higher-than-peers loan loss reserves (254% of impaired loans at 1H19). Fitch considers Pichincha's funding and liquidity position to be conservative and adequate within the Ecuadorian market. Loans are funded mostly through customer deposits as loan to deposits at June 2019 was 87%. Pichincha's funding structure benefits from a successful franchise and a wide distribution network. Both allow the bank to enjoy a well-diversified, stable and relatively low-cost funding base. SUPPORT RATING AND SUPPORT RATING FLOOR Despite having the largest deposit market share, Pichincha's Support Rating of '5' and Support Rating Floor (SRF) of 'NF', indicate that Fitch believes that sovereign external support cannot be relied upon due to Ecuador's limited funding flexibility as well as the lack of a lender of last resort. RATING SENSITIVITIES IDRS AND VR Ecuador's Sovereign Rating Outlook is Stable although Pichincha's IDR and VR are sensitive to changes in the sovereign rating. Potential upgrades of the IDR and VR are limited in the foreseeable future. Conversely, a significant reduction in these banks' earnings retention or an acceleration of growth that leads to a decrease in the Fitch Core Capital to Risk Weighted Assets metric consistently below 9%, along with a material decline in excess loan loss reserves could result in negative rating actions. SUPPORT RATING AND SUPPORT RATING FLOOR Ecuador's propensity or ability to provide timely support to Pichincha and Guayaquil is not likely to change given the sovereign's low sub-investment-grade IDR. As such, the SR and SRF have no upgrade potential. PRODUBANCO: Fitch Affirms B- IDR, Outlook Stable ------------------------------------------------ Fitch Ratings affirmed Banco de la Produccion S.A. Produbanco y Subsidiarias's Long-Term Issuer Default Rating (IDR) at 'B-', its Viability Rating at 'b-' and its Short-Term IDR at 'B'. The Rating Outlook is Stable. KEY RATING DRIVERS IDRs AND VRs Produbanco's Viability Rating, or standalone creditworthiness, drives its Long-Term IDR. The high influence of the operating environment and risk appetite of the bank drive Produbanco's VR. Fitch considers the sovereign's influence on the VRs to be high, given the impact of the government's macroeconomic and regulatory policies on the banks' financial performance. The banks' asset quality and other financial metrics could be pressured if the bank were to increase its risk appetite amid Ecuador's weak economic conditions. Fitch's view on the rating also considers the bank's midsize national franchise, adequate impairment ratios, its moderate profitability and relatively lower capital ratios. Fitch factors in Produbanco's adequate asset quality relative to local and international peers and despite moderately increasing impairment loans. As of June 2019, impaired loans under local regulation accounted for 2.1% (past due over 90 days: 0.9%), which is lower than the system average (3.0%). The bank's charge-offs and restructured loans remain low at levels below 1%. Fitch's view of the impact of the political unrest during October 2019 could result in slightly higher delinquency levels and reduced lending, but the impact should be contained given to the resilience among the bank's largest corporate exposures. Profitability metrics are moderate as operating profits to risk-weighted assets close to 1.6% as of June 2019. Gross income has continuously increased although operating profits have been reduced by higher loan impairment charges (LICs) along with higher operating expenses. As of June 2019 the bank's FCC ratio reached 10.3%, which is relatively low for the current challenging operating environment and compares below local peers. However, capital is considered to be of good quality as common shares and retained earnings accounted for 8.3% of risk-weighted assets as of July 2019. Fitch expects capital ratios to remain stable as credit growth slowed down. As of June 2019, total capital ratio stood at 13.3% benefited by subordinated debt. As of June 2019, deposits represented close to 88% of Produbanco's funding (June 2018: 93.6%) complemented by an increasing access to unsecured wholesale funding and to a lesser extend subordinated debt. The loan/deposit ratio remained low (June 2019: 87.9%; June 2018: 79.5%), reflecting adequate levels of liquidity on the balance sheet. As of June 2019, cash, deposits and securities equalized 33% of total funding. SUPPORT RATING Produbanco's Support Rating (SR) of '5' reflects Fitch's view of possible external support from its majority shareholder Promerica Financial Corporation (PFC; 62.2% ownership); nevertheless, this cannot be relied upon, due to the relatively large size of the subsidiary (21% of consolidated