/raid1/www/Hosts/bankrupt/TCRLA_Public/200617.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, June 17, 2020, Vol. 21, No. 121
Headlines
A R G E N T I N A
ARGENTINA: IMF Warns Poorest Nations Will Default w/o Debt Relief
ARGENTINA: Mendoza Launches Own Debt Restructuring
B A H A M A S
BAHAMAS: Faces Deep Recession, IMF Says
B R A Z I L
BRAZIL: Ranks Second on Countries With Highest Covid Deaths
LOCALIZA RENT-A-CAR: Moody's Confirms 'Ba2/Aa1.br' Ratings
SABESP: S&P Affirms 'BB-' Global Scale Issuer Credit Rating
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: 1MM+ Workers Are Jobless
DOMINICAN REPUBLIC: Dollar Purchases Fall 28% in April
M E X I C O
INFONAVIT CEDEVIS 07-VSM: Moody's Cuts Series A-2 Debt to B2
P U E R T O R I C O
FERRELLGAS PARTNERS: Signs Forbearance Agreement with Noteholders
- - - - -
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A R G E N T I N A
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ARGENTINA: IMF Warns Poorest Nations Will Default w/o Debt Relief
-----------------------------------------------------------------
Eric Martin and Enda Curran at Bloomberg News report that the head
of the International Monetary Fund called on private creditors to
join the Group of 20 in providing debt relief for the world's
poorest nations, saying that the alternative to suspension and
restructuring is defaults.
A debt-service suspension would provide time for restructuring debt
on a case-by-case basis in countries where debt sustainability
needs to be restored, Managing Director Kristalina Georgieva said
in a webcast with the U.S. Chamber of Commerce, according to
Bloomberg News.
Private investors said they may offer low-income countries cash to
ease the burden of $140 billion in debt payments due this year to
help them fight the coronavirus pandemic, Bloomberg News relays.
Still, the voluntary nature of the proposal may mean it falls short
of easing the unsustainable burden carried by some developing
nations, according to Jubilee Debt Campaign, an advocacy group,
Bloomberg News discloses.
Failure to provide relief and restructuring "would lead to
inevitably a much worse option, which is disorderly defaults,"
Georgieva said, Bloomberg News notes. "We can prevent that."
Reserve Assets
In a separate event, Georgieva's first deputy, Geoffrey Okamoto,
said that the IMF is looking at ways to mobilize existing reserve
assets rather than create new ones to help countries deal with the
economic fallout of the global pandemic, Bloomberg News discloses.
The fund is doing "quite a bit" of internal work to figure out how
to use existing special drawing rights, or SDRs, to replicate the
impact of creating more of them, Okamoto said on a conference call,
Bloomberg News says. A proposed $500 billion SDR allocation was
blocked in April by the IMF's biggest shareholder, the U.S,
Bloomberg News notes.
"While I think myself and others would be interested in a general
SDR allocation, we are exploring every available option to make
sure that we effectively get the benefit of an SDR allocation but
with the existing stock that we currently have," Okamoto said,
Bloomberg Newsrelays. "There's quite a bit of internal work being
done on this at the moment. I don't want to preview too much," he
added.
Georgieva had previously said that the IMF wants to find ways to
get SDRs from rich countries that don't need them to poorer nations
that do, Bloomberg News notes.
The most likely way to facilitate the redistribution of reserve
assets would be through a new or existing trust mechanism, said
Douglas Rediker, a senior fellow at the Brookings Institution and
former U.S. executive director at the Fund, Bloomberg News says.
For example, the IMF has a Catastrophe Containment and Relief
Trust, funded through contributions from by rich nations, that it
uses to provide grants for debt relief to poor borrowers, Bloomberg
News relates.
U.S. Treasury Secretary Steven Mnuchin said in April that the Trump
administration opposed the plan to create more reserve assets
because they are allotted to countries in proportion to their IMF
voting share, Bloomberg News notes. This means 70% would go to
G-20 countries that don't need the help and just 3% to the poorest
developing nations, Bloomberg News adds.
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.
As reported by the Troubled Company Reporter - Latin America on
April 14, 2020, Fitch Ratings upgraded Argentina's Long-Term
Foreign Currency Issuer Default Rating to 'CC' from 'RD' and
Short-Term Foreign Currency IDR to 'C' from 'RD'.
The TCR-LA reported on April 13, 2020, that S&P Global Ratings
also lowered its long- and short-term foreign currency sovereign
credit ratings on Argentina to 'SD/SD' from 'CCC-/C'. S&P also
affirmed the local currency sovereign credit ratings at 'SD/SD'.
There is no outlook on 'SD' ratings.
On April 9, the TCR-LA reported that Moody's Investors Service
downgraded the Government of Argentina's foreign-currency and
local-currency long-term issuer and senior unsecured ratings to Ca
from Caa2.
ARGENTINA: Mendoza Launches Own Debt Restructuring
---------------------------------------------------
Adam Jourdan at Reuters reports that Argentina's Mendoza province,
famed for its bodegas and Malbec grapes grown in the shadows of the
Andes, has formally launched a debt restructuring process after
missing an initial payment deadline on a 2024 bond.
The regional government said in a statement that it had opened an
invitation to holders of around $590 million of the 2024 notes,
which could see new debt instruments issued. The missed payment is
still within a grace period, according to Reuters.
The debt revamp is only a small sideshow as the South American
country's national government races to seal a deal to restructure
around $65 billion in sovereign debt, but underscores how the
provinces are also grappling with their own debt crises, the report
notes.
The larger province of Buenos Aires is also looking to restructure
around $7 billion in foreign debt, the report relays.
Argentina has been pummeled by stubborn inflation, sky-high
interest rates and a biting recession, which is now being sharpened
by the impact of the coronavirus pandemic, the report discloses.
Mendoza's invitation will expire on June 16. The provincial
government said it had engaged Credit Suisse Securities and AdCap
Securities to help manage the invitation process, the report adds.
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.
As reported by the Troubled Company Reporter - Latin America on
April 14, 2020, Fitch Ratings upgraded Argentina's Long-Term
Foreign Currency Issuer Default Rating to 'CC' from 'RD' and
Short-Term Foreign Currency IDR to 'C' from 'RD'.
The TCR-LA reported on April 13, 2020, that S&P Global Ratings
also lowered its long- and short-term foreign currency sovereign
credit ratings on Argentina to 'SD/SD' from 'CCC-/C'. S&P also
affirmed the local currency sovereign credit ratings at 'SD/SD'.
There is no outlook on 'SD' ratings.
On April 9, the TCR-LA reported that Moody's Investors Service
downgraded the Government of Argentina's foreign-currency and
local-currency long-term issuer and senior unsecured ratings to Ca
from Caa2.
=============
B A H A M A S
=============
BAHAMAS: Faces Deep Recession, IMF Says
---------------------------------------
RJR News reports that the International Monetary Fund (IMF) is
warning that the Bahamas is facing a deep recession due to the
unprecedented crisis caused by the combination of COVID-19 and
Hurricane Dorian.
The Fund has since approved the nation's request for an emergency
USD250 million loan to meet the government's need for urgent
foreign reserves support amid the tourism industry shutdown,
according to RJR News.
It added that the loan was equivalent to 100 percent of the
Bahamas' special drawing rights in the IMF, the report notes.
As reported in the Troubled Company Reporter-Latin America on March
12, 2020, S&P Global Ratings revised the outlook on The
Commonwealth of The Bahamas to negative from stable. At the same
time, S&P Global Ratings affirmed its 'BB+/B' sovereign credit
ratings and 'BBB-' transfer and convertibility assessment on The
Bahamas.
===========
B R A Z I L
===========
BRAZIL: Ranks Second on Countries With Highest Covid Deaths
-----------------------------------------------------------
Iolanda Fonseca at Rio Times Online reports that two weeks were
enough for Brazil to jump from fifth to second place in the ranking
of countries with the highest number of deaths by Covid-19.
The country topped the United Kingdom (which records 41,481 deaths)
by reporting 41,828 fatalities from the novel coronavirus,
according to Rio Times Online.
According to data from the Ministry of Health, the country records
828,810 infections - with 909 new deaths and 25,982 cases reported
in 24 hours - and is still investigating a further 4,033 deaths,
the report notes.
As reported in the Troubled Company Reporter-Latin America on May
8, 2020, Fitch Ratings has affirmed Brazil's Long-Term Foreign
Currency Issuer Default Rating at 'BB-' and has revised the Rating
Outlook to Negative. The Outlook revision to Negative reflects the
deterioration of Brazil's economic and fiscal outlook, and downside
risks to both given renewed political uncertainty, including
tensions between the executive and congress, and uncertainty over
the duration and intensity of the coronavirus pandemic.
On April 10, 2020, the TCR-LA reported that S&P Global Ratings
revised on April 6, 2020, its outlook on its long-term ratings on
Brazil to stable from positive. At the same time, S&P affirmed its
'BB-/B' long- and short-term foreign and local currency sovereign
credit ratings. S&P also affirmed its 'brAAA' national scale rating
and its transfer and convertibility assessment of 'BB+'. The
outlook on the national scale rating remains stable.
LOCALIZA RENT-A-CAR: Moody's Confirms 'Ba2/Aa1.br' Ratings
----------------------------------------------------------
Moody's America Latina Ltda. confirmed Localiza Rent a Car S.A.'s
Ba2 global scale and Aa1.br national scale corporate family ratings
and senior unsecured debt ratings. The outlook for the ratings is
negative. This concludes the review initiated on April 9, 2020.
Ratings confirmed:
Issuer: Localiza Rent a Car S.A.
Corporate Family Rating: Ba2/Aa1.br
BRL500 million senior unsecured debentures due 2021: Ba2/Aa1.br
Outlook, Changed To Negative from Rating Under Review
RATINGS RATIONALE
The confirmation of Localiza's Ba2/Aa1.br ratings reflects
primarily the company's ability to sustain its car rental and used
car sales operations during the severe downturn caused by the
spread of coronavirus in Brazil, which reduced risks associated
with covenant breach, cash burn and a severe and prolonged
deterioration in credit metrics. Localiza's continued conservative
approach to leverage and liquidity, as evidenced by a focus on
liability management and strict cost and cash burn controls also
supported the confirmation. Finally, its expectations that the
company's long-term competitive advantages are been strengthened
during the current crisis and will support its post-crisis credit
profile, and that the dynamics of the Brazilian car rental market
will lead to a much weaker toll on local companies relative to its
global peers were additional considerations for the confirmation.
The outlook change to negative reflects its expectations that
Localiza's credit metrics will deteriorate and remain strained in
2020 due to the coronavirus outbreak and its impact on air travel
and ground transportation.
Localiza's Ba2/Aa1.br ratings continue to be supported by the
company's stable operating performance and cash flow generation,
combined with a resilient, relatively flexible business model,
especially in economic and auto market slowdowns. Localiza's
leading market share position in both the car and fleet rental
segments in Brazil (Ba2 stable) also supports the ratings. The
company is able to maintain robust profitability overtime as a
result of low fleet maintenance requirements, high utilization
rates, attractive discounts from automobile manufacturers and
expertise in the used-car sales market. The rating also reflects
the company's adequate corporate governance practices and strong
liquidity.
At the same time, the capital-intensive nature of the car rental
business constrains Localiza's rating, as does the company's lack
of a significant international footprint. The rating is further
constrained by its expectations that credit metrics will
deteriorate substantially in 2020 due to the coronavirus outbreak
and its impact on both the car rental and used-car sales
businesses. As such, the company's adjusted leverage ratio that was
already high at 4.6x at the end of March 2020 because of a fast
growth strategy will remain strained until 2021.
The coronavirus outbreak is impacting virtually all of Localiza's
lines of business - with operations at airports, ride-sharing and
daily and monthly rentals being the most affected - and is even
preventing the company to sell used-cars because of lockdown
requirements that are halting car licensing in some markets. But,
even though the duration and depth of the outbreak in Brazil's
economy are still unclear, Localiza proved to have some flexibility
within its business model and financial profile to sustain its
credit quality during the crisis. The company's preliminary results
for April indicated a softer than anticipated deterioration in its
rent-a-car operations, a stability on the fleet management
business, and more importantly, an ability to sell used cars and
raise cash, which has always been a key supporter of the company's
ratings and credit quality. All of that prevented a cash burn from
operations during what was so far the worst months of the pandemic
in Brazil, supported the maintenance of an adequate liquidity
profile and helped to abate risks related to covenant breaches
later in 2020. Moody's estimates Localiza was able to raise about
BRL100 million with used car sales during April, which helps to
offset the impact of lower demand for transportation coming from
mobility restrictions in its credit profile.
To avoid potential liquidity squeezes since the beginning of the
crisis, Localiza conservatively raised BRL380 million in proceeds
through the anticipation of credit card receivables, BRL1.3 billion
from new credit lines and BRL100 million in new working capital
lines. As such, Moody's estimates that the company's cash position
will remain close to BRL3 billion even after the payment of most
its trade payables with OEMs, which is sufficient to cover other
non-discretionary cash outflows in 2020, including BRL5 million in
principal debt payments and about BRL400-450 million in net
interest expenses. The company's current high cash position and
proven ability to sell cars on a timely manner to raise cash
mitigates risks associated with a high leverage and covenant
breach, as the company can quickly adjust its cash position to
offset the lower EBITDA stream.
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 transportation
sector is one of the sectors that will be significantly affected by
the shock given its sensitivity to consumer demand and sentiment.
As a result of the coronavirus impact on air travel and ground
transportation, the entire car rental industry will have to contend
with challenges that include: a rapid drop in rental car
utilization rates; a resulting need to liquidate vehicles in order
to right-size fleets; and, potentially large drops in vehicle
residual values. Moody's regards the coronavirus outbreak as a
social risk under its ESG framework, given the substantial credit
implications of public health and safety.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings would be downgraded if Localiza's liquidity
deteriorates because of weakness in operations and inability to
sell used cars, or if its car rental utilization rate decline
sustainably to below 60% for an extended period of time. A
sustained deterioration in credit metrics, measured by gross
debt/EBITDA not approaching 4.0x and EBITDA interest coverage
falling below 3.0x without prospects of improvement could also lead
to a downgrade. Finally, a downgrade of Brazil's sovereign rating
would result in a downgrade of Localiza's ratings.
An upgrade is unlikely in the medium term. In the long term,
Localiza's ratings could be upgraded if the company is able to
increase its market share, geographic diversification and revenue,
while maintaining healthy credit metrics on a sustained basis. An
upgrade of Brazil's sovereign rating would also be required for an
upgrade.
The principal methodology used in these ratings was Equipment and
Transportation Rental Industry published in April 2017.
Founded in 1973 and headquartered in Belo Horizonte, Minas Gerais,
Brazil, Localiza operates car rental, fleet rental and used car
businesses in Brazil. The company also franchises rental car
operations throughout South America. As of March 2020, the company
had a total fleet of 308,996 company-owned cars and 16,116 cars at
franchisees in Brazil and five other countries. The company is the
market leader in Brazil in terms of car rental, with the largest
number of car rental locations and presence in all main Brazilian
airports. In the last twelve months ended March 2020, the company
reported net revenue of BRL10.6 billion ($2.6 billion) and net
income of BRL854 million.
SABESP: S&P Affirms 'BB-' Global Scale Issuer Credit Rating
-----------------------------------------------------------
S&P Global Ratings, on June 12, 2020, affirmed its 'BB-' global
scale and 'brAAA' national scale issuer and issue-level credit
ratings on Brazil-based water and sewage company Companhia de
Saneamento Basico do Estado de Sao Paulo (SABESP). The stand-alone
credit profile (SACP) remains 'bb+'.
S&P said, "The ratings affirmation and outlook change reflects our
view that while SABESP is exposed to the overall fiscal weakness of
the state of Sao Paulo (not rated), at this point we don't expect
extraordinary action from the state government that could erode the
group's liquidity and credit metrics. In our view, this situation
could change if the economic and fiscal crisis worsens, because the
impact of the COVID-19 pandemic and subsequent economic downturn
have already significantly hit Brazilian local and regional
governments' (LRGs) overall tax collection, while increasing
expenditure pressures.
"Therefore, the negative outlook reflects the fact that because
SABESP is regulated by the state of Sao Paulo's regulatory agency
-- Agencia Reguladora de Saneamento e Energia do Estado de Sao
Paulo (ARSESP) -- the regulatory agency could ultimately be a
source of interference, because it's responsible for authorizing
SABESP's annual rate adjustments. Nevertheless, we acknowledge that
the regulatory framework in place has a track record of good
execution, and has ensured that SABESP can continue investing to
improve service coverage in the municipalities where it operates.
"In general, the credit quality of the Brazilian LRGs usually
limits those of the entities they control. We attribute varying
degrees of likelihood of support from the states to these
companies. However, we also believe states might intervene by
redirecting resources to the government and could therefore weaken
government-related entities (GREs), especially amid challenging
fiscal conditions.
"We view SABESP as a GRE because the state of Sao Paulo owns 50.3%
of the company. The remaining shares are publicly traded on the B3
S.A. – Brasil, Bolsa, Balcao (Brazil's stock exchange) and the
NYSE through American depository receipts. We believe that SABESP
has solid governance standards, a record of a hands-off approach by
the government, and financial resilience, which helps mitigate the
risk of potential interference. In addition, while the dividends
that the company is expected to distribute aren't relevant when
compared to the overall operating revenues of the state, SABESP is
an important vehicle for the state in terms of public investment in
the local economy. We also believe that the state's incentive to
impair an essential services provider is limited amid this
unprecedented public health crisis.
"Finally, we tested SABESP's resilience to a hypothetical default
of the state of Sao Paulo. Due to the overall weak Brazilian
economy and the fact that our base case already reflects stressed
conditions, the level of stress incorporated into our test on
SABESP was limited and included an extraordinary increase in state
tax, a delay in the application of tariffs, and much higher working
capital needs because of an increase in delinquency levels. In this
hypothetical scenario, we expect SABESP to be relatively resilient
to a state-level default."
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: 1MM+ Workers Are Jobless
--------------------------------------------
Dominican Today reports that more than a million workers are still
affected by the suspension of their labor contracts, but since the
de-escalation began, a total 248,020 who were suspended have
returned, according to the Ministry of Labor in the Dominican
Republic.
The partial return of economic activities, after the Dominican
government began the economic reopening on May 20, has reactivated
the contracts of thousands of workers, although the labor office
continues to receive daily new requests for suspension of labor
contracts and incorporations of workers in the assistance plans
that the government launched, according to Dominican Today.
The coronavirus has affected a total of 1,092,176 employees due to
the halt of non-essential operations across the country between
March 19 and May 19. Of that amount, some 841,010 people currently
receive government aid through the Employee Assistance Fund (FASE),
the report notes.
In April, the first month that the country was almost completely
shuttered to prevent the spread of COVID-19, the Dominican economy
contracted 29.8%, the report says. The accumulated result for the
first four months indicates a 7.5% decline, according to data from
the Central Bank, 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 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.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
DOMINICAN REPUBLIC: Dollar Purchases Fall 28% in April
------------------------------------------------------
Dominican Today reports that in April this year, net purchases of
dollars in the Dominican Republic fell 28% year-on-year, and in net
sales to the general public, that drop was 23%.
It's a significantly sharper drop than in April 2019, the year in
which, relative to March, registered a reduction in net purchases
of 13.3%, and 11.1% in net sales, according to Dominican Today.
Central Bank statistics show net operations do not include
interbank or inter-agency purchases and sales, and only reflect
operations with the general public, the report notes.
In April this year, purchases in the foreign exchange market
totaled US$2.8 billion, while sales reached US$2.9 billion, the
report relays.
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.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
===========
M E X I C O
===========
INFONAVIT CEDEVIS 07-VSM: Moody's Cuts Series A-2 Debt to B2
------------------------------------------------------------
Moody's de Mexico S.A. de C.V. has confirmed the CEDEVIS 07-VSM
(Series A-1) ratings at Baa1 (sf) (Global Scale Rating) and Aaa.mx
(sf) (National Scale Rating) and downgraded the ratings of Cl. A-2
CEDEVIS 07-VSM (Series A-2) to B3 (sf) (Global Scale Rating) and
B1.mx (sf) (National Scale Rating) of Infonavit - CEDEVIS 07-VSM, a
Mexican RMBS transaction issued by Nacional Financiera S.N.C.,
Institucion de Banca de Desarrollo, acting solely in its capacity
as trustee and serviced by Instituto del Fondo Nacional de la
Vivienda para los Trabajadores.
This action concludes the review for downgrade initiated on April
23, 2020 when both tranches were downgraded and placed on review
for further downgrade.
The complete rating action is as follows:
Issuer: Infonavit - CEDEVIS 07-VSM
CEDEVIS 07-VSM, Confirmed at Baa1 (sf); previously on April 23,
2020 Downgraded to Baa1 (sf) (Global Scale Rating) and Placed Under
Review for Possible Downgrade
CEDEVIS 07-VSM, Confirmed at Aaa.mx (sf); previously on April 23,
2020 Aaa.mx (sf) (National Scale Rating) Placed Under Review for
Possible Downgrade
Cl. A-2 CEDEVIS 07-VSM, Downgraded to B3 (sf); previously on April
23, 2020 Downgraded to Baa1 (sf) (Global Scale Rating) and Placed
Under Review for Possible Downgrade
Cl. A-2 CEDEVIS 07-VSM, Downgraded to B1.mx (sf); previously on
April 23, 2020 Aaa.mx (sf) (National Scale Rating) Placed Under
Review for Possible Downgrade
RATINGS RATIONALE
The rating action on these bonds is prompted by the erosion of
overcollateralization from 34.5% to 19.1% from September 2019 to
March 2020. The primary cause of this erosion in OC was an increase
in the reference index used to formulaically adjust the nominal
value of the certificates each year. In 2020, minimum salaries
jumped by 20% year-over-year increasing the reference index, which
is tied to the value of VSM. In 2019, the VNA was adjusted by a
different index, the Unidad de Medida y Actualizacion. Looking
ahead, Moody's expects this erosion in credit enhancement will
continue.
Furthermore, the proportion of delinquent loans is on the rise.
Loans more than 180 days past due increased to 14.3% in May 2020
from 10.5% in September 2019, which could ultimately contribute to
higher losses.
its analysis has considered the increased uncertainty relating to
the effect of the COVID-19 outbreak on the Mexican economy, as well
as the effects that the announced government measures put in place
to contain the virus, will have on the performance of consumer
assets. Specifically, for mortgage loans, performance will weaken
due to an unprecedented spike in the unemployment rate that may
limit borrower income and ability to service debt. Furthermore,
borrower assistance programs to affected borrowers may slow down
scheduled cash flows to bondholders.
The contraction in economic activity in the second quarter will be
severe and the overall recovery in the second half of the year will
be gradual. However, there are significant downside risks to its
forecasts in the event that the pandemic is not contained and
lockdowns have to be reinstated. As a result, the degree of
uncertainty around its forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implication for public health
and safety.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
Factors or circumstances that could lead to an upgrade of the
ratings include: (1) performance of the underlying collateral that
is better than Moody's expected; (2) deleveraging of the capital
structure; (3) improvements in the credit quality of the
transaction counterparties; and (4) a decrease in sovereign risk.
Factors or circumstances that could lead to a downgrade of the
ratings include: (1) unsatisfactory data quality; (2) performance
of the underlying collateral that is worse than Moody's expected;
(3) an increase in sovereign risk; (4) deterioration in the notes'
available credit enhancement; (5) deterioration in the credit
quality of the transaction counterparties and (6) a determination
that the Series A-1 certificates updated by VSM will negatively
impact the level of credit enhancement available.
RATING METHODOLOGY
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in
July 2019.
The Spanish language version of the "Moody's Approach to Rating
RMBS Using the MILAN Framework" methodology of July 2019. The
corresponding English language version of such methodology,
however, is already outdated for other jurisdictions and therefore
cannot be employed by MDM's affiliates for the assignment of
ratings of similar securities or entities in such other
jurisdictions.
The period of time covered in the financial information used to
determine Infonavit - CEDEVIS 07-VSM's ratings is between August
31, 2007 and May 30, 2020. (source: periodic collections and
remittances reports sent by the servicers, trustees and common
representative agents)
Moody's considered the servicer's practices and considers them
adequate.
=====================
P U E R T O R I C O
=====================
FERRELLGAS PARTNERS: Signs Forbearance Agreement with Noteholders
-----------------------------------------------------------------
Ferrellgas Partners, L.P. has entered into a forbearance agreement
with certain holders of its 8.625% Senior Notes due June 15, 2020
holding approximately 77% of the outstanding amount of such notes.
Pursuant to the agreement, the Forbearing Holders of the 2020 Notes
agreed to forbear from exercising any rights or remedies during the
forbearance period against FGP arising from FGP's failure to pay
amounts due and owing under the applicable indenture. The
Forbearing Holders also agreed to direct U.S. Bank National
Association, as indenture trustee, not to take any remedial action
during the term of the forbearance agreement. During the
forbearance period, FGP and the Forbearing Holders agreed to work
cooperatively to negotiate a definitive restructuring agreement
with respect to the 2020 Notes. The forbearance period extends
through July 31, 2020, subject to FGP's satisfaction of certain
milestones. FGP is represented by Squire Patton Boggs (US) LLP and
the Forbearing Holders are represented by Davis Polk & Wardwell
LLP.
About Ferrellgas
Ferrellgas Partners, L.P., through its operating partnership,
Ferrellgas, L.P., and subsidiaries, serves propane customers in all
50 states, the District of Columbia, and Puerto Rico.
Ferrellgas reported net loss of $64.54 million for the year ended
July 31, 2019, a net loss of $256.82 million for the year ended
July 31, 2018, and a net loss of $54.50 million for the year ended
July 31, 2017. As of April 30, 2020, the Company had $1.72 billion
in total assets, $602.81 million in total current liabilities,
$2.15 billion in long-term debt, $76.13 million in operating lease
liabilities, $52.17 million in other liabilities, and a total
partners' deficit of $1.15 billion.
* * *
As reported by the TCR on Oct. 22, 2019, S&P Global Ratings lowered
its issuer credit rating on Ferrellgas Partners L.P. to 'CCC-' from
'CCC'. The downgrade was based on S&P's assessment that
Ferrellgas' capital structure is unsustainable given the upcoming
maturity of its $357 million notes due June 2020.
As reported by the TCR on March 18, 2020, Moody's Investors Service
downgraded Ferrellgas Partners L.P.'s Corporate Family Rating to
Caa3 from Caa2. "Ferrellgas's downgrade is driven by the company's
continued high financial leverage and the very high likelihood that
the partnership will complete a full debt recapitalization in the
near-term," said Arvinder Saluja, Moody's vice president.
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S U B S C R I P T I O N I N F O R M A T I O N
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