/raid1/www/Hosts/bankrupt/TCRLA_Public/200127.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
Monday, January 27, 2020, Vol. 21, No. 19
Headlines
A R G E N T I N A
ARGENTINA: Buenos Aires Bonds Slide as Payment Stand-off Deepens
ARGENTINA: To Send Debt Bill to Congress Ahead of Talks
B R A Z I L
ELETROBRAS: Fitch Rates New $1.75 Billion Unsec. Bonds 'BB-'
ELETROBRAS: S&P Rates Up to $1.75 Billion Unsec. Notes 'BB-'
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Places US$2.5-Bil. Bond, To Mature in 10-40 Yrs
M E X I C O
MEXICO: Aims for Greater Presence in China
PETROLES MEXICANOS: Fitch Assigns BB+ Rating on Sr. Unsec. Debt
P U E R T O R I C O
J & C CORP: Plan & Disclosures Hearing Reset to March 11
MONTE IDILIO: Deadline to File Plan Extended to April 30
TECNICENTROS MUNDIAL: Court Confirms Amended Reorganization Plan
X X X X X X X X
[*] BOND PRICING: For the Week January 20 to January 24, 2020
- - - - -
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A R G E N T I N A
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ARGENTINA: Buenos Aires Bonds Slide as Payment Stand-off Deepens
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Globalinsolvency.com, citing the Financial Times, reports that
bondholders have balked at a plea to accept late payment on debt
backed by the province of Buenos Aires, in a stand-off that could
complicate already delicate negotiations over Argentina's central
government debt.
Buenos Aires province's bonds fell sharply after a group of
investors criticized an attempt to secure their approval to
postpone a $250 million debt payment coming due on January 26,
according to Globalinsolvency.com.
They hit out at the "truncated timetable" for a decision, raising
the risk of a default if the situation is not resolved and
prompting the bonds in question -- which mature in 2021 -- to fall
4 cents to 54 cents on the dollar, the report notes.
The province asked bondholders to give them until May 1 instead -
an extension portfolio manager Jared Lou at William Blair called "a
bridge to nowhere" without a more "credible" plan from the
government, the report says.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Moody's credit rating for Argentina was last set at Caa2 from B2
with under review outlook. Moody's rating was issued on Aug. 30,
2019. S&P Global Ratings, in December 2019, raised its foreign
currency sovereign credit ratings on Argentina to 'CC/C' from
'SD/D'. S&P's outlook on the long-term sovereign credit ratings is
negative. Fitch Ratings, in December 2019, upgraded Argentina's
Long-Term Foreign-Currency Issuer Default Rating to 'CC' from 'RD',
and its Short-Term Foreign-Currency IDR to 'C' from 'RD'. DBRS,
Inc. meanwhile downgraded Argentina's Long-Term and Short-Term
Foreign Currency - Issuer Ratings to Selective Default (SD), from
CC and R-5, respectively, also in December 2019.
ARGENTINA: To Send Debt Bill to Congress Ahead of Talks
-------------------------------------------------------
Globalinsolvency.com, citing Bloomberg News, reports that Argentina
will send a bill to Congress outlining a plan to address the debt
crisis and make payments "sustainable," Economy Minister Martin
Guzman said.
South America's second-largest economy isn't able to pay its debt
under current conditions and will look to either alter maturity
dates, interest rates or outstanding capital amounts, Guzman said,
according to Globalinsolvency.com. Exact details of the proposal
will have to wait, he said, though the bill will cover foreign law
bonds as well, the report notes.
"We have the willingness to pay, but the country needs to
regenerate its capacity to pay," Guzman told reporters in Buenos
Aires. "We are taking firm steps to achieve that, but we don't
want to make promises that we cannot keep," the report relates.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Moody's credit rating for Argentina was last set at Caa2 from B2
with under review outlook. Moody's rating was issued on Aug. 30,
2019. S&P Global Ratings, in December 2019, raised its foreign
currency sovereign credit ratings on Argentina to 'CC/C' from
'SD/D'. S&P's outlook on the long-term sovereign credit ratings is
negative. Fitch Ratings, in December 2019, upgraded Argentina's
Long-Term Foreign-Currency Issuer Default Rating to 'CC' from 'RD',
and its Short-Term Foreign-Currency IDR to 'C' from 'RD'. DBRS,
Inc. meanwhile downgraded Argentina's Long-Term and Short-Term
Foreign Currency - Issuer Ratings to Selective Default (SD), from
CC and R-5, respectively, also in December 2019.
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B R A Z I L
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ELETROBRAS: Fitch Rates New $1.75 Billion Unsec. Bonds 'BB-'
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Fitch Ratings assigned a 'BB-' rating to Eletrobras-Centrais
Eletricas Brasileiras S.A.'s Eletricas Brasileiras S.A.'s proposed
USD1.75 billion senior unsecured bonds. The issuance will be
comprised of two tranches, the first due 2025 and the second in
2030. The proceeds will be used to prepay existing debt. Fitch
currently rates Eletrobras' Long-Term Foreign Currency and Local
Currency Issuer Default Ratings 'BB-' and Long-Term National Scale
Rating 'AA(bra)'. The Rating Outlook for the corporate ratings is
Stable.
Per Fitch's Government Related Entity Criteria, Eletrobras' IDRs
are equalized with Brazil's sovereign rating (BB-/Stable), as the
company's linkage with the country is considered strong and the
government has a strong to very strong incentive to provide support
to the company.
Fitch views Eletrobras' linkage with the country as strong given
Brazil's 51% ownership of the company's voting shares. The federal
government also has broad control over Eletrobras' operational,
strategic and financing activities and guarantees 15% of
Eletrobras' consolidated on-balance-sheet debt. Fitch's assessment
of the government's incentive to support Eletrobras is based on the
strong socio-political implications that a default may have on the
company's ability to provide quality service. The Brazilian power
system relies on Eletrobras' asset portfolio of generation plants
and transmission lines as the largest participant in the sector. In
terms of financial implications, Fitch considers that the effect of
a default on the availability and cost of domestic or foreign
financing options for the sovereign and/or other government
subsidiaries would be very strong.
The government's intention to privatize Eletrobras is not
incorporated in this analysis, as it is uncertain. If Eletrobras
becomes a private entity, Fitch will likely decouple the rating to
the sovereign and analyze the company solely based on its
Standalone Credit Profile (SCP), which currently is consistent with
the 'b' rating, due to pressured FCF generation and high leverage,
despite low business risk and its significant size in the sector.
Management's initiatives to reduce costs and sell assets to improve
the group's capital structure are positive, but may take time to
significantly improve the overall credit profile.
KEY RATING DRIVERS
Strong Linkage to the Sovereign: Eletrobras' credit profile
benefits from the strong linkage between the company and the
country, which is one of the pillars for the rating equalization
between them. Brazil controls Eletrobras through its 51% stake on
the issuer's voting shares and plays an important role on
Eletrobras' operational, strategic and financing activities. The
guarantees provided to 15% of Eletrobras' debt reinforces the
linkage along with the capital injections that totalled BRL4.0
billion in 2019. Federal banks as counterparties of significant
portion of the group's on-balance sheet debt also add to the
strength of the linkage.
Strong to Very Strong Incentive to Support: Fitch considers that
Eletrobras' strategic importance as the largest electricity
generation and transmission company in Brazil is an incentive for
the government to support the group if necessary. Eletrobras group
concentrates 30% of the country's installed generation capacity and
45% of transmission lines above 230 kv as of September 2019. Its
size and presence in several significant energy operational assets
in Brazil makes it strategically important to the country's economy
and development. Furthermore, the agency evaluates that an event of
default in Eletrobras would have a very strong negative impact for
the sovereign and/or other government subsidiaries on the
availability and cost of funding.
Improving SCP: Eletrobras' SCP improved in the previous couple of
years, as the company sold off assets to significantly strengthen
its EBITDA, due to poor operational results in the distribution
segment. In addition, cost saving measures were implemented to
benefit cash generation. Eletrobras' current 'b' SCP reflects a
better capital structure achieved recently and Fitch's expectation
of continuing improvements on the financial profile over the next
few years.
Privatization Potentially Positive to SCP: Fitch considers
Eletrobras' new SCP after privatization, if it occurs, will be
linked to the expectation of potential cash flow generation,
leverage metrics and financial flexibility. The expected cash
inflow to be raised through the capitalization would not benefit
Eletrobras' credit profile immediately, as it would be mainly
directed to the federal government. However, the privatization
should allow the company to obtain higher sales prices associated
with part of its generation assets and more flexibility to manage
its costs.
Cash Generation to Improve: EBITDA should be around BRL12.0 billion
in 2020, according to Fitch's projections, considering the current
asset portfolio and cash inflows from compensation revenues of the
transmission concessions renewed early in 2013. In the LTM ended
Sept. 30, 2019, adjusted EBITDA amounted to BRL11.6 billion,
benefiting from compensation revenues bookings since July 2017 and
the sale of the subsidiaries in the distribution segment in 2018
and 2019, which used to pressure the consolidated results before
the sale with negative EBITDAs.
Capex and Dividends Pressures FCF: The strong growth in the
investment level in the Strategic Plan for 2019-2023 to BRL28.2
billion from BRL14.2 billion for 2018-2022 should pressure FCF over
the next years. Despite of robust cash flow from operations (CFFO)
of around BRL7.5 billion expected to the next two years, the strong
capex program should maintain Eletrobras' FCF in the negative
territory, with BRL448 million in 2020 and BRL1.0 billion in 2021.
The agency assumes in this period an extraordinary dividends
distribution of BRL2.3 billion related to the net income of 2018.
Part of the minimal dividend pay-out of 25% of 2018's net income
was already paid in December 2019 (BRL1.3 billion) and the balance
of BRL2.3 billion was postponed conditioned to the company's
availability of cash, which Fitch assumes will occur in the period.
The base case projections also incorporate BRL12.0 billion from the
construction of the nuclear plant, Angra 3. Eletrobras' plan is to
have a partner to finance at least part of the capex of this
project, but timing to succeed in this initiative is uncertain.
High Leverage: Fitch expects Eletrobras' adjusted leverage ratios
to remain high, with net adjusted debt/adjusted EBITDA of 5.5x-6.5x
until 2022. As a mitigating factor, Eletrobras' consolidated risk
profile benefits from an extended debt maturity schedule. For the
LTM ended Sept. 30, 2019, total adjusted debt/adjusted EBITDA and
net adjusted debt/adjusted EBITDA were 6.3x and 5.6x, respectively.
Total adjusted debt of BRL82.5 billion includes the sectorial fund
Reserva Global de Reversao (RGR) of BRL3.8 billion and
off-balance-sheet debt of BRL31.8 billion related to guarantees
provided to nonconsolidated subsidiaries. Excluding these debts,
net leverage would reach more conservative level at 3.2x.
DERIVATION SUMMARY
Eletrobras group's 'BB-' IDR mirrors the Brazilian sovereign's
'BB-' rating, given the company's strong linkage with the
government and its high importance to the country. Compared with
other state-owned electric utility companies in Latin America,
Eletrobras' IDRs are lower than the Mexican company Comission
Federal de Electricidad (CFE; BBB/Stable), and the Colombian group
Interconexion Electrica S.A. E.S.P (ISA; BBB+/Stable). CFE's
ratings are fully supported by the Mexican sovereign rating of
'BBB'/Outlook Stable due to its monopoly position in the country.
ISA's ratings are higher than the Colombian sovereign 'BBB'/Outlook
Negative rating as the linkage with the Colombian Government is
considered moderate and the company benefits from a low business
risk profile, strong geographic and business diversifivation of its
revenue source, which along with the high predictability of CFFO,
translate into a robust financial profile.
Eletrobras' 'b' SCP is five notches below the 'BBB-' Local Currency
IDR of the Brazilian generation company Engie Brasil Energia S.A.
and the Brazilian transmission groups Alupar Investmento S.A. and
Transmissora Alianca de Energia Eletrica S.A. due to its
significantly worst operating performance and much weaker financial
profile.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Receipt of BRL36.1 billion from compensation value for the
transmission concession renewal in monthly installments from
October 2019 to July 2025;
-- Average annual capex (not including equity contributions) of
BRL5.6 billion from 2019 to 2022;
-- Dividends of 25% of net profit in the coming years;
-- No further impairments and investigation findings beyond the
USD2.5 million Foreign Corrupt Practices Act settlement with
the U.S. SEC in 2018, and no revenues from asset disposals;
-- No execution of the outstanding guarantees to
non-consolidated
subsidiaries.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
-- Positive rating action on the sovereign.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
-- Negative rating action on the sovereign;
-- Perception of a weakening on Brazilian government support;
-- Significant deterioration on the company's SCP.
LIQUIDITY AND DEBT STRUCTURE
Manageable Debt Maturity: Eletrobras has historically maintained a
strong liquidity position and counts on the potential financial
flexibility provided by the sovereign. The company's consolidated
cash and marketable securities of BRL9.6 billion were above its
short-term debt of BRL7.5 billion at the end of the third quarter
of 2019 (3Q19) and was strengthened with the BRL3.7 billion raised
through a capital increase concluded in December 2019, which is
important to meet the expected negative FCF. The proposed BRL1.75
billion bonds issuance is also positive as it will refinance a bond
with the same amount due in January 2021, lengthening the group's
debt maturity schedule.
