/raid1/www/Hosts/bankrupt/TCRLA_Public/200907.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, September 7, 2020, Vol. 21, No. 179
Headlines
A R G E N T I N A
ARGENTINA: Moving Toward 6th Month of Covid-19 Quarantine
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Downpours Disrupt Food Prices
DOMINICAN REPUBLIC: Govt. Says Economy Will Recover Starting 4Q
DOMINICAN REPUBLIC: Oil Bill Plummets 47.1% in First 7 Months
E C U A D O R
ECUADOR SOCIAL BOND 2020: S&P Raises Class B Notes Rating to 'B-'
ECUADOR: Fitch Hikes LT IDR to B-, Outlook Stable
H O N D U R A S
ALCALDIA MUNICIPAL: Fitch Affirms LT IDR at B+, Outlook Stable
J A M A I C A
JAMAICA: Tourism Stakeholders Want Unified COVID-19 Response
M E X I C O
BANCA MIFEL: S&P Alters Outlook to Negative & Affirm 'BB-/B' ICRs
X X X X X X X X
[*] BOND PRICING: For the Week Aug. 31 to Sept. 4, 2020
- - - - -
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A R G E N T I N A
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ARGENTINA: Moving Toward 6th Month of Covid-19 Quarantine
---------------------------------------------------------
Cecilia Caminos at La Presa Latina Media reports that Argentina
begins yet another extension of its nationwide coronavirus
quarantine, and it will mark six months under lockdown on Sept. 20
as the number of confirmed cases continues to rise, putting the
healthcare system under severe pressure.
The restrictive measures that were extended vary according to the
health situation in the different districts in Argentina in what
has proven to be an ongoing debate over how the public is feeling
after so many months of quarantine and the urgency of getting
people back to work, given the heavy impact the pandemic has had on
the economy, which over the past two years has been hard-hit by
recession, the report relays.
"The situation is not better, it's not the same, it's worse," said
the governor of Buenos Aires province, Axel Kicillof, according to
La Presa Latina Media.
With more than 408,000 confirmed cases, Argentina has risen to 11th
place worldwide in the Covid-19 ranking of countries, just a short
step from the "Top 10," as it continues to adhere to one of the
world's longest quarantines, although according to what one can see
on the streets people are not really strictly complying with the
restrictions, the report notes.
The country, however, has registered a lower lethality index due to
the virus--only 2.1 percent, compared to the 3.5 percent average
across the globe. Nevertheless, 8,498 people have died from
Covid-19 so far over the past six months, while 301,195 people have
been diagnosed with the disease but have recovered, the report
relays.
The province of Buenos Aires has been the epicenter of the pandemic
in Argentina, with more than 60 percent of the country's confirmed
cases, and although capital region authorities decided to tighten
the restrictions in several cities, just like other districts have
done, the capital itself--which finds itself on a "plateau" in
terms of the infection curve--is moving toward reopening various
businesses, such as open-air bars and restaurants, along with other
activities, the report relays.
The Buenos Aires metro area, which includes the capital and the
heavily populated periphery with some 14 million people--the most
densely populated area in the country--has seen the largest number
of coronavirus cases, but in recent weeks warning lights have been
flashing due to the growth in cases in the outlying provinces, the
report notes.
Several districts have decided to tighten their quarantine
restrictions in certain zones where Covid-19 cases have escalated
in a bid to avoid seeing their healthcare systems overwhelmed, the
report says. Some regions in the provinces of Jujuy in the
northwest and Rio Negro in the south have already been experiencing
problems in treating the rising number of cases, the report
relays.
Health authorities detected community spread in 18 of the country's
24 districts and, although they authorized gatherings of up to 10
people in the open air, they have urged the public to maintain
social distancing to try and keep the number of infections in
check, the report notes.
Argentina President Alberto Fernandez warned that if people
continue to circulate as they have been "there is no health care
system that can handle it," the report relays.
A month-and-a-half ago, 7 percent of the newly detected Covid-19
cases each day were in the provinces and now that percentage has
increased fivefold and stands at 37 percent, according to Health
Access Secretary Carla Vizzotti, the report relays.
The government decided to change its messaging policy regarding the
pandemic and Fernandez announced the extension of the quarantine
via a missive disseminated on the social networks, the report
discloses.
Amid growing political tension with the opposition, Fernandez has
avoided--as on all other occasions--sitting down at the table with
Buenos Aires Gov. Kicillof and the capital mayor, opposition figure
Horacio Rodriguez Larreta, to report on the health measures, the
report relays.
