/raid1/www/Hosts/bankrupt/TCRLA_Public/230314.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 14, 2023, Vol. 24, No. 53
Headlines
A R G E N T I N A
ARGENTINA: Fitch Affirms Foreign & Local Currency IDRs at 'CCC-'
B R A Z I L
NEXA RESOURCES: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
C A Y M A N I S L A N D S
MUCHWOW LIMITED: Proof of Debts Deadline Set March 15
SOUNDVIEW ELITE: Company Dissolution Hearing Set March 3
SOUNDVIEW PREMIUM: Company Dissolution Hearing Set March 30
SOUNDVIEW STAR: Company Dissolution Hearing Set March 30
C H I L E
ENJOY SA: Fitch Affirms LongTerm Foreign Currency IDR at 'CCC+'
C O S T A R I C A
PROMERICA FINANCIAL: Fitch Affirms 'B/B' IDRs, Outlook Positive
REVENTAZON FINANCE: Fitch Ups Rating on US135MM Notes to BB
[*] Fitch Takes Actions on 7 FIs on Costa Rica Sovereign Upgrade
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Living With Minimum Wage in Country
DOMINICAN REPUBLIC: Meat Prices Go Up and Vegetable Prices Go Down
J A M A I C A
[*] JAMAICA: Robinson Chides Gov't. for Lack of Energy Projects
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Has Foreign Exchange Shortage, Not a Crisis
- - - - -
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A R G E N T I N A
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ARGENTINA: Fitch Affirms Foreign & Local Currency IDRs at 'CCC-'
----------------------------------------------------------------
Fitch Ratings has affirmed Argentina's Long-Term Foreign Currency
and Local Currency Issuer Default Ratings (IDRs) at 'CCC-'. Fitch
typically does not assign Rating Outlooks to sovereigns with a
rating of 'CCC+' or below.
KEY RATING DRIVERS
Local Currency Rating Affirmed: The affirmation of Argentina's
Local Currency IDR at 'CCC-' following a recent local currency debt
swap reflects Fitch's view that this operation did not constitute a
"distressed debt exchange" (DDE). Under Fitch's Sovereign Rating
Criteria, a debt management operation constitutes a DDE if it is
deemed to 1) involve a material reduction in terms to creditors;
and 2) be necessary to avoid a traditional payment default. Fitch
does not deem these criteria to have been met.
Major Swap Executed: On March 9, the Argentine government executed
a debt management operation in its domestic market to swap in
peso-denominated securities maturing in the coming months for new
securities maturing in 2024-2025. The swap affected a fairly large
amount of bonds totaling ARS7.5 trillion, equivalent to roughly
USD37.5 billion (or 6% of GDP), and representing around 10% of
total central government debt. The key objective of the operation
was to smooth and extend maturities past the 2023 election cycle
(beginning with primaries in August, culminating in general
elections in October), which had become congested in the coming
months as election-related policy uncertainty had complicated
placement of longer-dated securities.
Moderate Participation: Participation in the swap amounted to
around 57%, by Fitch's estimates, which included a large majority
of public-sector creditors and a minority of private-sector
creditors. Unofficial estimates suggest the private-sector
participation rate was 25%-30%, although the exact number has not
be disclosed. The operation clears up most of the repayments
previously due through June, though a substantial portion remains
to private-sector counterparties. Thus, the sovereign still faces a
challenging near-term financing picture, and is likely to pursue
additional swap operations.
Maturity Extension, Inflation/FX Protection: The swap exchanges
securities maturing in March-June of 2023 for new securities
offered in two baskets: the first consisting of inflation-indexed
bonds maturing February 2024, October 2024, and February 2025; the
second consisting of inflation-indexed bonds maturing in October
2024 and February 2025 and a "dual" bond (linked to the higher of
inflation and the official exchange rate) maturing in February
2024. The swap entailed an extension of maturities over a period of
particularly elevated uncertainty, but did so while offering higher
coupons and protection against inflation and devaluation risks. The
level of private-sector participation in the swap indicates that
the terms were attractive to some entities, but not to others given
perceived policy risks and/or a preference to remain in
shorter-dated instruments.
Heavy BCRA Support: Fitch does not deem the operation to have been
necessary to avoid a traditional payment default on upcoming
maturities. The sovereign's repayment capacity remains weak in
Fitch's view, but it has demonstrated willingness to stay current
on its peso debt obligations via heavy liquidity support from the
central bank (BCRA), despite the adverse spill-overs this poses for
the country's already deep macroeconomic woes (triple-digit
inflation, falling reserves, deep exchange-rate distortions).
Since mid-2022, the BCRA has purchasing a massive amount of
government bonds in the secondary market and offered a "put option"
to bondholders with some protection against price declines. As part
of the recent swap, the BCRA is offering a similar "repurchase
option". Argentina's Extended Fund Facility (EFF) with the IMF
limits direct BCRA financing of the government but does not
proscribe these other channels of financial support, which the IMF
has previously deemed "necessary to safeguard financial
stability".
Peso Default Record: Argentine has a recent record of defaulting on
peso debt securities, having unilaterally "reprofiled" these in
2019 (deemed a DDE by Fitch). Fitch believes the incentives for a
similar manoeuvre are lower in the current context of tight capital
controls and a higher share of holdings by regulated domestic
entities (such as banks) as opposed to non-residents. While this
mitigates the likelihood of a domestic credit event, it does not
preclude this possibility in Fitch's view, which remains a risk
reflected in the low 'CCC-' local currency rating.
Foreign Currency Rating Affirmed: The affirmation of Argentina's
Foreign Currency IDR at 'CCC-' 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.
Argentina has an ESG Relevance Score (RS) of '5' for both 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 Fitch's proprietary Sovereign Rating Model (SRM). Argentina
has a medium WBGI ranking at the 46th percentile, balancing
moderately high voice and accountability, a moderate level of
corruption, and a recent track record of peaceful political
transitions with weak institutional capacity and uneven application
of the rule of law.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Public Finances: Signs of probable default, including
intensification of financing strains that increase risks of and
incentives for the sovereign to miss, unilaterally reprofile or
renegotiate upcoming bond repayments on distressed terms.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- External Finances: A sustained build-up in central bank
international reserves supported by credible policy adjustments;
- Public Finances: Implementation of a credible fiscal adjustment
that puts government debt/GDP on a downward path and materially
improves access to market financing;
- Macro: Greater confidence in a policy plan that could support
economic recovery and improve macroeconomic stability.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Argentina a score equivalent to a
'B-' Long-Term Foreign Currency IDR. However, in accordance with
its rating criteria, Fitch's sovereign rating committee has not
utilized the SRM and Qualitative Overlay (QO) to explain the
ratings in this instance. Ratings of 'CCC+' and below are instead
guided by the rating definitions.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centered
averages, including one year of forecasts, to produce a score
equivalent to a Long-Term Foreign Currency IDR. Fitch's QO is a
forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating, reflecting
factors within its criteria that are not fully quantifiable and/or
not fully reflected in the SRM.
ESG CONSIDERATIONS
Argentina has an ESG Relevance Score of '5' for Political Stability
and Rights as WBGIs 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 Argentina has a percentile rank below 50 for
the respective Governance Indicator, this has a negative impact on
the credit profile.
Argentina has an ESG Relevance Score of '5' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
WBGIs 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 Argentina has a percentile rank below 50 for the
respective Governance Indicators, this has a negative impact on the
credit profile.
Argentina has an ESG Relevance Score of '4' [+] for Human Rights
and Political Freedoms as the Voice and Accountability pillar of
the WBGIs is relevant to the rating and a rating driver. As
Argentina has a percentile rank above 50 for the respective
Governance Indicator, this has a positive impact on the credit
profile.
Argentina 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 Argentina, as for all sovereigns. As
Argentina has a fairly recent restructuring of public debt in 2020,
this has a negative impact on the credit profile.
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
----------- ------ -----
Argentina LT IDR CCC- Affirmed CCC-
ST IDR C Affirmed C
LC LT IDR CCC- Affirmed CCC-
LC ST IDR C Affirmed C
Country Ceiling B- Affirmed B-
===========
B R A Z I L
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NEXA RESOURCES: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
-----------------------------------------------------------------
Moody's Investors Service affirmed Nexa Resources S.A.'s Ba2
corporate family rating and the Ba2 ratings on its senior unsecured
notes due 2027 and 2028. The outlook remains stable.
Rating Actions:
Issuer: Nexa Resources S.A.
LT Corporate Family Rating, affirmed at Ba2
$700 million backed senior unsecured notes due 2027, affirmed at
Ba2
$500 million backed senior unsecured notes due 2028, affirmed at
Ba2
Outlook Actions:
Issuer: Nexa Resources S.A.
Outlook, remains stable
RATINGS RATIONALE
The affirmation of Nexa's Ba2 ratings reflects Moody's expectation
that credit metrics will be sustained at the current level over the
next 12 to 18 months supported by operational stability and
continued ramp-up of the recently completed Aripuana mine. The
ramp-up of Aripuana and the lack of any material capacity expansion
will improve free cash flow generation and will allow Nexa to
maintain gross leverage metrics around 2.5x and liquidity
commensurate to the Ba2 ratings. Moreover, the ramp up of Aripuana
reduces the uncertainties regarding project execution and will
bring about 20% of additional zinc volumes to Nexa's total annual
production.
Nexa has historically maintained good liquidity and leverage
metrics, with strong cash balances relative to its debt
amortization schedule, with cash position covering debt maturities
until 2027. The company has a formal cash policy that takes into
consideration obligations due in the next 12 months. As of December
2022, Nexa had $516 million in cash and a fully available $300
million revolving credit facility (RCF), committed until October
2024.
Nexa Ba2 ratings remain supported by the company's strong presence
in the global zinc market (fifth-largest producer of mined zinc
globally) and its production profile, with the integration of
mining operations with smelters, both in Brazil and Peru.
Constraining the ratings are Nexa's exposure to commodity price
volatility, given its high concentration in zinc (60% of total
production in 2022) and its exposure to a single mine - Cerro Lindo
- that is responsible for 52% of total mine output on a zinc
equivalent basis. Nexa's relatively modest revenue size ($3.0
billion in 2022) compared to its global peers is an additional
constraint.
The stable outlook reflects Moody's expectation that credit metrics
will be sustained at the current level in the next 12 to 18 months,
supported by Nexa's solid operations, focus on costs and successful
ramp-up of Aripuana. The stable outlook also incorporates Moody's
assumption that the company will maintain its financial discipline
on capital allocation, good liquidity and a conservative balance
sheet without materially increasing debt levels.
ENVIRONMENTAL, SOCIAL & GOVERNANCE CONSIDERATIONS
ESG considerations are relevant for Nexa's credit quality. As a
mining company, Nexa has a very high natural capital and waste and
pollution exposure, given the significant impact on the land of
Nexa's mining and smelting operations. The company mitigates such
exposure with specific initiatives to reduce greenhouse gas
emissions and investments to decrease the disposal of tailings in
dams through dry stacking and to reduce the generation of mining
and smelting waste. Nexa's exposure to social risk factors are high
as well, in particular health and safety and responsible
production, balanced by moderately negative exposure to human
capital, and demographic and societal trends (zinc is heavily
dependent on the automotive industry). These environmental and
social risk exposures are balanced by the company's disciplined
financial strategy and risk management, while the track record of
some operational disruptions and capital spending revisions, which
have substantially increased capital spending requirements in the
Aripuana greenfield project, are reflected in the governance risk
exposure.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive rating pressure would require further diversification of
its metal revenue base and enhancing its production profile without
an increase in leverage or a deterioration in interest coverage
metrics. An upward rating or outlook movement would also require
the company to continue to improve its cost position, staying
comfortably in the second quartile of the industry curve.
Additionally, the outlook or ratings could be positively affected
if the company maintains a sound liquidity profile, with leverage
(total adjusted debt to EBITDA) trending towards 2.75x or lower,
and interest coverage (EBIT to interest expenses) trending towards
4.0x and above. A cash flow from operations minus dividends to
total debt ratio above 30% would also support a positive rating
action.
Nexa's ratings could be downgraded if its profitability and cash
generation capacity materially deteriorate as a consequence of a
decline in metal prices or significantly lower production volumes,
with EBIT margins staying below 12.5% and negative free cash flow
on a sustained basis. Production costs increasing significantly and
falling to the third or fourth quartile of the industry cost curve;
or leverage, measured by total adjusted debt to EBITDA, staying
above 3.1x and interest coverage leverage ratios, measured by EBIT
to interest expenses staying below 3.5x on a sustained basis could
also create negative rating pressure. Higher dividend payout,
jeopardizing the company's liquidity position and leading to cash
flow from operations minus dividends/debt staying below 25% could
also lead to a negative action.
The principal methodology used in these ratings was Mining
published in October 2021.
Nexa Resources S.A. (Nexa) is a subsidiary of Votorantim S.A.
(64.7%), with integrated operations (mines and smelters) in Brazil
and Peru, mostly concentrated in zinc, but also with exposure to
copper, silver, lead and gold. Nexa is the fifth-largest zinc
producer in the world, with operations spread out in three mines in
Peru (Cerro Lindo, Atacocha and El Porvenir) and three in Brazil
(Vazante, Morro Agudo and Aripuana), and a zinc smelter in Peru
(Cajamarquilla) and two zinc smelters in Brazil (Tres Marias and
Juiz de Fora). In 2022, Nexa reported revenue of $3.0 billion.
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C A Y M A N I S L A N D S
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MUCHWOW LIMITED: Proof of Debts Deadline Set March 15
-----------------------------------------------------
The official liquidator of Muchwow Limited intends to declare an
interim dividend. Any creditor wishes to participate in the interim
dividend must lodge his proof of debt with the Official Liquidator
no later than March 15, 2023.
The liquidator can be reached at:
Michael Pearson
FFP Limited, 2nd Floor Harbour Center
159 Mary Street George Town,
Grand Cayman
SOUNDVIEW ELITE: Company Dissolution Hearing Set March 3
--------------------------------------------------------
The official liquidator of Soundview Elite Ltd disclosed that the
hearing for an order to dissolve company is set March 30, 2023, at
10 p.m.
Any objections must be submitted to the liquidator by no later than
5:00 p.m. on
March 16, 2023.
The liquidator can be reached at:
Michael Peck
R&H Restructuring (Cayman) Ltd
Windward I, Regatta Office Park, PO Box 897
Grand Cayman KYI-1103, Cayman Island
SOUNDVIEW PREMIUM: Company Dissolution Hearing Set March 30
-----------------------------------------------------------
The official liquidator of Soundview Premium Ltd disclosed that the
hearing for an order to dissolve company is set March 30, 2023, at
10 p.m.
Any objections must be submitted to the liquidator by no later than
5:00 p.m. on March 16, 2023.
The liquidator can be reached at:
Michael Peck
R&H Restructuring (Cayman) Ltd
Windward I, Regatta Office Park, PO Box 897
Grand Cayman KYI-1103, Cayman Island
SOUNDVIEW STAR: Company Dissolution Hearing Set March 30
--------------------------------------------------------
The official liquidator of Soundview Star Ltd disclosed that the
hearing for an order to dissolve company is set March 30, 2023, at
10 p.m.
Any objections must be submitted to the liquidator by no later than
5:00 p.m. on March 16, 2023.
The liquidator can be reached at:
Michael Peck
R&H Restructuring (Cayman) Ltd
Windward I, Regatta Office Park, PO Box 897
Grand Cayman KYI-1103, Cayman Island
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C H I L E
=========
ENJOY SA: Fitch Affirms LongTerm Foreign Currency IDR at 'CCC+'
---------------------------------------------------------------
Fitch Ratings has affirmed Enjoy S.A.'s Long-Term Foreign Currency
Issuer Default Rating (IDR) at 'CCC+'. Fitch has also affirmed its
USD209 million tranche A notes due in 2027 at 'B-'/'RR3' and USD18
million tranche B notes due in 2027 at 'CCC-'/'RR6'.
Enjoy's ratings reflects its weak capital structure and financial
flexibility combined with volatile cash flow from operations due to
its discretionary business nature. Despite recent improvements in
revenues as all casinos are fully operating since October 2022,
cash flow generation improvements will be gradual considering the
costs associated with the renewals of operating licenses since 2021
and until 2024.
KEY RATING DRIVERS
Gradual Cash Flow Recovery: Fitch expects Enjoy's cash flow
improvement to be slow considering the challenging macroeconomic
scenario in Chile with high expected inflation and negative GDP
growth in 2023. In addition, despite revenues improvements in
recent quarters after all restriction were lifted since October
2022, higher costs associated with renewing operating licenses will
result in somewhat volatile cash flow generation. Fitch expects
EBITDA to become positive at around CLP33 billion in 2023 and
growing in the next few years.
Deleveraging Capacity: Fitch expects leverage measured as total
adjusted debt/EBITDA to be around 7.0x in 2023 from above 10.0x
expected in 2022. The improvement is supported by higher cash flow
generation assuming a full year of operations with no restrictions
in 2023 but also considering a contained macroeconomic environment
with higher interest rates, higher inflation, and lower
discretionary income.
Adequate Market Position: Enjoy's market position is adequate as it
represents around 38% of total market-share (total gross revenues)
and holds 31% of operating licenses in Chile. Around 70% of Enjoy's
EBITDA is expected to be originated in Uruguay while the balance is
originated in Chile. The casino business in Chile is mature, with
low-single-digit revenue growth, and as such, the recovery
prospects are slow and volatile. Additionally, Enjoy's growth
strategy is focused on improving the performance of underdeveloped
locations.
Committed Capex: Enjoy has committed capex related to municipal
licenses of approximately CLP8 billion between 2023 and 2025. This
timeframe was extended due to the lockdowns and Enjoy's inability
to continue its construction projects. Fitch expects total capex of
CLP20 billion per year until 2025. In 2022, the company was awarded
with the renewal license to operate Rinconada, Los Ángeles and San
Antonio. In its base case, Fitch assumes the group will continue to
operate Antofagasta.
Positive M&A with Dreams: Enjoy's merger with Dreams could result
in an entity with a stronger capital structure, as well as greater
scale and geographic diversification. The new entity would hold
permits for almost 60% of the casinos and have over 75% of the
revenues in the gaming industry in Chile. The new company would
also have a presence in Peru, Colombia, Uruguay and Panama. The
historically higher margins of Dreams' operations would improve the
new company's overall profitability, and synergies could be
obtained in the supply chain and other areas. However, the merger
is now contingent on the divestment of Rinconada which could take a
few months to materialize.
Once the M&A is completed, Fitch will assess the new company's
corporate governance and financial management, as well as
regulatory approval for the transaction before taking a rating
action. Dreams had pre-pandemic EBITDA margins of 28%, compared to
Enjoy's 15%, which shows room for improvement under the potential
merger.
DERIVATION SUMMARY
Enjoy's 'CCC+' ratings are lower than other small casino operators
in the Americas. The company has lower profit margins than much
larger operators, such as MGM Resorts International (NR) and Las
Vegas Sands Corp (BB+/Negative). Enjoy's business was disrupted by
the pandemic as casinos were prohibited to operate and the company
had to restructure its financial obligations. Recovery is expected
to be gradual and slow.
On the positive side, and contributing for the recovery rates on
its secured notes, Enjoy owns all of its underlying real estate,
with the exception of Vina del Mar, San Antonio and Los Angeles.
This portfolio may provide additional financial flexibility if
required, either as collateral or asset sales.
KEY ASSUMPTIONS
- Casinos are fully open and with no restrictions going forward;
- Antofagasta will continue to operate and contribute to cash
flow from operations;
- Santiago, San Antonio and Los Angeles licenses will be
renewed once they expire during 2023 and 2024;
- Average annual capex of CLP20 billion over the period
2023-2025, including mandatory investments in municipal
licenses;
- No dividend payments.
KEY RECOVERY RATING ASSUMPTIONS
The 'RR3' Recovery Rating reflects average recovery prospects in
the event of default. The recovery analysis assumes that the value
of Enjoy would be assessed under a liquidation approach. Fitch has
assumed a 10% administrative claim.
The waterfall results in a 51%-70% recovery, corresponding to 'RR3'
recovery, for the USD209 million notes, tranche A and 0% recovery,
corresponding to 'RR6', for the USD18 million notes tranche B.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Adjusted debt/EBITDA below 5.5x on a consistent basis;
- EBITDAR fixed-charge coverage significantly above 1.5x on a
sustained basis;
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- EBITDAR fixed charge coverage at or below 1.0x;
- Consistently negative FCF;
LIQUIDITY AND DEBT STRUCTURE
Improving Liquidity: Enjoy's liquidity is improving supported by
improving cash flow generation, cash on hands and adequate debt
maturity profile.
As of Sept. 30, 2022, the company reported CLP15.2 billion while
short-term debt was CLP9.2 billion. Total debt was CLP306.8 billion
composed of CLP256.7 billion of notes and loans and CLP50 billion
of lease equivalent debt.
After the restructure in 2020, the notes have step up interest
rates of 6% for the first year, moving up to 9.5% for the seventh
year.
ISSUER PROFILE
Enjoy operates a total of ten casinos: nine casinos in Chile and
one in Uruguay. Enjoy is a leader in the Chilean gaming and
entertainment industry. It offers a complete portfolio of
recreational services that include not only casinos, but also
hotels, restaurants, spas and discotheques.
ESG CONSIDERATIONS
Enjoy has an ESG Relevance Score of '4' for management strategy due
to its record of recurring to debt restructuring processes during
2020 due to challenges the company has faced in executing its
strategy, meeting its projections and reducing its leverage.
Enjoy's below-average execution of its strategy has contributed to
a materially weaker operational performance and capital structure
in comparison with its peers. 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 Recovery Prior
----------- ------ -------- -----
Enjoy S.A. LT IDR CCC+ Affirmed CCC+
senior secured LT CCC- Affirmed RR6 CCC-
senior secured LT B- Affirmed RR3 B-
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C O S T A R I C A
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PROMERICA FINANCIAL: Fitch Affirms 'B/B' IDRs, Outlook Positive
---------------------------------------------------------------
Fitch Ratings has affirmed Promerica Financial Corporation's (PFC)
Long-Term Issuer Default Ratings (LT IDR) at 'B' and Short-Term IDR
(ST IDR) at 'B'. Fitch also affirmed PFC's Viability Rating (VR) at
'b' and the senior secured debt rating at 'B'/'RR4'. The Rating
Outlook of the LT IDR is Positive.
This ratings review follows the recent upward revision of Fitch's
assessment of the Operating Environment (OE) scores of Costa Rica
and Guatemala's banking systems, which are core international
jurisdictions for PFC's operations. The revisions of both
jurisdictions prompted an upgrade of PFC's OE score under the
agency's blended approach to 'b+' from 'b' with a stable trend.
However, as stated by the agency's sensitivities for PFC's ratings,
an upgrade would be driven by an improvement of the blended OE
assessment combined with improvements in capitalization and
profitability, the former two factors are still on a positive
trend.
KEY RATING DRIVERS
Ratings Driven by Viability Rating: PFC's IDR is driven by its VR,
based on the consolidated risk profile of the bank holding company.
This, in turn, reflects the performance of nine banks operating
across different countries in Latin America.
Multijurisdictional Environment Improvement: Fitch Ratings' blended
OE assessment for PFC is a key component of its intrinsic
creditworthiness. Fitch assess the OE by weighing the
multijurisdictional nature of PFC's operations. Since the last
review, the key jurisdictions of Guatemala and Costa Rica improved
their OEs, driving the blended OE factor of PFC to 'b+' to 'b'. The
improved environment underpins the likelihood of strengthening the
issuer's financial factors in the ratings horizon.
Relevant Position in Key Markets: PFC's noteworthy market position
is evidenced as the third-largest financial conglomerate owned by
local shareholders in Central America. The group has an average
total operating income of USD1.1 billion for 2018-2022, USD19.0
billion in total assets, USD12.2 billion in net loans and USD13.6
billion in core customer deposits as of September 2022.
Additionally, the Ecuadorian subsidiary has a relevant position as
the third-largest private bank, it is the leader in credit cards in
Guatemala and is the largest bank in Nicaragua.
Positive Profitability Trend: PFC's profits continue showing a
trend of recovery from the low level of 2020, with sustained and
even improving profitability anticipated in the coming years. Its
operating profit-to-risk-weighted assets (RWA) ratio was 1.8% as of
September 2022 and is expected to continue its improvement in the
short to medium term. This is underpinned by controlled credit
costs, a stronger net interest margin (NIM) and the strengthened
multijurisdictional OE; however, the challenges in 2023 would delay
or change this trend.
Capital is the Weakest Link: PFC's capitalization has remained
stable but still considered its weakest financial factor versus
regional peers. As of September 2022, its common equity Tier 1
ratio (CET1) was 9.8%, with a gradual increase in the base case
scenario projected over the next two years. Improvement in the
medium term could originate from improvement in profitability -
Fitch expects PFC to retain earnings in total and is not
anticipating any inorganic growth (acquisitions), which could also
potentially have negative impacts in its capital base.
Good Asset Quality: PFC's asset quality metrics deteriorated with a
90-days-past-due ratio of 1.9% as of September 2022, slightly above
the four-year average (1.5%), but commensurate with the current
rating category. Fitch's expectations are to maintain ratios close
to the 2% mark underpinned by the recent improvement in the OE of
some key markets and the stable outlook of the rest. Asset quality
also benefits also from the multijurisdictional business model and
good collateralization in lending to companies.
Deposit Base Funding Structure: PFC shows a typical universal bank
funding structure at a consolidated level, with 80.7% of funds
originating from core deposits and the rest coming from wholesale
sources. Loans to customer deposits remain at around 92.2% with a
four-year average of the ratio of 88.9%, while the remainder of
funding stems from an ample and diversified array of sources, e.g.
credit facilities and local debt issuance on a consolidated level
and global debt and credit facilities on an unconsolidated level.
In Fitch's view, the group's financial flexibility is good and
benefits from a business model that focuses on traditional banking
services.
GSR
The GSRs of 'ns' reflect that, however possible, external support
cannot be relied upon, given banking system's large size regarding
economy and weak support stance due to Panama's lack of a lender of
last resort.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The VR and IDR would be negatively affected by a decline in the
CET1 to below 8%, and remaining beneath that threshold
consistently, and/or the subsidiaries' dividends upstream to PFC
pressuring its debt servicing capacity. The ratings would be
pressured by a materially weaker assessment of PFC's
multijurisdictional OE, especially within its largest markets,
although this does not currently reflect Fitch's baseline
scenario.
Because the Government Support Rating (GSR) is at the lowest level
in its respective scale, there is no downside potential for the
GSR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Ratings could be upgraded by an improvement in profitability with a
ratio of operating profits to RWA sustained above 2.0% and CET1 to
RWA ratio consistently above 10% while maintaining the good asset
quality and its good regional market position.
As Panama is a dollarized country with no lender of last resort, a
GSR upgrade is considered unlikely.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The rating assigned to PFC's senior notes is in line with PFC's
Long-Term IDR, as the likelihood of default on the notes is the
same as that of PFC. Despite the notes being senior secured and
comprising unsubordinated obligations, Fitch believes the
collateral mechanism would not have a significant impact on
recovery rates. In accordance with Fitch's rating criteria,
recovery prospects for the notes are average and reflected in their
Recovery Rating of 'RR4'.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The senior debt ratings would be downgraded if PFC's Long-Term
IDR is downgraded.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The senior debt ratings would be upgraded if PFC's Long-Term
IDR is upgraded.
VR ADJUSTMENTS
The Operating Environment score has been assigned below the implied
score due to the following adjustment reasons: International
Operations (negative) and Regional Focus (negative).
The Business Profile score has been assigned above the implied
score due to the following adjustments: Group Benefits (positive).
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,
due to either their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Promerica
Financial
Corporation LT IDR B Affirmed B
ST IDR B Affirmed B
Viability b Affirmed b
Government Support ns Affirmed ns
senior secured LT B Affirmed RR4 B
REVENTAZON FINANCE: Fitch Ups Rating on US135MM Notes to BB
-----------------------------------------------------------
Fitch Ratings has upgraded Reventazon Finance Trust's USD135
million fixed-rate notes to 'BBsf' from 'B+sf'. The Rating Outlook
is Stable.
The rating action follows Fitch's upgrade of Instituto
Costarricense de Electricidad's (ICE) rating to 'BB-' from 'B',
which mirrors the recent upgrade of Costa Rica's sovereign rating.
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 financing its budget. For further
details, please see "Fitch Upgrades Instituto Costarricense de
Electricidad to 'BB-'; Outlook Stable" dated March 6, 2023 and
"Fitch Upgrades Costa Rica to 'BB-'; Outlook Stable" dated March 2,
2023.
Fitch's rating addresses timely payment of interest and ultimate
principal at legal maturity.
Entity/Debt Rating Prior
----------- ------ -----
Reventazon
Finance Trust
Notes
76138QAA5 LT BBsf Upgrade B+sf
Notes REGS
USG75463AA02 LT BBsf Upgrade B+sf
KEY RATING DRIVERS
Repayment of Notes Reliant on ICE Lease Payments: The notes are
backed by 100% participation interest on the Inter-American
Development Bank's (IDB) B-loan acquired through a participation
agreement, which gives the right to receive payments under IDB's
B-loan. Instituto Costarricense de Electricidad y Subsidiarias'
(ICE) lease payments from a non-cancellable financial lease
agreement for the operation and maintenance of the hydropower plant
will cover all payments on the loan.
Transaction Rating Linked to ICE's Issuer Default Rating (IDR):
Given the unconditional and irrevocable nature of the lease
payments, Fitch views the credit risk of these payments as linked
to ICE's credit quality. On March 6 2023, Fitch upgraded ICE's
Foreign and Local Currency IDRs. Grupo ICE's ratings are supported
by its linkage to Costa Rica's sovereign rating (BB/Stable), which
stems from the company's government ownership and the implicit and
explicit expectation of government support.
Lease Payment Obligation Supported by IDB as Lender of Record: To
determine the strength of the lease payment obligation, Fitch
considered the role of IDB as lender of record of the obligation
being covered by ICE's payments, tied to ICE's ownership structure.
As the IDB will continue to be the lender of record and administer
IDB's B-loan, Fitch believes the holders of the rated notes will
benefit from the B-loan preferential, de facto, status provided by
IDB. Because of this, the credit quality of the payment obligation
is considered in line with other obligations of Costa Rica with the
IDB, and therefore, was notched upward (one notch) from ICE's IDR.
Noteholders Benefit from IDB's Preferred Creditor Status:
Historically, sovereigns have prioritized certain obligations, such
as obligations from multilateral development banks, when the
government cannot service all of the country's external debt. While
the B-loan is not a direct obligation of the sovereign, Fitch
believes treatment of the IDB as a preferred creditor extends to
ICE as the debtor, since ICE is a strategic government-owned entity
that receives underlying sovereign support.
Although Costa Rica has defaulted in the past (1981), neither the
sovereign nor ICE have ever defaulted on debt issued by a preferred
creditor. Currently, IDB's share of Costa Rica's external debt is
approximately 13%, in line with historical figures, which makes it
an essential preferred creditor for the country.
Adequate Liquidity Present: The rated notes benefit from a debt
service reserve account equivalent to the next principal and
interest payment due amount. This liquidity provides certainty in
case the transaction is exposed to temporary liquidity shock. As of
November 2022, the account had sufficient liquidity to cover debt
service on the issued notes payment due in May 2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The notes' ratings are linked to ICE's Long-Term Foreign Currency
IDR; hence, a downgrade of ICE's IDR would trigger a downgrade of
the rated notes in the same proportion;
- Changes in Fitch's view of the treatment of the IDB as a
preferred creditor may trigger a rating action on the notes.
- In December 2022, Fitch revised its "Global Economic Outlook"
forecasts as a result of central banks being forced to mitigate
against inflation and China's property market outlook
deterioration. Downside risks have increased, and Fitch has
published an assessment of the potential rating and asset
performance impact of a plausible, but worse than expected, adverse
stagflation scenario on Fitch's major structured finance (SF) and
covered bond subsectors ("What a Stagflation Scenario Would Mean
for Global Structured Finance"). The impacts of the current
economic outlook are incorporated into Fitch's view of ICE's credit
quality and may therefore indirectly affect the transaction's
rating.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The notes' ratings are linked to ICE's Long-Term Foreign Currency
IDR; hence, an upgrade of ICEs IDR would trigger an upgrade of the
rated notes in the same proportion.
CRITERIA VARIATION
Fitch's "Single- and Multi-Name Credit Linked Notes Rating
Criteria," dated Jan. 11, 2023, establishes that the credit quality
of the risk presenting entity (RPE) in a credit-linked notes
transaction is typically determined by an IDR assigned by Fitch.
However, in some situations, a committee would consider using the
actual bond rating (e.g. senior unsecured rating, subordinate
rating) of an asset in place of the IDR.
For this transaction, Fitch has determined that the RPE's credit
quality is not commensurate with the IDR or any particular bond
rating of the obligor, as sovereign ratings do not directly address
all forms of obligations. To determine the credit quality of the
sovereign obligation and its notching from the sovereign IDR, Fitch
incorporated perspectives from its sovereign group. During the
analysis, it was determined that the appropriate notching uplift
from the primary risk contributor would be one notch.
[*] Fitch Takes Actions on 7 FIs on Costa Rica Sovereign Upgrade
----------------------------------------------------------------
Fitch Ratings has taken rating actions on five Costa Rican and two
Panamanian financial institutions (FI) following the upgrades of
Costa Rica's Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) to 'BB-' from 'B'. The Rating Outlooks are Stable
(See "Fitch Upgrades Costa Rica to 'BB-'; Outlook Stable," dated
March 02, 2023). The rating actions also follow Fitch's revision
of its assessment for the Costa Rican banking system's operating
environment (OE) to 'bb-' from 'b' with a stable trend.
The OE revision reflects Fitch's assessment Costa Rica's economic
recovery, supported by a structural enhancement of the country's
fiscal stance, as well as higher economic development reflected in
the favorable performance of the Operational Risk Index and
per-capita income. Fitch expects these improvements to benefit the
banking business expansion and the banks' financial performance.
The National Ratings of four of the banks, as well as those of
other FIs rated in Costa Rica, are not directly impacted by the
sovereign upgrade, as they reflect the relative strengths and
weaknesses of each entity in that specific jurisdiction.
KEY RATING DRIVERS
State-Owned Banks
Fitch has upgraded the Long-Term Foreign and Local Currency IDRs of
Banco Nacional de Costa Rica (BNCR) and Banco de Costa Rica (BCR)
to 'BB-' from 'B'. The upgrades were driven by the upgrade of their
Government Support Rating (GSR) to 'bb-' from 'b', respectively.
This reflects the Costa Rican sovereign upgrade and Fitch's
assessment of the potential support the banks would receive, if
needed, from its single owner, the Costa Rican government. The
Rating Outlook on the banks' Long-Term IDRs is Stable, mirroring
the sovereign's Rating Outlook.
In addition, the Viability Ratings (VR) of BNCR and BCR were
upgraded to 'bb-' from 'b'. All Short-Term Foreign and Local
Currency IDRs were affirmed at 'B', and BNCR's long-term senior
unsecured debt rating has been upgraded to 'BB-' from 'B'/'RR4'.
Regarding the sovereign's ability to support the banks, Fitch
considers, with high importance, the Costa Rican sovereign rating.
The government propensity to support is driven, with high
influence, by the explicit guarantee stated in the National Banking
System Law (article 4) for BNCR and BCR as a state-owned banks. The
law stipulates that the government is responsible for all
non-subordinated liabilities of the state-owned banks in the event
of their liquidation.
BNCR's VR reflects its sound business profile, characterized by the
highest Total Operating Income of all Costa Rican banks rated by
Fitch and its strong market position. Fitch also considers BNCR's
consistent financial performance. BNCR's asset quality has been
pro-actively managed and profitability has been remarkable. The
bank's capital position, although decreasing, provides cushion for
unexpected credit losses. The bank's liquidity is supported by its
wide deposit base and ample access to alternative funding.
BCR's VR reflects its strong market position, diversified business
model and policy role, namely in providing financial services to
Costa Rica's productive sectors. Its VR also incorporates its
controlled asset quality, appropriate profitability and according
to its business model, as well as adequate capital levels. This
along with its sound funding structure that presents stable
deposits resulting from its current market position and ordinary
government support.
BNCR's senior unsecured debt is rated at the same level as the
bank's rating, as the likelihood of default on the debt is the same
as BNCR's. Fitch has removed the notes' 'RR4' Recovery Rating, as
it is not considered relevant to the agency's coverage, since the
issuer's senior unsecured rating is in the 'BB' category.
Banco Popular y de Desarrollo Comunal (BPDC)
Fitch has upgraded BPDC's Long-Term Foreign and Local Currency IDRs
to 'BB-' from 'B'. The upgrades are driven by the upgrade of its VR
to 'bb-' from 'b'. The Rating Outlook on the bank's Long-Term IDR
is Stable, mirroring the OE's trend. The upgrades keep these
ratings aligned with the sovereign rating. In addition, Fitch has
affirmed BPDC's Short-Term Foreign and Local Currency IDRs at 'B'.
Fitch also upgraded BPDC's GSR to 'b+' from 'b-' due to the
sovereign upgrade and the bank's high systemic importance.
BPDC's IDRs are driven by its intrinsic creditworthiness embodied
in its 'bb-' VR, which is one notch below its implied VR due to
sovereign rating constraints. BPDC's VR captures its consistent
business profile, underpinned by the bank's public nature. This in
turn propels the bank's adequate financial performance, especially
its sound capital metrics; adequate asset quality, profitability,
as well as its reasonable and stable funding profile.
Fitch believes the bank's 'b+' GSR, one notch below the sovereign's
IDR, reflects the limited probability of support from the Costa
Rican government and its current ability to support the bank.
Despite the bank's legally protected public nature, as well as its
systemic importance, there is no government explicit guarantee
which would likely equalize the ratings.
Foreign-Owned Commercial Banks
Fitch has upgraded Banco BAC San Jose, S.A.'s (BAC San Jose)
Long-Term Foreign and Local Currency IDRs to 'BB' from 'B+' and to
'BB' from 'BB-', respectively. The IDR upgrades are driven by the
upgrade of its Shareholder Support Rating (SSR) to 'bb' from 'b+'.
The Rating Outlook for the Long-Term IDRs is Stable, mirroring the
Outlook of its parent, BAC International Bank, Inc. (BIB;
'BB'/Stable). In addition, Fitch has affirmed BAC San Jose's
Short-Term Foreign and Local Currency IDRs at 'B'.
Fitch has upgraded Banco Davivienda (Costa Rica), S.A.'s
(Davivienda CR) Long-Term Foreign and Local Currency IDRs to 'BB'
from 'B+' and to 'BB+' from 'BB-', respectively. The Long-Term
Foreign Currency upgrade is driven by the upgrade of its
Shareholder Support Rating (SSR) to 'bb' from 'b+'. The Rating
Outlook for the Long-Term IDRs is Stable, mirroring the Outlook for
its parent, Banco Davivienda, S.A. (Davivienda) ('BB+'/Stable). In
addition, Fitch has affirmed Davivienda CR's Short-Term Foreign and
Local Currency IDRs at 'B'.
In addition, BAC San Jose's and Davivienda CR's VR were upgraded to
'bb-' from 'b', reflecting their good market positions and stable
financial performance.
BAC San Jose
BAC San Jose's IDRs and SSR are driven by Fitch's assessment of the
support the bank would receive from its ultimate parent, BIB, if
needed. In Fitch's view, BIB's strong ability and propensity to
support the Costa Rican subsidiary remains high, mainly due to the
relevance of BAC San Jose's operations to the regional
diversification strategy. Fitch also considers that BAC San Jose's
default would risk large reputational risk for BIB. BAC San Jose's
VR reflects its solid company profile, which has resulted in a
strong market position. The assessment also reflects BAC San Jose's
improving asset quality and profitability, as well as satisfactory
capital buffers and sound and stable funding sources.
Davivienda CR
Davivienda CR's IDRs reflects the potential support that it would
receive from its parent, Davivienda, if required.
According to Fitch's criteria, Davivienda CR's Long-Term Foreign
and Local Currency IDRs are limited by the country ceiling of the
subsidiary's jurisdiction, and captures the transfers and
convertibility risks. Fitch's assessment considers the large
reputational risks for Davivienda in the event of a default of its
subsidiary, as they share the same brand. Davivienda CR's VR
reflects the bank's moderate market shares of 7.8% of assets,
consistent asset quality, good operating profits, reasonable FCC
ratio and growing deposit base.
Banco Internacional de Costa Rica, S.A. (BICSA)
Fitch has affirmed BICSA's Long- and Short-Term IDRs and VR at
'BB-', 'B' and 'bb-', respectively. The Rating Outlook for the
Long-Term IDR is Stable. In addition, Fitch has upgraded BICSA's
SSR to 'bb-' from 'b'.
Currently, BICSA's VR is at the same level as its SSR; however,
Fitch believes the bank's support has strengthened due to the
upgrade of its parent companies' IDRs; therefore, BICSA's IDRs are
now driven by the shareholder support, given the 'higher of'
approach of the agency's criteria.
BICSA's 'bb-' VR is highly influenced by BICSA's risk profile,
which consists of solid credit policies and risk controls that
Fitch believes have allowed the bank to remain stable throughout
the economic cycles. The bank's business profile is also marked by
a modest market position and a corporate-oriented business model
that yields a rather low four-year average total operating income
(of around USD44 million) compared to peers. Nevertheless, the
institution's financial performance has been stable throughout the
business cycles, reflected by its adequate loan quality metrics,
alongside solid capitalization and sound liquidity.
BICSA's operating environment (OE) assessment weighs its
international operations as it has exposures in 30 jurisdictions.
Panama and Costa Rica represent 63% of total earning assets. The
outlook in most jurisdictions influences the affirmation of Fitch's
OE assessment at 'bb' with a stable trend.
Inversiones CrediQ Business S.A. (ICQB)
Fitch has upgraded ICQB's Long-Term IDR to 'B' from 'B-'. The
Rating Outlook is Stable. In addition, Fitch has affirmed the
Short-Term IDR at 'B'.
ICQB's Long-Term IDR upgrade reflects the improved blended OE to
'b' from 'b-', given the improved OE for Costa Rican FIs. Moreover,
Costa Rica's influence in ICQB's OE's assessment is relevant, as it
comprises nearly 50% of the company's earning assets. In addition,
the ratings reflect the consolidated franchise, controlled impaired
loans of 2.1% as of 2Q22, good pre-tax income to average assets of
4.9%, reasonable tangible leverage metric of 4.6x, and the limited
financial flexibility, as unsecured debt represented 23.2%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
State-Owned Banks
- BNCR's and BCR's IDRs and GSRs will be downgraded in the event of
a downgrade in Costa Rica's sovereign rating and Country Ceiling;
however, currently, this is not Fitch's base case given the
sovereign's Stable Outlook;
- BNCR's and BCR's VRs will be downgraded by a downward revision of
Fitch's assessment of the Costa Rican OE; however, currently, this
is not Fitch's base case given the OE's stable trend. Also, BNCR's
and BCR's VR will be downgraded by a materially further loan
portfolio deterioration that affects operating profitability and
pressures the FCC to RWA ratio consistently below 12%;
- BNCR's senior unsecured debt would mirror any negative change in
the BNCR's international scale rating.
BPDC
- The banks' ratings are sensitive to a downgrade of the sovereign
rating and to a deterioration in the local OE; however, this is not
currently Fitch's base case scenario given the Stable Rating
Outlook and OE stable trend;
- IDRs and VR could be downgraded if sustained deterioration in its
financial performance drives a material deterioration in asset
quality and decline in the bank's operating profit to risk weighted
assets (RWA) metric to a level continuously below 1.25%;
- GSR is sensitive to a downgrade of the sovereign rating, as well
as its propensity to provide support.
Foreign-Owned Commercial Banks
BAC San Jose
- Negative changes in BAC San Jose's IDRs and SSR would mirror any
movement in Costa Rica's Sovereign and Country Ceiling ratings;
- Any perception by Fitch of a relevant reduction in BIB's
propensity of support may trigger a downgrade of BAC San Jose's
IDRs and SSR. Also, a downgrade in BIB's IDRs could lead to a
similar action in BAC San Jose's ratings;
- BAC San Jose's VR could be downgraded in the case of a material
deterioration of the bank's financial performance resulting from a
material asset-quality deterioration that significantly erodes its
profitability and drops its FCC to RWA consistently below 9%.
Davivienda CR
- Negative changes in Davivienda CR's IDRs and SSR would mirror any
movement in Costa Rica's sovereign ratings and Country Ceiling;
- Any perception by Fitch of significantly reduced parent's
propensity to support the subsidiary may trigger a downgrade of
IDRs and SSR;
- A multi-notch downgrade of Davivienda's IDRs would also entail a
downgrade in Davivienda CR's FC IDR and SSR; while one notch
downgrade in Davivienda's IDRs would trigger a downgrade in
Davivienda CR's LC IDR.
- A downgrade of Davivienda CR's VR could result from a material
deterioration of the banks' financial performance that drops its
FCC/RWA consistently below 9% alongside incurring in sustained
operating losses.
BICSA
- The IDRs could be downgraded based on a material deterioration of
its parent companies' propensity and ability of support as
reflected on an SSR downgrade and accompanied by a deterioration of
VR;
- The VR could be downgraded by a material deterioration of the OEs
in Panama and Costa Rica where BICSA has its main exposures and/or
a deterioration of the bank's financial profile reflected in a
significant and sustained increase in its impaired loans and by a
further reduction of its operating profit to RWA that reduces its
CET1 ratio below 12%;
- The SSR is sensitive to negative changes in BCR's and BNCR's
ability or propensity to provide timely support to the bank.
ICQB
- ICQB's IDR could be downgraded due to a sustained deterioration
in its profitability, specifically a continued pre-tax income to
average assets indicator below 1.0%;
- A downgrade or material deterioration of the main OEs where ICQB
holds its major exposures.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
State-Owned Banks
- BNCR's and BCR's IDRs, VRs and GSRs could be upgraded in the
event of an upgrade of Costa Rica's sovereign rating and Country
Ceiling; however, currently, this is not Fitch's base case given
the sovereign rating Stable Outlook;
- Although not Fitch's base case, an upward revision of Fitch
assessment of the Costa Rican OE in conjunction with a consistent
financial performance and business profile could lead to an upgrade
of BNCR's and BCR's VRs. The sovereign rating acts as a cap to the
banks' VR;
- BNCR's senior unsecured debt would mirror any positive change in
the BNCR's international scale rating.
BPDC
- The bank's IDRs and VR have limited upside potential given that
they are at the sovereign level. The ratings could be upgraded if
financial performance is sustained and both Costa Rica's sovereign
rating and OE score are upgraded, although the latter is not
Fitch's base scenario given the current Stable Outlook;
- GSR could be upgraded if Costa Rica´s sovereign rating is
upgraded.
Foreign-Owned Commercial Banks
BAC San Jose
- BAC San Jose's Foreign Currency IDR and SSR could be upgraded if
Costa Rica's Country Ceiling and BIB's IDRs are upgraded; while the
Local Currency IDR would be upgraded if BIB's IDRs are upgraded, as
well as Costa Rica sovereign rating in case of multi-notch
improvement;
- The VR could be upgraded in case of a positive rating action on
the sovereign and Fitch revises upward its OE assessment while the
bank maintains a very strong financial profile.
Davivienda CR
- Davivienda CR's FC IDR and SSR could be upgraded in the event of
an upgrade of Costa Rica's Country Ceiling, while the LC IDR would
be upgraded if Davivienda's IDRs and Costa Rica sovereign rating
are upgraded;
- Davivienda CR's VR could be upgraded in the event of an
improvement in the local OE and if the bank continues with
consistent financial performance metrics.
BICSA
- The IDRs could be upgraded based on a material improvement of its
parent companies' propensity and ability of support as reflected on
an SSR upgrade or an improvement of the VR, in the latter case, the
IDRs would return to be driven by the bank's intrinsic
performance;
- The VR could be upgraded by a significant and sustained
improvement in its financial performance, resulting in a higher
operating return on RWAs above 1.25% and an improved funding
structure reflected in a loan-to-deposit ratio of 140%, while
maintaining capitalization ratios assets and strong asset quality;
- Although not likely in the foreseeable future, the SSR is
sensitive to significant positive changes in BCR's and BNCR's
ability or propensity to provide timely support to the bank.
ICQB
- Ratings can be upgraded if the entity is able to diversify its
revenues sources while maintaining its profitability levels, along
with meaningful improvement in the scale of its operations without
significantly altering ICQB's risk profile;
- By an improvement on Fitch's assessment of the OEs where ICQB
holds its major exposures.
VR ADJUSTMENTS
BPDC
BPDC's VR of 'bb-'has been assigned below the 'bb' implied VR due
to the following adjustment reason: Operating Environment /
Sovereign Rating Constraint (negative).
BAC San Jose
The VR of 'bb-' has been assigned below the implied Viability
Rating of 'bb' due to the following adjustment reason(s): Operating
Environment / Sovereign Rating Constraint (negative).
BICSA
The VR score of 'bb-' has been assigned above the 'b+' implied
score due to the following adjustment reason: Risk Profile
(positive).
SUMMARY OF FINANCIAL ADJUSTMENTS
BNCR
Fitch reclassified prepaid expenses, deposits as guarantee,
construction in process and other deferred assets as intangibles
and deducted them from total equity to reflect their low absorption
capacity.
BPDC
All intangible assets were deducted from total equity to obtain the
Fitch Core Capital since the agency believes these are of low loss
absorption capacity.
BAC San Jose
Prepaid expenses and other deferred assets were reclassified as
intangible assets and deducted from total equity as Fitch considers
these to have low capacity to absorb losses.
Davivienda CR
Prepaid expenses were reclassified as intangibles, and deducted
from equity, to reflect their lower loss absorption capacity.
ICQB
Prepaid expenses were reclassified as intangibles, and deducted
from equity, to reflect their lower loss absorption capacity.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
BNCR's and BCR's IDRs and GSRs are linked to the Costa Rican
sovereign rating.
BICSA's IDRs and SSR are driven by the potential support it could
receive from its parents, BCR and BNCR, if required.
BAC San Jose's IDRs and SSR are driven by the potential support it
could receive from its parent, BIB, if required.
Davivienda CR's IDRs and SSR are driven by the potential support it
could receive from its parent, Davivienda.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Banco Davivienda
(Costa Rica), S.A. LT IDR BB Upgrade B+
ST IDR B Affirmed B
LC LT IDR BB+ Upgrade BB-
LC ST IDR B Affirmed B
Viability bb- Upgrade b
Shareholder Support bb Upgrade b+
Banco Popular y
de Desarrollo
Comunal LT IDR BB- Upgrade B
ST IDR B Affirmed B
LC LT IDR BB- Upgrade B
LC ST IDR B Affirmed B
Viability bb- Upgrade b
Government Support b+ Upgrade b-
Banco Nacional
de Costa Rica LT IDR BB- Upgrade B
ST IDR B Affirmed B
LC LT IDR BB- Upgrade B
LC ST IDR B Affirmed B
Viability bb- Upgrade b
Government Support bb- Upgrade b
senior
unsecured LT BB- Upgrade B
Banco Internacional
de Costa Rica, S.A. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
Viability bb- Affirmed bb-
Shareholder Support bb- Upgrade b
Inversiones
CrediQ Business
S.A. LT IDR B Upgrade B-
ST IDR B Affirmed B
Banco de Costa
Rica LT IDR BB- Upgrade B
ST IDR B Affirmed B
LC LT IDR BB- Upgrade B
LC ST IDR B Affirmed B
Viability bb- Upgrade b
Government Support bb- Upgrade b
Banco BAC San
Jose, S.A. LT IDR BB Upgrade B+
ST IDR B Affirmed B
LC LT IDR BB Upgrade BB-
LC ST IDR B Affirmed B
Viability bb- Upgrade b
Shareholder Support bb Upgrade b+
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Living With Minimum Wage in Country
-------------------------------------------------------
Dominican Today reports that most people move between more than a
dozen current minimum wages that the national employer sector has
on the guidelines established by the State, through the Ministry of
Labor. From their realities, a few people tell their struggles to
be able to survive with an income that isn't to cover even half of
their expenses, in some cases, according to Dominican Today. Going
for multiple jobs or refraining from acquiring products or services
that may be essential, including food, are some of the ways to make
do with what they have, in a country where the cost of the basic
basket, at its lowest level, is 25,908.60, according to the data
published by the Central Bank of the Dominican Republic as of
January 2023, the report notes.
Although the minimum wage experienced an increase in 2021, the
National Salary Committee is currently convened to discuss a new
salary adjustment, which should be, according to the express
aspirations of the President of the Republic, above inflation,
which stood at 7.83%, last year, according to the Central Bank, the
report relays.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
DOMINICAN REPUBLIC: Meat Prices Go Up and Vegetable Prices Go Down
------------------------------------------------------------------
Dominican Today reports that the Santo Domingo Livestock Fair
receives hundreds of buyers every day who come to its shelves in
search of better prices for the products that make up the basic
family basket. Vegetables, fruits, and meats are the main
attraction of the establishments where the vendors themselves
assured that the cost of vegetables is falling, while meat prices
continue to increase, assured Jose Pantaleon, owner of the first
table From the market, according to Dominican Today. Cherry
tomatoes cost RD$25 per pound and salad tomatoes RD$30, the same as
chili peppers, while carrots sell for RD$25 per pound and bell
peppers cost 50 pesos, the report notes.
On the other hand, meats have risen a lot, which was the immediate
response of a frequent buyers. According to Albania Beltre, she has
been purchasing food products there for more than three years and
came to buy a pound of pork at 75 pesos, but now it is RD$125, the
report relays. "Here I got to buy gallons of oil at 250 and it is
almost 400 pesos. Everything is very expensive". In the "Yoan meat
distributor", for example, pork costs $125 a pound, chicken $83,
and beef 175 pesos a pound, the report notes.
"Everything is very expensive, so the best thing is not to ask the
price," said Josefina, another consumer. A pound of cassava costs
30 pesos, potato can be found for RD$28. Both squash and onion are
sold for RD$35, coconut yautia for 55 pesos, while the white and
yellow ones cost RD$70, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
=============
J A M A I C A
=============
[*] JAMAICA: Robinson Chides Gov't. for Lack of Energy Projects
---------------------------------------------------------------
RJR News reports that Opposition Spokesman on Finance Julian
Robinson has blasted the government for its approach to increasing
renewable energy sources.
During his budget presentation, Mr. Robinson said Jamaica continues
to face high energy costs, which also puts pressure on wages paid
to workers, according to RJR News.
He said the government needs to ramp up bids for renewable energy
projects, the report notes.
"The last one was in 2013 and that buildout took place in
2016/2017. But in seven years, not a single request for proposal
for renewable energy," Mr. Robinson complained, the report relays.
"Last year, I raised it. There were promises it coming soon. I hear
again it coming soon. Every time the issue comes up, we hear it is
coming soon," he lamented, 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.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Has Foreign Exchange Shortage, Not a Crisis
--------------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that Finance
Minister Colm Imbert says the country is experiencing a foreign
exchange shortage, not a crisis. He made the statement while
speaking at the Jamaica Trade Mission conference at the Hyatt
Regency hotel in Port of Spain, according to Trinidad Express.
He said the demand outweighs the supply for foreign exchange and
what was done to help alleviate the problems EximBank launched a
forex facility in 2018, for the exporters and manufacturers to
access foreign exchange, the report notes.
"The Government provides this bank with foreign exchange which is
then distributed to companies on request. So, you have to apply.
From what I have been told by the business community it has been a
very successful programme. So far, we have put almost a billion US
dollars into that entity for distribution. Cabinet just agreed to
put another US$180 million into it and it works very well. In
fact, from what I am hearing from the Exim Bank the amount of
foreign exchange given to the business community is now less than
the money being repatriated. So, let's say we give them a billion
US. They're repatriating more than a billion US in terms of
exports," Imbert explained, the report relays.
Central Bank Governor Dr Alvin Hilaire said citizens will have to
be prepared to continue facing shortages of foreign exchange, the
report relays. Hilaire noted the situation will persist until as a
country we can achieve market equilibrium based on improved
macroeconomic conditions, the report notes.
"We all know that we are in a situation now in Trinidad and Tobago,
where the market is not clearing, so we do have some access
problems. In the short run, I think as a society, we must have a
consistent, foreign exchange regime that involves better and
equitable access," Hilaire said, the report discloses.
For over five years, businesses have been complaining about the
lack of foreign exchange and some even expressed going on the black
market to access the currency, to bring in their goods, the report
relays.
No Devaluation of The Dollar
As it pertains to devaluing the dollar, the minister assured that
this would not be happening, contrary to what some critics would
say, the report notes.
"We have enough foreign reserves of seven billion US and we have
Heritage funds back up to five billion US, so between those two, we
have eight and a half months import cover," Imbert said, the report
discloses.
Turning his attention to Jamaica, the minister encouraged
businesses to invest in this country's economy as it is safe and
stable, the report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *