/raid1/www/Hosts/bankrupt/TCRLA_Public/221208.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
Thursday, December 8, 2022, Vol. 23, No. 239
Headlines
A R G E N T I N A
YPF SA: Poised to Rein in Capex Ambitions Amid Fuel Controls
B E R M U D A
APEX STRUCTURED: Moody's Affirms 'B2' CFR, Alters Outlook to Neg.
B O L I V I A
BOLIVIA: S&P Lowers Long-Term SCR to 'B' on Higher External Risks
B R A Z I L
BANCO ORIGINAL: S&P Downgrades LT ICR to 'B-', Outlook Stable
BRAZIL: GDP Growth Slows More Than Expected Due to Interest Rates
BRAZIL: IDB OKs $72.7-Mil Loan to Improve Fiscal Management
C H I L E
INVERSIONES LATIN: Moody's Cuts Notes Rating to B2; Put on Review
VTR FINANCE: S&P Downgrades ICR to 'B', Outlook Negative
D O M I N I C A N R E P U B L I C
[*] DOMINICAN REPUBLIC: To Invest DOP250M to Promote Caballeros
M E X I C O
ASARCO LLC: Court Maintains Stay Until EPA's Remediation Plan
OPERADORA DE SERVICIOS MEGA: S&P Affirms 'B' ICR, Outlook Negative
P U E R T O R I C O
WILMER TACORONTE ORTIZ: Court Denies Sec. 363 Sale of Property
U R U G U A Y
URUGUAY: IDB OKs $30M Loan to Strengthen STEM Skills of Students
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A R G E N T I N A
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YPF SA: Poised to Rein in Capex Ambitions Amid Fuel Controls
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Jonathan Gilbert at Bloomberg News reports that Argentina's
state-run oil company YPF probably will set next year's spending
plan at the lower end of a range that executives are discussing
internally, according to a person familiar with the matter.
The driller and refiner previously said it's planning to use its
strong financial position to accelerate spending in the Vaca Muerta
shale region that could pump one million barrels of crude a day by
the end of the decade, according to Bloomberg News.
But expectations that investment would reach US$5.5 billion are
fading, in part because oil refiners in the country recently agreed
to government demands to cap fuel-price hikes over the next four
months to tame inflation, Bloomberg News relays.
That deal may augur more controls through 2023, something that YPF
- whose drilling activity depends heavily on revenue from petrol
and diesel sales - has to factor into its outlook, Bloomberg News
notes. A company spokesman declined to comment.
Capital spending will be closer to US$5 billion in 2023, although
discussions to finalise the plan are ongoing, the person said,
Bloomberg News relays. That figure would still be the highest since
2015, according to Bloomberg data. YPF is forecast to invest
US$4.1 billion this yea, Bloomberg News adds.
* * *
As reported in the Troubled Company Reporter-Latin America on Jun
8, 2022, S&P Global Ratings affirmed its 'CCC+' ratings on
Argentine integrated oil and gas producer YPF S.A.
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B E R M U D A
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APEX STRUCTURED: Moody's Affirms 'B2' CFR, Alters Outlook to Neg.
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Moody's Investors Service has affirmed the B2 corporate family
rating and B2-PD probability of default rating of Apex Structured
Intermediate Holdings Ltd. ("Apex", or "the group"). Concurrently,
Moody's has affirmed the B1 instrument ratings of the existing
senior secured first-lien term loan due 2028 with tranches of
$1,365 million and $720 million (upsized by $400 million) issued by
Apex Group Treasury LLC, the EUR745 million senior secured
first-lien term loan due 2028 and the $300 million senior secured
first-lien revolving credit facility (RCF) due 2026 issued by Apex
Group Treasury Limited. The outlook on all ratings has been changed
to negative from stable.
The proceeds of the additional $400 million debt issuance will
mainly be used to finance Apex's acquisitions of Pacific Fund
Systems (PFS) and Boutique Collective Investments (BCI) for a
combined consideration of around $330 million and related
transaction costs.
RATINGS RATIONALE
The affirmation of Apex's B2 CFR and the outlook change to negative
from stable reflects Moody's expectation that the group's leverage
will remain above the expected range for the B2 rating for longer,
with its Moody's-adjusted leverage increasing again to 8.3x, pro
forma for the contemplated transaction and based on the twelve
months period to September 30, 2022. At the same time the rating
action reflects Moody's view that the group still has the ability
to reduce leverage towards the more appropriate level of around
6.5x by the end of 2023.
The reduction in leverage is particularly dependent on the
successful integration of the various acquisitions completed
recently and the realisation of related synergies. In combination
with continued double-digit revenue growth in percentage terms,
Moody's forecast Apex's EBITDA to grow by around 25% in 2023 to
over $500 million and thereby leverage to decrease to about 6.7x by
fiscal year-end December 2023. Any additional debt-funded
acquisitions, a notable underperformance of the business against
its budget or failure to realise targeted synergies that lead to a
meaningful deviation from this deleveraging trajectory would lead
to a downgrade of Apex's ratings.
Apex's B2 CFR further reflects (1) the group's established market
position as one of the largest independent fund services providers
globally with a comprehensive product offering and global
footprint, which will be further improved by the contemplated
acquisitions; (2) the largely recurring revenue streams supported
by a sticky and diversified customer base and strong underlying
market fundamentals; and (3) the group's good profitability levels
that should translate into strong free cash flow generation beyond
2023 as one-off cash costs fade away.
Conversely, the CFR is constrained by (1) Apex's exposure to
regulatory and legal risk; (2) the elevated financial leverage of
8.3x Moody's-adjusted Debt/EBITDA, based on the twelve months
period to September 30, 2022 and pro forma for the contemplated
transaction, and high level of pro forma adjustments to EBITDA; (3)
Apex's M&A-driven growth strategy that continues to constrain
deleveraging potential; and (4) the integration risk related to the
various recent acquisitions, such as potential delays in the
realisation of targeted synergies or increased implementation cost,
and potential distraction resulting from the substantial
integration causing delays in the forecasted strong organic
growth.
ESG CONSIDERATIONS
Apex's ratings factor in certain governance considerations such as
Apex's ownership structure with Genstar as the majority
shareholder. As it is common for companies that are majority owned
by private equity firms, Apex's financial policy is characterised
by a tolerance for high financial leverage and a debt-funded M&A
driven growth strategy.
RATING OUTLOOK
The negative outlook reflects Moody's expectation that Apex's
leverage will remain above expectations for the B2 rating category
for a prolonged period. At the same time the outlook considers
Apex's ability to rapidly decrease leverage through a combination
of good organic revenue growth and the successful realisation of
synergies related to the various acquisitions completed recently. A
stabilisation of the outlook would require Apex to reduce its
Moody's-adjusted Debt/EBITDA towards 6.5x by year-end 2023 while
maintaining good liquidity.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
As expressed by the negative outlook, the ratings are weakly
positioned in view of the high leverage, a relatively aggressive
financial policy and the substantial integration to be delivered,
as a result of which limited upward rating pressure is expected.
However, upward pressure on the rating could occur if
Moody's-adjusted Debt/EBITDA sustainably decreases to below 5.5x,
whilst maintaining its high operating profitability and substantial
free cash flow generation. An upgrade would also require Apex to
successfully execute the integration of the recently closed
acquisitions and realise targeted synergies.
Downward pressure on the rating could develop if Apex fails to
reduce its Moody's-adjusted Debt/EBITDA to around 6.5x by 2023,
EBITA margins significantly decrease from current high levels or
free cash flow generation reduces towards zero for a sustained
period of time.
Furthermore, another substantial increase in first-lien over
second-lien debt could result in a notch down and therefore
alignment of first-lien instrument ratings with the CFR.
LIQUIDITY PROFILE
Pro forma for the contemplated transaction, Moody's consider Apex's
liquidity to be good. At closing of the transaction, pro forma on
September 30, 2022, the group has $121 million of cash on balance
sheet, as well as $124 million that are considered as restricted
for regulatory purposes. The group's liquidity is supported by its
fully undrawn $300 million RCF, pro forma for the transaction.
Apex's liquidity profile further benefits from its good cash
generation ability and Moody's forecasts free cash flow of around
$90 million in 2023, following an only marginally positive free
cash flow in 2022 due to sizeable one-off costs.
STRUCTURAL CONSIDERATIONS
Apex's debt facilities, pro forma for the contemplated transaction,
consist of a first-lien term loan due 2028, divided into tranches
of $1,365 million and EUR745 million, incremental tranches of an
aggregate of $720 million raised in 2022, a pari passu ranking $300
million RCF due 2026 and a $455 million second-lien term loan due
2029.
The B1 rating on the first-lien senior secured facilities is one
notch above the B2 CFR and reflects the priority position of these
facilities ahead of the second-lien facility and non-debt
liabilities consisting mainly of leases, earn-outs and trade
payables at the operating companies.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Business and
Consumer Services published in November 2021.
CORPORATE PROFILE
Apex is one of the largest independent providers of fund
administration services, financial and corporate solutions, founded
in 2003 by its current CEO and with headquarters in Bermuda. The
group is a global operator with presence in 50 countries across the
world, serving more than 10,000 clients with over $3 trillion of
assets on its platforms. Apex is majority-owned by private equity
firm Genstar, with minority shareholders TA Associates, founder
Peter Hughes, Mubadala and Carlyle holding most the remaining
equity. During the twelve months period ended September 30, 2022,
the group generated pro forma revenue of around $1.2 billion.
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B O L I V I A
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BOLIVIA: S&P Lowers Long-Term SCR to 'B' on Higher External Risks
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On Dec. 6, 2022, S&P Global Ratings lowered its long-term sovereign
credit ratings on Bolivia to 'B' from 'B+'. The outlook on the
long-term ratings is stable. At the same time, S&P affirmed its 'B'
short-term foreign and local currency ratings. S&P revised down
Bolivia's transfer and convertibility assessment to 'B' from 'B+'.
Outlook
S&P said, "The stable outlook indicates our expectation that
continued economic recovery and some expenditure containment
measures should gradually reduce Bolivia's fiscal deficit,
resulting in net general government debt stabilizing just above 60%
of GDP.
"We also consider the benefits of the recent debt management
operation that reduced foreign commercial debt payment obligations
for 2023 to $183 million, from $500 originally. This liability
management operation, coupled with our expectation of continued
access to official and commercial funding, should help sustain
external liquidity and manage rising--but still moderate--current
account deficits (CADs) in the next 12 months."
Downside scenario
S&P could lower the ratings over the next year if unexpected shocks
to commodity prices or deepening political impasse deteriorates
investor confidence and leads to a sudden loss of external
liquidity, further weakening Bolivia's external profile. Gross
external financing needs are set to continue rising amid CADs and
higher external debt. In that context, the sovereign's continued
access to external funding is key to preventing further strain on
the central bank's foreign exchange reserves, in a de facto fixed
exchange rate regime. Unexpected adverse movement in the exchange
rate could increase the sovereign's debt and interest payments (as
a share of its revenues) and affect the liquidity of the local
banking sector.
S&P could also lower the rating if the country's trend rate of GDP
growth declines to levels below that of other countries at a
similar level of development.
Upside scenario
S&P could raise the ratings in the next 12-18 months if effective
policy management leads to faster-than-expected correction of the
fiscal gap and reduction of the sovereign's debt and interest
burden. Political initiatives to curb expenditure growth or boost
revenues while sustaining economic growth could bolster Bolivia's
budgetary flexibility and help contain external pressures.
Rationale
The downgrade follows increasing vulnerabilities from persistent
and sizable fiscal deficits that have pushed net government debt
above 60% of GDP and worsened the country's external profile.
International reserves have fallen consistently over the last two
years, despite record export values amid the recent commodity boom.
Bolivia's external financing needs are set to continue increasing
amid less supportive commodity prices, reduced export capacity of
the gas sector, and exchange rate inflexibility. Moreover,
political challenges have worsened with increasing regional
tensions and divisions within the ruling coalition. Political
impasse raises risk of further erosion of external liquidity in a
context of tight external market conditions.
The ratings on Bolivia reflect its low per capita GDP (projected at
US$3,590 in 2022), and limited monetary policy flexibility arising
from exchange rate rigidities. That said, Bolivia also has a track
record of low inflation, low dollarization in the financial system,
and manageable debt service in the next two years.
Institutional and economic profile: Political divisions raise
questions about the government's ability to correct macroeconomic
imbalances
-- GDP growth will likely slow to 3% in 2022, after a 6.1% rebound
in 2021.
-- GDP per capita should remain just below $3,600 through 2025,
below that of South American peers.
-- Deepening political impasse could make it more difficult to
make timely policy decisions.
Fiscal and monetary policies implemented after the pandemic have
helped economic recovery and reversed much of the social fallout
from the 2020 economic downturn. S&P expects the economy to grow 3%
this year, after a rebound of 6.1% in 2021 following a record
contraction of 8.7% in 2020. GDP per capita is set to climb just
above its pre-pandemic level this year. Unemployment has also
declined below 6% from its 11% peak amid the 2020 crisis--although
informality remains high.
Public-sector spending has played an important role in the economic
recovery, especially through funds directed to the development of
the energy and industrial sectors, as well as social programs aimed
at boosting domestic demand. However, expansionary spending
policies have raised macroeconomic vulnerabilities as large
deficits have deteriorated Bolivia's once large fiscal and external
buffers. The government's debt burden has almost doubled vis-a-vis
2018, while the sovereign's narrow net external position has
weakened consistently.
The administration of President Luis Arce, of the governing
Movimiento al Socialismo (MAS), has taken steps to gradually
reverse those weakening trends by curbing expenses, while promoting
projects that should boost exports and reduce import dependency in
the long term. However, it could be difficult for the
administration to undertake timely and forceful policy adjustments
to stabilize and rebuild external and fiscal buffers amid a
divisive political context and fragile social conditions.
Bolivia's political fragmentation across regional, social, and
ethnic divisions worsened after the irregular change of government
in 2019. Subsequently, national elections in 2020 reduced political
tensions during 2021 and the first half of 2022. However, a recent
prolonged strike in the country's business hub of Santa Cruz
underscores the difficulties of managing different interest groups
within the country. The protests, which began after the
government's decision to delay a national population census for two
years, interrupted activities in the relatively prosperous Santa
Cruz region.
The citywide strike halted after a month, after the government
passed a law for a new census in 2024. However, the government
coalition was divided over the new law, highlighting the internal
political disagreements that negatively affect policymaking. There
have been similar challenges to approving other important laws,
such as a bill to expand central bank powers to manage gold
reserves-–submitted in June 2021-–and proposals to approve
loans from multilateral banks, even though MAS has a simple
majority in both chambers of the legislature.
MAS remains the strongest political force in Bolivia, but its
internal divisions could worsen ahead of the 2024 party elections.
These complex political dynamics--reflecting the need to balance
the interests of the alliance members (indigenous groups, unions,
cooperatives)--could reduce the likelihood of timely corrective
fiscal and other policies.
Flexibility and performance profile: Weakened external buffers and
high financing needs remain rating weaknesses, while the debt
profile counterbalances the risks
-- Supportive commodity prices are not sufficient to offset strong
import growth; the current account is likely to turn to a deficit
in 2022.
-- Pressure on foreign exchange reserves continues.
-- Slow fiscal adjustment will likely push net general government
debt beyond 60% of GDP by 2023.
The increase in energy prices and a real appreciation of the
boliviano (which reflects the strength of the U.S. dollar) are
boosting import growth. As a result, the current account is likely
to turn to a 1% of GDP deficit, from a 2.1% surplus in 2021. The
reversal is expected despite very strong export performance in the
first half of the year. Mineral exports (especially gold), fostered
by supportive prices, are expected to reach a record level this
year. Meanwhile, the increase in international oil prices and
recent negotiation of a natural gas contract with Argentina raised
the gas export value to the highest level since 2016, despite the
shrinking export volumes. That said, higher fuel prices have a net
negative impact on the current account as the trade balance of oil
products turned negative in 2021. In fact, with good economic
growth and a fixed fuel price policy, fuel imports have been
growing, likely reaching 34% of total imports this year from 11% in
2015.
The current account balance will likely remain negative over the
next two to three years as commodity prices become less supportive.
Natural gas exports are expected to continue shrinking. Large
public investment, coupled with a strong currency, will likely
support a high level of imports. To tackle these negative trends,
the administration has been raising Bolivia's gas exploration
budget and is selecting a foreign partner to help develop its
lithium reserves--the world's largest. However, the potential
positive impact of such developments would appear beyond S&P's
forecasted period.
The external deficits are likely to be mostly financed by debt and
some erosion of external assets, as foreign direct investment will
likely remain low (around 1% of GDP, on average, in the next three
years). As a result, we project narrow net external debt to rise to
80% of current account receipts (CAR) by 2025, from 60% currently.
Gross external financing needs are likely to average 92% of CAR and
usable reserves in 2022-2025, up from 66% in 2020.
However, official balance-of-payments data shows that "errors and
omissions" have been above historical levels over the last two
years, potentially indicating unreported external outflows. This
has led to a faster-than-expected deterioration of external assets,
with central bank reserves falling to $3.9 billion in November 2022
from $4.7 billion at the beginning of the year, despite other data
showing a balanced current account and positive net external
borrowing. The outflow of dollars has changed the composition of
official reserves, with non-gold reserves falling to $1.4 billion.
S&P expects the government will receive external financing,
especially from multilateral banks, helping to stabilize foreign
exchange reserves in the coming months.
The creditor profile constitutes a relative rating strength--only
17% of external debt is owed to commercial creditors. Moreover, a
debt management operation done in February 2022 reduced 2023 bond
principal payments to $183 million, from $500 originally.
The government is likely to undertake gradual fiscal correction
from recent high deficits. As a result, the increase in net general
government debt relative to GDP is likely to exceed 6% in
2022-2023, down from a nearly 13% record amid the pandemic. Fiscal
correction would mainly come from slowing execution of
infrastructure spending and continued recovery in tax revenues. But
the complex political and social context will limit the
government's ability to reduce spending. For example, the cost of
fuel subsides has been rising over the last years and is currently
over 2% of GDP. However, the subsidy has anchored prices and
preserved social stability.
S&P expects net general government debt to exceed 60% of GDP by
2023, up from 39%, on average, in 2019-2020. Higher debt could
raise interest spending as a share of government revenue toward 5%
by 2023. A high share of foreign currency debt (over 45% of the
total sovereign debt) makes the debt burden vulnerable to potential
sharp adverse swings in the currency.
Rapid growth of credit over the last decade has boosted the assets
of the banking sector, which now exceed 100% of GDP. At the same
time, the pandemic-induced slowdown and prolonged credit
moratoriums could worsen banks' asset quality. That said, reported
nonperforming loans are around 2.2% of total loans and are fully
covered by conservative provisioning policies and the high share of
collateralized loans.
The risks to stability are mitigated by the considerable reduction
in the foreign currency exposure of the financial system.
Dollar-denominated lending has plunged during the past few years
and now represents only about 1% of total bank loans, supported by
both currency stability for many years and low inflation. S&P
expects inflation to average 2.5% in 2022, the lowest in the
region. However, the exchange rate regime also constrains monetary
flexibility.
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
DOWNGRADED
TO FROM
BOLIVIA (PLURINATIONAL STATE OF)
Transfer & Convertibility Assessment
Local Currency B B+
BOLIVIA (PLURINATIONAL STATE OF)
Senior Unsecured B B+
DOWNGRADED; CREDITWATCH/OUTLOOK ACTION; RATINGS AFFIRMED
TO FROM
BOLIVIA (PLURINATIONAL STATE OF)
Sovereign Credit Rating B/Stable/B B+/Negative/B
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B R A Z I L
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BANCO ORIGINAL: S&P Downgrades LT ICR to 'B-', Outlook Stable
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S&P Global Ratings lowered its long-term issuer credit rating on
Banco Original S.A. (Original) to 'B-' from 'B'. At the same time,
S&P lowered the long-term national scale rating to 'brBBB' from
'brA-' and affirmed the short-term national scale rating at
'brA-2'. The outlook for all long-term ratings is stable.
Original followed its digital expansion strategy, which aimed to
increase the scale of its retail unit, especially credit card
offerings. That resulted in the retail portfolio tripling in size
in one year--a 200% increase, to R$9 billion in June 2022 from R$3
billion in June 2021--and retail now represents 60% of the total
portfolio from 35% a year before. As a result, the bank's asset
quality metrics started to worsen, with nonperforming loans (NPLs)
reaching 17% as of June 2022, from 1.8% one year before. S&P
expects the bank to revise its business strategy, reducing its
exposure to the low-credit-quality clients and writing off this
portion of the portfolio.
The increase in the loans' risk profile led the bank to need higher
provisioning, which combined with challenging economic conditions
weakened Original's profitability. As of June 2022, the bank's loan
loss provisions were R$1.7 billion, versus R$113 million in June
2021. As a result, the bank posted a net loss of R$545 million from
a net income of R$66 million in June 2021.
S&P said, "Shareholders performed several capital increases to deal
with the business losses, and we expect them to continue doing so.
As a result, we expect the regulatory capital--which was 12.43% in
June 2022--to be at least 100 basis points (bps) above minimum
requirements. We also forecast the risk-adjusted capital (RAC)
ratio to continue to be between 4.0% and 5.0% in the next two
years."
Banco Original is part of Conglomerado Financeiro Original. S&P's
assessment of the group credit profile incorporates these entities
on a consolidated basis, because Banco Original plays a key role in
the conglomerate's strategy and represents most of the group's
capital and revenue. J&F Participacoes, owned by Joesley and Wesley
Batista, owns 100% of Conglomerado Financeiro Original. Given that
the ultimate parent of the bank is a family firm, the conglomerate
isn't subject to any potential group support.
S&P's forecast incorporates the following base-case assumptions:
-- Brazil's GDP growing 2.5% in 2022 and 0.6% in 2023.
-- Credit growth of 30% in 2022, followed by no growth in 2023.
-- NPLs at 20%-25% in 2022 and falling to 5% in 2023, with
write-offs at about 25%.
-- Net losses of about R$1 billion in 2022, with breakeven in the
bottom-line in 2023.
-- No dividend distribution in the next two years.
-- Additional R$300 million in capital injections still to come in
2022 and new injections in 2023.
S&P said, "In our view, the bank has an adequate liquidity position
and regularly monitors cash flow projections, and it has no
material debt maturity concentration in the next 12 months. As of
June 2022, the bank's broad liquid assets totaled R$6.4 billion and
covered short-term wholesale funding by 1.4x. Moreover, its stable
funding ratio was 107.6% in the same period, which we consider
comfortable."
BRAZIL: GDP Growth Slows More Than Expected Due to Interest Rates
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Reuters reports that Brazil's economic growth slowed more than
expected in the third quarter as higher interest rates affected
household spending, underscoring challenges facing President-elect
Luiz Inacio Lula da Silva next year.
Gross domestic product rose 0.4% in the three months to September,
government statistics agency IBGE said, below the 0.7% growth
forecast by economists polled by Reuters.
Brazil's central bank have raised borrowing costs to a nearly
six-year high to battle double-digit inflation this year, which has
begun to weigh on domestic demand, the report notes. Economists
warn that if Lula unleashes a surge of new government spending, the
central bank may not cut rates as expected, the report relays.
Household consumption rose just 1%, down from 2.1% in the second
quarter, while fixed investments gained 2.8% and a burst of
election-year spending lifted government expenditures 1.3%, the
report discloses.
On the production side, farm output fell 0.9% in the quarter due to
a delayed sugar cane harvest, while industrial output advanced 0.8%
and the dominant services sector rose 1.1%, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian
general election. He will be sworn in on January 1, 2023, as the
39th president of Brazil, succeeding Jair Bolsonaro.
In July 2022, Fitch Ratings affirmed Brazil's Long-Term Foreign
Currency Issuer Default Rating at 'BB-' and revised the Rating
Outlook to Stable from Negative. In June 2022, S&P Global
Ratings
also affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. Moody's, in April
2022, affirmed Brazil's long-term Ba2 issuer ratings and senior
unsecured bond ratings, (P)Ba2 senior unsecured shelf ratings, and
maintained the stable outlook. On the other had, DBRS, in
August
2022, confirmed Brazil's Long-Term Foreign and Local Currency
Issuer Ratings at BB (low).
BRAZIL: IDB OKs $72.7-Mil Loan to Improve Fiscal Management
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Brazil's Federal District will modernize its fiscal management
while enhancing its tax administration and public expenditure
management with the help of a $72.7 million loan approved by the
Inter-American Development Bank (IDB).
The financing is part of the $900 million PROFISCO II program,
which was approved in 2017 to digitally transform and modernize
fiscal management in Brazil's 26 states and the Federal District.
Most of the funds ($40 million) will be used to upgrade
technological infrastructure by creating data storage and
processing platforms, establishing an IT park, training staff on
new technologies, implementing data cybersecurity systems, and
using artificial intelligence to serve taxpayers, among other
initiatives.
Another $21 million of the new loan is designed to streamline tax
collection, raise revenues, and simplify tax compliance. This
component will primarily focus on implementing a modern system for
monitoring the movement of goods, an automated audit planning
system, and a module for integrating the single foreign trade
portal.
A third component will focus on modernizing financial management,
including the budget, financial and accounting management system
modules. It will also set up a computerized payroll system.
This project will allocate almost a quarter of its resources to
help mitigate climate change. Measures in this area include
boosting the efficiency of public buildings by installing solar
panels and appropriate lighting, air conditioning, and wiring
systems to reduce electricity consumption.
The $72.7 million loan has a 24.5-year term and a 6-year grace
period, at an interest rate based on the Secured Overnight
Financing Rate (SOFR).
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian
general election. He will be sworn in on January 1, 2023, as the
39th president of Brazil, succeeding Jair Bolsonaro.
In July 2022, Fitch Ratings affirmed Brazil's Long-Term Foreign
Currency Issuer Default Rating at 'BB-' and revised the Rating
Outlook to Stable from Negative. In June 2022, S&P Global
Ratings
also affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. Moody's, in April
2022, affirmed Brazil's long-term Ba2 issuer ratings and senior
unsecured bond ratings, (P)Ba2 senior unsecured shelf ratings, and
maintained the stable outlook. On the other had, DBRS, in
August
2022, confirmed Brazil's Long-Term Foreign and Local Currency
Issuer Ratings at BB (low).
=========
C H I L E
=========
INVERSIONES LATIN: Moody's Cuts Notes Rating to B2; Put on Review
-----------------------------------------------------------------
Moody's Investors Service has downgraded to B2 from Ba2 and placed
on review for further downgrade the rating assigned to the $404
million Senior Secured Notes issued by Inversiones Latin America
Power Limitada ("ILAP" or the "Project") with final maturity in
2033 ("Notes"). The rating action was driven by both environmental,
social and governance factors. The rating was placed under review
for further downgrade.
Downgrades:
Issuer: Inversiones Latin America Power Limitada
Senior Secured Regular Bond/Debenture, Downgraded to B2 from Ba2;
Placed Under Review for further Downgrade
Outlook Actions:
Issuer: Inversiones Latin America Power Limitada
Outlook, Changed To Rating Under Review From Negative
RATINGS RATIONALE
The downgrade of Inversiones Latin America Power Limitada's (ILAP)
secured notes to B2 reflects the continued deterioration of the
project's cash flow generation, as a result of prolonged negative
operating and market conditions that resulted in lower than
anticipated revenues and higher costs since mid-2021, thus
increasing the reliance on external sources of liquidity to service
its upcoming debt payments in January 2023.
ILAP generated a total of 575 GWh during the last-twelve-months to
September 2022, slightly above the P90 expectation used in Moody's
base case, but not enough to cover its commitments of energy
delivery. Energy demand from ILAP's offtakers has exceeded its
generation in approximately 44 GWh, forcing the project to incur
losses as it purchases energy in the volatile spot market to honor
its power purchase agreement (PPA) engagements. Despite the
stronger participation of hydro-power generators in the country's
energy mix since July 2022, spot prices have remained elevated over
$150/MWh during night hours due to higher commodity prices for coal
and liquified natural gas. Average decoupling costs reached
$19.2/MWh during the same period, reducing its PPA margin, while
pending definitions for the regulatory relief on the stabilized
price mechanism continued to add working capital pressures.
Moody's recognizes that ILAP has successfully managed to get
through the most severe period of volatility for power production
in Chile, but the adverse conditions have depleted the project
liquidity cushion. In October 2022, ILAP announced it used the
entirety of its operation and maintenance reserve facility to pay
for suppliers accounts payable negotiated in the second quarter of
2022.
Moody's expects decoupling costs and volatility of spot prices to
continue hurting the project's cash generation during the 4Q22, and
revised its base case scenario contemplating a debt service
coverage ratio (DSCR) below 1.0x for this period. To meet the
upcoming debt payment of $15.2 million in January 2023, ILAP relies
on the debt service reserve account that is fully funded through a
liquidity facility of $16.5 million. Going forward, Moody's expects
cash generation to improve but remain subdued over the next 12-18
months, translating into further needs for additional sources of
cash to rebuild liquidity cushion for debt service and O&M costs.
As an alternative source of cash, the project will be entitled to
collect over $6.0 million after the implementation of Chile's new
retail price stabilization fund in early 2023 (PEC II). These
additional liquidity sources combined to the project's cash
generation will allow for the payment of July 2023 debt service
while improvement in market conditions lead to some recovery of
ILAP's cash flow generation through 2024. Nonetheless, a rating
level in the mid Ba range is no longer tenable. The B2 rating
ceases to recognize any benefit for the cash-sweep mechanism at
this point given the very low prospects that the company will meet
any target amortization payment over the next three years. In
addition, the rating considers the rising refinancing risks given
that a bullet payment of approximately 42% of the issued notes will
be due in 2033.
ILAP's B2 rating remains supported by the high share of contracted
revenue from creditworthy counterparties during the life of the
notes, except for the last year ahead of the final amortization
payment, when the share of contracted revenues will drop to about
25%. The rating also incorporates Moody's favorable views of the
Chilean regulatory framework for the electricity sector and the
intrinsic value of ILAP's highly priced PPAs. The Project further
benefits from fixed price, full scope operations and maintenance
(O&M) contracts with Vestas Wind Systems A/S (Baa1 negative) for
the initial years of the transaction.The agency recognizes the
Project's cash flow protections to the current high inflation
environment, as its PPA prices are indexed to the US consumer price
index (CPI) and adjusted every six months, resulting in higher
margins. Over the last twelve months to October 2022, the CPI
registered a 7.7% increase. Moody's also note the track record of
extraordinary shareholder support in June 2022, including a $5
million injection from its parent Latin America Power S.A., first
structured as a subordinated loan and then converted in equity.
ILAP's environmental, social and governance were a consideration in
this rating action. However, ILAP's overall Credit Impact Score
(CIS-4) and moderately negative Issuer Profile Scores (IPS-3) for
E, S and G are unchanged at this time. The environmental factor is
highly negative, because Chile's consecutive years of drought have
forced the country to rely on more expensive thermal technologies,
adding volatility to spot prices and negatively affected ILAP's
cash flow generation. The social factors were also decisive
because the stabilized energy prices since 2019 in the context of
high spot prices has been further draining their liquidity.
Finally, governance factors were also taken into account for this
rating action because ILAP's notes payment structure entails high
leverage and allows for little deviations from the initial
projections.
During the review, Moody's will focus on the project's
profitability and cash flow trends through the first quarter of
2023 and on the external sources of cash available to improve
liquidity in the short-term. The review will include an assessment
of the project's ability to continue and sustainably service its
upcoming debt payments, which remains reliant on internally
generated cash flows and is very vulnerable to the developments
around the implementation of the new price stabilization fund and
the evolution of the Chilean energy market.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
There is little prospect for ratings upgrade over the review
process horizon. The outlook could return to stable if ILAP
demonstrates a recovery of its liquidity profile, evidenced by a
DSCR consistently above 1.0x and the refunding of its operation and
maintenance reserve account.
The rating could be downgraded if further deterioration if Moody's
perceives ILAP's liquidity profile to further deteriorates over the
next twelve to eighteen months, with the exhaustion of external
liquidity sources, delays on the approval of PEC II regulatory
relief and the DSCR remaining constantly below 1.0x.
ILAP is a subsidiary of Latin America Power S.A., owned by BTG
Pactual Brazil Infrastructure Fund II (45.85%), Patria Investments
(45.85%), and GMR Holding B.V. (8.30%). ILAP owns 100% of the
ownership interest in two wind power generation assets in Chile,
"San Juan" and "Totoral", which have achieved full commercial
operating date on March 2017 and January 2010, respectively, and
have a combined installed capacity of 239.2 megawatt ("MW") North
of Santiago.
The principal methodology used in this rating was Power Generation
Projects Methodology published in January 2022.
VTR FINANCE: S&P Downgrades ICR to 'B', Outlook Negative
--------------------------------------------------------
On Dec. 6, 2022, S&P Global Ratings lowered its issuer credit
rating on VTR Finance N.V. (VTR) to 'B' from 'B+', issue-level
rating on its senior notes to 'B-' from 'B', and issue-level rating
on VTR Comunicaciones SpA's senior secured bonds to 'B' from 'B+'.
The negative outlook on VTR reflects our expectation of
persistently very high leverage and cash-flow deficits, along with
a potentially additional downgrade in the next six months if
operating weakness persists and S&P doesn't have clarity on the
JV's business plan and potential shareholder support to it, and
ultimately, to VTR and Claro.
As of September 2022, S&P Global Ratings-adjusted EBITDA margin for
the company declined to 24% for the last 12 months from 29.9% in
December 2021 and 38.6% in December 2020. This was primary due to
elevated churn of pay-TV and broadband subscribers, stemming from
intense competition from other Chilean operators with better
network and from VTR's customer services-related issues. In
response, the company increased commercial and promotional efforts
to regain higher-end customers lost during the pandemic. However,
this took a toll on average revenue per user (ARPUs), which coupled
with increased network costs, hit margins. S&P said, "We expect
intense operating pressures and competition to persist, which along
with Chile's sluggish economy could pose additional challenges for
VTR's churn rates and margins to recover. We forecast VTR's revenue
to decrease 13.2% in fiscal 2022 (versus a 3.7% drop in our
previous forecast), 6% in 2023, and flat in 2024. We also project
EBITDA margin to remain below 30%, despite synergies from the JV,
which pushes up leverage to 9x-10x for the forecast period."
For the nine months ended September 2022, Claro Chile's revenue
contracted 9% due to lower ARPUs and equipment sales, while EBITDA
margin dropped 15% from a historical level of 20%. S&P said, "We
view potential benefits stemming from combining the two brands in
the JV's ability to offer attractive bundle offers in a
cost-effective manner. For instance, JV would have a greater share
of the Chilean broadband and mobile telecoms markets with a wider
array of services. Pro forma based upon information as of June
2022, the JV will have the leading position in fixed broadband and
pay-TV segments with 37% and 40% of market share, respectively. In
the mobile business, the combined operations will become the
third-largest operator with 22% of market share. In addition, the
JV would yield run-rate synergies estimated at about $180 million,
the bulk of which is likely to occur by the end of 2025 mainly from
cost efficiencies and cross-selling of services. However, we
believe that the combined company could struggle to achieve
meaningful revenue synergies, given that both VTR and Claro Chile
have been losing subscribers in the past few quarters, as rivals
compete aggressively in technology and customer services."
S&P said, "We believe that the JV lags behind domestic peers in
terms of network. We believe that it will need considerable
investments to deploy 5G and fiber broadband to improve network
quality and customer services to meet future customer demand. We
expect the JV's leverage to remain at 7x-8x, while sizable capital
expenditures (capex) for network build-up and upgrades to defend
customer base will likely keep free operating cash flows (FOCF)
negative.
"We believe there's commitment from the JV's shareholders to
maintain its leading market share and address recent business
trends. We also believe that clarity on the JV's business plan and
strategy to restore brand reputation, resume revenue growth,
improve margins, finance investments, and lower leverage is
paramount. This is because we expect VTR's credit profile to
benefit from a stronger combined group credit profile and potential
support."
ESG Indicators: E-2, S-2, G-2.
===================================
D O M I N I C A N R E P U B L I C
===================================
[*] DOMINICAN REPUBLIC: To Invest DOP250M to Promote Caballeros
---------------------------------------------------------------
Dominican Today reports that the Minister of Tourism, David
Collado, disclosed that in 2023 they will allocate 250 million
pesos to promote the city of Santiago de los Caballeros
internationally as a tourist destination. The information was
released at a working meeting between the official and the Santiago
Tourist Destination Cluster, led by communicators Ramón Paulino
and Yomaris Gomez and which took place at the Hodelpa Gran
Almirante Hotel & Casino, according to Dominican Today.
Ten million will be destined to design the Santiago city brand
requested by the Tourism Cluster, and another 40 million will be
dedicated to the promotion and support of cultural activities that
take place in the Historic Center, typical of the entities that
have to do with the organization of this type of event, support for
the carnival, the Son de Keka, which takes place in the populous
sector of Los Pepines, and others, the report notes. The remaining
200 million will be dedicated to the renovation of areas located in
the Historic Center of the city, the report relays.
Next year, 2023, Santiago de los Caballeros will be presented as a
tourist destination at the ANATO Fair, in Bogotá, which will be
dedicated to the Dominican Republic and will be held from February
22 to 24, reported Collado, ther eport discloses. The Minister of
Tourism announced that the fifth he will sign a work and
inter-institutional collaboration agreement with the Santiago
Tourist Destination Cluster in Santiago, the report relays. During
the activity, the tourist attractions of the city of Santiago were
presented: the León Center, the Santiago Apostol Cathedral, the
Monument to the Heroes of the Restoration, the route of the murals,
the Santiago City Tour, museums, and buildings, 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. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To 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.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.  The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.  S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.  A rapid
economic recovery from the downturn because of the pandemic should
mitigate external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
===========
M E X I C O
===========
ASARCO LLC: Court Maintains Stay Until EPA's Remediation Plan
-------------------------------------------------------------
District Judge David Barlow denies Asarco, LLC's motion to lift
stay filed in the case styled ASARCO, LLC, a Delaware limited
liability company, Plaintiff, v. NORANDA MINING, INC., a Delaware
corporation, Defendant, Case No. 2:12-cv-00527-DBB, (D. Utah).
The Court previously granted Noranda Mining, Inc.'s motion for a
stay on July 11, 2017. In its 2017 order, the Court reasoned that
a stay would "promote judicial economy because the EPA, not the
court, is the proper agency to assess the correct cleanup plan;"
"avoid confusion and potentially inconsistent results if the EPA
selected a different cleanup plan than the one determined by the
experts;" and "cause minimal prejudice or undue hardship." The
Court decreed that the stay would be lifted after the EPA approved
a remediation plan for the Lower Silver Creek site.
The Court's 2017 order also reasoned that whether Asarco had "paid
more than its fair share" depended on the EPA's final cleanup plan
-- concluding that the EPA must approve a cleanup plan before it
could accurately allocate fault. The EPA has not yet done so.
Instead of waiting until the EPA determined the amount of pollution
and what parties are responsible, Asarco settled with the EPA due
to its bankruptcy. Asarco now seeks contribution from Noranda
for anticipated response actions in the future. Under the law,
Asarco was permitted to seek the protection of bankruptcy, but it
then faced a statute of limitations for filing a contribution
claim, so it filed its claim long before EPA, the subject matter
expert, had done the work that would allow the parties and the
court the benefit of an accurate fact record. Asarco's actions
alone baked in
the likelihood that this action would take years longer than
usual.
Then the party who had assumed responsibility for the cleanup
(United Park) failed, adding years more. And, of course,
COVID-19
has delayed nearly everything and everyone, including EPA,
occasioning further delay.
After five years, Asarco now moves the Court to lift the stay.
Asarco asserts that one does not need to consider future
remediation to make a prima facie case for a CERCLA contribution
claim. Asarco makes two related arguments. First, it contends
that the claim against Noranda is justiciable even with unknown
costs because the court can issue a declaratory judgment for
Asarco's and Noranda's proportional liability. Second, it
dismisses as speculative Noranda's concern that the remediation
plan may be inconsistent with the National Contingency Plan because
there is purportedly a presumption that the cleanup actions are
consistent with the NCP.
For its part, Noranda argues that until the EPA approves a
remediation plan, Asarco cannot establish: (a) that funds spent on
cleanup are consistent with the NCP because the court cannot
"simply assume. . . given that the EPA has not finalized a cleanup
plan;" and accurately determine whether Asarco has "paid more than
its fair share." According to Noranda, without a final cleanup
plan, "it is impossible to determine whether Asarco's liability
requires apportionment of any orphan share attributable to United
Park's historical mining operations."
The Court defers to the EPA's expertise. The EPA has not yet
published its Site Characterization Report, EE/CA, or action
memorandum -- these documents would provide the parties and the
Court with a more accurate picture of environmental conditions at
the Lower Silver Creek site and consequently party liability. Thus,
until the EPA releases the EE/CA and remediation plan, the Court
and the Parties' experts have incomplete (and very likely
inaccurate) data.
Currently, the Court lacks key information that would help it make
an accurate decision. Should the Court proceed to summary trial
before the EPA completes its investigation, there is the potential
for duplicative efforts if the data changes the liability analysis,
whether by revealing additional PRPs or changing the balance
between Asarco and Noranda. The Court believes that waiting for the
EPA's remediation plan -- particularly the EE/CA -- will promote
judicial economy, avoid inconsistent results, and help the Court
make a more informed and accurate determination of liability.
Hence, the Court finds that the balance of factors weighs in favor
of maintaining the stay. The Court believes that the EPA's EE/CA
and action memorandum will better inform the Court's liability
apportionment decision -- it will be able to accurately determine
liability for Potentially Responsible Parties because the EPA's
findings will illuminate the quantity and extent of environmental
damage. The EPA's reports will also help the Court determine
whether Asarco has paid its fair share. Otherwise, Noranda may be
liable initially for a significant percentage of site cleanup and
then potentially stand relieved of that liability when the EPA
concludes its studies.
Asarco also contends that the five-year stay has become "immoderate
and hence unlawful" because the EPA has made no significant
progress in approving a remediation plan. Asarco further argues
that the Court's prediction that the EPA would soon promulgate a
plan has not materialized and thus the stay has "the impermissible
legal effect of preventing Asarco from proceeding with its claim in
federal court for an indefinite period of time, potentially for
years."
In response, Noranda contends that the Court can maintain a stay
"as long as it identifies a pressing need for the stay and then
balances the interests favoring a stay against interests frustrated
by the action." Noranda argues that the stay is necessary to
preserve judicial resources and to prevent confusion and
inconsistent results should the EPA use a cleanup plan different
from the one proposed by experts. Finally, Noranda contends that it
is reasonable for the Court to maintain the stay because the EPA
has made progress in the remediation plan and the court should
defer to the agency's expertise.
As the Court previously stated, "forecasting allocation of
liability before a formal Record of Decision may turn out to be
inaccurate and a waste of resources." As a result, the Court
ordered a stay until the EPA completed its studies and created a
remediation plan. The need for the EPA to provide more information
has not vanished simply because five years has elapsed. Part of the
delay is also attributable to the COVID-19 pandemic, something
which was unforeseen. The Court reasons that continuing the stay
here will prevent an inaccurate decision as to the liability
apportionment, help avoid piecemeal litigation, and provide needed
development of the record by EPA.
Contrary to Asarco's claims, the Court has not "nullified Asarco's
rights of contribution," nor has the Court "prohibited Asarco from
exercising its . . . right to seek contribution." Indeed, the stay
has not barred Asarco from seeking contribution. The Court has
merely delayed the case until the parties can efficiently litigate
their claims so that the Court can accurately determine liability.
The Court will settle Asarco's contribution claim against Noranda
once it lifts the stay.
Finally, the Court has not denied Asarco due process. Asarco has
already brought its contribution action before the Court -- Asarco
has not identified any case law to support the proposition that a
stay in a CERCLA contribution case is "tantamount to the denial of
due process." Additionally, the Court's postponement of a liability
determination does not cause Asarco undue hardship -- Asarco has
already declared bankruptcy and settled with the EPA for its
liability at the Lower Silver Creek site for a fixed sum.
A full-text copy of the Memorandum Decision and Order dated Nov.
23, 2022, is available at https://tinyurl.com/5a57sd6y from
Leagle.com.
About Asarco LLC
Based in Tucson, Arizona, ASARCO LLC -- http://www.asarco.com/ --
is an integrated copper mining, smelting and refining company.
Grupo Mexico S.A. de C.V. is ASARCO's ultimate parent.
ASARCO LLC filed for Chapter 11 protection (Bankr. S.D. Tex. Case
No. 05-21207) on Aug. 9, 2005. Attorneys at Baker Botts L.L.P.,
and Jordan, Hyden, Womble & Culbreth, P.C. represented the Debtor
in its restructuring efforts.
On Dec. 9, 2009, Asarco Incorporated and Americas Mining
Corporation's Seventh Amended Plan of Reorganization for the
Debtors became effective and the ASARCO Asbestos Personal Injury
Settlement Trust was created and funded with nearly $1 billion in
assets, including more than $650 million in cash plus a $280
million secured note from Reorganized ASARCO. The Plan, which
was
confirmed both by the bankruptcy and district courts, reintegrated
ASARCO LLC back to parent Grupo Mexico concluding the four-year
Chapter 11 proceeding.
OPERADORA DE SERVICIOS MEGA: S&P Affirms 'B' ICR, Outlook Negative
------------------------------------------------------------------
S&P Global Ratings affirmed its long-term 'B' global scale issuer
credit rating on Operadora de Servicios Mega S.A. de C.V. SOFOM
E.R. (GFMega). S&P also affirmed the 'mxBB+/mxB' national scale
ratings. Finally, S&P affirmed its 'B' issue-level rating on the
company's senior unsecured notes. The outlook on the long-term
ratings remains negative.
On Dec. 1, Mexican nonbank financial institution (NBFI) GFMega made
a tender offer to repurchase up to $100 million of its outstanding
$365 million senior unsecured bond due 2025. This debt repurchase
would be below par, but 25% above market prices.
The company offered to buy back the 2025 bond at 50 cents on the
dollar--this is 25% above current market prices. S&P understands
that investors who don't accept the offer will maintain the right
to receive the full payment amount at the bond's maturity date. S&P
considers the transaction an opportunistic debt restructuring that
corresponds to a liability management operation. The company will
fund this transaction with existing credit facilities with Mexican
commercial banks.
The company continues to collect up to MXN1.2 billion quarterly. As
long as these collection levels remain stable, they could provide
sufficient inflows to pay near-term financial needs. In addition,
GFMega has MXN1.5 billion available in its approved credit lines
with Mexican and international credit facilities and is working on
expanding these lines and obtaining new ones. S&P said, "Moreover,
we think that if needed, GFMega has additional liquidity sources
that include secured funding, considering that only about 15% of
its assets are pledged. We expect the company to use its available
assets to obtain new secured funding sources, at least while the
tightening financing conditions and investors' general risk-averse
mood toward Mexican NBFIs remains." As of September 2022, GFMega's
funding is still concentrated in its international unsecured bond
due in 2025 that accounts for 46% of the funding base. The domestic
unsecured green bond accounts for 19% of the base, and the
remaining 34% comes from facilities with several national and
international credit institutions.
The company has been proactive in refinancing the 2025 bond by
reducing the principal through open market buybacks and now through
the proposed tender offer. S&P said, "However, we believe that the
refinancing challenge for 2025 remains. Therefore, we will continue
closely monitoring the company's liquidity management and
refinancing plans amid tightening financing conditions and low
investor appetite for the sector. If any of our abovementioned
assumptions change in upcoming months, we could revise our
liquidity assessment to a weaker category, and consequently lower
our ratings on GFMega."
S&P believed that the higher funding costs--due to tightening
financing conditions and lower investor appetite for the
sector--that GFMega will face will pressure its margins. In
addition, although total loans grew about 25% in the past 12
months, the lender's interest income didn't grow. In S&P's opinion,
if GFMega's bottom-line results keep eroding (its profitability
already compares unfavorably with those of peers in the Mexican
leasing industry), pressures on its payment capacity will
increase.
=====================
P U E R T O R I C O
=====================
WILMER TACORONTE ORTIZ: Court Denies Sec. 363 Sale of Property
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Puerto Rico denies
Wilmer Tacoronte Ortiz's (a) motion to sell real and personal
property at private sale under 11 U.S.C Section 363 free and clear
of liens and (b) request for post-confirmation modification of the
joint chapter 11 plan. Moreover, the Court grants OSP
Consortium
LLC's motion requesting the entry of order for the transfer of
properties E and F.
At the outset, the Court notes that all three matters are related
to a Joint Stipulation approved by the Court in this case on Aug.
30, 2021. The Stipulation was executed by OSP and Tacoronte,
along with the Debtor Hotel Cupido Inc. in case 19-03799 (MAG11)
and consolidated Debtors Remliw Inc. and Monte Idilio, Inc. in case
19-01179 (MAG11) and filed in all three cases, which were jointly
administered at the time. The joint chapter 11 plan filed by all
the Debtors in all three cases and confirmed on Jan. 12, 2022
provides that OSP's claim will be paid pursuant to the terms of the
Stipulation.
Pursuant to the terms of the Stipulation, the Debtors, jointly
(including Tacoronte), agreed to pay the reduced amount of $1.4
million in cash to OSP within 12 months of the entry of the order
approving the Stipulation. The Stipulation called for monthly
payments to be made by the Debtors and payments to be made from the
sale of real estate properties and from insurance claim proceeds.
Upon payment of the $1.4 million, OSP agreed under the Stipulation
to release the Debtors and cancel the liens over their properties.
On Aug. 22, 2022, Tacoronte moved the Court to sell free and clear
of liens under 11 U.S.C. Section 363(f) Property C located in
Aguadilla, Puerto Rico. Tacoronte explains that he seeks to
preserve and maximize the value of his operations by selling
Property C to Mr. Jose Acevedo Tacoronte and that the sale is a
sound business decision which is in the best interest of the estate
and its creditors. Tacoronte proposes to sell the property for a
total amount of $736,295, which if approved, would be paid by
Acevedo in cash. Upon the sale, $600,000 would be paid to OSP,
while the remaining $136,295 would be paid to CRIM for accrued
property taxes. Tacoronte further asserts that the remaining
balance of the stipulated payment of $1.4 million can be covered
with the sale of Property E. The motion for sale provides that the
closing date will be within 30 days after the Court's approval of
the sale or on such other date and time as may be agreed between
Tacoronte and the buyer in writing.
OSP opposes the sale of Property C, arguing that it is at odds with
the terms of the Stipulation, which are clear, unambiguous, and
carry res judicata effect. OSP asserts that the Debtors are in
default with the Stipulation and the proposed sale and the
resulting payment to OSP of $600,000 falls short of the balance
owed on the stipulated $1.4 million by $168,111. OSP further argues
that at this juncture the Court may not authorize a Section 363(f)
sale free and clear of liens because such section provides the
mechanism to sell property of the estate and upon the confirmation
of the joint plan -- which in this case, there is no estate,
property of the estate, or a debtor-in-possession.
The Court agrees with OSP that a sale under 11 U.S.C. Section
363(f) is inapplicable at this juncture. Undoubtedly, when the
Stipulation was executed on Aug. 4, 2021, it allowed sales free and
clear of liens because it was filed prior to the confirmation of
the joint plan in all three bankruptcy cases. However, after
confirmation of the joint plan on Jan. 14, 2022, all property of
the estate vested in the Debtors under 11 U.S.C. Section 1141(b).
More importantly, as argued by OSP, the Court finds that
Tacoronte's motion for sale contravenes with the terms of the
Stipulation for the treatment of OSP's claims -- to which the
Debtors agreed to be bound and which were incorporated into
Tacoronte's confirmed plan -- because it purports to extend the
deadline for the payment.
While Tacoronte correctly states that the motion for sale was filed
prior to the Aug. 30, 2022 deadline to complete the payment of $1.4
million, the Court finds, however, that the motion for sale
includes a closing date past the Aug. 30, 2022 payout deadline.
Furthermore, the Court points out that Tacoronte would still be in
default of the Stipulation upon the sale of Property C because it
would only allow payment to OSP of $600,000 of the $768,111 owed to
complete the $1.4 million obligation.
Tacoronte invokes the doctrine of rebus sic stantibus. However,
rebus sic stantibus may only be applied under extraordinary
circumstances. Termination of a contract under rebus sic stantibus
is not appropriate if the ensuing hardship is part of the normal
risks related to the contract. Tacoronte argues that he's been
acting in good faith, that OSP knew the difficulties motel
businesses face in today's economy, and that the motion for sale
was filed prior to the expiration of the stipulated deadline. The
Court finds that Tacoronte fails to allege, in any form, the
exceptional circumstances that warrant the application of the
doctrine or how the requirements of the rebus sic stantibus
doctrine are met in this case.
Meanwhile, OSP moves the Court for the entry of an order for the
transfer of Properties E and F free and clear of any and all
pre-transfer date liens, claims, interests, liabilities, and
contractual commitments of any kind or nature. OSP argues that
pursuant to the terms of the Stipulation and upon the Debtors'
default, Tacoronte is required to transfer these two properties and
requests that the Court issue an order transferring title and a
writ of cancellation of liens.
Tacoronte opposes OSP's motion, arguing that the transfer does not
serve the best interest of the estate, which would be better served
by the sale to a third party. Furthermore, he states that if the
transfer is approved by the court, it must be done under 11 U.S.C.
Section 363 and that the transferee must pay accrued property taxes
and notarial fees.
The Court finds that the transfer sought by OSP is under the terms
of the Debtors' joint chapter 11 plan that incorporated the terms
of the Stipulation. As a result, the Court grants OSP's motion
requesting entry of order for the transfer of Properties E and F.
Tacoronte also filed a post-confirmation modification, so that the
Court will permit the proposed sale of Property C for the partial
payment of OSP's claim. Tacoronte again proposes to pay OSP $600,00
in cash the day of the sale of Property C. He also proposes to pay
OSP the remaining balance of $168,111 by either selling Property E
to a third party, or in the alternative, transferring it to OSP.
OSP objects to the post-confirmation modification, arguing that the
limited scope for post-confirmation modifications in chapter 11
individual cases allowed by 11 U.S.C. Section 1127(e) does not
permit the type of modification proposed by Tacoronte.
The Court agrees with OSP that the modification sought by Tacoronte
goes further than 11 U.S.C. Section 1127(e) allows because it is a
modification of the total amount of OSP's claim. Per the confirmed
joint plan, which incorporates the terms of the Stipulation, the
Debtors had until Aug. 30, 2022 to pay jointly $1.4 million in
cash. Upon failure to comply with the $1.4 million payment by the
due date, the Debtors' obligations reverted to their original state
under the loan documents and their debt to OSP is no longer the
stipulated $1.4 million. The Court finds Tacoronte's
post-confirmation modification as an attempt at circumventing the
terms and conditions of the Stipulation by disregarding its default
provisions and extending the deadline for the payment of $1.4
million, which is no longer applicable. Therefore, the Court denies
Tacoronte's post-confirmation modification.
A full-text copy of the Opinion and Order dated Nov. 23, 2022, is
available at https://tinyurl.com/2p98xx7s from Leagle.com.
About Wilmer Tacoronte Ortiz
Wilmer Tacoronte Ortiz sought Chapter 11 protection (Bankr. D. P.R.
Case No. 19-01178) on March 2, 2019. The Debtor tapped Damaris
Quinones Vargas, Esq. at Bufete Quinonez Vargas & Assoc. as
counsel.
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U R U G U A Y
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URUGUAY: IDB OKs $30M Loan to Strengthen STEM Skills of Students
----------------------------------------------------------------
The Inter-American Development Bank (IDB) approved a $30 million
loan for Uruguay that will support Ceibal's work to reduce gender
and socioeconomic gaps in skills related to science, technology,
engineering, and mathematics (STEM).
The "Generation D: developing digital skills with equity in the
knowledge era" program aims to expand access to teaching resources
and improve teaching work with the integration of technology and
innovation and reduce gaps in access to computational thinking in
primary education.
The loan will allocate funds to bring Ceibal's Computational
Thinking Program to groups from the fourth to the sixth level of
primary education in urban schools through videoconferences. The
initiative will also renew the computers for basic secondary
education students to adapt them to the needs of that cycle.
In addition, the loan will finance new teacher training courses in
the area of innovation in teaching with technology and will
strengthen the "Global Learning Network" and the Ceilab Program
(Espacio Makers).
Finally, the efforts will include the development of an instrument
to improve the measurement of the computational thinking skills of
Uruguayan students.
Studies show that early exposure to computational thinking is
associated with higher development of girls and other
underrepresented groups in STEM fields, higher enrollment rates in
higher education, access to higher wages, and likelihood to be
employed.
In the last decade, the IDB has accompanied the Uruguayan education
sector with various operations, and this program constitutes the
third loan for Ceibal. The US$30 million financing has a 25-year
repayment term and a 5.5-year grace period.
*********
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