assets excluding non-controlling interests and 33.7% including non-controlling interest). Country risk also represents a constraint for SR as Ecuador's country ceiling is assigned at the same level as the sovereign rating of 'B-'. RATING SENSITIVITIES IDRS AND VRS Ecuador's Sovereign Rating Outlook is Stable, although Produbanco's IDR and VR are both sensitive to changes in the sovereign rating. Upside potential is limited as the agency usually does not rate banks above the sovereign (B-/Stable), especially in such a level of sovereign credit risk and regulatory influence. A significant deterioration in financial metrics reflected in a material decline in excess of loan loss reserves along with a decrease in FCC metrics consistently below 9% could result in negative rating actions. SUPPORT RATING AND SUPPORT RATING FLOOR Produbanco's support rating has limited upgrade potential over the rating horizon given Ecuador's low country ceiling relative to its majority shareholder's long-term IDR. ===================== P U E R T O R I C O ===================== STONEMOR PARTNERS: Will Hold a Special Meeting on Dec. 20 --------------------------------------------------------- StoneMor Partners L.P. announced that the special meeting of the Partnership unitholders will be held on Dec. 20, 2019, at the Courtyard Philadelphia Bensalem, 3280 Tillman Road, Bensalem, PA 19020, on Dec. 20, 2019 at 10:00 a.m. Eastern Time. All Partnership common units and Series A Convertible Preferred Units of record as of the close of business on Nov. 4, 2019, which is the record date for the special meeting, will be entitled to vote their units. The approval of the previously announced Merger and Reorganization Agreement and the transactions contemplated thereby, including, among other things, the conversion of GP from a Delaware limited liability company into a Delaware corporation to be named StoneMor Inc. and the merger of a wholly owned subsidiary of GP with and into the Partnership and the Partnership becoming a wholly-owned subsidiary of the Company, requires the affirmative vote of at least a majority of the outstanding units, voting together as a class, and as such, not voting will have the same effect as a vote against the merger. Pursuant to the terms of the previously announced merger agreement, upon completion of the merger, Partnership unitholders (other than certain affiliates of GP) converted into the right to receive one share of common stock, par value $0.01 per share of the Company. GP and the Partnership expect the transaction to close during the fourth quarter of 2019, subject to certain closing conditions under the terms of the merger agreement, including receipt of the required approval by the Partnership's unitholders and the satisfaction of other customary closing conditions. Partnership unitholders and their brokers who have questions about the merger or the special meeting, or desire additional copies of the proxy statement/prospectus or additional proxy cards or voting instruction forms should contact D.F. King & Co., Inc., the Partnership's proxy solicitor, at: D.F. King & Co., Inc., toll free for unitholders at (800-967-4607). About StoneMor Partners StoneMor Partners L.P., headquartered in Trevose, Pennsylvania -- http://www.stonemor.com-- is an owner and operator of cemeteries and funeral homes in the United States, with 321 cemeteries and 90 funeral homes in 27 states and Puerto Rico. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. StoneMor reported a net loss of $72.69 million for the year ended Dec. 31, 2018, compared to a net loss of $75.15 million for the year ended Dec. 31, 2017. As of June 30, 2019, the Company had $1.76 billion in total assets, $1.76 billion in total liabilities, $57.50 million in total redeemable convertible preferred units, and a total partners' deficit of $60.94 million. * * * As reported by the TCR on Feb. 13, 2019, Moody's Investors Service downgraded StoneMor Partners L.P.'s Corporate Family rating to Caa2 from Caa1 and Probability of Default rating to Caa3-PD from Caa1-PD. The Caa2 CFR reflects Moody's concern that if pre-need cemetery selling and liquidity pressures do not abate while the senior secured credit facility is being refinanced, a distressed exchange or other default event could become more likely. As reported by the TCR on July 3, 2019, S&P Global Ratings affirmed its 'CCC+' issuer credit rating on StoneMor Partners L.P. The outlook remains negative. S&P said, "The rating affirmation reflects our view that despite the removal of near term maturities and sufficient liquidity over the next twelve months, we continue to view StoneMor's capital structure as unsustainable in the long term given our projection for persistent free cash flow deficits. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: Budgeted Money Not Being Paid Out ---------------------------------------------------- Anna Ramdass at Trinidad Express reports that Independent Senator Sophia Chote has raised alarm over the monies allocated in national budgets that are not being paid out to departments of the Government. She cited examples noting that millions were allocated to the police service and the judiciary yet they are still suffering from lack of resources because while the monies were allocated, the amounts were not being paid to them to run their operations, according to Trinidad Express. ================= V E N E Z U E L A ================= VENEZUELA: Defaults on Last Bond, Setting Up Legal Showdown ----------------------------------------------------------- Ben Bartenstein at Bloomberg News reports that the team advising Venezuelan National Assembly President Juan Guaido skipped a payment on the nation's only bonds not in default, setting up a legal showdown with creditors. Rather than pay the $913 million due on Petroleos de Venezuela's 2020 notes, Guaido's advisers say they will take legal action against investors to fight any efforts to seize the collateral on the bonds -- 50.1% of Citgo Holding Inc.'s shares, according to Bloomberg News. Their argument is that the debt is illegal because the opposition-led National Assembly never approved its issuance. The Trump administration moved to temporarily shield the collateral from creditors, Bloomberg News notes. "Despite all the efforts to date, the ad hoc administrative board of PDVSA hasn't achieved a reasonable arrangement with the bondholders," the board said in a statement obtained by the news agency. The board "will take legal actions aimed at protecting its rights based on the invalidity of the 2020 bonds," the board added. Luxembourg-based Clearstream Banking and Brussels-based Euroclear, the clearinghouses for the debt, didn't receive the $843 million in principal and $71 million in interest, according to two people familiar with the matter, Bloomberg News discloses. Guaido, recognized by the U.S. and nearly 60 countries as Venezuela's interim president, scored a last-minute victory when the Treasury Department updated its sanctions guidelines to block creditors from seizing their collateral for 90 days, Bloomberg News relates. With the Trump administration's support, Guaido and his allies effectively run Houston-based Citgo, yet have little operational control over its Caracas-based parent PDVSA, Bloomberg News notes. London-based Ashmore Group Plc holds about half of the PDVSA 2020 bonds, according to data compiled by Bloomberg. BlackRock Inc., T Rowe Price Group Inc. and the Royal Bank of Canada are among the other top reported holders, Bloomberg News adds. About Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South Ameri ca, consisting of a continental landmass and a large number of small islands and islets in the Caribbean sea. The capital is the city of Caracas. Hugo Chavez was president to Venezuela from 1999 to 2013. The Chavez presidency was plagued with challenges, which included a 2002 coup d'etat, a 2002 national strike and a 2004 recall referendum. Nicolas Maduro was elected president in 2013 after the death of Chavez. Maduro won a second term at the May 2018 Venezuela elections, but this result has been challenged by countries including Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States who deemed it fraudulent and moved to recognize Juan Guaido as president. The presidencies of Chavez and Maduro have challenged Venezuela with a socioeconomic and political crisis. It is marked by hyperinflation, climbing hunger, poverty, disease, crime and death rates, social unrest, corruption and emigration from the country. Standard and Poor's long- and short-term foreign currency sovereign credit ratings for Venezuela stands at 'SD/D' (November 2017). S&P's local currency sovereign credit ratings on the other hand are 'CCC-/C'. The May 2018 outlook on the long-term local currency sovereign credit rating is negative, reflecting S&P's view that the sovereign could miss a payment on its outstanding local currency debt obligations or advance a distressed debt exchange operation, equivalent to default. Moody's credit rating (long term foreign and domestic issuer ratings) for Venezuela was last set at C with stable outlook (March 2018). Fitch's long term issuer default rating for Venezuela was last set at RD (2017) and country ceiling was CC. Fitch, on June 27, 2019, affirmed then withdrew the ratings due to the imposition of U.S. sanctions on Venezuela. ********* 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 * * *