The strategies being pursued in the capital itself and in Buenos
Aires province are diverging more and more, the report discloses.
The health minister of the city of Buenos Aires, Fernan Quiros,
said that the capital has "passed the worst point, which was at the
beginning of August" and starting authorities decided to reopen
open-air bars and restaurants and to reactivate the construction
sector, the report relays.
On the other hand, the Buenos Aires governor was categorical in
warning that "the virus is crossing" the General Paz highway
separating the capital from the rest of the province and "the
epidemiological situation in the Buenos Aires Metro Area is one of
tremendously fragile stability. A rising trend has become
established and the truth is that the situation is not better, it's
not the same, it's worse," the report notes.
"In this situation, we can't have more openings. It's a mistake and
we don't agree with that. What we can do it try to stabilize
things, because we can't risk losing in five days what it's taken
five months to achieve," said Kicillof in reporting on the
prevailing restrictions in the country's richest and most populated
province, the report discloses.
"We're all anxious, we're all fed up, because this situation is
extremely complicated. The virus is winning and we still don't
have a vaccine or any other options" said the Peronist governor in
explaining that the restrictive measures do not mean "a loss of
freedom but a gain in health," the report says.
The differences among the districts become more acute each day and
in some cases they are translating into strict controls along the
borders between the districts, with some dramatic cases arising
like the one of a father who could not enter Cordoba province to
say a last goodbye to his daughter terminally ill with cancer who
died a few days later, 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.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Downpours Disrupt Food Prices
-------------------------------------------------
Dominican Today reports that due to the damage caused by the floods
of the two storms Isaias and Laura, some prices of food products in
the markets had declined, while others increased.
Vegetables decreased due to the rains, according to Dominican
Today. Carrots, broccoli, tomatoes and vegetables used to have a
"more or less stable price," said Juan Pablo, a vendor on the
Duarte market told Listin Diario, the report notes.
He said that so far the vegetables are kept at variable prices
depending on the conditions of each day, the report relays. "The
sale is weak, there are no buyers. Things are bad," he said as he
leaned back against a crate of tomatoes, adds the report.
In the small establishments of the Duarte Market, the presence of
these foods was rare, the report notes.
Another vendor: "in the market things are not as good as they look"
due to the rains that have caused flooding. His stand had parsley
and other vegetables in poor condition, 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: Govt. Says Economy Will Recover Starting 4Q
---------------------------------------------------------------
Dominican Today reports that Dominican Republic Economy Minister,
Miguel Ceara Hatton, said the government expects the economy will
recover starting the fourth quarter this year.
"What we expect for the fourth quarter is that there will be a
relative recovery of the economy," he said, estimating that GDP
growth between October and December would be between zero and 1%,
according to Dominican Today.
Ceara Hatton clarified that this will not stop the fall of the
economy, which he affirms will be greater than 4% and less than 5%
for the entire year 2020, the report notes.
"It seems the most feasible," he told Teleantillas, "to avert
further problems from COVID," he added.
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: Oil Bill Plummets 47.1% in First 7 Months
-------------------------------------------------------------
Dominican Today reports that the country's oil bill fell 47.1% in
the first seven months of the year, compared to the same period in
2019, a fall that deepened between April and July, a period where
the effects of the COVID pandemic on the economy flared.
Between January and July 2020, the country registered oil imports
of US$1.2 billion, a figure lower than the US$2.3 billion on the
same date the previous year, a net reduction of US$1.1 billion,
according to Dominican Today.
According to the Customs Directorate, during the aforementioned
period, fuel imports from the dispatch-for-consumption regime
decreased by51.7%, to US$1.0 billion, a net fall of US$1.1 million
in relation to the US$2.1 billion registered from January to July
2019, 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.
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).
=============
E C U A D O R
=============
ECUADOR SOCIAL BOND 2020: S&P Raises Class B Notes Rating to 'B-'
-----------------------------------------------------------------
S&P Global Ratings raised its rating on Ecuador Social Bond S.a
r.l.'s series 2020 class B notes to 'B-' from 'CCC-'. This follows
the upgrade to 'B-' on the social bond issued by the Republic of
Ecuador that serves as collateral for the transaction. At the same
time, we affirmed our 'AAA' rating on the class A notes.
Ecuador Social Bond S.a r.l. is a repack securitization backed by a
social bond issued by the Republic of Ecuador and partially
guaranteed by the Inter-American Development Bank (IDB)
(AAA/Stable/A-1+). Amounts received by the issuer from the social
bond will be used to make payments on the notes. As such, the
transaction will be a pass-through of Ecuador's payments. In
addition, the class A notes will benefit from payments under the
IDB guarantee, as explained below.
The class A noteholders will be the ultimate beneficiaries of the
IDB guarantee. Pursuant to the US$300 million IDB guarantee, the
IDB will unconditionally and irrevocably guarantee the payment of
scheduled interest and principal under the social bond on each
scheduled payment date. Thus, the rating on class A is weak-linked
to the rating on the IDB. In turn, the rating on the class B notes
reflects the rating on the social bond, which is linked to our
sovereign credit rating on Ecuador. The 'SD' (selective default)
foreign and local currency sovereign credit ratings on Ecuador
remain unchanged.
The rating actions follow the completion of Ecuador's distressed
debt exchange on Aug. 31, 2020, which resulted in foreign and local
currency sovereign credit ratings on Ecuador being raised to 'B-/B'
from 'SD/SD'. The outlook on the long-term ratings is stable and
S&P also revised its transfer and convertibility assessment to 'B-'
from 'CCC-'. Participation in the exchange was high, above 95%, and
was sufficient to trigger the collective action clauses provided in
the old bond indentures to avoid future holdout litigation. As a
result, Ecuador has restructured about $17.4 billion of foreign
public debt, with an 8.3% reduction in principal, extension of
maturities, and a reduction of interest payments. The deal reduces
Ecuador's gross financing needs by $1.4 billion this year and by
$6.6 billion in 2021-2023. Complementing the restructuring was a
revised 27-month International Monetary Fund agreement under the
Extended Fund Facility of US$6.5 billion.
S&P Global Ratings acknowledges a high degree of uncertainty about
the evolution of the coronavirus pandemic. The consensus among
health experts is that the pandemic may now be at, or near, its
peak in some regions but will remain a threat until a vaccine or
effective treatment is widely available, which may not occur until
the second half of 2021. S&P said, "We are using this assumption in
assessing the economic and credit implications associated with the
pandemic. As the situation evolves, we will update our assumptions
and estimates accordingly."
S&P will continue to monitor the rating on this structured finance
transaction and revise the rating as necessary to reflect any
changes in the transaction's underlying credit quality.
ECUADOR: Fitch Hikes LT IDR to B-, Outlook Stable
-------------------------------------------------
Fitch Ratings has upgraded Ecuador's Long-Term Foreign Currency
Issuer Default Rating (IDR) to 'B-' from 'RD', and assigned ratings
of 'B-' to the new securities issued as part of a bond exchange.
The Outlook is Stable.
KEY RATING DRIVERS
The upgrade of Ecuador's rating to 'B-' reflects the completion of
a 'distressed debt exchange' (DDE) that Fitch deems to have cured
the default event initiated by the 'consent solicitation' in April.
The Outlook is Stable. Despite deep economic challenges and
political uncertainty, the DDE has helped support near-term
repayment capacity both by greatly reducing near-term debt service
and paving the way for a new 27-month USD6.5 billion Extended Fund
Facility (EFF) with the IMF. Fitch expects any government will have
incentives to honor the debt deal following upcoming elections in
2021, but election risks pose significant uncertainty around
commitments under the EFF and appetite for reforms and fiscal
adjustment. The ratings assigned to the new bonds are 'B-', in line
with the Long-Term Foreign Currency IDR.
The 'B-' rating is constrained by risks to liquidity and debt
sustainability that persist despite the relief offered by the debt
deal. The sovereign may remain challenged to meet its financing
needs, particularly as support from the IMF - expected to be front
loaded - tails off. Political risks surrounding the 2021 elections
and the economic fallout from the coronavirus crisis may complicate
the economic recovery and fiscal adjustment needed to ensure debt
sustainability and recover market access. The rating is also
constrained by a weak external liquidity position, which heightens
vulnerabilities in the context of commodity dependence and
dollarization, and a weak repayment record that offsets support
from high per capita income.
On Aug. 31, 2020, the Ecuadorian authorities completed an exchange
of 10 sovereign bonds for four new ones, after having received
acceptance of their offer from bondholders (98%) well above the
thresholds set in the collective action clauses (CACs). The deal
postpones amortization payments to 2026, includes a 10% principal
haircut, reduces interest payments via a 25% reduction in the
effective terminal coupon rate (to 6.9%) with gradual step-ups
through 2029, and includes a USD1 billion zero-coupon bond for
past-due interest (PDI). Concurrently, the authorities have
obtained staff-level approval from the IMF for the new USD6.5
billion EFF, which replaces an EFF cancelled in May due to missed
targets. The EFF still requires approval by the IMF board, and full
details on its terms and disbursement schedule are not yet
available.
The debt deal and new EFF should help the sovereign overcome a
severe financing squeeze in 2020, which has led to spending cuts,
build-up in arrears (USD2.8 billion as of July in the 2020 budget
alone, excluding the now-resolved bond interest arrears), and
attempts to clear some of these with debt securities rather than
cash. Fitch projects the sovereign should be able to cover its
financing needs of USD16.8 billion in 2020 (including a USD8.8
billion central government deficit) with external and internal
financing secured so far in 2020, rollover of local debt in the
rest of the year (including USD2.5 billion in short-term Cetes
instruments), further intra-public debt placements, new loans from
China, and up-front disbursements under the EFF that Fitch expects
to represent most of the total USD6.5 billion package.
Financing under a front-loaded EFF could decline quickly in 2021,
rendering the sovereign's ability to avoid financing stress
contingent on its ability to reduce the fiscal deficit in an
orderly fashion or secure other financing, both of which are
particularly uncertain in an election year. Fitch currently
projects financing gaps of USD4 billion to USD5 billion in
2021-2022 after expected EFF funds and domestic rollover, assuming
a reduction in the central government deficit to 5.1% of GDP in
2021 and 4.2% in 2022, on a cyclical revenue rebound and cuts to
capex and gas subsidies.
Financing strains, should they persist after 2020, pose risks of
further disorderly spending cuts and arrears, but are unlikely to
jeopardize commercial debt service in Fitch's view. Virtually all
external sovereign debt service will be to official creditors for
several years. Domestic debt mostly consists of bonds held by other
public entities and Cetes (USD2.5 billion in July) held by banks on
which the government has remained current and which have been
rolled over even amid the volatility of recent months.
Fitch projects real GDP to contract 11.0% in 2020, capturing a slow
normalization in activity after a 14% yoy fall in the first half of
2020 amid a severe coronavirus outbreak and lockdown, oil supply
disruptions, and absence of counter-cyclical fiscal and monetary
policy flexibility. Fitch expects growth to rebound 4.9% in 2021 on
a favorable base effect as the pandemic recedes, but by far less
than peers in the context of fiscal adjustment, lasting effects on
household incomes and businesses' balance sheets, and heightened
economic and political uncertainty. Large EFF disbursements could
offer an upside, allowing the government to clear arrears and
inject external funds into the local financial system that could
support credit conditions. So far in 2020, banks have opted to
build liquidity buffers instead of increasing lending in the
context of acute economic uncertainty.
Fitch projects growth will converge to a modest trend pace of 1.3%
in 2022, although this is subject to elevated uncertainty and will
depend on the policy orientation and appetite for reforms that
emerge under the next government. Fitch expects a much stronger
pace of growth could be difficult to achieve following any election
outcome, as efforts to boost private-sector investment could take
time to offset the drag on growth posed by retrenchment in the
public sector.
Fitch projects general government debt to jump to 71.5% of GDP in
2020 from 54.7% in 2019 on a dramatic fall in nominal GDP and
widening of the primary deficit. The bond restructuring has helped
debt dynamics primarily by reducing the interest bill, but the
impact on the nominal debt stock was modest given the principal
haircut was balanced by inclusion of the PDI bond.
After 2020, Fitch expects debt/GDP to remain on an upward path as
fiscal consolidation advances slowly and growth and inflation
recover to respective paces of 1.3% and 1% that, while modest, are
higher than their 2016-2019 averages. This differs from the
authorities' expectations expressed during the debt restructuring
that a faster fiscal consolidation, economic recovery and inflation
would put consolidated non-financial public sector (NFPS) debt
(slight lower than Fitch's general government debt metric) on a
downward trajectory to 55% of GDP by 2025. Fitch's debt dynamics
also incorporate the higher central government (CG) deficit rather
than the NFPS deficit, given that reported public sector surpluses
outside the CG have not proven fully available as financing for the
CG and have also been prone to data deficiencies. Debt could rise
more quickly should the government seek to build deposits.
Pressures on international reserves have eased, with the trade
balance improving so far in 2020 as imports have fallen even more
sharply than energy-intensive exports, and external interest
payments have fallen greatly due to the bond restructuring.
Reserves of USD3.2 billion as of August 28 are up from a low of
USD2.0 billion in March, and disbursements from the IMF should
provide a further boost. Underlying pressure persists, however, as
reserves have been supported by the appreciation of gold,
activation of a central bank external credit line, and liberation
of part of the commercial bank liquidity fund (COSEDE). A recovery
in imports could add to the pressure. This makes prospects for a
sustained build-up in central bank reserves uncertain.
The likely outcome of upcoming presidential and legislative
elections in February 2021 remains highly uncertain, and tickets
are currently being finalized. Guillermo Lasso of the CREO party
appears poised to be a key contender on the right. On the left,
Andres Arauz is likely to be a competitive candidate, even if
former President Rafael Correa is legally barred from running on
his ticket as vice president as he currently plans. In Fitch's
view, structural reforms and fiscal adjustment are likely to prove
politically difficult in any outcome, as seen by the difficulties
faced by the outgoing Moreno administration. Fitch believes any
government will have incentives to honor the bond restructuring as
it pushes major repayments past the entire next administration into
2026. Support for the IMF deal is less clear, as its
conditionalities in terms of reforms and fiscal adjustments have
yet to be detailed and could be controversial.
ESG Considerations
Ecuador has an Environmental, Social and Governance (ESG) Relevance
Score (RS) of '5' for Political Stability and Rights and for the
Rule of Law, Institutional and Regulatory Quality and Control of
Corruption, as is the case for all sovereigns. These scores reflect
the high weight that the World Bank Governance Indicators (WBGI)
have in its proprietary Sovereign Rating Model (SRM). Ecuador has a
low WBGI ranking (35th percentile), balancing weak rule of law,
control of corruption and regulatory quality with average political
stability, government effectiveness and voice and accountability.
Ecuador has an ESG RS of '5' for Creditor Rights as willingness to
service and repay debt is highly relevant to the rating and is a
key rating driver with a high weight. Ecuador has defaulted on its
commercial debt obligations repeatedly in the past, most recently
in 2020.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Ecuador a score equivalent to a
rating of 'B-' on the Long-Term Foreign Currency (LT FC) IDR
scale.
Fitch's sovereign rating committee did not adjust the output from
the SRM to arrive at the final LT FC IDR.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centered
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within its
criteria that are not fully quantifiable and/or not fully reflected
in the SRM.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Public Finances: Fiscal consolidation contributing to primary
surpluses that support a sustained reduction in government
financing needs and a downward trajectory for general government
debt/GDP.
-- Macro: Increased confidence in policymaking and reforms that
could support stronger medium-term economic growth prospects.
-- External Finances: Sustained build-up in central bank reserves
that would bolster the underpinnings of the dollarization regime.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Structural: Evidence of deterioration in political willingness
to honor sovereign debt obligations in the coming years.
-- Public Finances: Emergence of liquidity stress that could
compromise sovereign debt repayment capacity in the coming years,
including evidence of increased rollover risk in local debt
securities.
KEY ASSUMPTIONS
Fitch projects Brent crude prices to average USD35/barrel in 2020
and recover to USD45/barrel in 2021 and USD53/barrel in 2022.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Ecuador has an ESG RS of '5' for Political Stability and Rights as
WBGI have the highest weight in Fitch's SRM. They are therefore
highly relevant to the rating and a key rating driver with a high
weight.
Ecuador has an ESG RS of '5' for Rule of Law, Institutional and
Regulatory Quality and Control of Corruption as WBGI are also
highly relevant to the rating and a key rating driver with a high
weight.
Ecuador has an ESG RS of '5' for Creditor Rights as willingness to
service and repay debt is highly relevant to the rating and is a
key rating driver with a high weight. Ecuador has defaulted on its
commercial debt obligations repeatedly in the past, most recently
in 2020.
Ecuador has an ESG RS of '4' for Human Rights and Political
Freedoms as strong social stability and voice and accountability
are reflected in the WBGI that have the highest weight in the SRM.
They are relevant to the rating and a rating driver.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of '3'. This means 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.
===============
H O N D U R A S
===============
ALCALDIA MUNICIPAL: Fitch Affirms LT IDR at B+, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed at 'B+' the Long-Term Foreign and Local
Currency Issuer Default Ratings (IDR) of Honduras's Alcaldia
Municipal del Distrito Central, Tegucigalpa (AMDC). The Rating
Outlook is Stable. At the same time, Fitch has affirmed at 'B' the
Short-Term IDR of AMDC. The standalone credit profile (SCP) has
also been affirmed at 'b+'.
The affirmation reflects Fitch's expectation that AMDC will
maintain its operating performance, although it may be adversely
affected by rising costs and subdued tax collections due to the
coronavirus pandemic in 2020-2021. The rating action also
incorporates AMDC's vulnerable risk profile by international
standards against Fitch's expectations of adequate debt
sustainability underpinned by sound operating balances above 55.0%
on average in 2014-2018. The assessment also takes into account
AMDCs capex trend over the last six years that, if maintained, will
need to be financed with new debt in the rating case scenario. The
Stable Outlook on the IDRs reflects its opinion that AMDC will
perform in line with its projections.
Fitch's ratings are forward looking in nature, and Fitch will
monitor developments in the public sector for coronavirus pandemic
severity and duration, and incorporate revised base- and
rating-case qualitative and quantitative inputs based on
performance expectations and assessment of key risks.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
AMDC's 'Vulnerable' risk profile reflects its 'Midrange' assessment
on two risk factors: expenditure sustainability and expenditure
adjustability; and four as 'Weaker': revenue robustness, revenue
adjustability, liabilities and liquidity robustness and
flexibility. The vulnerable assessment reflects the weak
institutional framework in which Local and Regional Governments
operate in Honduras.
Revenue Robustness: 'Weaker'
AMDC has strong and predictable local revenue collection rates;
hence its operating revenue is mostly made up of taxes and fees
(2019: 93%), the growth prospects of which are constraint by
disruptions caused by the coronavirus pandemic. However, in real
terms, AMDC's operating revenue grew at 2.7% in 2015-2019 versus
Honduras' average real GDP growth of 3.8%. In 2019, real operating
revenue grew at 6.0%, above Honduras's GDP growth of 2.7%, mainly
driven by higher than expected fees. Tax collection decreased by
4.8% in nominal terms; however operating revenue grew 11.4% versus
2018.
Stable tax revenue is counterbalanced by a low GDP per capita by
international standards that constrained the growth prospects of
taxes and non-taxes. In addition, taxation has shown some
volatility linked to political cycles; own-revenues have
represented more than 90% of total revenues over the last eight
years. As of June 2020, operating revenue decreased by 22.2% yoy;
total revenue was affected in a similar manner. However, Fitch
expects that AMDC's track record on tax collection will underpin
its recovery if no second coronavirus outbreak unfolds.
Revenue Adjustability: 'Weaker'
AMDC's ability to generate additional revenue in response to
possible economic downturns is limited. The city has formal
tax-setting authority over several local taxes and fees that
accounted for about 93.4% of total revenue in 2019. Its ability to
raise revenue is constrained by the moderate income of residents by
international standards and social-political sensitivity to tax
increases.
AMDC's main flexibility rests on the wide and fully exploited tax
base and in recovering tax arrears. Management is acting to
increase tax compliance with diverse controls, technology and
data.
Fitch considers that the current negative macroeconomic environment
due to the coronavirus also limits the municipality's ability to
increase tax rates and expand tax bases to boost its local
operating revenues. In this regard, Fitch expects that tax revenues
will grow at the same rate as inflation in 2020, if no second
outbreak unfolds.
Expenditure Sustainability: 'Midrange'
AMDC's control over operating expenditure is remarkable, with a
track record of keeping spending growth below that of operating
revenue for the period of 2015-2019, allowing for a stable
operating margin of around 57.3% on average in 2015-2019. Operating
expenditure (current expenses plus government transfers)
represented on average 36.0% of total expenditure over the last
five years. Over the same period, capital outlays have represented
an average of 55.3% of total expenditure (in fiscal 2019: 53.6%).
Expenditure Adjustability: 'Midrange'
In its rating scenario, Fitch expects AMDC to continue to report
large operating margins of 47.0%. Around 53.6% of expenditure
before debt service is capital outlays, keeping the share of
inflexible expenditure well below 70%. This represents a moderate
flexibility to control and cut expenses in a scenario of lower
revenues. Fitch believes that the high level of capital investments
necessary to cover the city's large infrastructure needs and
requirements will largely be financed by operating margins and
debt.
Under Fitch's rating scenario, which incorporates stresses due to
the coronavirus lockdown, AMDC is expected to retain its
flexibility. Capex is expected to decline to around 43% of
expenditure before debt service, but a high level of capex is
necessary to maintain local attractiveness amid demographic
pressures calling for more spending on infrastructure such as water
distribution and roads.
Liabilities and Liquidity Robustness: 'Weaker'
The central government sets a public debt ceiling for subnationals.
However, this can be waived if Congress permits subnational
governments to acquire new debt. Besides bank loans, there is no
track record of capital market access for financing. Their direct
long-term debt (DLTD) is exposed to market risk since all the debt
has variable interest rates; however, the maturity profile of this
debt has no concentration risk. Overall, there is a weak national
framework for debt and liquidity management.
At year-end 2019, direct debt totaled HNL4.2 billion, of which
HNL1.0 billion was short-term bank loans. Average cost of debt is
around 10.4%. Long- and short-term debt is paid through a trust
mechanism that ensures timely debt service payments. All of
Alcaldia Municipal del Distrito Central is with local commercial
banks.
Liabilities and Liquidity Flexibility: 'Weaker'
Fitch perceives Honduras' national framework regarding liquidity
support and funding available to subnationals as 'Weaker', as there
are no formal emergency liquidity support mechanisms established or
bail-out mechanisms. AMDC has exhibited high concentration of
counterparty risk on bank credit lines (bank ratings) below 'BBB'
category, triggering a 'Weaker' assessment on this factor.
Historically, local governments in Honduras prefer to tap bank
loans rather than other funding options due to shallow capital
markets. Last but not least, in its rating case, Fitch notes that
increasing direct long-term debt would be the only option in a
scenario of lower than expected operating balances amid large
infrastructure needs.
At the end of 2019, AMDC's liquidity coverage ratio (operating
balance to debt service) weakened to 1.2x from 1.8x in 2018. The
economic lockdown triggered by coronavirus has hindered operating
balance; as such, the city tapped the local-currency capital market
for short-term debt; as of June 2020, AMDC had HNL1.0 billion
outstanding (June 2019: HNL0.4 billion.
Debt sustainability: 'a' category
Fitch classifies AMDC as a Type B LRG. These are required to cover
debt service from cash flow on an annual basis. In Fitch's rating
case scenario, AMDC's payback ratio (net adjusted debt to operating
balance) is adequate at around 8.9 years in its 2020-2024
projections; this is the primary metric of debt sustainability, and
is assessed in the 'aa' category.
Fitch overrides the primary metric by one rating category, to
incorporate an actual debt service coverage ratio (ADSCR, operating
balance to debt service) below 1.0x in its rating case. The
assessment envisages some stress on both revenues and expenditures
to capture historical volatility; furthermore, it takes into
account AMDC's infrastructure investment trend that, if it grows in
line with inflation, will need to be financed with new debt in the
rating case scenario.
The overall final score for debt sustainability is 'a'.
AMDC is Honduras' capital city with GDP per capita close to
USD6,000. This is above the national average, but is low by
international standards. The city's economic structure is well
diversified; fueled by public and private investment and a
population over 1.2 million, AMDC's economic structure supports its
robust internally generated revenues.
DERIVATION SUMMARY
AMDC's 'b+' SCP reflects a combination of a Vulnerable risk profile
and an 'a' debt sustainability assessment. The notch-specific
rating positioning also factors in appropriate rated peers. Fitch
does not apply any asymmetric risk or extraordinary support from
upper tier government, which results in an IDR of 'B+'. The
short-term rating of 'B' is derived from AMDC's Long-Term IDRs.
KEY ASSUMPTIONS
Fitch's rating case is a 'through-the-cycle' scenario, which
incorporates a combination of revenue, cost and financial risk
stresses in case of economic slowdown. It is based on 2015-2019
figures and 2020-2024 projected ratios. Fitch revised its rating
case scenario's assumptions to reflect the economic consequences of
the coronavirus on AMDC's debt sustainability metrics. The key
assumptions for the scenario include:
-- 22.2% yoy decrease in tax collection and 12% in non-taxes for
2020; overall operating revenue CAGR for 2020-2024 is forecast at
8.5%.
-- Operating expenditure is forecast to reach a CAGR for
2020-2024 of 12.0%;
-- Net capital balance of around minus HNL2.0 billion in 2024;
-- Cost of debt for 2020-2024 at 11.4% on average;
-- Capex is expected to grow at least in line with inflation in
the rating case, which is to be financed with operating margins and
new debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade or a higher SCP: --A positive reassessment of
AMDC's risk profile, particularly due to more robust revenues,
could be positive for the ratings, provided debt sustainability
metrics improve such that the payback ratio is lower than 5x and
the fiscal debt burden is between 50% and 100%, coupled with an
improved debt service coverage of ratio between 2.0x and 4.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade or a lower SCP: --A sustained deterioration
of the payback ratio above 9x due to a weakened operating balance
could lead to a downgrade of Long-Term IDRs. --Prolonged
coronavirus impact and much slower economic recovery lasting until
2025 would put pressure on the city's tax receipts. Should AMDC be
unable to proactively reduce expenditure or supplement weaker
receipts from increased central government transfers, this may lead
to a downgrade.
SUMMARY OF FINANCIAL ADJUSTMENTS
No material adjustments were made to figures reported by the
municipality.
SOURCES OF INFORMATION
The principal sources of information used in the analysis are
described in the Applicable Criteria referenced.
ESG CONSIDERATIONS
The highest level of Environmental, Social and Governance (ESG)
credit relevance, if present, is a score of '3'. This means 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.
=============
J A M A I C A
=============
JAMAICA: Tourism Stakeholders Want Unified COVID-19 Response
------------------------------------------------------------
RJR News reports that tourism stakeholders are calling for a more
unified national COVID-19 response between public and
private-sector entities, arguing that anything less could be
self-defeating and counterproductive.
Speaking at a JIS Think Tank, the sector players argued that what
the country currently needs is a cohesive message where the health
and safety guidelines established by the government can be
strengthened, according to RJR News.
Omar Robinson, President of the Jamaica Hotel and Tourist
Association (JHTA), said talks have been initiated with different
private-sector organisations and he is confident that a more
cohesive approach is in the making going forward, the report
notes.
As reported in the Troubled Company Reporter-Latin America, S&P
Global Ratings revised on April 16, 2020 its outlook on Jamaica to
negative from stable. At the same time, S&P affirmed its 'B+'
long-term foreign and local currency sovereign credit ratings, its
'B' short-term foreign and local currency sovereign credit ratings
on the country, and its 'BB-' transfer and convertibility
assessment.
The TCR-LA also reported that Fitch Ratings, in April 2020, revised
Jamaica's Outlook to Stable from Positive. The Long-Term
Foreign-Currency Issuer Default Rating is affirmed at B+. The
Outlook change reflects the shock to Jamaica from the coronavirus
pandemic, which is expected to lead to a sharp contraction in its
main sources of foreign currency revenues: tourism, remittances and
alumina exports.
===========
M E X I C O
===========
BANCA MIFEL: S&P Alters Outlook to Negative & Affirm 'BB-/B' ICRs
-----------------------------------------------------------------
S&P Global Ratings revised its outlook on Mexico-based niche bank
Banca Mifel S.A. (Mifel) to negative from stable. At the same time,
S&P affirmed its 'BB-/B' global scale issuer credit ratings and its
'mxA-/mxA-2' national scale ratings on the bank. Finally, S&P also
affirmed its 'B-' issue-level rating on the bank's subordinated
notes.
S&P said, "The outlook revision stems from our belief that the bank
could face capital level pressures in the next 24 months. Given
that we expect the bank's asset quality to deteriorate amid the
pandemic-induced economic crisis, the bank will be forced to
generate additional loan-loss reserves. This will take a heavy toll
on Mifel's operating revenue, and ultimately, bottom-line results.
In this sense, we could lower the ratings if the bank's internal
generation worsens beyond our base-case scenario, dragging our
consolidated RAC ratio consistently below 7%."
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Aug. 31 to Sept. 4, 2020
-------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Polarcus Ltd 5.6 71.8 7/1/2022 AE 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
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
China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
MIE Holdings Corp 7.5 56.4 4/25/2019 HK USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Argentine Republic Gov 6.9 75.2 1/11/2048 AR 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
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Banco Security SA 3.0 27.4 6/1/2021 CL CLP
Provincia de Buenos Ai 7.9 75.3 6/15/2027 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 56.2 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
Odebrecht Finance Ltd 7.0 17.0 4/21/2020 KY USD
SACI Falabella 2.3 50.6 7/15/2020 CL CLP
Sylph Ltd 2.4 65.1 9/25/2036 KY 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
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
Argentine Republic Gov 8.3 72.9 12/31/2033 AR 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
Empresa de Transporte 4.3 30.9 7/15/2020 CL CLP
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
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Cia Energetica de Pern 6.2 1.1 1/15/2022 BR BRL
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
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Province of Santa Fe 6.9 75.2 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
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
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
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
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.
.
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