/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230126.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, January 26, 2023, Vol. 24, No. 20 Headlines A R G E N T I N A ARGENTINA: US$1-Bllion Bond Buyback Baffles Investors B E R M U D A FTX GROUP: Says Hackers Stole $415 Million in Crypto B R A Z I L AMERICANAS SA: Crash Deepens as BTG Cites Fraud in Legal Battle BANCO FIBRA: Fitch Affirms LongTerm IDRs at 'B+', Outlook Stable BRAZIL: IDB OKs $260MM to Improve Urban Management and Housing EMBRAER SA: Fitch Affirms LongTerm IDRs at 'BB+', Outlook Stable MV24 CAPITAL: Fitch Alters Outlook on 'BB+' Rating to Stable C H I L E INVERSIONES LATIN AMERICA: S&P Cuts ICR to 'B-', On Watch Negative D O M I N I C A N R E P U B L I C [*] DOMINICAN REPUBLIC: Pena Cites 3 Lessons for Sustainable Growth P A N A M A MULTIBANK INC: Moody's Rates New Senior Unsecured Notes 'Ba1' T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: Beckles Seeks IDB Help for Country's Roads - - - - - ================= A R G E N T I N A ================= ARGENTINA: US$1-Bllion Bond Buyback Baffles Investors ----------------------------------------------------- Scott Squires at Bloomberg News reports that Argentina's plan to repurchase US$1 billion of its deeply distressed dollar bonds has emerging-market investors scratching their heads. Economy Minister Sergio Massa announced the plan to buy back securities maturing in 2029 and 2030 trading at 30-some cents on the dollar, according to Bloomberg News. The notes jumped to their highest prices in more than a year after Massa spoke, extending a rally that had already produced 60 percent returns for investors since October, Bloomberg News relays. While repurchasing the bonds at a fraction of their face value could ultimately save the country hundreds of millions of dollars in interest and principal payments, investors point out that the government doesn't have very much room in Central Bank coffers to fund such a lavish buyback. Argentina's long-standing financial woes are, of course, partly why the bonds were so cheap in the first place, Bloomberg News notes. The plan makes so little sense that the market gains may be short lived once investors sort through the details, according to Pablo Waldman, a senior strategist at Inviu in Buenos Aires, Bloomberg News discloses. "There are very limited resources, and this is a very risky way of deploying them," Waldman said. "If they don't follow through with other measures, the very limited scope of this plan likely won't cause bonds to rally further," he added. Argentina's US$16.1 billion in dollar bonds due 2030 pared gains, slipping 0.9 cent to about 34.6 cents on the dollar, as of 1.24pm in Buenos Aires. The announcement is all the more perplexing because while Central Bank reserves have climbed in recent months, net reserves are still dangerously low at just over US$6 billion, according to local brokerage Portfolio Personal Inversiones, Bloomberg News discloses. The nation is under pressure to bolster those reserves to comply with targets laid out in its US$44-billion program with the International Monetary Fund, and it's facing a severe drought that looks set to sap export dollars from flowing into the Central Bank later this year,Bloomberg News relays. While the Economy Ministry provided few details on the plan, officials are said to be planning to use dollars held by the Treasury to fund the buyback, Bloomberg News notes. Some of the money comes from expectations for lower energy imports in 2023, Bloomberg News recalls. The Economy Ministry declined to comment. Some investors are speculating that the buyback plan may be an attempt by the government to appear market friendly ahead of elections in October, Bloomberg News says. Others guess it could be the first step of a convoluted process to help prop up the peso in unofficial foreign-exchange markets, Bloomberg News relays. Alejo Costa, chief Argentina strategist at BTG Pactual in Buenos Aires, said he thinks it's most likely a ploy by officials to support the peso, but he doesn't rule out more purely political motivations, Bloomberg News notes. "The government may think they're improving market sentiment," Costa said. "All Massa knows is politics and rhetoric, and he may believe this rhetoric improves the context ahead of the elections this year," Bloomberg News discloses. A senior Economy Ministry official said the plan seeks to reduce the gap between Argentina's official and parallel exchange rates, Bloomberg News says. Argentina's parallel exchange rate, known locally as the blue-chip swap, weakened to a record 363 pesos per dollar earlier, Bloomberg News relates. Argentina's official exchange rate, held steady by capital controls, weakened 0.2 percent to around 183 pesos per dollar, Bloomberg News notes. Regardless of Argentina's motive, investors say the buyback would have been more beneficial to the government if it had taken place last year, when bond prices were even lower, Bloomberg News relays. "I think they are just shouting out loud just to have something on the front pages of the newspaper," said Joaquin Almeyra, a fixed income trader at Bulltick LLC in Miami. "It would have made more sense to do this months ago," he added. About Argentina Argentina is a country located mostly in the southern half of South America. Its 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. Last March 25, 2022, Argentina finalized agreement with the IMF for a new USD44 billion Extended Funding Facility (EFF) intended to fund USD40 billion in looming repayments of the defunct Stand-By Arrangement (SBA), with an extra USD4 billion in up-front net financing. This has averted the risk of a default to the IMF and is facilitating a parallel rescheduling of Paris Club debt. S&P Global Ratings, on Jan. 20, 2023, affirmed its 'CCC+/C' foreign currency and 'CCC-/C' local currency sovereign credit ratings on Argentina. The outlook on the long-term ratings remains negative. S&P's 'CCC+' transfer and convertibility assessment is unchanged. The negative outlook on the long-term ratings reflects risks surrounding pronounced economic imbalances and policy uncertainties before and after the 2023 national elections. Global capital markets are closed to Argentina. Moreover, disagreement within the government coalition and infighting among the opposition constrains the sovereign's ability to implement timely changes in economic policy. Fitch Ratings, on the other hand, downgraded in October 2022 Argentina's Long-Term Foreign-Currency (FC) and Local-Currency (LC) Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade reflects deep macroeconomic imbalances and a highly constrained external liquidity position, which Fitch expects to increasingly undermine repayment capacity as foreign-currency debt service ramps up in the coming years. Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and Long-Term Local Currency Issuer Rating at CCC (high) on July 21, 2022. ============= B E R M U D A ============= FTX GROUP: Says Hackers Stole $415 Million in Crypto ---------------------------------------------------- RJR News reports that approximately $415 million of crypto has been stolen from FTX by hackers. CEO of FTX says about $323 million was hacked from its international exchange and $90 million from its US platform since the firm filed for bankruptcy, according to RJR News. It is alleged that co-founder Sam Bankman-Fried stole billions of dollars to settle outstanding debts at his other firm, the report notes. He pleaded not guilty to fraud charges, the report adds. About FTX Group FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests. Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations. At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 million in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10 showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent, maintaining the page https://cases.ra.kroll.com/FTX/Home-Index The Official Committee of Unsecured Creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the Committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. =========== B R A Z I L =========== AMERICANAS SA: Crash Deepens as BTG Cites Fraud in Legal Battle --------------------------------------------------------------- globalinsolvency.com, citing Bloomberg, reports that Americanas SA shares sank further after the Brazilian retailer, whose main backers include billionaire Jorge Paulo Lemann, obtained a decision that paves the way for a potential bankruptcy filing, sparking a legal reaction from creditors that accuse the company of fraud. The Rio de Janeiro-based firm said a local court granted it protection against early debt maturity and asset-seizure for a 30-day period, after which Americanas could file for bankruptcy protection, according to globalinsolvency.com. The decision follows the surprise departure of the firm's chief executive and financial officers due to "accounting inconsistencies" estimated at around 20 billion reais ($3.9 billion) tied to supply finance operations, the report relays. These inconsistencies will require adjustments that could impact the company's past balance sheets and possibly breach covenants that could lead to early debt maturity of nearly 40 billion reais, the court decision reads, the report notes. Americanas also told the court that some creditors moved to request some of its assets be frozen, including over 1.2 billion reais by Banco BTG Pactual SA. BTG went to court trying to revert the decision and accused the company of fraud, according to a document obtained by Bloomberg, the report relays. The judge denied the request, citing no urgency for the matter. BTG is planning to go to court again, according to people familiar with the matter, the report says. As reported in the Troubled Company Reporter-Latin America on Jan. 24, 2023, Fitch Ratings has downgraded Americanas S.A.'s (Americana) Long-Term Foreign Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs) to 'D' from 'C', its Long-Term National Scale Rating to 'D(bra)' from 'C(bra)', as well as the rating of its unsecured debentures to 'D(bra)' from 'C(bra)'. Fitch has also affirmed the rating of the senior unsecured global notes issued by its wholly owned subsidiaries JSM Global S.a.r.l. and B2W Digital Lux S.a.r.l. at 'C', revising the recovery rating to 'RR5' from 'RR4'. BANCO FIBRA: Fitch Affirms LongTerm IDRs at 'B+', Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Banco Fibra S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B+'. The Rating Outlook on the IDRs has been revised to Stable from Negative. In addition, Fitch has affirmed the bank's National Long-Term Rating at 'BBB+(bra)'/Outlook Stable. The Outlook revision on the IDRs reflects Fitch's improved assessment of the operating environment (OE) for Brazilian banks. This reflects the Brazilian economy's better-than-expected performance, improving trends on Brazil's GDP per capita of USD8.937, Fitch's Operational Risk Index of 41 (percentile rank), and Brazil's sovereign rating affirmation at 'BB-'/Stable in December 2022. Consequently, Fitch believes that downside risks to Fibra's asset quality and capitalization have receded. KEY RATING DRIVERS Viability Rating: Fibra's IDRs and National Ratings are driven by its intrinsic strength, as reflected in its 'b+' Viability Rating (VR). The VR reflects Fibra's improved risk profile since its retail portfolio run-off. This has supported continuous progress on the execution of its restructuring plan and has led to notable improvements in asset quality in the last four years. However, the ratings also reflect Fibra's modest core operating profitability, which is at the low end for the rating category. Also, the bank's capitalization has been pressured over the past several years but capital injections to enable further credit growth are expected to mitigate Fitch's concerns, as has the improved operating environment of Brazil. Good Asset Quality: Fibra's conservative underwriting standards are in line with standard industry practices. Since dropping its retail segment, the bank has adopted a more conservative underwriting standard, with a focused client target market approach and mainly offering structured credit products with some kind of guarantee. This approach proved to be beneficial, resulting in a steady improvement in asset quality. The bank is focused on structured loans with collateral (guarantees or receivables) and plays within its strengths. Risks and reporting tools are adequate, and risk limits are well-monitored. Fibra's Net Loan Portfolio decreased to BRL5.2 billion at the end of June 2022 from BRL5.7 at the end of December 