The group's cash position has been benefited from compensation of
its transmission lines assets renewed in 2013, which should
represent a cash inflow of BRL4.0 billion in 2019. The group still
had a balance of BRL36 billion to be received until 2025 at the end
of 3Q19. The agreement signed with Eletropaulo Metropolitana
Eletricidade de Sao Paulo S.A. in 2018, which represents a cash
inflow of BRL1.5 billion to be received in five annual
installments, and the outstanding amount of BRL550 million in
ongoing closing process of assets sold, as of September 2019, are
also expected to benefit the liquidity profile.
Eletrobras group's total adjusted debt of BRL82.5 billion at the
end of September 2019 was mainly concentrated in Brazilian
state-owned entities. Federal banks hold 34% of the consolidated
on-balance-sheet debt, with Petrobras responsible for 18% and RGR
8%, which strengths the linkage with the government. Foreign
currency debt comprised by Eurobonds and loans with international
development banks, such as Corporacion Andino de Fomento, Banco
Interamericano de Desenvolvimento and Kreditanstalt fur
Wiederaufbau, represents around 17% of group's debt. Brazilian
government provides guarantee in the amount of BRL7.6 billion,
representing around 15% of total consolidated debt.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
Environmental, Social and Governance (ESG)credit relevance is a
score of '3' - ESG issues are credit neutral or have only a minimal
credit impact on the entity, either due to their nature or the way
in which they are being managed by the entity.
ELETROBRAS: S&P Rates Up to $1.75 Billion Unsec. Notes 'BB-'
------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue-level rating to
Eletrobras-Centrais Eletricas Brasileiras S.A.'s (Eletrobras;
BB-/Positive/--) proposed senior unsecured notes of up to $1.75
billion due 2025 and 2030.
The new notes will be issued in connection with an exchange and
cash tender offers for the company's $1.75 billion, 5.750% notes
due 2021. This transaction is in line with S&P's expectations of
the company's debt refinancing, and it will further improve
Eletrobras' medium-term financial flexibility.
The terms of the new notes are very similar to those for the
existing ones, including the absence of financial covenants. The
rating on the proposed notes is at the same level as S&P's issuer
credit rating on the company, given its strong relationship with
the government and that government-related entities aren't subject
to reorganization according to Brazil's law.
Eletrobras is Brazil's national integrated electricity utility,
founded in 1962 under the Law 3,890. The government directly holds
51% of the company's voting capital and 41% of total capital.
Eletrobras focuses on generation (with 49.8 gigawatts in installed
capacity) and transmission (64,833 kilometers), which represent
about 76% and 21% of its revenues, respectively.
Ratings List
New Rating
Eletrobras-Centrais Eletricas Brasileiras S.A.
Senior Unsecured Notes BB-
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Places US$2.5-Bil. Bond, To Mature in 10-40 Yrs
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Dominican Today reports that the Dominican Republic placed a US$2.5
billion bond, with maturities of 10 and 40 years, at rates of 4.50%
and 5.875%, and amounts of US$1.0 billion and US$1.5 billion,
respectively.
"The placement is part of this year's Financing Plan, approved and
duly recorded in Law 506-19 that approves the General State Budget
for 2020, as well as in the Public Debt Securities Act, the Finance
Ministry said, according to Dominican Today.
The funds received will allow compliance with this year's
investment plan and meet the Government's obligations, the report
discloses.
The 10-year issue for US$1.0 billion with an interest rate of 4.50%
is, "the lowest issued by the Dominican Republic for this period,"
the report notes.
It adds that it's the first time it issues a 40-year bond, "the
instrument with the highest term issued by the country", the report
relates.
The interest rate or coupon of 5.875%, the lowest issued for a bond
with maturity greater than or equal to 30 years, "constitutes a
historical milestone in the trajectory of the Republic in
international capital markets," the Finance Ministry said in its
statement, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported on April 4,
2019 that the Dominican Today related that Juan Del Rosario of the
UASD Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
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).
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M E X I C O
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MEXICO: Aims for Greater Presence in China
------------------------------------------
EFE News reports that President Andres Manuel Lopez Obrador's
administration wants Mexico to have closer relations with China and
a greater presence in the Asian giant, aiming for complementarily
rather than competition in economic matters, Foreign Relations
Secretary Marcelo Ebrard said.
"It has been pointed out a lot that China and Mexico compete in
everything, but it is not true. There are sectors in which we do
compete, but the complementarily of the two economies is more
important than competition," Ebrard said during an event on trade
with China organized by the Economy Secretariat, according to EFE
News.
PETROLES MEXICANOS: Fitch Assigns BB+ Rating on Sr. Unsec. Debt
---------------------------------------------------------------
Fitch Ratings assigned long-term ratings of 'BB+' to Petroleos
Mexicanos' announced senior unsecured debt issuances and exchange
offers. PEMEX expects to use the proceeds from the issuance to
repay debt, particularly for a cash tender offer for two notes
maturating in 2020. PEMEX also announced an exchange offer of up to
USD2 billion targeting U.S. dollar-denominated notes with
maturities between 2021 and 2048 to be exchanged for two new notes
due in 2031 and 2060. Successful completion of this transaction
will further bolster PEMEX's liquidity profile by reducing
short-term debt and smoothing medium-term maturities. PEMEX has a
Negative Rating Outlook.
PEMEX's ratings reflect the Mexican government's "moderate"
support-track record for the company given the ongoing heavy tax
burden, which has historically limited PEMEX's reinvestment
capacity. Total support from the Mexican government toward PEMEX in
2019 may have totaled approximately USD9.5 billion after a USD5
billion capital injection and provided the company was able to
realize 100% of the tax benefits the Mexican government extended to
PEMEX last year. This support compares with approximately USD27
billion of transfers from PEMEX to the Mexican government in 2018
in the form of taxes, duties and others. Mexico has announced
additional support measures for PEMEX for 2020 and 2021, which
could amount to approximately USD11.4 in total for both years.
PEMEX's standalone credit profile is commensurate with a 'ccc'
rating as a result of the company's weak capital structure
resulting from its elevated leverage. Fitch's assessment of the
government's incentive to support the company is currently
"strong", which together with the 'ccc' SCP, "very strong"
ownership and control and "moderate" support track record result in
PEMEX's rating being two notches below those of Mexico (BBB/Stable)
in accordance with Fitch's Government-Related Entities Criteria.
PEMEX's Negative Outlook reflects the potential for further
deterioration of the company's SCP to below 'ccc'. Although PEMEX
has implemented some cost cutting measures and received moderate
tax cuts from Mexico, the company continues to severely underinvest
in its upstream business, which could lead to further production
and reserves decline. The very high level of transfers from PEMEX
to the Mexican government continues to significantly pressure
PEMEX's cash flow generation and reinvestment ability and weaken
its SCP.
KEY RATING DRIVERS
Strong Government Linkage: Although Fitch's assessment of the
strength of the linkage between PEMEX and the government was
revised downward as a result of the SCP deterioration, Fitch
continues to expect the government to ensure PEMEX maintains a
robust liquidity position to service debt, which supports the
material rating uplift from the SCP. PEMEX's linkage to the Mexican
government results from strong incentives to support the company
given the socio-political and financial consequences a PEMEX
default would have for the country. PEMEX is Mexico's largest
company and one of the government's major sources of funds,
historically contributing between 25% and 30% of government
revenues.
Transfers Weaken SCP: PEMEX's deteriorating SCP is primarily the
result of excessive distributions to the government. The company's
contributions to Mexico averaged approximately 10% of government
revenues or approximately USD27 billion in 2018. Transfers from
PEMEX to the government remain high in relation to the company's
cash flow generation, and during the past five years, transfers to
the government averaged 45% of sales, or more than 80% of adjusted
EBITDA. As a result, the company's balance sheet has steadily
weakened with a significant increase in debt and negative equity
since year-end 2009. PEMEX's debt lacks an explicit guarantee from
the Mexican government.
Strategic Importance for Energy Security: Linkage to the sovereign
stems from the company's strategic importance in supplying liquid
fuels to Mexico. A financial crisis at the oil company would have
very strong socio-political consequences for Mexico as it could
potentially disrupt the country's liquid fuel supply. Mexico is a
net importer of liquid fuels as a result of continued production
decline. The country relies on PEMEX for virtually all the supply
of gasoline and diesel, of which approximately two thirds come from
imports. A financial distress at PEMEX could also have very strong
financial consequences for the Mexican government and other GREs,
especially regarding their access to funding.
Moderate Government Support: Fitch considers Mexico's support of
PEMEX to be moderate, and it reflects modest capital injections,
support for pension liabilities and marginal tax reductions. This
moderate support assessment reflects the high level of transfers
from the company to the government. Fitch expects the government to
execute more meaningful supportive actions when needed; for example
the USD5 billion capital injection received in September 2019 to
bolster liquidity. Total support for PEMEX in 2019 could have
amounted to USD9.5 billion after this injection and other support
measures executed earlier in the year. In the past, the company has
also received other capital injections for different purposes, and
Fitch expects the Mexican government to continue ensuring PEMEX has
strong liquidity position to service debt.
Deteriorating Underlying Credit Quality: PEMEX's SCP would be in
line with a Long-Term IDR of 'ccc' if it were not owned by the
state and if the government did not provide financial support.
PEMEX's SCP could continue deteriorating if the Mexican government
continues extracting large amounts of funds from the company,
resulting in weak FFO, negative FCF and increasing leverage. The
company's SCP could also continue deteriorating as a result of a
change in strategy that materially increases downstream capex,
especially if it is at the expense of lowering upstream capex
and/or increasing leverage. During the LTM ended Sept. 30, 2019,
PEMEX reported an adjusted EBITDA before net pension expenses of
USD23 billion and negative Fitch defined FFO, while total financial
debt amounted to USD104 billion.
Weak Post-tax Credit Metrics: Although PEMEX reports moderately
solid pre-tax credit metrics, its post-tax credit protection
metrics are weak as a result of high transfers to the federal
government. As of the LTM ended June 30, 2019, PEMEX reported a
Fitch calculated FFO-adjusted leverage of roughly 22x. PEMEX's
total debt-to-proved reserves (1P) have deteriorated to around
USD15/boe as of year-end 2018 from USD9.2/boe in 2015. Excluding
the USD5 billion capital injection received in September 2019,
Fitch expects PEMEX to report a marginally negative FCF for 2019.
Continued Upstream Underinvestment: Fitch expects production and
hydrocarbon reserves to continue declining over the medium term in
line with recent history as current and projected capex is likely
to be insufficient to replenish reserves. Fitch estimates PEMEX
will require annual capex of around USD13 billion to USD18 billion
to replenish reserves. This is based on a finding, development and
acquisition cost (FD&A) estimate of between USD13/boe to USD18/boe.
Fitch estimates production could decline 5% per year over the next
few years, in line with historical trends. Recent discoveries,
namely Ixachi, which added an estimated 1.3bn boe of 3P reserves,
and Quesqui with estimated 3P reserves of 500 million boe, may help
offset somewhat the company's production and reserve decline but
are not enough to reverse the declining trend.
Weak Corporate Governance: Fitch considers PEMEX's corporate
governance weak given the continued high level of government
interference in the company's strategy, financing and management
changes with changes in administration.
DERIVATION SUMMARY
PEMEX's linkage to the sovereign compares unfavorably with that of
Petrobras (BB-/Stable), Ecopetrol (BBB/Negative), Enap (A/Stable)
and Petroperu (BBB+/Stable). All of PEMEX's regional peers have
strong linkage to their respective sovereigns as a result of strong
government support. In Fitch's view, all governments in the region,
except for Mexico, have implemented different measures to ensure
the SCPs of their respective national oil and gas companies (NOCs)
remain viable in the long term.
PEMEX's ratings continue to reflect its close, albeit
deteriorating, linkage to the government of Mexico and the
company's fiscal importance to the sovereign and strategic
importance to the country. PEMEX's ratings also reflect the
company's competitive pre-tax cost structure, national and
export-oriented profile, sizable hydrocarbon reserves and its
strong domestic market position. The ratings are constrained by
PEMEX's substantial tax burden, high leverage, significant unfunded
pension liabilities, large capital investment requirements,
negative equity and exposure to political interference risk.
Fitch views PEMEX's SCP as commensurate with a 'ccc' rating, which
is seven notches below Petrobras' SCP of 'BB+' and nine notches
below Ecopetrol's SCP of 'BBB'. These differences are primarily due
to PEMEX's weaker capital structure and increasing debt and
leverage trajectory. PEMEX's SCP of 'ccc' reflects the company's
burdensome transfers to Mexico's federal government; its large and
increasing financial debt balance when compared with 1P reserves;
elevated FFO-adjusted leverage; and its decreasing production and
reserves trend. In comparison, Ecopetrol and Petrobras have
significantly strengthened their capital structure and maintain
stable operating profiles.
KEY ASSUMPTIONS
-- Average West Texas Intermediate (WTI) crude prices trend
towards USD55/bbl in the long term;
-- Upstream capex continues in line with the last three-year
average;
-- Production declines by 5% per year over the next few years;
-- PEMEX will receive necessary support from the government to
ensure adequate liquidity and debt service payments.
RATING SENSITIVITIES
Although not expected in the short term, developments that may,
individually or collectively, lead to positive rating action for
PEMEX include:
-- An upgrade of Mexico's sovereign ratings;
-- An irrevocable guarantee from Mexico's government sovereign of
sustainably more than 75% of PEMEX's debt;
-- A material capitalization coupled with a material reduction of
PEMEX taxes together with a business plan that results in neutral
to positive FCF through the cycle, while implementing a sustainable
upstream capex that is sufficient to replace 100% of reserve and
stabilize production profitably;
-- A sustainable FFO-adjusted leverage below 5x.
PEMEX's Outlook could stabilize through material cost savings and
tax reductions that allow the company to have neutral to positive
FCF through the cycle, while implementing a sustainable upstream
capex that is sufficient to replace 100% of reserve and stabilize
production profitably.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action for PEMEX include:
-- Although not expected in the short term, a downgrade of
Mexico's sovereign rating;
-- A sustained deterioration of PEMEX's financial flexibility
coupled with government inaction to support liquidity. This could
result from continued negative FCF and/or a material reduction of
the company's cash on hand, credit facilities and/or restricted
capital markets access;
-- FFO-adjusted leverage materially above 8x and total debt to 1P
reserve significantly higher than USD15/boe;
-- A continued deterioration of the company's SCP to below the
current 'ccc' assessment, which could result if the company fails
to stabilize production and continues with unsustainable reserves
replacement ratios and negative FCF.
LIQUIDITY AND DEBT STRUCTURE
Tight Liquidity to Improve After Proposed Issuance: As of Sept. 30,
2019, PEMEX reported low liquidity with cash on hand of USD3.4
billion, or MXN68 billion, which compares with approximately USD10
billion of short-term debt, or MXN192 billion, including accrued
interest. PEMEX's USD8 billion of bank debt refinancing and
liability management executed in September 2019 illustrates
continued access to funding but the liquidity ratio remains low.
PEMEX's availability and undrawn committed lines of credit were
approximately USD8.7 billion as of Sept. 30, 2019. The announced
transaction is expected to bolster the company's liquidity,
although cash on hand will likely remain low while available RCFs
will remain robust at approximately USD8.4 billion. Liquidity is
further bolstered by robust pre-tax cash flow generation supported
by a competitive operational cost structure.
ESG CONSIDERATIONS
Unless otherwise disclosed in the section, the highest level of ESG
credit relevance is a score of 3. ESG issues are credit-neutral or
have only a minimal credit impact on the entity, either due to
their nature or to the way in which they are being managed by the
entity.
PEMEX has an ESG Relevance Score of 4 for Community Relations &
Social Access (SCR) as oil and gas production companies are
typically exposed to social and community relationship issues in
their area of influence.
PEMEX has an ESG Relevance Score of 4 for Governance Structure
(GGV) resulting from its nature as a majority government owned
entity and the inherent governance risk that arise with a dominant
state shareholder.
=====================
P U E R T O R I C O
=====================
J & C CORP: Plan & Disclosures Hearing Reset to March 11
--------------------------------------------------------
Judge Mildred Caban Flores of the U.S. Bankruptcy Court for the
District of Puerto Rico granted the urgent motion of Debtor J & C
Corporation Inc. to extend time to confirm the small business plan
and to reschedule the hearing.
The hearing on final approval of the disclosure statement and
confirmation of the plan scheduled for Jan. 8, 2019, is
rescheduled, for cause, for March 11, 2020, at 9:00 a.m., at the
United States Court, Jose V. Toledo Federal Building and US
Courthouse, 300 Recinto Sur Street, Courtroom 3, Third Floor, San
Juan, Puerto Rico. The term to confirm the plan is extended, for
cause, until May 19, 2020.
About J & C Corporation
J & C Corporation Inc. sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D.P.R. Case No. 19-04176) on July 24,
2019.
At the time of the filing, the Debtor had estimated assets of
between $500,001 and $1 million and liabilities of between $100,001
and $500,000. The case is assigned to Judge Mildred Caban Flores.
The Debtor tapped Modesto Bigas Mendez, Esq., as its legal
counsel.
MONTE IDILIO: Deadline to File Plan Extended to April 30
--------------------------------------------------------
The U.S. Bankruptcy Court for the District of Puerto Rico extended
to April 30 the deadline for Monte Idilio, Inc. and affiliates to
file their Chapter 11 plan of reorganization and disclosure
statement.
About Monte Idilio
Monte Idilio Inc., a company based in Hormigueros, P.R., filed a
Chapter 11 petition (Bankr. D.P.R. Case No. 19-03828) on July 1,
2019. In the petition signed by Wilmer Tacoronte Negron,
administrator, the Debtor disclosed $1,300,000 in assets and
$2,777,793 in liabilities. Judge Edward A. Godoy oversees the case.
Damaris Quinones Vargas, Esq., at LCDA Damaris Quinones, and Jose
F. Cardona, Esq., serve as the Debtor's bankruptcy attorneys.
TECNICENTROS MUNDIAL: Court Confirms Amended Reorganization Plan
----------------------------------------------------------------
Judge Enrique S. Lamoutte of the U.S. Bankruptcy Court for the
District of Puerto Rico has confirmed and approved the Amended Plan
of Reorganization of Tecnicentros Mundial Inc. pursuant to Section
1129 of the Bankruptcy Code.
The Asset Sale contemplated in the Amended Plan is approved. On
the effective date and subject to the closing of the Asset Sale,
all Purchased Assets shall be sold and transferred to, and vested
in, the Purchaser free and clear of all liens, claims, rights,
liabilities, encumbrances and other interests.
The classification of Claims and interests for purposes of the
distributions to be made under the Amended Plan shall be governed
solely by the terms of the Amended Plan.
The Disclosure Statement explaining the Plan was approved earlier,
in October 2019.
Also, back in November 2019, (a) the Debtor and M. Miller & Sons
LLC reached an agreement whereby Miller & Sons withdrew a complaint
against Oriental Bank and the Debtor under Adversary Case No.
19-00437, (b) the Debtor withdrew its objections to Miller & Sons'
proof of claims, and (c) the Debtor, Oriental Bank, and M. Miller
resolved all other controversies to allow the Court to scheduled a
confirmation hearing.
A full-text copy of the Order Confirming the Plan is available at
https://tinyurl.com/rslysne from PacerMonitor.com at no charge.
About Tecnicentros Mundial
Based in San Juan, Puerto Rico, Tecnicentros Mundial, Inc., a
distributor of tires and tubes for passenger and commercial
vehicles, filed a voluntary Chapter 11 petition (Bankr. D.P.R. Case
No. 19-04471) on Aug. 6, 2019. In the petition signed by Jacklin
Tirado Rivera, vice-president, the Debtor had total assets of
$3,459,283 and total liabilities of $8,891,276. The case is
assigned to Hon. Enrique S. Lamoutte Inclan. William Vidal
Carvajal, Esq., in San Juan, Puerto Rico, is the Debtor's counsel.
Luis Carrasquillo, CPA, is the financial advisor.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week January 20 to January 24, 2020
-------------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
SACI Falabella 2.3 50.6 7/15/2020 CL CLP
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Banco Security SA 3.0 27.4 6/1/2021 CL CLP
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
Enel Americas SA 5.8 32.7 6/15/2022 CL CLP
Empresa Provincial de 12.5 0.0 1/29/2020 AR USD
Cia Energetica de Pern 6.2 1.1 1/15/2022 BR BRL
Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD
Odebrecht Finance Ltd 7.0 17.0 4/21/2020 KY USD
Yida China Holdings Lt 7.0 74.3 4/19/2020 CN USD
Noble Holding Internat 6.1 62.0 3/1/2041 KY USD
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Provincia del Chubut A 4.5 2208 3/30/2021 AR USD
Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD
Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD
Polarcus Ltd 5.6 71.8 7/1/2022 AE USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD
KrisEnergy Ltd 4.0 40.4 6/9/2022 SG SGD
Noble Holding Internat 5.3 60.5 3/15/2042 KY USD
AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL
MIE Holdings Corp 7.5 56.4 4/25/2019 HK USD
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Empresa de Transporte 4.3 30.9 7/15/2020 CL CLP
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Plaza SA 3.5 38.3 8/15/2020 CL CLP
Banco Security SA 3.0 5.6 7/1/2019 CL CLP
Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD
Corp Universidad de Co 5.9 64.2 11/10/2021 CL CLP
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD
Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR
Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD
Fospar S/A 6.5 1.2 5/15/2026 BR BRL
Empresa Electrica de l 2.5 63.8 5/15/2021 CL CLP
Sociedad Austral de El 3.0 17.0 9/20/2019 CL CLP
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
Esval SA 3.5 49.9 2/15/2026 CL CLP
*********
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 2020. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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