/raid1/www/Hosts/bankrupt/TCRLA_Public/230307.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, March 7, 2023, Vol. 24, No. 48
Headlines
A R G E N T I N A
ARGENTINA: Hit By Huge Power Outage, Affecting Several Provinces
BLOCKFI INC: Slows Down Efforts to Return Customers' Crypto
ENTRE RIOS: Fitch Affirms Foreign & Local Currency IDRs at 'CCC-'
PROVINCE OF CHACO: Fitch Affirms Foreign & Local Curr. IDRs at CCC-
PROVINCE OF SALTA: Fitch Affirms Foreign & Local Curr. IDRs at CCC-
B R A Z I L
AMERICANAS SA: Bondholders Hire Moelis, Padis Matter for Advice
BRAZIL: Faltering Economy Endangers 'Barbecue And Beer' Promise
C O L O M B I A
PA UNION DEL SUR: Fitch Affirms 'BB+' Rating on Loans & Notes
C O S T A R I C A
COSTA RICA: Fitch Hikes LongTerm IDRs to 'BB-', Outlook Stable
J A M A I C A
JAMAICA: Minister Calls for Approach to Protecting Resources
M E X I C O
FINANCIERA INDEPENDENCIA: Fitch Alters Outlook on 'BB-' IDRs to Neg
P E R U
PERU: Discloses $9-Bil Injection to Boost Economy Amid Protests
PETROLEOS DEL PERU: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Neg.
- - - - -
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A R G E N T I N A
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ARGENTINA: Hit By Huge Power Outage, Affecting Several Provinces
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Buenos Aires Times reports that residents across Argentina were hit
by a massive power cut on March 1 as temperatures soared above 35
degrees Celsius.
The massive outage affected large swathes of the Buenos Aires
Metropolitan Area (AMBA), hitting several neighbourhoods in Buenos
Aires City and large parts of the Conurbano, the populous region
that encircles the capital, according to Buenos Aires Times.
Users on social networks also reported widespread power cuts in
Mendoza, Santa Fe, Córdoba, Neuquén and other provinces, the
report notes.
According to initial reporting by several local outlets, the power
cut came after the Atucha I nuclear power plant went offline, the
report relays. A second nuclear power plant, Atucha II, has been
out of service since last year due to maintenance work, the report
discloses.
Nucleoelectrica, the state firm in charge of operating Atucha I,
told the La Nacion newspaper that "a problem with the grid took us
out of service," the report notes.
Government sources told Noticias Argentinas that the outage was
caused by "several failures in the interconnected system",
including the shutdown of the Atucha I nuclear power plant, the
report relays. They said the cause of the power cut would be
investigated, the report says.
The websites of both the ENRE (Ente Nacional Regulador de la
Electricidad) national regulator and Cammesa, the firm that manages
the local electricity market went offline, the report discloses.
The electricity failure arrived as 11 provinces in the centre and
east of the country were in the midst of a heatwave, with
temperatures surpassing 35 degrees Celsius in several regions, the
report notes.
Buenos Aires City recorded the hottest summer since records began
in 1906 over the 2022-2023 period with an average temperature of
25.6 degrees, according to the National Meteorological Service
(SMN), the report relays.
In the capital, power outages were reported in Colegiales, Villa
Lugano, Parque Patricios, Mataderos, Palermo and Caballito, among
others, the report says.
Electricity failures were also reported in the provinces of Jujuy,
Salta, San Luis, Tucuman, La Pampa, La Rioja and Santiago del
Estero, the report adds.
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.
On 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.
BLOCKFI INC: Slows Down Efforts to Return Customers' Crypto
-----------------------------------------------------------
Steven Church of Bloomberg News reports that BlockFi Inc. slowed
down its effort to give certain digital coins back to customers
while the bankrupt company negotiates with creditors over who can
immediately recover their assets.
US Bankruptcy Judge Michael Kaplan agreed to put on hold BlockFi's
request to return cryptoassets held in customer wallets. The
company will try to settle with creditors who have opposing views
on key issues, including whether some crypto in customer wallets
should be seized because the demand to return those assets is
inappropriate bankruptcy claims.
About BlockFi Inc.
BlockFi is building a bridge between digital assets and traditional
financial and wealth management products to advance the overall
digital asset ecosystem for individual and institutional
investors.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in
its early days had backing from influential Wall Street investors
like Mike Novogratz and, later on, Valar Ventures, a Peter
Thiel-backed venture fund as well as Winklevoss Capital, among
others. BlockFi made waves in 2019 when it began providing
interest-bearing accounts with returns paid in Bitcoin and Ether,
with its program attracting millions of dollars in deposits right
away.
BlockFi grew during the pandemic years and had offices in New York,
New Jersey, Singapore, Poland and Argentina.
BlockFi worked with FTX US after it took an $80 million hit from
the bad debt of crypto hedge fund Three Arrows Capital, which
imploded after the TerraUSD stablecoin wipeout in May 2022.
BlockFi had significant exposure to the companies founded by former
FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a
$400 million credit line from FTX US in an agreement that also gave
FTX the option to acquire BlockFi through a bailout orchestrated by
Bankman-Fried over the summer. BlockFi also had collateralized
loans to Alameda Research, the trading firm co-founded by
Bankman-Fried.
BlockFi is the latest crypto firm to seek bankruptcy amid a
prolonged slump in digital asset prices. Lenders Celsius Network
LLC and Voyager Digital Holdings Inc. also filed for court
protection this year. Kirkland & Ellis is also advising Celsius and
Voyager in their separate Chapter 11 cases.
BlockFi Inc. and eight affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on
Nov. 28, 2022. In the petitions signed by their chief executive
officer, Zachary Prince, the Debtors reported $1 billion to $10
billion in both assets and liabilities.
Judge Michael B. Kaplan oversees the cases.
The Debtors taped Kirkland & Ellis and Haynes and Boone, LLP as
general bankruptcy counsels; Walkers (Bermuda) Limited as special
Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley
Research Group, LLC as financial advisor; Moelis & Company as
investment banker; and Street Advisory Group, LLC as strategic and
communications advisor. Kroll Restructuring Administration, LLC is
the notice and claims agent.
ENTRE RIOS: Fitch Affirms Foreign & Local Currency IDRs at 'CCC-'
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Fitch Ratings has affirmed the Province of Entre Rios, Argentina's
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
at 'CCC-'. Additionally, Fitch has maintained Entre Rios'
Standalone Credit Profile (SCP) at 'ccc-'. The province's IDR is at
the same level as Argentina's 'CCC-' IDR. Fitch relied on its
rating definitions to position Entre Rios' ratings and SCP.
The rating action reflects Fitch's expectations that Entre Rios
will maintain a debt sustainability score assessed in 'aa' category
under its rating case (2023-2025) and, namely, a debt service
coverage ratio over the next 12-month period above 1x amid the
current context of macroeconomic vulnerability. Coverage at this
level is based on its adequate fiscal performance in 2021-2022 that
resulted in stable operating balances and an improved liquidity
driven by the 2021 and 2022 economic rebound.
However, refinancing risk persists, given its exposure to
heightening macroeconomic uncertainties and opex recomposition
pressures that could affect its operating margins. The high pension
burden could also impair liquidity metrics. The province has begun
to amortize its USD 517.5 million senior unsecured step-up notes as
of February 2023.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The 'Vulnerable' assessment for all Argentine local and regional
governments (LRGs) reflects Fitch's view that there is a very high
risk of the issuer's ability to cover debt service with the
operating balance weakening unexpectedly over the scenario horizon
(2023-2025) due to lower revenue, higher expenditure, or an
unexpected rise in liabilities or debt-service requirements. LRGs
in Argentina operate in a context of a weak institutional revenue
framework, high expenditure structures, tight liquidity and FX
risks.
Revenue Robustness: 'Weaker'
The assessment reflects the complexity and imbalanced nature of the
national fiscal framework. Entre Rios significantly relies on
federal automatic transfers from Argentina, a 'CCC-' sovereign
counterparty. This revenue source represented around 71% of
operating revenues on average, for 2018-2022. Weak and volatile
national economic performance is also factored into the revenue
robustness assessment; amidst weaker economic growth prospects
towards 2023 after the 2021 and 2022 rebound. In 2022,
co-participation tax transfers showed an accumulated 85% annual
nominal term growth; and own-source revenues increased 73%, for a
total operating revenue growth of 76.2%, slightly above average
inflation.
Revenue Adjustability: 'Weaker'
Local revenue adjustability is low and challenged by the country's
large and distortive tax burden. The negative macroeconomic
environment further limits the province's ability to increase tax
rates and expand tax bases to boost local operating revenues.
Structurally high inflation constantly erodes real-term revenue
growth and affects affordability. Provincial jurisdictions have
legal autonomy to set tax rates. Tax collection accounted for 23.4%
of total consolidated provincial revenues in 2022, reflecting low
fiscal autonomy and reliance on federal transfers from the
co-participation program.
Expenditure Sustainability: 'Weaker'
Argentine provinces have high expenditure responsibilities as the
nation's fiscal program is structurally imbalanced in revenue
expenditure decentralization. This is further exacerbated by the
high inflationary operating environment, which weakens Entre Rios'
control over total expenditure growth prospects. Currency
depreciation also affects expenditure costs, such as capex
projects.
In 2020-2022, Entre Rios controlled opex in real terms, resulting
in operating margins equivalent to 19.3% on average. Fitch believes
that this performance is unsustainable towards the medium term due
to high expenditure needs in healthcare, social, justice and public
services and due to the lag effect inflation tends to have on
real-term wages and pension obligations. During 2022, staff
expenditure presented a substantial recomposition and soared by
around 15% in real terms yoy; thus, opex growth reached 87.3%
nominally. Fitch estimates opex will increase above average
inflation and will lower operating balance to 10.3% in 2023 due to
wages adjustments amid elections at the provincial and national
level.
Entre Rios is among the provinces that did not transfer its pension
scheme to the nation, thus when considering the weight of this
additional burden the operating balance stands at 7.4% in 2022
(from 16.9%). This represents an additional expenditure burden and
risk for its operating balance results. Entre Rios needs to cover
more than 50% of the deficit of its social security system.
Expenditure Adjustability: 'Weaker'
Entre Rios' staff expenses in its opex structure is high, relative
to international peers, at 66.7% in 2022, with opex totaling around
90% of total expenditure. Although staff expenses have remained
steady during 2018-2022 in nominal terms, they represented a rigid
58.2% of total expenses, on average, limiting the province's
budgetary flexibility. Entre Rios' flexibility to cut expenses is
viewed as weak, relative to international peers, as a low average
of 6.6% for 2018-2022 of the province's total expenditure was
capex.
The province's capex has remained at roughly 8% of total
expenditure in 2021-2022, compared with an average of 5.8% in
2018-2020. However, just like other Argentine peers, the province
has very high infrastructure needs, which means increasing capex
does not translate into economic growth due to infrastructure lags,
as there is not much flexibility to adjust capex.
Liabilities & Liquidity Robustness: 'Weaker'
Capital market discipline is currently heightened by a 'CCC-' rated
sovereign, curtailing external market access to LRGs. Unhedged
foreign currency debt exposure is an important structural weakness
considered in this assessment, along with the weak national
framework for debt and liquidity and an underdeveloped local
market. The context of national capital controls is an additional
weakness captured in this key risk factor (KRF), although currently
there are no legal restrictions in place for subnationals to access
the foreign exchange market and service external debt. The
uncertain evolution of exchange regulations could affect LRGs'
abilities to fulfill their financial obligations in case of
regulatory changes.
Entre Rios restructured its foreign currency notes on March 15,
2021 after a distressed debt exchange (DDE) process. Direct debt
totaled ARS153.9 billion at YE 2022 with 85.6% foreign currency
denominated. Total debt grew around 58%, with regard to 2021,
mainly due to currency depreciation.
The province has not used short-term treasury bills. Entre Rios'
fiscal burden ratio was 22.6% at YE 2022, as its unrestricted cash
grew with regard to 2021. Although the province's debt capital
maturities began in February 2023, Fitch expects Entre Rios' ADSCR
to be above 1x in the near term. The province covered the first
repayment smoothly due to its improved liquidity position and the
purchase of U.S. dollars in advance.
The 2023 budget law enacted the creation of a reserve fund. The
province intends to provision this reserve to cover upcoming debt
service payments. The sinking fund would be created with the 2022
fiscal surplus. Likewise, the province is analyzing other
strategies to protect its liquidity from local currency volatility
and diminish its exposure to sovereign risk.
The main amendments to the notes after restructuring included an
extension to the notes' maturity to August 2028 from August 2025; a
modification of the amortization profile to 12 capital installments
from three, to smooth out principal repayments throughout the life
of the amended notes with semi-annual payments in February and
August; and easing of the interest rate conditions.
Liabilities & Liquidity Flexibility: 'Weaker'
Fitch perceives the Argentine national framework in place for
liquidity support and funding available to subnationals as
'Weaker', as there are no formal emergency liquidity support or
bail-out mechanisms established. The national government can
support Entre Rios in the form of a friendly creditor, such as
making some programs and loans available to provinces from federal
trust funds. However, the macroeconomic environment constrains the
predictability, size and timing of this support. Impeding access to
liquidity from international market and concentration of
counterparty risk below 'BBB-' also drive the assessment of such
support to 'Weaker'.
For 2020-2022, the entity showed improved liquidity coverage
metrics (current operating balance plus unrestricted cash from
previous year to debt service) averaging 4.5x (2022: 4.9x). During
2022, the province's interest revenues rocketed and reached ARS24
billion. The province has invested in National treasury bills in
order to have higher financial yield.
Debt Sustainability: 'aa category'
Considering the current 'CCC-' sovereign rating and curtailment of
the external market amid a volatile macroeconomic and regulatory
context, Fitch is only projecting a rating case for 2023-2025.
Fitch analyzed debt sustainability metrics to evaluate Entre
Rios-specific debt repayment capacity and its liquidity position in
this short rating case horizon.
Under Fitch's rating case scenario, the debt payback ratio (net
adjusted debt-to-operating balance), the primary metric of debt
sustainability, will remain below 5x, consistent with a score of
'aaa'. The actual debt service coverage ratio (operating balance to
debt service, ADSCR) is projected above 1x for the next two years,
consistent with a score of 'bb' and below 1x in 2025, in the 'b'
range. The final 'aa' debt sustainability assessment reflects an
override of the debt payback ratio because of the projected weaker
coverage level.
The debt sustainability score of 'aa' is underpinned by the profile
of the restructured USD notes that started amortizing in 2023 in
tandem with adequate operating balances and liquidity.
DERIVATION SUMMARY
Entre Rios' SCP is assessed at 'ccc-', reflecting a combination of
vulnerable risk profile and debt sustainability in the 'aa'
category. The SCP of 'ccc-' reflects debt service coverage ratio
above 1x in 2023 and 2024 and considers a comparison with peers,
including the Provinces of Chaco, Salta and La Rioja. Entre Rios is
currently meeting its debt service obligations, and debt distress
does not appear probable in the following 12-months. Entre Rios is
deemed to have less flexibility to reduce opex in comparison to
other Argentine provinces because of its sizeable pension deficit
burden and regulatory restrictions to reduce the pension-system
deficit.
Fitch does not apply any asymmetric risks or extraordinary support
from upper-tier government. The rating is based on Fitch's rating
definitions. The province's IDRs reflect the exposure to
macroeconomic counterparty risks and the unpredictable regulatory
framework that prevail in Argentina.
KEY ASSUMPTIONS
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Debt sustainability: 'aa'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap (LT IDR): 'CCC-'
Sovereign Cap (LT LC IDR) 'CCC-'
Sovereign Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2018-2022 figures and 2023-2025 projected
ratios. The key assumptions for the scenario include:
- Yoy 73.8% increase in operating revenue on average in 2023-2025;
- Yoy 82.7% increase in operating spending on average in
2023-2025;
- Net capital balance of negative ARS125.3 billion on average in
2023-2025;
- Cost of debt: 9.8% (2023), 9.0% (2024) and 9.3% (2025);
- Cost of debt considers non-cash debt movements due to currency
depreciation, assuming an exchange rate (ARS per USD) of 251.4 for
2023, 448.9 in 2024 and 700.6 in 2025.
Liquidity and Debt Structure
Direct debt totaled ARS153.9 billion at YE 2022 with 85.6% foreign
currency denominated, one of the highest shares among Argentine
provinces. Furthermore, around 74% of such a debt is at fixed rate.
The main amendments to the notes after restructuring included an
extension to the notes maturity (from August 2025 to August 2028),
a modification of the amortization profile to 12 capital
installments from three (smooth out principal repayments throughout
the life of the amended notes, with semi-annual payments in
February and August beginning in 2023), and easing of the interest
rate conditions.
Issuer Profile
The Province of Entre Rios has an exceptional geographic location
and endowment of natural resources. It is located in the northeast
region of Argentina, the heart of Mercosur. Entre Rios is next to
the Province of Buenos Aires, the main market of production and
consumption in Argentina. Its territory is suitable for livestock,
while 53% of the province's surface is suitable for agricultural
activity and agribusiness, which represent the core of the
productive and exportation structure. Entre Rios exports mainly to
Asia. The province's population, at 1.4 million, equals approximate
3% of Argentina's.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Signs of deeper liquidity stress that could compromise debt
repayment capacity in the next 12 months of the projected horizon,
including evidence of increased refinancing risks underpinned by
the inability to access the international capital market, and
capital controls that hinder debt servicing of USD notes.
- Any formal announcement by the province that is assessed as a DDE
under Fitch's rating definitions.
- A downgrade of the sovereign IDR could result in a downgrade in
Entre Rios' IDR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade to the sovereign IDR, combined with debt
sustainability metrics remaining in line with projections of a
payback ratio below 5x and ADSCR above 1.0x and a structural and
sustainable liquidity coverage ratio over the rating case horizon.
The latter could be caused by more expenditure predictability
related to an unfunded pension deficit.
ESG Considerations
Entre Rios has an ESG Relevance Score of '4' for Rule of Law,
Institutional & Regulatory Quality, Control of Corruption due to it
presents weak management practices and regulations toward its
financial obligations. This has a negative impact on the credit
profile and is relevant to the ratings in conjunction with other
factors.
Fitch has an ESG Relevance Score of '4' for Creditor Rights because
the 2021 DDE continues to weigh on its credit profile. Fitch
expects that fiscal challenges at the national and local level will
continue to hinder the province's ability to repay its debt
obligations. This has a negative impact on the credit profile and
is relevant to the rating in conjunction with other factors.
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
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Entre Rios,
Province of LT IDR CCC- Affirmed CCC-
LC LT IDR CCC- Affirmed CCC-
PROVINCE OF CHACO: Fitch Affirms Foreign & Local Curr. IDRs at CCC-
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Fitch Ratings has affirmed Province of Chaco's Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) at 'CCC-'.
Additionally, Fitch also affirmed at 'CCC-' the rating for Chaco's
step-up USD262.6 million senior unsecured notes due 2028. The bonds
are rated at the same level as the province's IDRs. Fitch has
maintained Chaco's Standalone Credit Profile (SCP) at 'ccc', and
the IDRs are capped by the sovereign rating. Fitch relied on its
rating definitions to position Chaco's ratings and SCP.
The rating affirmation reflects the current context of
macroeconomic vulnerability as well as debt refinancing risks that
remain reflected in an actual debt service coverage ratio (ADSCR)
expected to remain above 1x in the next 12 months and in Fitch's
2023-2024 rating case horizon.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The 'Vulnerable' assessment, for all Argentine local and regional
governments (LRGs) reflects Fitch's view that there is a very high
risk of the issuer's ability to cover debt service with the
operating balance weakening unexpectedly over the scenario horizon
due to lower revenue, higher expenditure, or an unexpected rise in
liabilities or debt-service requirements. LRGs in Argentina operate
in a context of a weak institutional revenue framework, high
expenditure structures, tight liquidity and foreign exchange
risks.
Revenue Robustness: 'Weaker'
The assessment reflects the complexity and imbalanced of the
national fiscal framework, dependence on 'CCC-' sovereign
counterparty risk for 83.5% (three year-average) of its total
revenue, that mostly correspond to national automatic
coparticipation tax transfers. Federal co-participation tax
transfers are a very important component of subnational fiscal
performance. As of September 2022, coparticipation tax transfers
show an accumulated 79.5% annual nominal term growth; and
own-revenues could increase 113.7%, for a total operating revenue
growth of 76.5%, driven by historically high inflation levels and
2021-2022 economic recovery.
Revenue Adjustability: 'Weaker'
Chaco's ability to generate additional revenue in response to
possible economic downturns is limited, like all Fitch-rated
Argentine LRGs. However, for Chaco this is further exacerbated
given its high reliance in national automatic transfers with tax
revenue/total revenue representing a low 12% in YE 2021.
Fitch considers that local revenue adjustability is low and is
challenged by the country's large and distortive tax burden.
Structurally high inflation also constantly erodes real-term
revenue growth and affects affordability. Chaco's weak
socioeconomic indicators (below the national average), which lags
international peers, also weighs in the assessment of this key
rating factor.
Expenditure Sustainability: 'Weaker'
In Fitch's view, spending decentralization could continue to rise
to fulfill Argentina's IMF Extended Fund Facility (EFF) fiscal
targets. Fitch will monitor how this agreement unfolds and impact
the provinces' fiscal framework.
Since 2017, the province has turned its margins from negative
territory toward a positive operating balance of 16.9% in 2020 and
19.5% in 2021 driven by the economic activity rebound of 2021 and
2022. As of September 2022, operating margin is 3.4 percentage
points lower than in the same period of 2021; for YE 2022 Fitch
expects an operating margin of 15.6%.
Fitch deems margins will converge towards lower levels in the short
to medium term given elections at the provincial and national level
this year; in conjunction to the lag effect that inflation tends to
have on real-term wages, and the strong economic deceleration
expected in 2023 (0.3%). Thus, from 2023 Fitch estimates opex will
increase above inflation and will lower operating balance to 9.7%
in 2023, below the 2019-2021 average of 15.0%. High inflation
hinders expenditure sustainability and predictability. Currency
depreciation also affects expenditure costs, such as capex
projects.
Expenditure Adjustability: 'Weaker'
Fitch views Chaco's leeway or flexibility to cut expenses as weak
relative to international peers, considering an average of only
around 11.8% of consolidated provincial total expenditures going to
capex from 2017 to 2021, which increased to 22.2% at YE 2021.
Similar to other Argentine peers, the province has very high
infrastructure needs; therefore, increasing capex does not
translate into economic growth due to the important infrastructure
lag, which also reflects minimal flexibility to adjust capex.
Compared with international peers, Chaco has a high share of opex
to total expenditure, 83.2% average of last three years. Staff
expenses represented 52.0% of total expenses (five year-average
54.5%), deemed high relative to international peers. Chaco's
socioeconomic indicators below the national average further
constrained its opex flexibility.
Liabilities and Liquidity Robustness: 'Weaker'
Direct debt increased by 25.5% in 2021 mainly due to currency
depreciation, totaling ARS64.6 billion. As of 3Q22, the outstanding
amount stands at ARS83.7 billion; approximately 64.7% of Chaco's
direct debt is denominated in foreign currency and is unhedged,
mainly in U.S. dollars, which is a rating risk in the current
environment of high inflation and currency depreciation. However,
87.2% of its total debt has fixed interest rates. The external
market remains closed.
The context of national capital controls is an additional weakness
captured in this key risk factor (KRF), although currently there
are no legal restrictions in place for subnationals to access the
foreign exchange market and service external debt. The uncertain
evolution of exchange regulations could affect LRGs' abilities to
fulfill their financial obligations in case of regulatory changes.
Chaco completed its DDE on June 25, 2021. The debt restructuring
provided some external debt service relief for the province until
2024, when capital repayments begin. However, despite this relief,
the 'CCC-' IDRs reflect challenges ahead that could hinder the
province's repayment capacity. Also, Chaco is among the provinces
that did not transfer their pension scheme to the nation, thus when
considering the weight of this additional burden the operating
balance stands at 13.5% (from 19.5%) in 2021.
Liabilities and Liquidity Flexibility: 'Weaker'
Fitch perceives the Argentine national framework in place for
liquidity support and funding available to subnationals as
'Weaker', as there are no formal emergency liquidity support or
bail-out mechanisms established. The national government can
support Chaco in the form of a friendly creditor, such as making
some programs and loans available to provinces from federal trust
funds, and through co-participation tax transfers advancements.
However, the macroeconomic environment constrains the
predictability, size and timing of this support. Impeding access to
liquidity from international market and concentration of
counterparty risk below 'BBB-' also drive the assessment of such
support to 'Weaker'.
For 2017-2019, the entity showed weak and volatile liquidity
coverage metrics (current operating balance plus unrestricted cash
from previous year to debt service) averaging over the last five
years 1.9x (2021: 3.3x). Fitch expects total cash to progressively
shrinking towards 2024 due to outturns and capex outlays increasing
above inflation. The province has been tapping the local currency
capital market issuing short term treasury bills to cover seasonal
cash imbalances on a regular basis. In 2021, Chaco's short-term
treasury bill program stood at ARS4.5 billion for 2021, ARS5
billion for 2022; for 2023 the province has budgeted ARS8 billion.
Debt sustainability: 'aa' category
Considering the current sovereign 'CCC-' rating level, curtailment
of the external market amid a volatile macroeconomic and regulatory
context, Fitch is only projecting a rating case for three years,
until YE 2024. Debt sustainability metrics are analyzed to evaluate
Province of Chaco-specific debt repayment capacity and its
liquidity position in this short rating case horizon.
Under Fitch's rating case scenario (2022 based on 3Q22
figures-2024), the debt payback ratio (net adjusted
debt-to-operating balance), the primary metric, will remain below
5.0x by 2024 (2021: 1.4x), which corresponds to a 'aaa' assessment.
In addition, ADSCR (operating balance-to-debt service), the
secondary metric of debt sustainability, stands at 2.4x in 2024
(3.4x in 2021), at the 'aa' assessment category. The final debt
sustainability assessment at the 'aa' level reflects an override
for a lower secondary metric in comparison to the payback ratio
category.
The overall debt sustainability score at 'aa' is underpinned by the
profile of the restructured USD note that begin amortizing in 2024
in tandem with 2021 and 2022 improved operating and liquidity
metrics. The projected fiscal debt burden below 50% of operating
revenue also drives the score.
DERIVATION SUMMARY
Chaco's 'ccc' SCP is derived from a 'Vulnerable' Risk Profile and a
'aa' debt sustainability score, but also reflects substantial
credit risk, including the risk that a default is a real
possibility. The SCP considers comparison with peers, including the
Provinces of Salta and Entre Rios. Fitch does not apply any
asymmetric risk or extraordinary support from upper-tier
government. The rating is based on Fitch's rating definitions. The
province's IDRs reflect the exposure to macroeconomic counterparty
risks and unpredictable regulatory framework that prevail in
Argentina.
KEY ASSUMPTIONS
Qualitative Assumptions
- Risk Profile: 'Vulnerable';
- Revenue Robustness: 'Weaker';
- Revenue Adjustability: 'Weaker';
- Expenditure Sustainability: 'Weaker';
- Expenditure Adjustability: 'Weaker';
- Liabilities and Liquidity Robustness: 'Weaker';
- Liabilities and Liquidity Flexibility: 'Weaker'.
- Debt sustainability: 'aa' category.
- Budget Loans or Ad-Hoc Support: n/a
- Asymmetric Risk: n/a
- Sovereign Cap: 'CCC-'
Quantitative Assumptions -- Issuer Specific.
In line with its LRG criteria, for an entity with base case
financial profile indicating an SCP of 'b' or below, the base case
analysis alone may be sufficient to evaluate the risk of default
and transition for the debt. Therefore, in the case of Chaco,
Fitch's base case is the rating case which already incorporates a
very stressful scenario. It is based on 2017-2021 figures and on
updated figures as of 3Q22.The key assumptions for the scenario
include:
- Operating revenue average growth of 82.1% for 2022-2024;
- Operating expenditure average growth of 90.3% for 2022-2024;
- Average net capital balance of around minus ARS222.4 billion
during 2022-2024;
- Cost of debt considers non-cash debt movements due to currency
depreciation with an average exchange rate of ARS137.7 per U.S.
dollar for 2022, ARS251.4 for 2023 and ARS448.9 for 2024;
- Consumer price inflation (annual average % change) of 70.7% for
2022, 96.5% for 2023, and 82.0% for 2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- IDRs are capped by the sovereign rating. Argentina's IDR upgrade
would lead to a corresponding rating action on Chaco if their SCPs
remain at 'ccc'.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade of Argentina's 'CCC-' IDR could result in a downgrade
in Chaco's IDR;
- Signs of deeper liquidity stress that could compromise debt
repayment capacity in the next 12 months of the projected horizon,
including evidence of increased refinancing risks underpinned by
the inability to access the international capital market, and
capital controls that hinder debt servicing of USD notes;
- Policy or budgetary uncertainties that deteriorate operating
margins and drive DSCR below 1.0x;
- Additional expenditure risks that increase volatility of
operating balances and deteriorate ADSCR relative to Argentine LRG
peers;
- Any formal announcement by the province that is assessed as a DDE
under Fitch's rating definitions.
ISSUER PROFILE
Chaco is located in the northeast region of Argentina and has a
small, low value-added economy. With an estimated population of
around 1.2 million, less than 3% of Argentina's population, GDP per
capita is estimated at USD4,579 in 2020 (below the national average
of USD8,409), and the poverty rate is at 49.9% (national average:
36.5%) as per first semester 2022 figures. Services (tertiary)
sector represents 65.5% of the province's gross domestic product,
followed by manufacturing and construction (secondary) sector at
24.2%, and the agriculture, fishing and mining at 10.3. Cotton
production is one of the most important commodities, followed by
sunflower seeds, and soybean.
SUMMARY OF FINANCIAL ADJUSTMENTS
No material adjustments were made to figures reported by the
province.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Chaco's IDR are capped by Argentina's IDR.
ESG CONSIDERATIONS
Chaco, Province of has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact of a weak regulatory framework and
national policies have over the province, which has a negative
impact on the credit profile, and is relevant to the rating in
conjunction with other factors.
Chaco, Province of has an ESG Relevance Score of '4' for Creditor
Rights, as despite the entity's improved willingness to service and
repay its debt obligations, the 2021 DDE continues to weigh on its
credit profile and debt coverage is expected to remain pressured,
therefore, the issue of Creditor Rights remains relevant to the
rating in conjunction with other factors.
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
----------- ------ -----
Chaco, Province of LT IDR CCC- Affirmed CCC-
LC LT IDR CCC- Affirmed CCC-
senior
unsecured LT CCC- Affirmed CCC-
PROVINCE OF SALTA: Fitch Affirms Foreign & Local Curr. IDRs at CCC-
-------------------------------------------------------------------
Fitch Ratings has affirmed the Province of Salta's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) at
'CCC-'. Salta's Standalone Credit Profile (SCP) is assessed at
'ccc'. Salta's IDRs are capped by Argentina sovereign IDR. In
addition, Fitch has affirmed Salta's USD 357.4 million senior
unsecured step-up notes due in 2027 at 'CCC-', the same level as
the province's IDRs. Fitch relied on its rating definitions to
position Salta´s ratings and SCP.
Salta's rating affirmation is supported by an actual debt service
coverage ratio (ADSCR) above 1x and by adequate liquidity coverage
ratios projected for the next 12-24 months. The province will begin
to amortize its USD357.4 million senior unsecured step-up notes
with two principal amount payments of 5% in June 2023 and December
2023, followed by two principal amount payments of 7.5% in June
2024 and December 2024.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The assessment reflects Fitch´s view that there is a very high
risk of the issuer´s ability to cover debt service with the
operating balance weakening unexpectedly over the scenario horizon
(2023-2025) due to lower revenue, higher expenditure, or an
unexpected rise in liabilities or debt-service requirements.
Revenue Robustness: 'Weaker'
Salta's revenue robustness is assessed as 'Weaker' and reflects its
high dependence on federal transfers, which account for 74%
(average for 2018-2022) of its operating revenues. These federal
transfers are automatic from the co-participation tax-sharing
regime, which stem from a 'CCC-'-rated sovereign counterparty. The
latter is compounded by the country's modest economic growth
prospects.
The national GDP dropped 2.6% in 2018, a further 2.1% in 2019, and
9.9% in 2020 due to the coronavirus pandemic, in real terms. The
national GDP recovered 10.4% in 2021 and 3.0% in 2022 but will
decelerate in 2023 by 0.3%.
Revenue Adjustability: 'Weaker'
Fitch believes that local revenue adjustability is low and
challenged by the country's large and distortive tax burden. The
weak macroeconomic environment also limits local and regional
governments' (LRGs) ability to increase tax rates and expand tax
bases to boost their local operating revenues. Structurally high
inflation also constantly erodes real-term revenue growth and
affects affordability.
Provincial jurisdictions have legal autonomy to set tax rates on
local revenues that mainly consist on turnover taxes (Ingresos
Brutos) and stamps. Local taxes represented 24.5% of total
consolidated provincial revenues in 2021, reflecting low fiscal
autonomy and reliance on federal transfers from the
co-participation shared tax regime.
Expenditure Sustainability: 'Weaker'
Argentine provinces have high expenditure responsibilities,
including healthcare, education, water, transportation and other
services. The country's fiscal regime is structurally imbalanced
regarding revenue-expenditure decentralization. This is further
exacerbated by the high inflationary environment, which weakens the
province's control over total expenditure growth.
Salta reported an average of 7.1% for operating margins in the
2018-2022 period. There was some improvement until 2021, when the
operating margin reached 7.9, driven by economic recovery and
real-term OPEX containment. However, Fitch observed a sizable
growth in OPEX toward the last quarter of 2022, with margins
deteriorating somewhat to 5.9% by the end of the year. Salta had
accumulated real reductions in payroll in the last few years,
leading to pressures to adjust wages. The payroll now appears to be
slightly above the level observed in 2017. Considering the current
context of national and provincial elections as well as economic
deceleration, going forward, Fitch expects operating margins will
converge towards 5.9% in 2023, followed by some moderation toward
the end of the projection horizon, with margins at 5.2% by 2025.
Salta is among the provinces that transferred its pension system to
the national government and, therefore, is not pressured by pension
deficits.
Expenditure Adjustability: 'Weaker'
Fitch views leeway or flexibility to cut expenses for Argentine
LRGs as weak relative to international peers. Salta's capex
corresponded to 8.9% of consolidated provincial total expenditures
in 2022 and 7.1% on average for the 2018-2022 period. For all
Argentine provinces, capex corresponded to 13.4% of total
expenditures on average in 2021. Salta's payroll bill is high at
63.4% of total expenditures in 2022, among the highest for
Argentine LRGs, limiting the provinces budgetary flexibility.
Liabilities & Liquidity Robustness: 'Weaker'
Capital market discipline is currently heightened by a 'CCC-' rated
sovereign, thus curtailing external market access to LRGs. Unhedged
foreign currency debt exposure is an important structural weakness
considered in this KRF assessment, along with the weak national
framework for debt and liquidity and underdeveloped local market.
The context of national capital controls is an additional weakness
captured in this key risk factor (KRF), although currently there
are no legal restrictions in place for subnationals to access the
foreign exchange market and service external debt. The uncertain
evolution of exchange regulations could affect LRGs' abilities to
fulfill their financial obligations in case of regulatory changes.
The province's 2020 default of its senior unsecured notes and DDE
of February 2021 also weigh on the 'Weaker' assessment.
Liabilities & Liquidity Flexibility: 'Weaker'
For liquidity, Argentine provinces rely mainly on their own
unrestricted cash. Fitch believes the national framework in place
regarding liquidity support and funding available to subnationals
is weak, as there are no emergency-support liquidity mechanisms,
and considering that the sovereign's external market access affects
the entity's refinancing capacity. Fitch estimates the province's
liquidity coverage ratio at 2.3x by YE 2021 and 2.5x by the YE
2022.
Debt Sustainability: 'aa category'
Considering the current 'CCC-' sovereign rating and curtailment of
the external market amid a volatile macroeconomic and regulatory
context, Fitch is only projecting a rating case for 2023-2025.
Fitch analyzed debt sustainability metrics to evaluate Salta's debt
repayment capacity and its liquidity position under this short
rating case horizon.
Under Fitch's rating case scenario, the primary metric of payback
burden (net adjusted debt to operating balance) will be below 5x
with a score of 'aaa'. The actual debt service coverage ratio
(operating balance to debt service, ADSCR) is projected slightly
above 1.0x, a 'bb' score, resulting in a final 'aa' debt
sustainability assessment, reflects an override of the payback
ratio because of the weaker coverage level.
DERIVATION SUMMARY
The Province of Salta's SCP of 'ccc' reflects rating definitions,
considering the province's adequate debt service and liquidity
coverage ratios over the next 12-24 months. Salta's risk profile is
assessed as 'Vulnerable', while its debt sustainability is assessed
at 'aa'. Salta's SCP factors in a comparison with national and
international peers. The province's IDRS of 'CCC-' are capped by
the Argentine sovereign IDRs.
Debt Ratings
The province's USD 357.4 million senior unsecured notes are
positioned at the same level as its 'CCC-' IDRs.
KEY ASSUMPTIONS
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Debt sustainability: 'aa'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap (LT IDR): 'CCC-'
Sovereign Cap (LT LC IDR) 'CCC-'
Sovereign Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2018-2022 figures and 2023-2025 projected
ratios. The key assumptions for the scenario include:
- Across the argentine LRG portfolio, guidelines assumptions are
being considered; however, Fitch also considers each issuer's case
by case trends;
- Due to FX versus inflation dynamics, assumptions include a
relevant stress in taxes and transfers received to a level below
inflation for 2023-2025;
- Opex projections consider entity-specific historical performance.
For the Province of Salta, after years of wage bill adjustments
lagging inflation, the province reported a sizable OPEX growth in
the 4Q2022. As a result, OPEX is above the level observed in 2017
for the first time in five years. Therefore, Fitch considers that
there will be less pressure for wage growth going forward. In fact,
Salta´s operating margins have been fairly consistent in the last
five years. Fitch's rating case projects OPEX to grow aligned with
operating revenues, which translates into fairly constant operating
margins, with some deterioration towards the end of the rating
case;
- Capex is expected to grow with inflation in 2023-2024,
decelerating in 2025;
- No new debt is assumed as there is no FX market access. Debt
growth reflects FX depreciation and has no cash impact.
Quantitative assumptions - Sovereign Related
Figures as per Fitch's sovereign actual for 2021 and forecast for
2022.
Liquidity and Debt Structure
By YE 2022, direct debt increased by about 64.5% due to FX
depreciation, totaling around ARS94.9 billion. Approximately 75% of
debt is in foreign currency. There is significant maturity
concentration in 2024-2027. For the year of 2023, close to ARS10.2
billion of maturities are to the federal government, compared with
a total maturity of ARS21.9 billion in that same year.
Issuer Profile
The Province of Salta is located in northwest Argentina. It has a
small and weak local economy concentrated in the tertiary sector,
heavily weighted in social services and the public sector. The
primary sector also contributes, and includes hydrocarbon
extraction. Salta has a low GDP per capita and a higher than
average percentage of the population with unsatisfied basic needs,
which translates into structurally high infrastructure needs.
Salta's economy corresponded to around 1.5% of national GDP, which
is equivalent to ARS 694.2 billion in 2021. The province's
population is estimated at 1.4 million or 3.1% of the national
population.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Signs of deeper liquidity stress that could compromise debt
repayment capacity in the next 12 months of the projected horizon,
including evidence of increased refinancing risks or any regulatory
impositions that hinder debt servicing of external debt;
- Policy or budgetary uncertainties that deteriorate operating
margins and drive debt service coverage ratio below 1.0x;
- Additional expenditure risks that increase volatility of
operating balances and deteriorate ADSCR relative to Argentine LRG
peers;
- Any formal announcement by the province or its agent that is
assessed as a distressed debt exchange (DDE) under Fitch's rating
definitions;
- A downgrade of the sovereign IDR could result in a downgrade of
Salta´s IDR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade to Argentina´s IDR would result in an upgrade in
Salta´s IDR.
ESG Considerations
Salta, Province of has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption due
to weak management practices and regulations towards its financial
obligations, which has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.
Salta, Province of has an ESG Relevance Score of '4' for Creditor
Rights due to the 2021 Distressed Debt Exchange, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
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
----------- ------ -----
Salta, Province of LT IDR CCC- Affirmed CCC-
LC LT IDR CCC- Affirmed CCC-
senior
unsecured LT CCC- Affirmed CCC-
===========
B R A Z I L
===========
AMERICANAS SA: Bondholders Hire Moelis, Padis Matter for Advice
---------------------------------------------------------------
Reshmi Basu and Rachel Butt of Bloomberg News report that a group
of Americanas SA bondholders has tapped financial adviser Moelis &
Co. and Brazilian law firm Padis Mattar Advogados for advice as the
distressed Brazilian retailer prepares to restructure its debt,
according to people with knowledge of the matter.
The ad hoc committee of bondholders is also working with Akin Gump
Strauss Hauer & Feld for assistance, Bloomberg has reported.
Debtwire earlier reported on the Padis Mattar engagement, and Reorg
reported on Moelis.
About Americanas SA
Americanas was one of the largest diversified retail chains in
Brazil, with a wide platform of physical stores, robust
e-commerce,
fintech, and has just entered into the niche food retail. It is
listed on B3, being indirectly controlled by billionaire Jorge
Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles.
The retailer nosedived in January 2023 after becoming mired in an
accounting scandal. The firm filed for bankruptcy at a court in
Rio de Janeiro on Jan. 19, 2023.
Americanas sought protection under Chapter 15 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25,
2023. White & Case LLP, led by John K. Cunningham, is the U.S.
counsel.
BRAZIL: Faltering Economy Endangers 'Barbecue And Beer' Promise
---------------------------------------------------------------
Andrew Rosati at Bloomberg News reports that President Luiz Inacio
Lula da Silva promised to bring prosperity back -- "barbecue and
beer" for all -- if he returned to Brazil's top job. Two months
into his presidency, the economy he inherited is cutting his
honeymoon short and has him rushing to stem the damage.
Official data released showed Brazil's gross domestic product
shrank 0.2 percent at the end of 2022, snapping five straight
quarters of growth, according to Bloomberg News. The downturn is
widely expected to continue this year, the report relays.
If analysts' forecasts hold true, Lula's ambitious plans to fight
both hunger and the deep political divide in Latin America's
largest nation are under threat, the report notes. He won the
election evoking nostalgia for the boom times of his previous two
terms when poverty fell and Brazil rose to the centre of the world
stage, the report says.
His pitch: "People need to be able to barbecue again."
But since taking office on January 1, Lula appears to be struggling
to reconcile with the tough economic reality, the report notes.
He's clashed with investors and his own Central Bank chief,
whipsawing markets and budget hawks who fret about high debt levels
and limited space for more spending, the report says.
"The fact is, Lula is really worried about a recession," said
Thomas Traumann, a columnist and political consultant. "He's
hitting every button he has available, but realises there's not
much he can do," the report relays.
Pummelled Demand
For full-year 2022, Brazil posted 2.9 percent growth largely on
services as Covid-19 restrictions were lifted, and on gains in
industry, according to the national statistics institute, the
report relays. On the other hand, agriculture lost productivity,
the report says.
Now, tight financial conditions and above-target inflation are
pummelling demand. At the same, the effects of a multi-billion
dollar stimulus introduced last year by former President Jair
Bolsonaro are fading, while the global economy seems set to slump,
the report notes.
The upshot is analysts see gross domestic product expanding less
than 1% in 2023. While that could change, most agree the risks are
rising, the report discloses.
"High interest rates are taking a toll on Brazil's economy and put
the growth outlook for the first year of President Luiz Inacio Lula
da Silva's term on weak footing. Instead of quarrelling with the
Central Bank, Lula could foster growth by clarifying his economic
policies and overhauling consumption taxes to boost productivity,"
said Adriana Dupita, Bloomberg's Brazil and Argentina economist,
the report notes.
Truth is, Lula had nothing to do with the data. The economy was
initially hit by the pandemic and then propped up temporarily by
tax cuts and handouts given by his predecessor ahead of last year's
election, the report relays.
Still, it's now a far different country than the one Lula led from
2003 to 2010, the report says. Back then, he oversaw a commodity
bonanza that fuelled growth and welfare programs that pulled
millions of Brazilians into the ranks of the middle class, the
report discloses.
And after beating Bolsonaro, a conservative former army captain, by
one of the slimmest margins in Brazil's modern history -- a victory
that his opponent still hasn't formally recognised -- the
77-year-old president is hard-pressed to show supporters he's
serious about bringing the nation back to its former glory, the
report relays.
Concerns about what four more years of Bolsonaro would have meant
for Brazil's young democracy united both allies and one-time Lula
critics. Though, "to many voters, Lula is 'barbecue and beer,'"
Traumann said. "It's the feel-good factor," the report notes.
The pressure on Lula to deliver was heightened just days into his
new administration when thousands of Bolsonaro backers rioted in
the capital, Brasília, ransacking some of the nation's most sacred
democratic institutions and alleging electoral fraud, the report
relays. The mobs were quickly quashed, but staunch opposition
remains, the report adds.
Measures
Lula has pursued measures to soften the blow from inflation and
give the economy a jolt. Chief among them was securing approval to
lift spending by some US$32 billion this year, mostly for aid to
the poor, the report notes.
The leftist leader is pledging to introduce a new fiscal framework
in coming weeks, the report says. But with the government expected
to run a primary deficit this year, investors are anxiously asking
how and when?
"This uncertainty is the problem," said Tatiana Pinheiro, chief
economist at Galapagos Capital, as asset manager in São Paulo.
"This year everything depends on the fiscal side," the report
relays
For its part, the Central Bank is warning it will keep the key
interest rate at a six-year high of 13.75 percent to tamp down
rising inflation expectations -- and making the economy run cooler
for longer, the report discloses. The stance has led Lula to
unload his frustrations on the bank's chief, Roberto Campos Neto,
slamming him for monetary policy that he says is too restrictive,
the report relays.
The spat hasn't helped: traders are paring back bets on rate cuts
this year. Though, it may allow Lula to share the blame if the
economic slide continues, the report relays.
"Lula understands he needs to first demonstrate how messed up the
house was when he arrived," said Thiago de Aragão, head of
strategy at Arko Advice, a consulting firm. "And second, prepare
his followers and supporters for an environment where he won't be
able to make miracles," 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 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).
===============
C O L O M B I A
===============
PA UNION DEL SUR: Fitch Affirms 'BB+' Rating on Loans & Notes
-------------------------------------------------------------
Fitch Ratings has affirmed the following ratings for Patrimonio
Autonomo Union del Sur, in connection with the Rumichaca - Pasto
toll road project in Colombia:
- USD Loan A: USD125 million at SOFR + 2.375% due
in May 2030 'BB+'; Outlook Stable;
- USD Loan B: USD152 million at SOFR + 2.75%, years
one to seven and 3%, years eight until maturity,
due in May 2037 'BB+'; Outlook Stable;
- COP Loan: COP1,019.5 billion at IPC+ 5.25% due in
April 2030 'BB+'; Outlook Stable;
- UVR Notes: COP1,027.5 billion at 6.6% due in
February 2041 'BB+'; Outlook Stable;
Fitch has also affirmed the National Long-Term Ratings for all of
the debt at 'AA+(col)'. The Rating Outlook is Positive.
RATING RATIONALE
The ratings reflect the project's robust concession agreement
structure, which limits exposure to revenue risk via traffic
top-ups and grantor payments. The ratings are further supported by
an adequate tariff adjustment mechanism that increases toll rates
by inflation. The ratings consider a strong debt structure
characterized by robust reserve accounts, cash sweep mechanisms
that largely protect the transaction from traffic performance being
materially above or below expected, and a satisfactory distribution
test.
A 12-month debt service reserve comes from a letter of credit (LOC)
provided by investment-grade (IG) entities for the USD tranches and
from a liquidity facility provided by the
infrastructure-specialized investment manager, Union Para La
Infraestructura (UPLI), for the COP tranches. Fitch's rating case
minimum loan life coverage ratio (LLCR) of 1.4x is robust for the
rating according to applicable criteria and revenue profile,
reflecting the entity's strong dependence on the grantor payments
as toll revenues roughly represent 30% of the project's total
revenues.
The Stable Outlook on the 'BB+' international ratings reflects the
transaction's exposure to the credit quality of the National
Infrastructure Agency's (ANI) grantor obligations. Fitch views
ANI's obligations as credit-linked to the Government of Colombia
(Local Currency Issuer Default Rating [IDR] BB+/Stable).
The Positive Outlook on the 'AA+(col)' national scale ratings
reflects satisfactory progress on construction works, along with
Fitch's expectation that once the remaining land acquisition
procedures are completed, the project will no longer be exposed to
residual completion risks. As of the date of this review, only a
small percentage (16%) of land acquisition is pending. The National
Ratings may be upgraded once the concessionaire complies with all
of the pending construction obligations under the Concession
Agreement, subject to adequate financial performance.
KEY RATING DRIVERS
Limited Volume Risk (Volume Risk: Midrange): Traffic at the
currently operating toll station, El Placer, has a certain degree
of volatility. Tariffs at El Placer is expected to be somewhat
high, but the project's substantial time savings mitigate the
elasticity risk compared with competing roads. Nonetheless, about
70% of the project's revenues consist of ANI's contributions,
mostly streaming from top-up payments, future budget allocations
(FBA), and 90% of the estimated toll revenues at the shadow toll
booth of Ipiales. Fitch believes the ANI payment obligations under
the concession agreement are consistent with the project's credit
quality.
Sources of revenue are subject to infrastructure availability,
service levels, and quality standards based on the fulfilment of
indicators provided in the concession agreement. There are clearly
defined penalty deduction mechanisms in the concession agreement
with robust cure periods and deductions legally capped at 10%.
Additionally, fines imposed on the concessionaire and penalty
clauses in case of early termination of the agreement are limited
by the contract. The midrange assessment reflects the road's
traffic characteristics solely as per applicable criteria; however,
exposure to traffic risk is limited due to the concession
framework.
Inflation-adjusted tolls (Price Risk: Midrange): Tariffs are
adjusted annually by the Colombian inflation rate at the beginning
of the year, and toll rates are somewhat elevated compared to
Colombian peers. However, in January 2023, the Colombian government
announced that toll rates for 2023 would be frozen as part of the
government's anti-inflationary policies. However, the contractual
mechanism establishes the collection of the differences in the
collection of tariffs, and additionally, if the net present value
of toll collections received by the eighth, 13th, 18th, and last
year of the concession is below guaranteed values, the ANI must
cover any shortfalls after deductions.
Adequate Maintenance Plan (Infrastructure Development and Renewal:
Midrange): The project depends on a moderately developed capital
and maintenance plan to be implemented directly by the
concessionaire. The program will be funded mainly from project cash
flows, and the concession agreement does not contemplate hand-back
requirements. However, the concessionaire must continuously operate
and maintain the road in compliance with pre-established
contractual requirements.
Infrata Limited (Infrata), the independent engineer (IE), confirmed
that the concessionaire has the experience and ability to operate
the project successfully. Per the IE, the O&M plan is reasonable,
and the budget allowances are at the upper end of the range
compared to similar 4G Colombian projects, anticipating reduced
cost overruns. The structure benefits from a robust 12-month
forward-looking O&M reserve account (OMRA), and a dynamic major
maintenance accrual account funded to the extent resources are
available equivalent to 100% of the forward-looking maintenance
costs forecasted for the first year, 66% of expenses to be incurred
during the second year, and 33% for the following third year.
Robust Debt Structure (Debt Structure: Stronger): The project's
debt is fully amortizing, senior secured, comprising USD-, UVR- and
COP-denominated financings. USD-denominated debts are matched with
USD-linked revenues settled in COP, as 57% of future budget
allocations are USD-linked but are partially exposed to a variable
interest rate. UVR-denominated debts are indexed to inflation;
similarly, the COP debt interest rate is exposed to inflation
fluctuations.
Structural features include 12-month debt service reserve accounts
(DSRA) in the form of a LOC provided by IG entities and a liquidity
facility from UPLI, and cash sweep mechanisms for traffic over and
underperformance, according to pre-established debt service
coverage ratio (DSCR) levels. While the UVR tranche legal maturity
dates extend beyond the minimum concession termination date, deemed
as a negative feature, Fitch believes it is highly unlikely the
toll collection present value will be reached by the concession's
25th anniversary.
Fitch does not currently rate UPLI. However, Fitch is aware of the
creditworthiness of some entities that have committed investments
in UPLI or its holding companies. This is the case with Atlantic
Security Bank, whose parent company is an investment-grade
counterparty. The same applies to the regulated obligatory pension
funds managed by Skandia Pensiones y Cesantias S.A., AFP
Proteccion, and Porvenir S.A. Fitch rates the funds' underlying
assets' AAAf(col)' and views their management quality as
excellent.
Together with the characteristics of the liquidity facility, the
nature of the investment commitments, and the quality of the
underlying asset, this has resulted in Fitch giving credit to the
investment commitments associated with the investors and,
ultimately, giving partial credit to UPLI's commitment to the
project.
Financial Profile
The most relevant financial metric for the project is LLCR, given
the transaction's debt structure. While DSCRs are projected below
1.0x under Fitch's rating case due to the assumed delays to ANI's
payment obligations, the existence of cash sweep mechanisms and
reserve accounts support liquidity in case top-up payments or
future budget allocations are not timely received.
PEER GROUP
Rumichaca is comparable to Fideicomiso P.A. Pacifico Tres
(Pacifico; BB+/Stable and AA+[col]/Positive). Both projects are
part of Colombia's 4G toll road program and share the same
assessments for all risk attributes. They also have a similar
contribution of toll revenues to total revenues (around 30%) and
are equally exposed to volume risk. Although Pacifico and Rumichaca
have similar LLCRs at 1.4x, Pacifico is still mildly exposed to
completion risk—the credit quality of ANI's grantor obligations
constraints Pacifico and Rumichaca ratings.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Deterioration in Fitch's view regarding the credit
quality of ANI's grantor obligations;
- Unexpected and material difficulties to fully complete the
pending construction obligations or deteriorating financial
performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- For international ratings, an improvement on Fitch's view
regarding the credit quality of ANI's grantor obligations;
- For the national scale rating only: successful compliance of
the pending construction obligations per the Concession
Agreement subject to adequate financial performance.
CREDIT UPDATE
Although the pending construction works in FU1 and FU2 experienced
significant delays mainly due to heavy rains driven by La Nina
Phenomenon, FU2 received the completion certificate on July 29,
2022, and FU1 on Jan. 30, 2023. The concessionaire is currently
finishing tasks under the FU's punch list, and a sanctioning
process was opened for the construction delays in FU1 and land
acquisitions. However, the concessionaire disputed the charge and
expects no fines.
In 2022, average annual daily traffic (AADT) in El Placer toll
booth reached 8,076 vehicles, representing 142% of 2019 levels and
surpassing Fitch's rating case expectations of 6,846. Toll revenues
amounted to COP40 billion, 47% below Fitch's rating case, due to
higher-than-expected participation of light vehicles compared to
heavy vehicles and the construction delays experienced at FU1,
which impeded opening the Contadero toll booth.
The concessionaire installed traffic counting equipment in a
control stand (shadow toll booth) in Ipiales PR11+100. Due to
social opposition, the relocated Contadero toll station will remain
closed until further notice. The compensation for
lower-than-expected toll collection will be quarterly calculated
and paid by the ANI, equaling 90% of the toll collection that would
have been collected at Ipiales.
On Jan. 15, 2023, the Colombian government announced, through
Decree 050, that toll rates for 2023 will be frozen as part of the
government's anti-inflationary policies. The decree also states
that the government will design and apply a mechanism to
re-establish the tariff scheme by Dec. 31, 2024. The decree also
states that ANI will meet the contingent obligations generated in
the concession projects.
Total revenues reached COP492 billion, well below Fitch's rating
case expectations of COP739 billion. The experienced construction
delays mainly explain the difference as the concessionaire received
partial remuneration for Future Budget Allocations, the toll
collections at El Placer, and null collection or compensation at
the Ipiales and Contadero stations since the project remained
classified as pre-operational per ANI's guidelines.
Nevertheless, Fitch believes ANI's contributions should be stable
during 2023 as the project already received the pending completion
certificates and is currently working on the punch list items,
which the IE considers as minor activities that can be addressed
within the given 180 days.
Operational expenditures (opex) reached COP86 billion, above
Fitch's projections of COP74 billion but mitigated by
higher-than-expected financial revenues. The opex deviation was
mainly driven by construction phase delay and higher-than-expected
inflation. The concessionaire believes opex will decrease in 2023
to COP50 billion as the project has achieved its operational
phase.
Although the 2022 cash flow for debt service (CFADS) was COP398
billion, below Fitch's expectations under its base case of COP637
billion, the issuer properly complied with debt service payments
and didn't withdraw funds from the OMRA and DSRA.
FINANCIAL ANALYSIS
Fitch's base case assumed Colombia's inflation at 6.0% for 2023,
2.7% for 2024, 3.0% for 2025 and 2.5% from 2026 onward. For the
U.S.'s CPI, the assumption was 3.6% in 2023, 2.7% in 2024, and 2.0%
throughout the life of the debt. Fitch base case considered the
2022 actual traffic performance at El Placer, and assumed a traffic
growth at a CAGR of 1.7% between 2023-2040.
Fitch assumed FBAs payment would present a three-month delay, while
the top-up payment delay would be equivalent to 18 months. The
assumptions represent the maximum days of delay allowed per the
concession contract before a termination event is triggered. Fitch
also assumed deductions of 0.2%, in line with the IE's
expectations. The assumed cost profile aligns with the sponsor's
updated 2023 budget since the IE confirmed operating expenses are
sufficient to support operations. and included a growth at a CAGR
of 0.7%. SOFR rate was considered at 5.0%. Under Fitch's base case,
the minimum LLCR is 1.4x in 2023.
Fitch's rating case reflects a reasonable likely combination of
uncorrelated stresses that could occur in any given year but are
not expected to persist. Because of this, the rating case further
sensitizes Fitch's base case financial performance by assuming a
CAGR of 1.1% from 2023 to 2040.
The Fitch rating case also assumed revenue deductions at 1.8%
following the IE's lenders' downside case, a 7.5% increase for
operating expenses and capital expenses. Inflation and ANI payment
delays assumptions remained as described for the base case. Fitch's
rating case resulted in a minimum LLCR of 1.4x in 2023.
Fitch was informed of a difference in the interpretation of the
estimation of the top-up payment related to the eighth year of the
concession agreement, potentially impacting toll road concessions
of the Fourth Generation (4G) program. Fitch ran an additional
sensitivity where Union del Sur receives only 50% of the accrued
top-up payment, which results in an LLCR of 1.3x, still consistent
with the assigned rating under Fitch's applicable criteria. Union
del Sur can withstand temporary liquidity stress periods as it
benefits from 12-month debt service reserve account (DSRA).
Currently, Fitch believes this situation is just a misunderstanding
that results from testing the top-up payment concession mechanism
for the first time and should be resolved in a favorable way for
concessionaires in the near future. However, significant delays in
resolving the situation or an outcome inconsistent with Fitch's
interpretation of the concession contract top-up mechanism, could
impact the agency's view of the credit quality of ANI's payment
obligations under the concession contract. The quality of such
obligations ultimately caps ratings of the 4G projects, regardless
of the impact on individual projects' credit metrics.
SECURITY
The security package constitutes substantially all of the assets of
the issuer, Patrimonio Autonomo Union del Sur, and Concesionaria
Vial Union del Sur S.A.S., the co-obligor. The collateral also
includes certain reserve accounts, pledges of rights and stock,
including stand-by letters of credit or other acceptable support
instruments such as UPLI's liquidity facility, assignments of
revenues, the concession and the transaction trust.
On Sept. 11, 2015, Concesionaria Vial Union del Sur S.A.S. was
granted a 25-year concession for the construction and operation of
the existing 83-kilometer Rumichaca-Pasto corridor, located in the
Narino department. The conversion of the toll road into a dual
carriageway aims to provide connectivity between local and
international markets (Ecuador) with indigenous and farmers'
communities in the region's municipalities. The concession period
began on Oct. 27, 2015, and can be extended up to a maximum of 29
years if the tolls collection net present value (VPIP) is not
reached by the 25th concession anniversary.
The project's revenues consist of collected toll revenues at El
Placer and ANI's contributions, including future budget allocations
(vigencias futuras), top-up traffic payments (diferencias de
recaudo), and the 90% of Ipiales shadow toll revenues. ANI's
payments enhance revenue stability and predictability and are
denominated in COP and USD, although they are always paid in COP.
ANI's contributions are assigned upon completion or, under certain
circumstances, under partial completion of each FU.
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
----------- ------ -----
Patrimonio
Autonomo Union
del Sur
Patrimonio
Autonomo Union
del Sur/senior
secured/1 LT LT BB+ Affirmed BB+
Patrimonio
Autonomo Union
del Sur/senior
secured/1 Natl LT Natl LT AA+(col)Affirmed AA+(col)
===================
C O S T A R I C A
===================
COSTA RICA: Fitch Hikes LongTerm IDRs to 'BB-', Outlook Stable
--------------------------------------------------------------
Fitch Ratings has upgraded Costa Rica's Long-Term Foreign Currency
and Local Currency Issuer Default Ratings (IDR) to 'BB-' from 'B'.
the Rating Outlook is Stable.
KEY RATING DRIVERS
Two-Notch Upgrade, Stable Outlook: The two-notch upgrade of Costa
Rica's ratings to 'BB-' reflects the sharp structural improvement
of its fiscal position and easing of government constraints to
finance its budget. Sustained access to multilateral lending
further eased financing constraints and high borrowing costs. The
strict implementation of the fiscal rule over the past few years
represents an important shift from a decade of fiscal deterioration
that drove a sharp increase in the debt/GDP ratio. The government
has consistently outperformed the fiscal targets embedded in the
IMF Extended Fund Facility (EFF) program agreed in 2021 by a wide
margin.
Credit Fundamentals: Costa Rica's 'BB-' rating is supported by
structural strengths relative to the 'BB' category, including
strong governance indicators, higher economic development and
per-capita income well above peers. An economic model centered on
high-value-added manufacturing and service activities continues to
support macroeconomic stability and strong FDI flows. Strict
compliance with its fiscal rule (which caps government spending
based on past nominal GDP growth) has resulted in a significant
improvement in public finances trends. This is counterbalanced by
relatively high financing needs in the near term and high interest
payments reflecting the steep increase of the debt burden over the
past decade. Political gridlock continues to result in uncertainty
about the government's external financing capacity, although this
has improved in the near term in the context of the global bond
issuance approval by the legislative assembly for the next three
years.
Fiscal Improvement Continues: The central government primary
balance reached a surplus of 2.1% of GDP in 2022 (the highest since
2008), compared to a deficit of 0.3% in 2021 and well above the
0.7% primary surplus EFF target. The improvement of the fiscal
balance reflects robust tax collection, one-off revenue items and
lower spending growth, which continues to be rather limited by the
fiscal rule. The government's adherence to the fiscal rule, first
implemented in 2020, has been pivotal to the consolidation. The
change of administration after former finance minister Rodrigo
Chaves won April's presidential election has not affected the
commitment to improve Costa Rica's fiscal position and compliance
with the EFF.
Debt Trajectory Past Inflection Point: Central government debt
declined to 63.8% of GDP in 2022 from 68.0% in 2021, in line with
our forecasts, driven by a sharp improvement of the government's
primary balance and robust economic activity. General government
debt (net of social security government debt holdings) declined to
57.6% in 2022 (60.9% in 2021), roughly in line with the 'BB'
category median of 54.6%. This marks a sharp reversal of steady
fiscal deterioration that led to debt/GDP tripling between 2008 and
2021. Fitch expects a downward debt trajectory over the coming five
years, largely reflecting a better primary surplus.
Easing Financing Constraints: Costa Rica's legislative assembly
approved external bond issuances of up to USD5 billion (equivalent
to 7.2% of forecast 2022 GDP), USD1.5 billion in the first and
second halves of 2023, USD1 billion in 2024 and USD1 billion in
2025. Authorization requires a two-thirds congressional
supermajority. This marks the first approval since Congress
authorized just USD1.5 billion of issuance in 2019. The need for
Congress's authorization of external market issuance and borrowing
from multilaterals caused uncertainty over the government's
financing capacity, with broader macro implications.
Political Gridlock Remains: Rodrigo Chaves of the centrist PSD
party won the presidential election in a second round in April
2022. The administration has not deviated from the previous
government's fiscal consolidation commitment through its first
year, and we do not anticipate a material change of fiscal policy
in the coming years. Political gridlock will persist as the 57
congressional seats were divided among six political parties while
the governing PSD secured only 10 seats. The congressional approval
of global bond issuances, while positive, may not signal a broader
improvement in the relationship between the executive branch and
the legislative assembly, and we anticipate significant challenges
for the government to push its own agenda.
Economic Activity Moderates: Real GDP growth reached 4.3% in 2022,
after 7.8% in 2021, reflecting a robust recovery from the 3.7%
contraction in 2020. Economic activity was supported by robust
external demand, growing by 12.2% in 2022 as the free trade zones
continue to showcase double digit growth. Fitch forecast 2023
growth to slow to 2.5% as external demand cools down given Fitch's
expectation of a US mild recession this year. Near-shoring
prospects given U.S.-China tensions may benefit key sectors in
Costa Rica such as health-related exports, although this may not
materialize in the near term.
Inflationary Pressures Now Receding: Inflation rose through 2022,
peaking at 12% but has now receded to 7.65% by January 2023.
Inflation pressures have been driven mainly by higher commodity
prices, particularly fuel, affecting transportation and food
prices. Costa Rica's central bank began tightening its monetary
policy rate in late 2021 at a rather fast pace, going from 0.75% in
November 2021 to 9.0% by October 2022. Fitch expects a restrictive
monetary policy stance coupled with the easing of global commodity
prices will result in a gradual convergence to the central bank's
inflation target of 3% by 2024.
Easing External Pressures: The exchange rate and international
reserves have been pressured by the pandemic-related halt of
tourism revenues, government external financing needs amid
constricted funding access, a higher fuel import bill and
speculation over foreign reserve adequacy following remarks made by
the current administration. The recovery of the tourism sector,
increased government access to external financing and the central
bank's acquisition of a USD1.1 billion lending facility from FLAR
to support foreign reserves sharply reverted the near-term foreign
exchange (FX) pressures and foreign reverses. The government's
global bond issuance approval will further ease external financing
pressures, as previous restrictions led the public sector to be a
net FX buyer rather than a supplier.
Moderate Disruption from Cyberattack: The government declared a
national emergency May 2022 in response to a ransomware attack
affecting multiple public sector institutions including the
Ministry of Finance and Social Security Institute, for which
Russia-based international criminal group Conti claimed
responsibility. The attack disrupted government administrative
functions but did not materially affect economic activity, tax
collection or the government's capacity to repay its debt
obligations.
ESG Governance: Costa Rica has an ESG Relevance Score of '5'/'5'
[+] for Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption.
These scores reflect the high weight that the World Bank Governance
Indicators (WBGI) have in our proprietary Sovereign Rating Model.
Costa Rica has a high WBGI ranking at 73, reflecting its long track
record of stable and peaceful political transitions, well
established rights for participation in the political process,
strong institutional capacity, effective rule of law and a low
level of corruption.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Public Finances: Re-emergence of financing constraints;
- Public Finances: Fiscal policy reversal that results in an
upward debt trajectory, for example failure to adhere to the fiscal
rule or a significant modification of the fiscal rule resulting in
a wider fiscal deficit;
- External: Evidence of external liquidity stress; for example, a
sharp decline of international reserves.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Public Finances: Continued political commitment to maintain the
ongoing fiscal consolidation that maintains the trajectory of the
government's debt/GDP ratio on a downward path and preserves the
improvement of government financing flexibility and cost of
borrowing;
- External: Sustained improvement in external liquidity buffers;
- Structural: Reduction of political fragmentation that supports
more cohesive policy making, for example, a significant improvement
in the relationship between the executive branch and the
legislative assembly.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary Sovereign Rating Model (SRM) assigns Costa Rica
a score equivalent to a rating of 'BBB' on the Long-Term
Foreign-Currency IDR scale.
In accordance with its rating criteria, Fitch's sovereign rating
committee decided to adjust the rating indicated by the SRM by more
than the usual maximum range of +/- three notches because of the
extent of Costa Rica's fiscal budget financing constraints leading
to concerns about debt sustainability, as well as the emergence of
macroeconomic vulnerabilities.
Structural: -2 notches; reflects a long track record of
institutional gridlock that has hindered timely progress on
necessary reforms and external financing, which is not fully
captured in the high governance scores that feed into the SRM.
Public Finances: -1 notch; reflects an adverse fiscal structure as
interest payments have significantly grow in the context of a steep
debt rise and high borrowing costs. Central government fiscal
metrics are much weaker than the general government metrics that
feed into the SRM, signalling greater fiscal financing and rigidity
challenges. Fitch has removed -1 notch to reflect the significant
improvement towards reducing the fiscal deficit which has resulted
in an improvement in the debt trajectory going forward.
External Finances: -1 notch; reflects the institutional gridlock
that led to periodic barriers to external bond issuance, and
reserve adequacy metrics that are low in the context of a managed
exchange rate and high financial dollarization. Absent
authorization for external debt, the government would be a net
buyer of foreign exchange rather than a supplier, increasing
external vulnerabilities.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a long-Term Foreign Currency IDR. Fitch's Qualitative
Overlay is a forward-looking qualitative framework designed to
allow for adjustment to the SRM output to assign the final rating,
reflecting factors within its criteria that are not fully
quantifiable and/or not fully reflected in the SRM.
ESG CONSIDERATIONS
Costa Rica has an ESG Relevance Score of '5'[+] for Political
Stability and Rights, as WBGI have the highest weight in Fitch's
SRM and are therefore highly relevant to the rating and a key
rating driver with a high weight. As Costa Rica has a percentile
rank above 50 for the respective governance indicator, this has a
positive impact on the credit profile.
Costa Rica has an ESG Relevance Score of '5' [+] for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
WBGI have the highest weight in Fitch's SRM and are therefore
highly relevant to the rating and are a key rating driver with a
high weight. As Costa Rica has a percentile rank above 50 for the
respective governance indicators, this has a positive impact on the
credit profile.
Costa Rica has an ESG Relevance Score of '4' [+] for Human Rights
and Political Freedoms as the Voice and Accountability pillar of
the WBGI is relevant to the rating and a rating driver. As Costa
Rica has a percentile rank above 50 for the respective governance
indicator, this has a positive impact on the credit profile.
Costa Rica has an ESG Relevance Score of '4' [+] for Creditor
Rights as willingness to service and repay debt is relevant to the
rating and is a rating driver for Costa Rica, as for all
sovereigns. As Costa Rica has record of 20+ years without a
restructuring of public debt, which is captured in its SRM
variable, this has a positive impact on the credit profile.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, is a score of '3'. This means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or to the way in which they
are being managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Costa Rica LT IDR BB- Upgrade B
ST IDR B Affirmed B
LC LT IDR BB- Upgrade B
LC ST IDR B Affirmed B
Country Ceiling BB Upgrade B+
senior
unsecured LT BB- Upgrade B
=============
J A M A I C A
=============
JAMAICA: Minister Calls for Approach to Protecting Resources
------------------------------------------------------------
RJR News reports that Jamaican Tourism Minister Edmund Bartlett is
urging stakeholders in the tourism industry to adopt a proactive
strategy in safeguarding the ocean and its marine resources.
This is in light of the ongoing threats to the sustainability of
these natural assets, according to RJR News.
Mr. Bartlett said there needs to be "a seriousness of intent,
purpose and action" to address activities that harm marine
resources, the report notes.
He said this commitment to sustainable behaviour and practices is
necessary to help preserve the benefits of the marine and coastal
ecosystems which enable the survival of billions of people
globally, the report relays.
He was speaking at a recent lecture series hosted by the Caribbean
Maritime University, the report adds.
As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
M E X I C O
===========
FINANCIERA INDEPENDENCIA: Fitch Alters Outlook on 'BB-' IDRs to Neg
-------------------------------------------------------------------
Fitch Ratings has revised Financiera Independencia, S.A.B. de C.V.,
SOFOM, E.N.R.'s (Findep) Rating Outlook to Negative from Stable,
and affirmed its Long-Term Foreign and Local Currency Issuer
Default Ratings (IDRs) and global senior unsecured debt at 'BB-'
and Short-Term Local and Foreign Currency IDRs at 'B'.
In addition, Fitch has affirmed the Long- and Short-Term National
Scale ratings of Findep and its subsidiary Apoyo Economico Familiar
S.A. de C.V., SOFOM, E.N.R.'s (AEF) at 'A-(mex)' and 'F1(mex)',
respectively. The Rating Outlooks on the Long-Term national scale
ratings were also revised to Negative from Stable.
Fitch also has assigned a final rating of 'BB-' to Findep's U.S.
dollar senior unsecured notes (Step-Up Notes) of USD83.3 million.
The final rating is in line with the expected rating assigned on
Jan. 24, 2023.
KEY RATING DRIVERS
The Negative Outlook reflects the agency's expectation that
Findep's liquidity coverage could tighten toward levels around
0.3x, a level that, in Fitch's opinion, could pose relevant risks
for the company in the next 12-24 months. Additionally, the funding
structure will trend toward a greater proportion of secured funding
sources after the results of the recent Exchange Offer of its 8%
Senior Notes (Existing Notes) given the toughened funding
conditions for the sector. The ratings affirmation takes into
account that Findep's financial and business profiles remain
consistent with the ratings and that the entity has been taking
precautionary steps toward addressing its refinancing risks.
Expected Low Funding Flexibility and Liquidity Pressures: Fitch has
revised downward its assessment of Findep's funding, liquidity and
coverage, to 'b+' from 'bb-', modified the trend to Negative from
Stable and maintained its high importance for the ratings. The 'b+'
assessment reflects Findep's remaining refinancing risks from the
pending amount of its Existing Notes (USD57.5 million of principal)
and the agency's expectation of a reduced unsecured funding ratio
and a pressured liquidity position going forward. As of YE22, the
unsecured debt to total debt was 59.5% (YE21: 72.1%) and the
available cash covered around 0.6x the payments due in the next 12
months. After the Exchange Offer payment, Fitch expects the
coverage to be around 0.3x.
Significant International Operations and Recognized Franchise:
Fitch has revised the trend of business profile (assessed at 'bb-'
and high importance) to negative from stable. Fitch considers that
Findep's business profile could be affected if its refinancing
actions result in a significant and prolonged reduction in its
origination that impacts its franchise and competitive position.
The entity has a recognized franchise and its geographical
diversification in the microfinance sector partly offsets the
higher risk of its business model. Fitch assesses Findep's
operating environment (OE) at 'bbb-' with a stable trend and
moderate importance. Fitch considers a blended approach that
incorporates the entity's operations in Mexico and in the U.S.
Pressures on Asset Quality: During 2022, Findep exhibited some
deterioration in its asset quality metrics. As of December 2022,
the adjusted delinquency ratio considering charge-offs of the
previous 12 months was around 18.8%, above the 15.2% at YE21, but
still below the pre-pandemic levels. At the end of 2022 (YE22), the
core delinquency metric was 6.7% (the legacy metric was 5.7%
according to information provided by the company), above the 4.4%
at YE21. Although the core metric was impacted by the
implementation of the new CNBV guidelines, Fitch has observed a
deteriorating trend during 2022, and does not rule out additional
increases in Findep's delinquency metrics considering the high
inflation environment in Mexico and the U.S.
Strengthened Profitability and Low Tangible Leverage: Profitability
ratios have benefited from cost structure efficiencies. As of YE22
the pre-tax profit to average assets ratio was around 8%, above the
6.4% of YE21. Fitch expects profitability will be affected by
increased funding costs, but will remain commensurate with Findep's
rating. The company's tangible leverage remains a rating strength
with a metric near 1.6x driven by improved profitability and
earning retention. Fitch expects tangible leverage metrics to
remain close to recent levels due to the company's recent growth
target revision to single digits.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Failure to proactively address 12 months ahead of the remaining
2024 bond maturity through refinancing;
- A low and sustained liquidity coverage;
- A relevant deterioration of Findep's business prospects and
diversification, which could result in a change on Fitch's
assessment of its business profile and OE.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The Outlook could be revised to Stable if Findep exhibits a
sustained strengthening of its liquidity coverage above the level
reached after the payment of the exchange offer;
- In the medium term, the ratings could be upgraded due to a
significant and sustained improvement in the company's overall
financial profile, particularly a profitability metric consistently
above 7% and an asset quality metric significantly lower than
current levels;
- A material strengthening of Findep's franchise and business model
consistency, provided that there are no refinancing and liquidity
risks.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
Debt Rating: Findep's global debt issuances ratings are in line
with its respective corporate rating level, as the debt is senior
unsecured.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
Senior unsecured debt ratings would mirror any changes in Findep's
IDRs or could be downgraded below Findep's IDR if the level of
unencumbered assets substantially deteriorates, subordinating
bondholders to other debt.
SUBSIDIARY AND AFFILIATE RATINGS: KEY RATING DRIVERS
Subsidiary Ratings: AEF national ratings are equalized to those of
Findep, driven by Fitch's opinion on the group's ability and
propensity to support the subsidiary. Fitch's opinion on support
considers with high importance AEF's relevant role to the
consolidated operation providing credits to customers in Findep's
core sector and market, the considerable integration with the
shareholder and funding fungibility.
SUBSIDIARY AND AFFILIATE RATINGS: RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- An upgrade of Findep's national ratings.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- If Findep's ratings are downgraded or Fitch reduces its
evaluation of the entity's strategic importance to the parent.
SUMMARY OF FINANCIAL ADJUSTMENTS
Pre-paid expenses and other deferred assets were reclassified as
intangibles and deducted from equity to reflect their low loss
absorption capacity.
SOURCES OF INFORMATION
Financial figures are in accordance with the CNBV criteria. 4Q22
figures include recent accounting changes in the process to
converge to International Financial Reporting Standards (IFRS).
Prior years did not include this change and the agency believes
they are not directly comparable.
ESG CONSIDERATIONS
Findep has an ESG Relevance Score of '4' for Customer Welfare —
Fair Messaging, Privacy & Data Security as its business model has
high lending rates to unbanked, lower income segments of the
population, which exposes Findep to relatively high regulatory,
legal and reputational risks. This has a negative impact on the
credit profile and is relevant to the rating in conjunction with
other factors.
Findep has an ESG Relevance Score of '4' for Exposure to Social
Impacts given that its business model (individual loans to
low-income segments) is exposed to shifts of consumer or social
preferences or to measures that the government could take to
increase financial inclusion. This has a negative impact on the
credit profile and is relevant to the rating in conjunction with
other factors.
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
----------- ------ -----
Financiera
Independencia,
S.A.B. de C.V.,
SOFOM, E.N.R. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT A-(mex) Affirmed A-(mex)
Natl ST F1(mex) Affirmed F1(mex)
senior
unsecured LT BB- Affirmed BB-
senior
unsecured LT BB- New Rating BB-(EXP)
Apoyo Economico Familiar S. A.
de C. V., Sociedad Financiera
de Objeto Multiple, E. N. R.
Natl LT A-(mex) Affirmed A-(mex)
Natl ST F1(mex) Affirmed F1(mex)
=======
P E R U
=======
PERU: Discloses $9-Bil Injection to Boost Economy Amid Protests
---------------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Peru's
government announced the launch of more than 30 public-private
projects worth nearly $9 billion, hoping to revive the economy hit
by violent anti-government protests.
The projects, involving road infrastructure, energy and sanitation,
are set to begin between this year and 2024, according to the head
of the state's agency for investment promotion Jose Salardi,
speaking at an event with investors, the report notes.
"The key is to regain confidence," Salardi said, adding the
government is simplifying processes, standardizing contracts and
coordinating with the private sector, according to
globalinsolvency.com.
Anti-government protests have gripped the country since the Dec. 7
ouster of Former President Pedro Castillo, with clashes between
demonstrators and security forces leaving dozens dead, the report
notes.
Private investment in Peru fell 0.5% last year, while it posted a
37.4% growth in 2021, according to economy ministry data, the
report relays.
In the same conference with investors, Economy Minister Alex
Contreras stated protests affected the economy of the world's
second largest copper producer in December and January, but early
economic indicators are showing a recovery in February, the report
discloses.
"The goal is for private investment to increase 3% this year,"
Contreras told the conference, the report adds.
PETROLEOS DEL PERU: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Neg.
-------------------------------------------------------------------
Fitch Ratings has affirmed Petroleos del Peru - Petroperu S.A.'s
Long-Term Foreign and Local Currency Issuer Default Ratings (IDR)
at 'BB+'. Fitch has also affirmed the rating of Petroperu's senior
unsecured notes at 'BB+'. The Negative Rating Watch has been
removed and the Rating Outlook is Negative.
Petroperu's ratings reflect its moderate linkage to Peru's
(BBB/Negative) credit quality coupled with a weak Standalone Credit
Profile (SCP), which Fitch believes is commensurate with a 'ccc-'
SCP reflected by its persistently weak liquidity, higher working
capital needs and high leverage estimated to average 4.8x over the
rated horizon.
The Negative Watch was removed given the company published its
audited financials for year-end 2021 and obtained a consent from
bonds holders to avoid an event of default, due to its failure to
provide audited financial, preventing an acceleration of its debt.
The Negative Outlook mirrors that of the sovereign Outlook, given
its ratings are tied to the sovereign.
KEY RATING DRIVERS
Government Related Entity: Petroperu's ratings are linked with the
sovereign's through Fitch's GRE criteria. The company is rated on a
top-down-minus-two basis due to a GRE assessment score of 32.5.
These factors, coupled with a more than four notch differential
between the SCP and the sovereign rating, resulted in a 'BB+'
rating.
The GRE criteria covers four factors. Status, Ownership and Control
which was rated 'very strong.' Petroperu is 100% owned by the
Peruvian government, through the Ministry of Energy and Mines (60%)
and the Ministry of Economy and Finance (40%). Support Track Record
and Expectations was assessed as moderate, which reflects Fitch's
view that despite recent actions from the government to support the
company, the track record shows irregularity and action was taken
only as a measure of last resort to ensure national energy
security, and not to address balance sheet issues of the company
long-term. Elevated leverage, which is deemed unsustainable, was
not fully addressed as no debt was repaid with the funds made
available, and the support from the government came as severe
liquidity issuers were imminent and the country's fuel supply was
at risk. Socio-Political and Financial Implications of Default,
factors and both were assessed as Strong reflecting the
significance of the company as a provider of key economic and
public service activity, and the impact on the credit quality of
the sovereign in an event of default of the corporate.
Additional Government Support is Needed: The federal government
took some actions in 2022 to support the company and address its
immediate liquidity needs, but none of these measures alleviated
the structural issue of high indebtedness. The government support
amounted to USD2.4 billion, comprising of a USD1.0 billion capital
injection, a guarantee of up to USD500 million for commercial
letters of credit, USD150 million in refunds from the price
stabilization fund, and the extension of a USD750 million
intercompany loan, which has a grace period to repay principal and
interest through August 2024.
Fitch views this support as positive, but still considers that
further support is needed, as high debt levels persist. Elevated
leverage, which is deemed unsustainable, was not fully addressed as
no debt was repaid with the funds provided, and the support from
the government came when the company faced a severe liquidity
constrain and needed imminent support in order to procure fuel for
the country, to avoid an energy shortage.
High Leverage: Petroperu's projected gross debt/EBITDA for 2022 is
estimated to be negative. Fitch estimates Petroperu will maintain a
structural debt close to USD5.0 billion during at least the next
two years. Gross leverage is projected to be 7.0x in 2023 before
falling to around 4.3x during 2024 as the calibration of the Talara
Refinery concludes and it reaches favorable commercial and
financially viable operations. Thus far, the calibration has proven
costly, demanding a high volume of crude which, due to global
market conditions, has been imported at high prices impacting the
company's already weak liquidity and leverage.
Operational Cash Flow Volatility: Petroperu's cash flow generation
is sensitive to changes in oil prices. Since Peru is a net importer
of crude, elevated oil prices result in a compression of its profit
margins. Operational interruptions to its transportation business,
including disruptions related to the actions of local communities,
further exacerbate cash flow volatility. Petroperu's cash flow
volatility experienced in 2021 continued into 2022. The completion
of the Talara refinery should lower capex for the company past
2023. It will also increase operational efficiency, and predictable
crack spreads should translate into stronger EBITDA margins over
the rating horizon.
DERIVATION SUMMARY
Petroperu's rating linkage to the Peruvian sovereign rating is in
line with the linkage present for most national oil and gas
companies (NOCs) in the region, including Empresa Nacional de
Petroleo (ENAP; A-/Stable), YPF S.A. (CCC-), Ecopetrol S.A.
(BB+/Stable) and Petroleo Brasileiro S.A. (Petrobras; BB-/Stable).
In Latin America most NOCs are of significant strategic importance
for energy supply to their countries, and a default could have
potentially negative social and financial implications at a
national level. Like its peers, Petroperu has legal ties to the
government, through its majority ownership and strong operational
control.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within the Rating Case for the Issuer
- Fitch's Brent oil price at USD100 per barrel (bbl) in 2022,
USD85/bbl in 2023, USD65/bbl in 2024, and long-term prices at
USD53/bbl;
- Domestic sales of 102 kbbls in 2023, 115 kbbls in 2024, and 120
kbbls long term;
- PMRT achieving commercial production in 2023, achieving crack
spreads of USD25 per barrel in 2024;
- Roll over of short-term working capital facilities;
- Average capex of USD350 million per year through the rating
horizon
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action of the Peruvian sovereign could lead to
a positive rating action on Petroperu;
- An upgrade can be considered if the government makes a capital
injection that improves the company credit profile, capitalizes its
loans, and/or guarantees a greater portion of Petroperu's debt;
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade of Peru's sovereign rating;
- A sustained deterioration of Petroperu's financial flexibility,
combined with government inaction to support the company's
liquidity, potentially resulting from continued negative FCF or a
material reduction of cash on hand, credit facilities and
restricted capital markets access.
LIQUIDITY AND DEBT STRUCTURE
Deteriorated Liquidity: As of December 2022, Petroperu reported
USD89 million in cash on hand, compared with the USD240 million
registered during December 2021. The company has revolving credit
lines for up to USD2.9 billion, out of which USD1.2 billion is
currently under review by financial institutions, and short-term
financial debt totaling USD868 million.
ISSUER PROFILE
Petroleos del Peru S.A. (Petroperu) is a Peruvian state-owned
petroleum company under private law and dedicated to
transportation, refining, distribution and marketing of fuels and
other petroleum-derived products. Refineries are located at Talara,
Iquitos and Conchan.
ESG CONSIDERATIONS
Petroleos del Peru - Petroperu S.A. has an ESG Relevance Score of
'4' for Financial Transparency, revised from a '5' as the issues
with the delayed audited statements were resolved and the documents
were delivered.
Petroleos del Peru - Petroperu S.A. has an ESG Relevance Score of
'4' for Management Strategy, Group Structure and Governance
Structure due to its nature as a majority government-owned entity
and the inherent governance risk that arises with a dominant state
shareholder, which has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.
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
----------- ------ -----
Petroleos del
Peru - Petroperu
S.A. LT IDR BB+ Affirmed BB+
LC LT IDR BB+ Affirmed BB+
senior
unsecured LT BB+ Affirmed BB+
*********
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
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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
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