2021, (a 7% decline). Asset quality compares favorably against peers, with an Impaired Loans to Gross Loans ratio of 1.7% at June 30, 2022. The Loan Loss Reserves/Impaired loans ratio was at a comfortable 146% at June 30, 2022. Fitch believes the bank is in an adequate position to absorb credit deterioration. Business Profile Stabilization: Fibra's business profile is focused on structured loans with receivables as guarantees and benefits from synergies with the group by providing loan operations with suppliers, especially the suppliers of Compania Siderurgica Nacional (CSN). The bank's main focus are corporates with over BRL300 million in revenue, SMEs and agrobusiness, which provided the bank with some stability during the pandemic. The bank's business model reflects its relatively small size, modest profitability and limited client base and product offerings relative to its peers. Earnings and Profitability Remain Low: Fibra's core banking earnings have improved over the past three years (2018, 2019 and 2020) due to growing business volumes and on reduced loan impairment charges. However, profitability still falls short compared to peers, due to less diversified revenue sources and comparatively weaker cost efficiency. In 2021 and first half of 2022, operating results remained near breakeven and net income was aided by non-recurring income. Over the near term, continued momentum in client growth will be important to support 2022 earnings, although Fitch anticipates that underlying profitability will remain modest. Improved Capital Ratios: In terms of capitalization, Fibra's CET1 ratio improved to 10.2% at June 2022 from 9.0% at December 2021. Funding and Liquidity Remains Stable: Fibra largely funds its loan book through wholesale deposits and financial bills (Letras Financeiras) distributed through a series of partner brokerages. As a result of recent funding expansion and a slight decrease in credit, the loan to customer deposits ratio fell to 71.6% at June 30, 2022 from 81.1% at YE December 2021 and 108% at December 2020. Liquidity remains adequate compared with short-term needs. Government Support Rating (GSR): Fibra's GSR reflects Fitch's view that the bank cannot rely on receiving extraordinary support from the sovereign. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: VR/IDR/GSR - A sustained reduction in the bank's CET 1 ratio below 9%, either due to rapid credit growth or weak internal capital generation. - A substantial deterioration of the bank's asset quality and earnings driven by a significant change in long-term strategy. - Sustained operating losses over the medium-term. NATIONAL RATINGS - National Ratings are sensitive to a weakening creditworthiness relative to other Brazilian issuers. Factors that could, individually or collectively, lead to positive rating action/upgrade: VR/IDR/GSR - A potential upgrade of Fibra's GSR is unlikely for the foreseeable future, as this would only arise from a material gain in the bank's systemic importance. - Over the medium term, a sustained improvement in the bank's Operating Profit/RWA ratio above 2.5% and CET1 ratio above 12% combined with the maintenance of current asset quality metrics would be positive for creditworthiness. NATIONAL RATINGS - National Ratings are sensitive to strengthening creditworthiness relative to other Brazilian issuers. VR ADJUSTMENTS The VR has been assigned in line with the implied VR. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance 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 the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Banco Fibra S.A. LT IDR B+ Affirmed B+ ST IDR B Affirmed B LC LT IDR B+ Affirmed B+ LC ST IDR B Affirmed B Natl LT BBB+(bra)Affirmed BBB+(bra) Natl ST F2(bra) Affirmed F2(bra) Viability b+ Affirmed b+ Government Support ns Affirmed ns BRAZIL: IDB OKs $260MM to Improve Urban Management and Housing -------------------------------------------------------------- The Inter-American Development Bank (IDB) approved a $260 million loan to Brazil to improve housing in vulnerable neighborhoods of Recife. The city is the country's ninth largest, and also one of its most threatened by climate change because of its geography. The program aims to give low-income communities more access to infrastructure, urban facilities and social services. Another objective of the loan is to mitigate landslides risks on the city's hillsides, as well as flooding danger in areas near the Tejipió, Jiquiá, and Moxoto rivers. To achieve this goal, it will finance integrated urban development and containment works. The program will also build macrodrainage infrastructure and linear parks to serve as buffers against floods. To increase the municipal government's urban planning tools, the program will launch an integrated system for managing urban, housing, and social and environmental data. It will also structure an urban risk monitoring system for the municipality. As the population of Recife has boomed, a lack of urban management tools and scarce affordable housing for low-income groups has led to disorganized and informal urban planning, which this program is designed to help remedy. The loan will benefit low-income residents in vulnerable areas of the city, including 4,000 families living in flood- and landslide-prone areas. These families, 59% of which are headed by women, will be resettled under the program. Vulnerable areas make up an estimated 20% of the total surface area of Recife and 30% of its built-up area. Additionally, 56% of homes in the city have no connection to the sanitary sewer system, and 10% have no drinking water. According to the calculations of the Local Social Housing Plan, the city has a 71,160-home housing deficit. A further 57,329 homes have defective land titles, 13,198 are overcrowded, and 52,408 are located in flood-prone areas. Recife is the Brazilian capital most threatened by sea level rise, according to the Intergovernmental Panel on Climate Change. The IDB loan has a 23.5-year repayment term and a seven-year grace period. 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 was sworn in on January 1, 2023, as the 39th president of Brazil, succeeding Jair Bolsonaro. As recently reported in the Troubled Company Reporter-Latin America, Fitch Ratings, in December 2022, affirmed Brazil's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. The ratings are constrained by high government indebtedness, a rigid fiscal structure, weak economic growth potential, and a record of governability challenges that have hampered efforts to address these fiscal and economic issues and clouded policy predictability. The Stable Outlook reflects Fitch's expectation that growth will slow in the coming year and that recent fiscal improvement will erode under a new government, but within a margin consistent with the current rating, and from a better starting point than previously expected. Uncertainty is elevated regarding the plans of the incoming government and the extent to which these could ease or aggravate fiscal and economic challenges. However, Fitch does not expect policies that jeopardize broad economic stability. Standard & Poor's affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil, and the outlook remains stable (June 2022). The stable outlook reflects S&P's base-case assumption that Brazil will maintain its fiscal anchors over the next two years despite an increasing interest burden, preventing significant fiscal slippage and limiting the rise in its already high debt burden. Moody's credit rating for Brazil was last set at Ba2 in 2018 with stable outlook. Moody's affirmed the Ba2 issuer ratings and senior unsecured bond ratings in April 2022. DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). EMBRAER SA: Fitch Affirms LongTerm IDRs at 'BB+', Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Embraer S.A.'s Long-Term Foreign and Local Currency Issuer Default Rating (IDR) at 'BB+' and its National Scale Rating at 'AAA(bra)'. Fitch has also affirmed the 'BB+' unsecured notes of Embraer Overseas Limited and Embraer Netherlands Finance BV. The Rating Outlooks for the IDRs and National Scale Rating are Stable. Embraer's ratings reflect its competitive positions in the commercial and business jet markets; large backlog (USD18.4 billion) covering several years of sales; and some product portfolio diversification that further includes defense programs and solid operations of its services and support segment. Embraer's robust liquidity profile (mostly held outside Brazil) and its large export revenues combined with some offshore operating cash flow further support its ratings. Fitch forecasts Embraer's consolidated net leverage to remain around 2.5x in the next three years, while it develops its new business segment (Eve Holdings Inc.). Embraer will be challenged to reduce its gross leverage, which is expected to decline to around 5.3x by 2024, as operating cash flow generation improves. KEY RATING DRIVERS Ongoing Backlog and Deliveries Recover: Fitch expects commercial aircraft deliveries for 2022 to be 36% below 2019 levels and 21% and 13% for 2023 and 2024, (close to the company's guidance of 60, 70 and 80 aircrafts deliveries per year), respectively. For business jet deliveries, the rebound has been faster with 6% lower deliveries in 2022 and an increase of 15% in 2023 and of 24% in 2024 (close to the company's guidance of 100, 125 and 135 aircrafts deliveries per year, respectively). During 2022, Embraer and the global aerospace & defense industry as whole, suffered from materials shortages and supply chain constraints, which affected deliveries targets. Fitch expects this scenario to improve throughout 2023, which should support the ongoing rebound in deliveries. Embraer's firm order backlog (commercial aviation) stood at 297 aircraft at the end of 3Q22, up from 281 in 4Q20, but still below 338 in 2019 (pre-pandemic). In terms of financial backlog, it has already surpassed pre-pandemic levels, with USD17.8 billion at the end of 3Q22, amount higher than 2019, and improvement from USD14.4 billion at the end of 2020. In Fitch's view, Embraer's backlog supports production for the next several years but suffers from concentration and quality. Embraer remains working to boost the orders of its E2 aircraft. Strong Market Position: Embraer's strong market position for commercial jets with fewer than 150 seats and within the global executive jets are key factors supporting the expected recovery in the company's backlog in the medium term. Midsize commercial jets producers are expected to continue to have opportunities with mainline or low-cost carriers that are looking to rightsize their fleet to adjust capacity. The weaker financial or business position of few competitors, or in some cases a change in strategy, are allowing growth opportunities for Embraer that are helping the company to see deliveries rebound in 2023/2024. Embraer's high exposure to the U.S. regional/domestic market, which have seen a stronger recover in some markets, are also facing some infrastructure constrains. The performance of those markets is also a key rating consideration and should help to drive commercial aviation deliveries. EBIT Margin Recovering: Embraer's operating performance is expected to improve as deliveries rebound. During 2022, Fitch projects that Embraer's EBIT margins will recover to around 4.6% and will continue to expand in 2023 and 2024 to around 6%, with the likely increase in backlog. During pre-pandemic period as the company was facing pressures as it navigated several new development programs. The lower deliveries in commercial aviation and less favorable mix have affected the company's fixed cost dilution during the 2020-22 period. Strong Working Capital Boost in 2022: Embraer is expected to post strong FCF generation during 2022 but ongoing capex programs and developments at EVE will pressure FCF in the next 2-3 years. The increased operating cash flow generation in 2022 and mostly, an important inflow of working capital (mostly pre-delivery payments), is expected to drive FCF to well above the guidance of USD150 million, per Fitch's estimative. This represents an improvement from the USD1 billion of FCF burn in 2020 and positive FCF of USD239 million in 2021. Fitch estimates consolidated capex is estimated around USD250 million. For 2023 and 2024, FCF is expected to be negative at USD227 million and USD292 million, after capex of USD396 million and USD555 million (including EVE), respectively. For 2022-2024, Fitch's rating case does not currently assume dividend distributions. Net Leverage Trending Down: Fitch forecasts Embraer's net debt/EBITDA to reach 2.4x in 2022, down from 4.3x in 2021, and then to stabilize around 2.3x. This compares with 20.7x in 2020, 4.1x in 2019 and average of 1.0x during the 2015-2017 period. On gross leverage, Embraer's leverage remains high for the rating, rating around 7.9x-5.3x over the next three years. The company's ability to maintain positive FCF generation, to reduce gross leverage, while maintain net leverage consistently below 2.5x during the next years and navigate the development of EVE is key to potential positive rating actions in the medium term. Modest Brazilian Risk: Approximately 90% of Embraer's revenue is generated from exports or from business operations based abroad. Nonetheless, Brazil's economic and political environment is a concern as the majority of Embraer's operating asset base is locally domiciled, and the government represents a large portion of the defense segment backlog. Brazil is listed as a related party in Embraer's SEC filings as a result of the Brazilian government's "golden share" and a direct shareholder stake (approximately 5% of Embraer) via a company controlled by the government. Embraer's recent contract renegotiations with the Federal Government was an item to watch, but Fitch does not expect any major impact to cash flow. Rating Above Country Ceiling: Fitch does not consider Brazil's country ceiling a rating constraint for Embraer currently, given the company's large cash holding outside of Brazil, as well as its heavy focus on exports, stand-by credit facility and growing business outside of Brazil. Based on these factors, under Fitch's criteria, Embraer could be rated up to three notches higher than the Brazilian country ceiling. DERIVATION SUMMARY Embraer is one the market leaders for commercial jets with fewer than 150 seats. Its aircraft are known for their engineering, commonality across models and interior design. The company had 297 firm jet orders in backlog as of Sept. 31, 2022. Embraer's total backlog, including contracts from all segments, was USD17.8 billion at Sept. 30, 2022. Embraer's weaker competitive position compared with major global peers, notably The Boeing Company (BBB-/Stable) and Airbus SE (BBB+/Stable), based on scale and financial strength, is partially offset by its good business position in the niche of commercial jets with fewer than 150 seats, and its manageable financial profile. Embraer's bulk of operations are in Brazil, but its large exports flow, cash balances and operating cash flow abroad are factors supporting its ratings above the country ceiling, as per Fitch`s criteria. KEY ASSUMPTIONS Fitch's Key Assumptions Within the Rating Case for the Issuer - Embraer's commercial deliveries to be close to the company's guidance of 60 in 2022 and 70 in 2023 (-36% and -21% versus 2019); - The business jet market deliveries to be close to the company's guidance of 100 in 2021 and 125 in 2022 (-6% and 15% versus 2019); - EBIT margin to be around 4.6% in 2022 followed by some incremental improvements; - Embraer to generate USD480 million in FCF in 2022; - Consolidated investment expenditures of around USD250 million in 2022 and USD396 million in 2023; - Embraer to maintain its strong liquidity throughout the forecast period and active liability management strategy to manage refinancing risks. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade to investment-grade level would be dependent on a return to net leverage below 2.5x on sustainable basis, in addition to gross leverage around 4.5x and strong liquidity position with no major refinancing risks in the medium term; - Strong rebound in deliveries to 2019 levels earlier than expected leading to EBIT Margins above 7%; - Steady positive FCF generation. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Higher than expected capex levels, including additional cash outflows related to EVE; - Substantial order cancellations in the E1 and E2 programs and business jet segment, or significant delays and cost increases on the new programs; - Net leverage remaining consistently above 3.5x from end of 2023 on; - Substantial declines in liquidity without commensurate debt reductions; - Multiple-notch downgrade of Brazil's sovereign rating, along with a similar reduction in the country ceiling. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Embraer's financial flexibility is solid and it is a key factor supporting the ratings. The company had USD3.1 billion of debt as of Sept. 30, 2022, with cross-border unsecured bonds representing 84% of this amount. Total cash and investments at the end of the period were USD1.44 billion, excluding EVE (USD 248 million), and is sufficient to support debt amortization up to at least 2025. The company has already announced the refinancing of its BNDES debt due in 2024 (around USD300 million). The company has around USD212 million of outstanding bond coming due 2023 that should be amortized. The company's liquidity is further enhanced by a revolving credit facility of USD650 million. Fitch expects Embraer to remain disciplined with its liquidity position, maintaining its proactive approach in liability management to avoid exposure to refinancing risks. At Sept. 30, 2022, approximately 98% of the company's cash, equivalents and financial investments were in U.S. dollars and a major part being held abroad. ISSUER PROFILE Embraer is the market leader for commercial jets with fewer than 150 seats. Its aircraft are known for their engineering, commonality across models, and interior design. The company delivered 48 commercial jets in 2021, an increase from 44 in 2020, but down from 89 in 2019, 90 in 2018, and 101 in 2017. Fitch expects 2022 commercial deliveries should be approximately 57 aircrafts, 30 were delivered during 4Q22. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance 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 the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Embraer Netherlands Finance BV senior unsecured LT BB+ Affirmed BB+ Embraer S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(bra) Affirmed AAA(bra) Embraer Overseas Limited senior unsecured LT BB+ Affirmed BB+ MV24 CAPITAL: Fitch Alters Outlook on 'BB+' Rating to Stable ------------------------------------------------------------ Fitch Ratings has affirmed the rating on the senior secured notes issued under the MV24 Capital B.V. transaction at 'BB+'. The Rating Outlook has been revised to Stable from Negative based on a detailed review of vessel performance over the last year and the alignment of the outlook with the sovereign as the current primary risk constraint. The affirmation is based on Fitch's view that the partners have a high incentive to meet their obligations under the concession agreement. The operating environment in Brazil continues to limit the uplift over Brazil's Issuer Default Rating (IDR) of 'BB-'/Outlook Stable by two notches. According to Fitch's Structured Finance Country Risk Criteria, this limit for Brazil can be up to three notches above the IDR, however, Fitch has tempered this to two notches due to Petrobras' status of being a state-owned enterprise and the potentially higher exposure to political interference and, therefore, at 'BB+' with a Stable Outlook. Entity/Debt Rating Prior ----------- ------ ----- MV24 Capital B.V. Senior Secured Notes 55388RAA4 LT BB+ Affirmed BB+ TRANSACTION SUMMARY The senior secured notes issued by MV24 Capital B.V. are backed by the flows related to the charter agreement initially signed with Tupi B.V. for the use of the FPSO Cidade de Mangaratiba MV24 for a term of 20 years. The BM-S-11 consortium is comprised of Petrobras, with 65% share, and Shell Brasil (wholly owned subsidiary of Royal Dutch Shell plc) with 25% share, and Petrogal Brazil S.A. (a joint venture [JV] between Galp Energia and Sinopec) with 10% share. The vessel is operated by Modec do Brasil Ltda., the Brazilian subsidiary of Modec, Inc., through a services agreement. Modec is one of four Japanese sponsors of the project, together with Mitsui & Co., Mitsui OSK Lines and Marubeni. The MV24 FPSO began operating at the Lula/Tupi oil field in October 2014. Fitch's rating addresses the timely payment of interest and principal on a semiannual basis until the legal final maturity in June 2034. KEY RATING DRIVERS Consortium Obligation Strength Exceeds Petrobras' The offtaking consortium is backed by Petrobras (65% share), the Shell subsidiary Shell Brasil Petróleo Ltda (25%) and the Galp/Sinopec JV (10%); all the pro rata obligations are guaranteed by affiliate companies (for the Petrobras group, Petrobras International Braspetro B.V.). The offtakers' obligations related to the 20-year charter and joint operating agreements are several, but not joint, as each party guarantees that it will make its portion of the payment. However, these payments can be seen as joint and several as the underlying concession states that each party must support all the obligations related to ongoing production. Fitch expects the payments to continue given the high economic incentives to maintain the concession. Therefore, the rating of the lowest-rated member, Petrobras (BB-/Stable), does not strictly limit the notes' rating. Soverign Event and T&C Risk Support Uplift The transaction's reserve account of six months of debt service, three months of opex and the offshore payment obligations offer sufficient protection to mitigate potential transfer and convertibility (T&C) restrictions and exceed Brazil's Country Ceiling of 'BB' by one notch. Additionally, the event risk linked to the operating environment, with Petrobras a state-owned enterprise, potentially subject to political interference, limits the uplift over Brazil's IDR of 'BB-'/Outlook Stable to two notches and, therefore, at 'BB+' with a Stable Outlook. Strong Operator Credit Quality Modec Brasil's credit quality is in line with investment-grade metrics, and this is relevant due to the underlying support offered by Modec to the transaction. In addition to the complexities involved with replacement of the operator, the services agreement and overall operating costs in connection with the services agreement are supported by Modec. The average availability since commercial operation is approximately 97%, in line with industry standards. Finally, operational expenses have remained relatively stable and expenditures relating to the discharge of its operational obligation under the services agreement are ultimately guaranteed by Modec through the O&M support agreement. Sufficient Financial Metrics The key leverage metric for fully amortizing FPSO transactions is the debt service coverage ratio (DSCR). The transaction is not currently constrained by leverage at the 'BB' rating level. Fitch expects base case DSCRs to be in the range of 1.13x-1.17x, which would constrain the rating to the 'BB' category. The charter rates are fixed with escalators for inflation, and operating expenses of MV24 are capped with overages structurally subordinated to amounts payable under the notes by the cash waterfall mechanism; therefore, DSCR levels indicate sufficient buffer to mitigate any downtime risks associated with operations. The transaction continues to benefit from a six-month debt service reserve account and three-month O&MRA, which have remained untapped and other structural elements like the prefunding mechanism that help meet debt service obligations in a timely manner. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: As described in Key Rating Drivers, the rating of the transaction is linked to Brazil's IDR, with an uplift of two notches. Therefore, a sovereign downgrade would trigger a downgrade of the notes. Both ratings have a Stable Outlook. For offtakers, Fitch could assign a rating in excess of Petrobras' by two notches, and this remains possible as long as the other offtakers remain rated above the notes. Given the current ratings of the other offtakers, Fitch deems this risk particularly remote. The other counterparty that could constrain the rating is the operator, Modec, which Fitch considers to be of better credit quality than the senior notes. Finally, the cash flow analysis results in a sufficient output, consistent with ratings in the 'BB' category. Although the DSCR and ultimate debt repayment depend on uptime, maintenance days, opex and CPI, none of these variables are expected to drive ratings down under the stresses Fitch applied (and considering a cap for opex). Factors that could, individually or collectively, lead to positive rating action/upgrade: The rating is constrained by leverage, the operating environment and counterparty issues. An upgrade of Brazil (which would likely also result in an upgrade of Petrobras) may result in an upgrade. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance 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 the way in which they are being managed by the entity. ========= C H I L E ========= INVERSIONES LATIN AMERICA: S&P Cuts ICR to 'B-', On Watch Negative ------------------------------------------------------------------ S&P Global Ratings lowered its rating on the Chilean wind power Inversiones Latin America Power Limitada (ILAP) project's senior secured notes due 2033 to 'B-' from 'B+' and placed it on CreditWatch with negative implications. The CreditWatch negative placement reflects the risk of a further downgrade in the next 90 days if cash deficits materialize in 2023. This can occur, for instance, if ILAP doesn't collect the PEC receivables in the first quarter of the year. Alternatively, we could lower the rating if we continue to see a price disparity between the injection and withdrawal nodes prices (also known as the "decoupling effect") consistently above $15 per megawatt hour (MWh). ILAP's debt service reserve account (DSRA) of only $3.5 million provides a very narrow cushion to cover any potential cash shortfall amid a complex scenario for the Chilean electricity sector. ILAP used $13 million of its DSRA to cover the interest payment of $16 million on Jan. 3, 2023, reducing the account's balance to only $3.5 million. In addition, ILAP used its entire operations and maintenance reserve account of $4.5 million to cover the outstanding working capital amounts. Even though the project could replenish its reserve accounts by June 15, 2024, in order to avoid an event of default, ILAP currently has a very narrow cushion to cover any additional potential cash shortfall under a downside-case scenario. S&P said, "Our base-case scenario incorporates inflows of $6 million in the first quarter of the year, consisting of the collection of PEC receivables for March-October 2022. Therefore, we believe that ILAP will generate CFADS of close to $35 million during the year, which would lead to DSCRs of close to 1.1x. Our base-case assumptions also incorporate more favorable prospects for the Chilean electricity market during 2023. More specifically, for the next few months, we expect the entrance of significant renewable capacity into the market, better hydrological conditions, and the hydro reserve to strengthen the system's reliability and reduce spot prices." Nevertheless, if any of these factors don't materialize, or if there are delays in collecting the PEC receivable, ILAP could struggle to service its debt of $13 million in July 2023 and/or $16 million in January 2024. In the next few years, the drop in the decoupling effect would depend on the expansion of transmission lines as more renewable projects start to operate in the country, as well on as the further development of the battery energy storage systems. As part of Chile's decarbonization program, about 8 gigawatts (GW) of solar and wind capacity was added to the system in the past year, which caused congestion on the transmission lines. This is because the renewable assets are located either in the northern and southern parts of the country, while most of electricity is consumed in the central part, around Santiago. S&P said, "As unconventional renewable capacity will continue to rise, we expect transmission capacity to remain pressured until the Kimal-Lo to Aguirre transmission line is completed by the end of 2028. Meanwhile, we expect the regulator-–Coordinador Electrico Nacional--to work on initiatives to alleviate the transmission congestion, for example, through additional transmission capacity between the southern and central parts of the country." =================================== D O M I N I C A N R E P U B L I C =================================== [*] DOMINICAN REPUBLIC: Pena Cites 3 Lessons for Sustainable Growth ------------------------------------------------------------------- Dominican Today reports that the Vice President of the Dominican Republic, Raquel Peña, stated that the pandemic had yielded three lessons that can serve as a model to achieve sustainable and inclusive growth. They will also boost Foreign Direct Investment (FDI), invest in its labor force through training and skills upgrading that place more people in family-sustaining jobs, and unlock diversified areas of growth and development, the report notes. Lessons learned are: first, make agile, data-driven decisions to implement accurate responses, the report relays. The second relies on integrated and innovative collaboration models with the private sector, academia, and civil society. And the third focus on the well-being and livelihoods of the Dominican people, the report notes. "Based on these learnings, we are working to double the size of the economy by 2030 in an inclusive and sustainable. In addition, the article is co-authored by Maria Eugenia del Castillo, special advisor to the Vice Presidency of the Dominican Republic, the report relays. "Despite this remarkable crisis management and economic recovery, we continue to face significant challenges: vulnerability to climate change, increased need for FDI for high-growth industries, income and wealth inequality; and ongoing humanitarian challenges caused by continued violence and political unrest in neighboring Haiti. However, the pandemic experience has given us a blueprint for responding quickly to a number of complex challenges," the publication states, 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. =========== P A N A M A =========== MULTIBANK INC: Moody's Rates New Senior Unsecured Notes 'Ba1' ------------------------------------------------------------- Moody's Investors Service has assigned a Ba1 long-term foreign currency senior debt rating to the senior unsecured notes to be issued by Multibank, Inc. The proposed notes will be denominated and settled in dollars for $300 million and will mature in five years. The notes will be senior unsecured obligations and will rank pari passu in right of payment with all of Multibank's existing and future unsecured and unsubordinated indebtedness. The outlook on the debt rating is stable. Assignments: Issuer: Multibank, Inc. Senior Unsecured Regular Bond/Debenture (Foreign Currency), Assigned Ba1, STA RATINGS RATIONALE The Ba1 senior unsecured debt rating is in line with Multibank's baseline credit assessment (BCA) and adjusted BCA of ba1 reflecting the bank's good capitalization metrics, supported by the no dividend payout policy and a well-established franchise in corporate banking and car financing segments in Panama (Baa2 negative). At the same time, the ba1 BCA reflects the recent increase in the bank's problem loan ratio, measured as loans classified as Stage 3 (IFRS9), to 8.2% of gross loans in September 2022, significantly above the 4.8% at year-end 2021. This deterioration resulted from the transfer of certain corporate exposures in the construction sector to Stage 3 classification, a conservative measure while the reestructuring and monitoring process is completed. However, the bank's loan delinquencies measured as 90 days past-due loans, was a relatively low 1.8% in September 2022, below the system average, while loan loss reserve coverage for 90 non-performing loans remained above a 100% in the same period. In addition, the modified loan portfolio related to the Covid measures, fell to 5% in September 2022 from 21% in December 2021. Multibank's asset risks will likely remain high amid a moderating economic activity and growth prospects anticipated for 2023-24 compared with that of the prior decade, which will continue to pressure the bank's borrowers repayment capacity. Multibank's ratings take into consideration the bank's good level of deposit funding from customers, which accounted for about two thirds of its total liabilities, and are 67% sourced from corporate clients. The rating also considers Multibank's level of market-based funding resources, higher than its peers in the country, that accounted for 31.9% of tangible banking assets in September 2022. The proposed notes will replace an existing $300 million loan taken to finance the bank's $300 million 144a/RegS issuance maturity in November 2022. In addition, Multibank's Ba1 foreign currency debt rating incorporates a very high probability of support from its ultimate parent, Banco de Bogota S.A. (Baa2 stable, ba1) which, however, does not result in any rating uplift by affiliate support, because Banco de Bogotá's baseline credit assessment (BCA) is ba1, at the same level of Multibank's BCA. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING An upgrade of Multibank's rating would arise from a sustainable reduction in the level of problem loans, combined with an increase in loan loss reserve coverage that would support the loss absorption capacity as the bank expands its business footprint in the country. Positive pressure would also be exerted by consistent improvement in profitability benefiting capital ratios. Conversely, the rating could be downgraded in case of further deterioration in asset metrics, high problem loans and low coverage ratios that could persist and result in higher credit losses. This scenario would, in turn, impair profitability and capital buffers. The principal methodology used in this rating was Banks Methodology published in July 2021. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: Beckles Seeks IDB Help for Country's Roads ------------------------------------------------------------- Trinidad Express reports that Trinidad & Tobago Minister of Planning and Development, Pennelope Beckles, and members of her team, hosted Tariq Ali, the Inter-American Development Bank's (IDB) newly appointed general manager of the Caribbean Department. Ali was accompanied by Carina Cockburn, IDB's country manager to Trinidad and Tobago and Sergios Rios chief of operations IDB to T&T, according to Trinidad Express. Minister Beckles congratulated Ali for being the first Trinidad and Tobago national to be selected at the helm of IDB's leadership team and also encouraged him to champion key projects for T&T, to support the nation's development strategy, Vision 2030, the report notes. In turn, Ali praised Beckles for her steadfast persistence in pursuit of funding opportunities from the IDB to finance key developmental initiatives in the areas of digitization, social programs, climate financing, infrastructure investment and the National Water Sector Transformation Program, the report relays. Discussions were also focused on partnering with the IDB for technical support to conduct research and assessment of T&T's roads, the report notes. The minister highlighted this as a critical challenge for T&T, in light of significant road damage experienced in recent times caused by increased flooding, the report says. She reiterated the need for resilient road engineering and construction to be implemented, as T&T combats the fallouts of climate change, the report discloses. Sustainable road rehabilitation provides longer service life for roads and also helps reduce traffic congestion and CO2 emissions, especially during road works, the report relays. Various techniques and compounds are currently available in road building technology that can be applied in Trinidad and Tobago to improve the quality of the nation's roadways, the report discloses. In addition, parties explored possible financing packages towards the strategic application of digitization for national security, to improve crime prevention as well as to increase criminal detection. Last but not least, the meeting also focused on avenues to modernize T&T to improve diversification, expand international trade opportunities and to develop new tourism opportunities, the report notes. About Tariq Ali Tariq Ali has over 20 years of experience in corporate finance spanning debt capital markets, deal origination, syndication, and structuring. He previously held several roles including assistant vice president and vice president across various indigenous financial institutions in Trinidad & Tobago before he joined the First Citizens Group in 2011. At the First Citizens Group, he held the positions of head of capital markets, assistant general manager - Corporate & Investment Banking Unit. Most recently he served as general manager - Corporate and Investment banking nnit where he had overall responsibility for the Unit's private sector, LATAM, Government of Trinidad & Tobago and Debt Capital Markets business units. ********* 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 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *