/raid1/www/Hosts/bankrupt/TCRLA_Public/200428.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
Tuesday, April 28, 2020, Vol. 21, No. 85
Headlines
A R G E N T I N A
TELECOM ARGENTINA: S&P Affirms 'B-' Issuer Credit Rating
B R A Z I L
IMCOPA: Soy Plant Takeover Blocked by Court Injunction
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Exporters Seeks to Pass Free Trade Pact
DOMINICAN REPUBLIC: Over 49K Firms Seek to Lay Off 814,326 Workers
J A M A I C A
DIGICEL GROUP: Attacks on Infrastructure Network Have Escalated
N I C A R A G U A
NICARAGUA: S&P Affirms 'B-/B' Sovereign Credit Ratings
P U E R T O R I C O
ACADIA HEALTHCARE: Moody's Cuts CFR to B2, Outlook Stable
JC PENNEY: Egan-Jones Lowers Senior Unsecured Debt Ratings to D
TOWN SPORTS: Moody's Lowers CFR to Ca, Outlook Stable
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: VAT Refunds Start Flowing
X X X X X X X X
[*] Moody's: More Companies in Crossrover Zone Amid Pandemic
[*] Unparallelled Global Recession Underway, Fitch Says
- - - - -
=================
A R G E N T I N A
=================
TELECOM ARGENTINA: S&P Affirms 'B-' Issuer Credit Rating
---------------------------------------------------------
On April 20, 2020, S&P Global Ratings lowered its stand-alone
credit profile assessment on Telecom Argentina S.A. (Telecom) to
'b+' from 'bb'. S&P also affirmed its 'B-' issuer credit and
issue-level ratings on Telecom because they're still capped by the
'B-' transfer and convertibility assessment (T&C) on Argentina.
The lower SACP reflects that Telecom has about $1.04 billion in
maturities for the remainder of 2020 and 2021 with about $850
million alone in 2021, while refinancing options remain limited for
Argentinean corporations. S&P believes the current funding crunch
and the sovereign's selective default post significant difficulties
for the domestic corporate sector to refinance debts in
international markets for the remainder of 2020. However, in our
view, Telecom should have sufficient liquidity to meet its
obligations in 2020. Given cash on hand and expected funds from
operations (FFO), it doesn't forecast cash shortages in 2020.
S&P said, "We expect most vulnerable sectors in the telecom
industry, such as prepaid mobile customers to reduce their
spending, and recession to take a toll on the B2B segment,
particularly, small to mid-size enterprises could be scaling back
their spending or some even going out of business. Amid recession,
we also expect the company's rate adjustments in most of its
business lines to somewhat lag behind inflation, pressuring into
average revenue per user (ARPUs). Finally, we expect some working
capital strains in the next couple of months because the extended
quarantine and the economy's halt could hurt collections.
Nevertheless, we regard the telecom industry as relatively
resilient and because Telecom is the leading operator in the
country with a dominant position in the broadband segment, we
expect the company's operating cash flows to remain sound. We
expect revenue and EBITDA to grow about 30% and 15%, respectively,
in 2020, but to fall in real terms given that we estimate inflation
could reach about 40% this year. However, Telecom should have more
than enough operating cash flows to cover capex needs and given
some refinancing during the first quarter, we expect the company to
have a strong cash position towards the end of the year.
"We estimate Telecom could need $300 million - $400 million in
refinancing to cover the 2021 maturities. Our forecast contemplates
about $1 billion in capex in 2021, as part of Telecom's $5 billion
capex plan it announced in 2018. However, there's likely
considerable flexibility in terms of investments, for instance, the
company will probably reduce investments to about $500 million this
year. Furthermore, despite difficulties in accessing international
capital markets, Telecom could still tap smaller amounts of funding
in domestic bond market, local banks, and even multilateral
agencies such as The International Finance Corporation (IFC), The
Inter-American Development Bank (IDB), and The Inter-American
Investment Corporation (IIC) from which the company secured loans
in the past. For example, Telecom has received new loans of $150
million from IDB so far this year, and still can draw $50 million
available under that financing."
===========
B R A Z I L
===========
IMCOPA: Soy Plant Takeover Blocked by Court Injunction
------------------------------------------------------
Ana Mano at Reuters, citing court filings, reports that a
previously unreported Brazilian court injunction last month has
thrown a wrench into Bunge Ltd's (BG.N) plan to take over two soy
processing plants from local crusher Imcopa.
The injunction was granted on behalf of two Panamanian entities
identified in the filings as "third parties," according to Reuters.
It effectively suspended a bankruptcy court auction in which Bunge
had bid a combined BRL50 million ($9.16 million) for the plants,
the report relays.
The Feb. 17 offer, made under an Imcopa reorganization plan
approved by creditors in 2017, also entailed assumption by Bunge of
around BRL1 billion ($183.11 million) of debt related to the
assets, the report notes.
Both Imcopa and Bunge have since challenged the ruling suspending
the sale of the plants, which crushed a combined 1 million tonnes
of soybeans in 2019, according to filings dated April 20 and April
16, the report relates.
Imcopa argued before the court that the Panamanian entities, which
say they acquired claims against Imcopa from other company
creditors, made "false allegations" and hence "induced the judge to
error," the report discloses.
Procedural delays caused by the coronavirus pandemic have made it
difficult to predict the timing of a new ruling that would allow
Bunge to close the deal, a source familiar with the matter said on
condition of anonymity, the report relays.
Bunge's acquisition is seen as crucial to keeping the plants
running, protecting 650 jobs and repaying Imcopa creditors, the
report notes.
Brewer Spat
The Imcopa plants have been run since 2014 under an agreement with
Brazilian brewer Cervejaria Petropolis whereby it pays certain
operating expenses in exchange for the proceeds of their soy
processing activities, the report notes.
That contract represents Imcopa's only source of income, it said in
court filings, the report relates.
Imcopa tried to end the agreement with the brewer due to an alleged
breach of contract, sparking a parallel legal battle, the report
discloses.
Imcopa is now seeking repayment of at least 4 million reais from
Cervejaria Petropolis covering certain operating expenses incurred
this year, court filings showed, the report relays. Imcopa says
its ability to keep processing soy is threatened by a lack of money
to pay suppliers, the report says.
Bunge said it won the auction but has yet to sign the purchase
agreement for the plants, which will only happen after the
bankruptcy court approves the deal, the report notes.
Imcopa declined to comment.
Cervejaria Petropolis told Reuters it is current on all its
contract obligations, adding that it does not recognize certain
expenses claimed by Imcopa under their agreement that extends at
least until 2024.
Imcopa, which makes soyoil and soy protein concentrate, is one of
the largest non-genetically modified soy crushers in Brazil.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Exporters Seeks to Pass Free Trade Pact
-----------------------------------------------------------
Dominican Today reports that Dominican Exporters Association
(Adoexpo) president, Luis Concepcion asked the Senate to ratify the
free trade agreement between the United Kingdom of Great Britain
and the members of the Caribbean Forum of African, Caribbean and
Pacific States (Cariforum), before December 31, the date that the
benefits granted by that nation under the agreement of the
Dominican Republic and the European Union will be repealed.
He said the action by the Upper House "will be of vital importance
because it would prevent a legal gap and a negative impact on
bilateral trade with the United Kingdom, which is the ninth
destination of Dominican exports, with an amount of about $93.4
billion dollars in 2019," according to Dominican Today.
"it is essential to guarantee that our exporters insert their
products in that market for the restoration of the sector and the
economy in general after the coronavirus pandemic crisis," the
report notes.
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 in April 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.
On April 16, 2020, S&P Global Ratings revised its outlook on the
long-term ratings on the Dominican Republic to negative from
stable. At the same time, S&P affirmed its 'BB-/B' long- and
short-term foreign and local currency sovereign credit ratings.
The transfer and convertibility (T&C) assessment is unchanged at
'BB+'.
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: Over 49K Firms Seek to Lay Off 814,326 Workers
------------------------------------------------------------------
Dominican Today reports that to date, a total of 49,831 companies
have requested the Labor Ministry to authorize laying off their
employees.
According to data from the Labor Ministry, the suspension requests
total 81,709, with 814,326 workers affected, the report notes.
The workers registered in the Employee Solidarity Assistance Fund
(FASE) are 756,273, of which 599,413 were approved and 112,193
workers were rejected, Diario Libre reports on figures from the
Labor Ministry, according to Dominican Today.
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 in April 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.
On April 16, 2020, S&P Global Ratings revised its outlook on the
long-term ratings on the Dominican Republic to negative from
stable. At the same time, S&P affirmed its 'BB-/B' long- and
short-term foreign and local currency sovereign credit ratings.
The transfer and convertibility (T&C) assessment is unchanged at
'BB+'.
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).
=============
J A M A I C A
=============
DIGICEL GROUP: Attacks on Infrastructure Network Have Escalated
---------------------------------------------------------------
RJR News reports that the country's two main telecom firms are
complaining that attacks on their network infrastructure have
escalated.
FLOW and Digicel say the perpetrators are now burning cell towers.
Chief Operating Officer at Digicel Group, Brian Bennett-Easy, said
the rise in malicious attacks stems from false information that the
sites cause covid-19, according to RJR News.
Digicel and Flow noted that this is happening at a time when the
country is more dependent on the internet, the report notes.
FLOW's Country Manager, Stephen Price, is demanding that the
government consider implementing orders under the emergency powers
act to protect telecoms network from attacks, the report relates.
He added that since the outbreak of COVID-19 on the island and with
more people staying home for school and work, FLOW has seen up to
30 per cent increase in data traffic, the report discloses.
Bennett-Easy said the damage to Digicel's cell tower will cost the
company about half a million dollars to replace, the report says.
He also noted that if the company loses one cell tower, about 7,000
people will be disconnected, the report adds.
About Digicel Group
Digicel Group is a mobile phone network provider operating in 33
markets across the Caribbean, Central America, and Oceania
regions.
The company is owned by the Irish billionaire Denis O'Brien, is
incorporated in Bermuda, and based in Jamaica.
As reported in the Troubled Company Reporter-Latin America
April 17, 2020, Moody's Investors Service downgraded Digicel
Group Limited's probability of default rating to Caa3-PD from
Caa2-PD. At the same time, Moody's downgraded the senior
secured rating of Digicel International Finance Limited to Caa1
from B3. All other ratings within the group remain unchanged.
The outlook is negative.
On April 10, 2020, the TCR-LA reported that Fitch Ratings has
downgraded Digicel Limited to 'C' from 'CCC', and its
outstanding debt instruments, including the 2021 and 2023
notes to 'C'/'RR4' from 'CCC'/'RR4'. Fitch has also
downgraded Digicel International Finance Limited to 'CCC+'
from 'B-'/Negative, and its outstanding debt instruments,
including the 2024 notes and the 2025 credit facility, to
'CCC+'/'RR4' from 'B-'/'RR4'. Fitch has removed the Negative
Rating Outlook from DIFL.
=================
N I C A R A G U A
=================
NICARAGUA: S&P Affirms 'B-/B' Sovereign Credit Ratings
------------------------------------------------------
On April 20, 2020, S&P Global Ratings affirmed its 'B-/B' long- and
short-term sovereign credit ratings on Nicaragua. The outlook on
the long-term ratings remains stable. S&P also affirmed its 'B-'
transfer and convertibility (T&C) assessment.
Outlook
S&P said, "The stable outlook reflects our view that economic
growth will moderately recover in 2021 after another year of
contraction due to the negative impact of the global downturn and
the COVID-19 pandemic. It also reflects our expectation that the
sovereign will be able to cover its external financing needs this
year and next year, balanced with continued political uncertainty
ahead of the November 2021 general elections.
"We could lower the rating in the next six to 18 months if
Nicaragua's ability to gain sufficient domestic and external
financing deteriorates as a result of a deeper economic downturn,
larger fiscal slippage, or increased political tensions. Heightened
pressures on the domestic financial system, which could put at risk
the crawling peg exchange rate regime, could also lead us to lower
the rating.
"We could raise the ratings over the next two years if, as the
COVID-19 shock subsides, political and policy developments raise
investor confidence, reverse the contraction in GDP faster than we
expect, and improve access to funding the country's fiscal deficit
and debt service payments. A clear track record of strengthening
economic and fiscal results and improvement in Nicaragua's external
liquidity on a sustainable basis could lead to an upgrade."
Rationale
The ratings on Nicaragua reflect its limited monetary, external,
and fiscal flexibility; low per capita GDP; narrow and concentrated
economic base; and institutional weaknesses. Political deadlock
since early 2018 has led to two years of GDP contraction and limits
the pace of economic recovery, as business sector confidence
remains low. The ratings also reflect a moderate net general
government debt burden and austere economic policies since the
start of domestic political tensions.
The global spread of COVID-19 will likely prolong the recession in
Nicaragua, delaying the country's recovery to 2021. S&P expects GDP
to contract by 5% in 2020, equivalent to a reduction of 6% in per
capita terms. Private consumption will suffer due to higher
unemployment and lower remittances from abroad. Investment and
exports are also likely to suffer this year. Moreover, activity
will remain depressed in the tourism sector.
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. S&P said,
"Some government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We project GDP growth in Nicaragua to
begin to recover in 2021, at a moderate pace of 2%, assuming
relative political stability ahead of the general elections in
November." GDP per capita is projected at US$1,808 in 2020.
Ongoing tensions, due to the lack of a political settlement between
President Ortega's government and the opposition, have damaged
Nicaragua's growth prospects and public finances since the outbreak
of the political crisis in 2018. The public health and political
impact of the COVID-19 pandemic could pose additional risks to
political stability as the country approaches presidential and
legislative elections late next year. President Daniel Ortega of
the governing Sandinista Party is now serving in his third
consecutive term (2016-2021). In S&P's opinion, a potential
increase in political risks could further limit Nicaragua's access
to official lending, or raise the risk of bank deposit outflows.
The economic downturn this year will lower fiscal revenues and
create pressure for more spending, likely boosting the general
government deficit to around 4.7% of GDP. Last year's reforms to
the tax and pension systems resulted in a significant reduction of
the budget deficit to a projected 0.8% (year-end result has not
been released yet) from 3.1% in 2018.
S&P said, "As the impact of the pandemic dissipates, we assume that
the authorities will undertake adjustment measures to stabilize
fiscal balances, as they did in 2019. Nevertheless, we are
expecting higher spending related to the 2021 elections. As a
result, the general government deficit is likely to narrow toward
2.5% of GDP, on average, in 2021-2023.
"In our opinion, Nicaragua will maintain its access to official
external financing to cover the government's financing needs,
although uncertainty will persist about international economic
sanctions. For instance, sanctions from the U.S. government have
restricted the approval of new loans from IDB and World Bank,
except for loans meant for humanitarian needs. However, financing
from the Central American Bank for Economic Integration (CABEI) is
projected to increase in the coming years. On the domestic front,
sales of Nicaraguan treasury bonds to the private sector
accelerated in 2019, boosted by high local interest rates."
S&P expects Nicaragua's net general government debt to increase to
47% of GDP in 2020 from 41% in 2019. All of the general government
debt is denominated in foreign currency, making it vulnerable to
potential abrupt changes in the exchange rate. However, official
creditors account for 99% of external amortization payments in the
coming two to three years, containing rollover risk.
The combination of current account surpluses and continued access
to official funding should mitigate the impact of the COVID-19
external shock on international reserves (around US$2.4 billion as
of Dec. 19, 2019) and, therefore, on the crawling peg exchange rate
regime. External liquidity pressures somewhat eased in 2019
compared with 2018. We foresee a decline in the current account
surplus in 2020, to 5% of GDP from around 6.7% in 2019, on the back
of lower merchandise exports, a drop in remittances, and a further
weakening of tourism inflows. The high current account surplus
estimated in 2019, as opposed to Nicaragua's historical deficit
position, stemmed mainly from a sharp fall in imports.
On the other hand, foreign direct investment (FDI) inflows will
remain low, below 1% of GDP. S&P expects Nicaragua's gross external
financing needs to average 94% of current account receipts (CARs)
and usable reserves for 2020-2023, below previous years' levels.
S&P anticipates that economic contraction will delay a recovery in
bank lending, as well as profitability, and may affect customer
deposit volumes. Deposits started to recover during the second half
of 2019, after a sharp fall following the political crisis, and
bank lending began to grow slowly in the last quarter of last year.
The central bank has access to a US$200 million revolving credit
line, made available by CABEI, for liquidity management purposes.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed
Nicaragua
Sovereign Credit Rating B-/Stable/B
Transfer & Convertibility Assessment B-
=====================
P U E R T O R I C O
=====================
ACADIA HEALTHCARE: Moody's Cuts CFR to B2, Outlook Stable
---------------------------------------------------------
Moody's Investors Service downgraded the ratings of Acadia
Healthcare Company, Inc., including the Corporate Family Rating to
B2 from B1 and the Probability of Default Rating to B2-PD from
B1-PD. Moody's also downgraded the senior secured ratings to Ba3
from Ba2 and the unsecured ratings to Caa1 from B3. Moody's also
downgraded the Speculative Grade Liquidity Rating to SGL-3 from
SGL-2 and changed the outlook to stable from negative.
The downgrade of the CFR reflects the company's persistently high
financial leverage, and Moody's expectation that debt/EBITDA will
remain above 5.5 times over the next 12-18 months. Moody's
estimates Acadia's adjusted debt/EBITDA approximated 6.0 times for
the twelve months ended December 31, 2019. The downgrade also
reflects multiple years of stagnant earnings despite hundreds of
millions of dollars spent on growth capital expenditures, delays
associated with the sale process of the underperforming UK
business, and rising refinancing risk.
While Moody's believes that the coronavirus impact on Acadia will
be moderate relative to other healthcare providers, given the
nature of Acadia's services, the pandemic will nonetheless be a
headwind, constraining the company's ability to materially grow
earnings. Further, Moody's believes the company will continue to
deploy a significant portion of its cash flow towards growth
cap-ex
in lieu of debt repayment. While the potential sale of the UK
business offers an opportunity for deleveraging, the timing of such
an event is uncertain, in light of global disruption caused by the
pandemic.
The stable outlook reflects the non-elective nature of Acadia's
services, good scale and diversity by geography and behavioral
service line. These factors will help to partially mitigate the
company's high financial leverage, which is unlikely to decline in
the near-term due to the impact of the coronavirus on patient
volumes and costs.
The downgrade of the Speculative Grade Liquidity Rating to SGL-3
incorporates upcoming debt maturities and rising refinancing risk.
The company has $150 million of notes maturing in March 2021 and
$347 million of term loan debt maturing in November 2021. That
said, Moody's expects that Acadia will maintain adequate liquidity
over the next 12-18 months. Liquidity is supported by strong cash
flow after maintenance capex (before growth capex) and a largely
available $500 million revolving credit facility (expiring November
2021). The company has three financial maintenance covenants, the
tightest of which is the total net leverage covenant which has
step-downs beginning at the end of 2020. Moody's expects the
cushion under this covenant will decline meaningfully in 2021. That
said, Moody's recognizes that the company has flexibility to sell
assets or reduce growth capex in order to reduce debt and improve
covenant cushion and liquidity. Liquidity will also benefit from
the CARES Act and other government programs, which will provide
both grant funding and advanced Medicare payments to Acadia.
Acadia Healthcare Company, Inc.
Ratings downgraded:
Corporate Family Rating to B2 from B1
Probability of Default Rating to B2-PD from B1-PD
Senior secured bank credit facility to Ba3 (LGD2) from Ba2 (LGD2)
Senior unsecured regular bond/debenture to Caa1 (LGD5) from B3
(LGD5)
Speculative Grade Liquidity Rating to SGL-3 from SGL-2
Outlook Actions:
The outlook was changed to stable from negative.
RATINGS RATIONALE
The B2 CFR is constrained by Acadia's high financial leverage as
well as its reliance on government reimbursement, both in the
United States (Medicare and Medicaid) and in the United Kingdom
(National Health Service). Acadia also has exposure to fluctuations
in the British pound and changes in economic conditions in the UK.
There are also risks associated with the rapid pace of growth
through acquisitions, opening of new facilities and the addition of
new beds in existing facilities. Further, the continuing spread of
the coronavirus will temporarily reduce patient volumes at Acadia's
behavioral health facilities.
The B2 rating is supported by the company's large scale and good
business and geographic diversity within the behavioral health care
industry. It is also supported by attractive industry fundamentals,
including growing demand for services and increasing willingness of
payors, including governments, to pay for behavioral health and
addiction treatment services. The B2 rating is also supported by
the company's strong operating cash flow and adequate liquidity.
The stable outlook reflects the non-elective nature of Acadia's
services, good scale and diversity by geography and behavioral
service line. These factors will help to partially mitigate the
company's high financial leverage, which is unlikely to decline in
the near-term due to the impact of the coronavirus on patient
volumes and costs.
As an operator of inpatient behavioral health hospitals, Acadia
faces high social risk. Any incident, such as a patient fatality or
a patient not receiving appropriate care at one of Acadia's
facilities, can result in increased regulatory burdens, government
investigations, and negative publicity. Acadia also has
environmental risk associated with inclement weather and natural
disasters. For example, Hurricane Dorian weakened patient volumes
in some of the company's North Carolina and Florida facilities in
September 2019, while wildfires in California in October 2019
necessitated the evacuation of three of the company's facilities
and dampened the patient volumes of others. From a governance
perspective, the significant amount of capital that Acadia has
allocated to acquisitions and new bed additions has not yet
demonstrated adequate returns, given that Acadia's EBITDA is below
where it was in 2016.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if debt to EBITDA is expected to be
sustained above 6.5 times. Adverse reimbursement developments could
also result in a rating downgrade. Moody's could also downgrade the
ratings if Acadia's financial policy becomes more aggressive, with
respect to the use of leverage for acquisitions or shareholder
returns. Finally, a downgrade could occur if refinancing risk
escalates or liquidity weakens.
The ratings could be upgraded if the company reduces and sustains
debt/EBITDA below 5.5 times and balances expansion opportunities
and acquisitions with debt reduction. Reduced reliance on Medicaid
and the UK's National Health Service (NHS) would also support an
upgrade.
Acadia is a provider of behavioral health care services. Acadia
provides psychiatric and chemical dependency services to its
patients in a variety of settings, including inpatient psychiatric
hospitals, residential treatment centers, outpatient clinics and
therapeutic school-based programs. Acadia operates behavioral
health facilities spanning across the US, Puerto Rico, England,
Wales, and Scotland. Acadia generated revenue of approximately $3.1
billion in 2019.
JC PENNEY: Egan-Jones Lowers Senior Unsecured Debt Ratings to D
---------------------------------------------------------------
Egan-Jones Ratings Company, on April 15, 2020, downgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by JCPenney Company, Inc. to D from C.
Headquartered in Plano, Texas, JCPenney Company, Inc. is an
American department store chain with 865 locations in 49 U.S.
states and Puerto Rico.
TOWN SPORTS: Moody's Lowers CFR to Ca, Outlook Stable
-----------------------------------------------------
Moody's Investors Service downgraded Town Sports International,
LLC's Corporate Family Rating to Ca from Caa2, Probability of
Default Rating to Ca-PD from Caa2-PD, and first lien credit
facilities to Ca from Caa1. Moody's also took no action on the
company's Speculative Grade Liquidity Rating of SGL-4. The outlook
is stable.
Town Sports International, LLC is a wholly owned subsidiary of the
publicly traded company Town Sports International Holdings, Inc.
together referred to as "Town Sports".
The downgrade reflects Moody's expectation that significant revenue
and earnings deterioration in 2020 due to coronavirus related
facility closures and membership declines will increase leverage
and, along with mounting refinancing pressures, further elevate
default risk. The recent termination of the planned acquisition of
certain Flywheel studios also eliminates a potential combination
that could have enhanced refinancing prospects. Town Sports' entire
debt structure matures this year with the first lien senior secured
$15 million revolver expiring in August 2020 and the $178 million
senior secured term loan maturing in November 2020. The downgrade
to Ca reflects the elevated risk of bankruptcy filing or other
default in the near term. The downgrade of the revolver and term
loan additionally reflects Moody's expectation for recovery in
default and that certain leases will remain in place and diminish
the loss-absorption cushion for the credit facility.
The negative effect on consumer income and wealth stemming from job
losses and asset price declines will diminish discretionary
resources to spend on leisure activities once the facilities
reopen. Moody's expects membership attrition to increase and lower
new recruitment because consumers may be reluctant to work out in
enclosed social settings until the risk of coronavirus spreading is
reduced. As a result, Moody's expects debt-to-EBITDA to rise to
meaningfully in 2020 with high cash burn during facility closures
adding to liquidity pressure. The facility closures began in
mid-March and the timing of when the facilities will reopen remains
uncertain.
Moody's took the following rating actions:
Issuer: Town Sports International, LLC
Corporate Family Rating, downgraded to Ca from Caa2
Probability of Default Rating, downgraded to Ca-PD from Caa2-PD
Speculative Grade Liquidity Rating, unchanged at SGL-4
Senior secured revolving credit facility, downgraded to Ca (LGD4)
from Caa1 (LGD3)
Senior secured term loan, downgraded to Ca (LGD4) from Caa1 (LGD3)
Outlook actions:
Outlook: revised to stable from negative
RATINGS RATIONALE
Town Sports Ca CFR reflects the elevated risk of near term default
due to coronavirus-related closures and membership declines, in
combination with the refinancing risk related to the $15 million
revolver expiring in August 2020 and $178 million term loan due in
November 2020. Currently, all of its gyms are closed due to efforts
to contain the coronavirus and Moody's expects membership once
facilities reopen to be weaker. The company also faced revenue
pressure in 2019 prior to the onset of the coronavirus due to
declines in comparable club performance. The rating also reflects
Town Sports concentration in the highly fragmented and competitive
fitness club industry which has low barriers to entry, high
attrition rates, and is experiencing a trend towards either
high-end or budget gym memberships which places pressure on the
mid-tier price point in which Town Sports currently operates.
Fitness club memberships are discretionary and revenue and earnings
are pressured when household income weakens. However, the rating
considers the company's well-recognized brand name in its operating
markets.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The fitness sector
has been one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment. More
specifically, the weaknesses in Town Sports' credit profile,
including its exposure to US quarantines have left it vulnerable to
shifts in market sentiment in these unprecedented operating
conditions and Excel remains vulnerable to the outbreak continuing
to spread. Moody's regards the coronavirus outbreak as a social
risk under its ESG framework, given the substantial implications
for public health and safety. Its action reflects the impact on
Town Sports of the breadth and severity of the shock, and the broad
deterioration in credit quality it has triggered.
The SGL-4 speculative-grade liquidity rating reflects the company's
weak liquidity because the entire debt structure matures in 2020
and the company is reliant on external capital to refinance at a
time when earnings and operating cash flow is weakened by the
efforts to contain the coronavirus.
The stable outlook reflects Moody's expectation that the
probability of a default is high over the next year and is
appropriately reflected in the Ca rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings could be downgraded if operating performance or
anticipated recoveries for creditors in an event of default weaken
further.
The ratings could be upgraded if the clubs reopen, membership,
revenue and earnings recover meaningfully, and the company
successfully refinances its first lien credit facilities at a
manageable cost.
The principal methodology used in these ratings was Business and
Consumer Service Industry published in October 2016.
Headquartered in Jupiter, FL, Town Sports International Holdings,
Inc., through its wholly-owned operating subsidiaries which include
Town Sports International, LLC, owns and operates about 186 fitness
clubs in 7 states, the District of Columbia, Puerto Rico and 3
clubs in Switzerland. Revenue for the fiscal year ended December
31, 2019 was about $467 million.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: VAT Refunds Start Flowing
--------------------------------------------
Trinidad Express reports that Trinidad and Tobago Finance Minister
Colm Imbert said 3,829 VAT refunds in cash totaling $260 million
for the month of March, have been paid to businesses who were owed
$250,000 or less per VAT period.
In a social media post, Imbert said the ministry decided to issue a
further $200 million in VAT refunds in cash to all businesses owed
between $250,000 and $500,000 per VAT period, according to Trinidad
Express.
Businessmen have been clamoring for their VAT refunds for more than
five years, the report notes.
When the COVID-19 restrictions began in March, the Government
announced additional fiscal and social measures to assist citizens
and businesses during the pandemic, the report relates.
Imbert at a media conference on March 23, said that the Government
owed $6,225,617,665 in VAT refunds to more than 10,000 registered
companies and assured it will pay the refunds to those owed up to
$250,000 which will cost the Government approximately $280 million,
the report discloses.
And regarding the income tax refund payments, the minister said
17,195 individual cheques were issued in March and the first week
in April, 2020 totaling $116 million, the report relates.
"This week, cheques will be issued to all outstanding individual
income tax refunds, totalling to $124 million, which will assist
another 7,900 taxpayers," Imbert added at the news conference last
month, the report notes.
The minister earlier stated the payout to people owed outstanding
income tax refunds will cost the State around $110 million, the
report discloses.
To further assist citizens who lost their jobs last month due to
the pandemic, the Government announced that the temporary salary
relief grant of up to $1500 a month will be issued to people who
qualify for a period of up to three months, the report relates.
At the post-Cabinet news conference, Imbert said since the forms
were made available at police stations and online, 38,000 people
applied, the report notes.
He added that the applications are being evaluated in batches and
shortly, disbursements of grants will begin, the report says.
The Government has set aside some $400 million for the grant, which
covers payments for the months of April, May and June, the report
adds.
===============
X X X X X X X X
===============
[*] Moody's: More Companies in Crossrover Zone Amid Pandemic
------------------------------------------------------------
Moody's Investors Service relates that the number of non-financial
companies in the "Crossover Zone" swelled to 96 through the first
quarter, a record high and up 26 from the end of 2019. The increase
was driven by the deteriorating global economic outlook, sharp
commodity price declines and significant financial market
volatility attributable to the spread of the coronavirus. These
factors resulted in a severe and extensive credit shock across many
sectors, regions and markets that led to potential fallen angels
soaring to 76, from 43 in the prior quarter. Potential rising stars
declined to 20 from 27.
* Twenty-one companies crossed over to speculative grade, and more
will likely be forthcoming with potential fallen angels climbing to
the highest level since Moody's began tracking this data in 2008.
Forty-seven new potential fallen angels entered the zone in Q1,
with fundamental credit developments accounting for all but one,
which was tied to M&A activity. Forty-three potential fallen angels
were affected by the expectation that worldwide economic growth
will contract due to broad weakness in leisure travel and
discretionary consumer spending, as well as production disruptions
directly attributable to social-distancing measures. Fourteen
companies exited the zone with 13 crossing over to speculative
grade, while one had its rating withdrawn. An additional eight
companies skipped the zone altogether, being downgraded straight to
speculative grade.
* Potential fallen angels held $593 billion in debt at the end of
Q1, with both non-US and US debt piles at record highs.
That figure is a significant increase from the $341 billion at the
end of 2019, and more than double the prior four-year average of
about $275 billion. The increase was primarily attributable to
General Motors (Baa3 review for downgrade) and Kraft Heinz Foods
Company (Baa3 negative), each with about $29 billion in debt,
entering the zone along with Delta Air Lines Inc. (Baa3 review for
downgrade) and its $22 billion in debt and A.P. Moller-Maersk A/S
(Baa3 negative) and its $17 billion in debt. Debt among non-US
companies rose to $383 billion, from $294 billion, while debt among
US companies increased to $210 billion, from $47 billion. Both are
at the highest level since we began tracking this data in 2008.
Non-US debt levels are likely to recede next quarter as Petroleos
Mexicanos (PEMEX Ba2 negative) and its $166 billion in debt exits
the zone since it was downgraded in April 2020. The companies that
skipped the crossover zone going straight to speculative grade,
held about $92 billion in debt, with $40 billion from Occidental
Petroleum Corporation (Ba1 ratings under review for downgrade)
alone. ยป Twelve potential rising stars exited the zone, nine
because of negative rating or outlook actions. Seven of the nine
actions were related to the coronavirus outbreak, two due to
fundamental reasons, while three were upgraded to Baa3 because of
positive credit developments. Five companies entered the zone as
potential rising stars. Four because of improved credit
fundamentals and the other because of M&A activity. Potential
rising stars held $160 billion in debt at the end of the first
quarter.
The entire Moody's report is Moody's report is available at
https://bit.ly/2YaY3qd
[*] Unparallelled Global Recession Underway, Fitch Says
-------------------------------------------------------
Fitch Ratings has made further large cuts to global GDP forecasts
in its latest Global Economic Outlook (GEO) in response to
coronavirus-related lockdown extensions and incoming data flows.
"World GDP is now expected to fall by 3.9% in 2020, a recession of
unprecedented depth in the post-war period," said Brian Coulton,
Chief Economist at Fitch Ratings. "This is twice as large as the
decline anticipated in our early April GEO update and would be
twice as severe as the 2009 recession."
The decline in GDP equates to a USD2.8 trillion fall in global
income levels relative to 2019 and a loss of USD4.5 trillion
relative to our pre-virus expectations of 2020 global GDP. Fitch
expects eurozone GDP to decline by 7%, US GDP by 5.6%, and UK GDP
by 6.3% in 2020.
The biggest downward revisions are in the eurozone, where the
measures to halt the spread of the coronavirus have already taken a
very heavy toll on activity in 1Q20. Fitch has cut Italy's 2020 GDP
forecast to -8% following official indications that GDP already
fell 5% in 1Q20 and after a recent extension of the lockdown there.
Official estimates also point to France and Spain experiencing near
5% declines in GDP in 1Q20, with the Spanish outlook hit
particularly hard by the collapse in tourism. Even allowing for a
slightly less negative outlook for Germany - where the headroom for
policy easing is greater and the benefits of a recovery in China
will be felt more directly - eurozone GDP is expected to shrink by
7% this year.
No country or region has been spared from the devastating economic
impact of the global pandemic. Fitch now anticipates that GDP in
both the US and the UK - where lockdowns started a little later
than in the eurozone - will decline by more than 10% (not
annualised) in 2Q20, compared to forecasts of around 7% in our
early April update. This will result in annual GDP declines of
around 6%, despite aggressive macro policy easing.
A notable feature of this update is sharp further downward
revisions to GDP forecasts for emerging markets (EM). Falling
commodity prices, capital outflows and more-limited policy
flexibility are exacerbating the impact of domestic
virus-containment measures; Mexico, Brazil, Russia, South Africa
and Turkey have all seen big GDP forecast adjustments. "With China
and India both now expected to see sub-1% growth, we expect an
outright contraction in EM GDP in 2020, a development unprecedented
since at least the 1980s. We expect supply responses and a
relaxation of lockdowns to help oil prices to recover in 2H20 from
current lows, which are being exacerbated by storage capacity
issues in the US and elsewhere," Fitch said.
Several major economies recently have extended lockdown measures,
and Fitch now needs to incorporate national lockdowns of around
eight or nine weeks as a central case assumption for most major
advanced economies. This contrasts to Fitch's previous assumption
of around five weeks. An extra month of lockdown would, all else
being equal, reduce the annual flow of income (GDP) by around 2pp,
as outlined in Fitch's previous GEO update.
In addition, incoming data - including official 'flash' GDP
estimates for 1Q20, monthly activity indicators for March and
weekly labour market data - point to a daily loss of activity
through lockdown episodes of closer to 25% than the 20% assumed
previously. This is consistent with the recently released outturn
for growth in China when GDP declined by 10% qoq in 1Q20, a period
encompassing entry to and exit from a five-week lockdown.
"Macro policy responses have been unprecedented in scale and scope
and will serve to cushion the near-term shock. But with job losses
occurring on an extreme scale and intense pressures on small and
medium-sized businesses, the path back to normality after the
health crisis subsides is likely to be slow. Our forecasts now show
US and eurozone GDP remaining below pre-virus (4Q19) levels through
the whole of 2021," added Coulton.
*********
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
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 * * *