/raid1/www/Hosts/bankrupt/TCRLA_Public/230317.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
Friday, March 17, 2023, Vol. 24, No. 56
Headlines
A R G E N T I N A
ARGENTINA: Inflation Soars Past 100% Mark
ARGENTINA: To Face Deeper 2023 Contraction on Drought, Itau Says
PROVINCE OF ENTRE RIOS: S&P Affirms 'CCC+' LT ICR, Outlook Stable
B O L I V I A
BOLIVIA: S&P Places 'B' Long-Term SCR on CreditWatch Negative
B R A Z I L
AMERICANAS SA: Billionaires Offer $1.9 Bil, Unlocking Debt Talks
AMERICANAS SA: Lawmakers Back Probe Into Firm, Congressman Says
AZUL SA: Airline Surge After Financing Deal Ease Cash Woes
BRF SA: Moody's Downgrades CFR & Senior Unsecured Notes to Ba3
GOL LINHAS: Enters Debt Restructuring Deal with Abra Group
GOL LINHAS: S&P Upgrades ICR to 'CCC+' on New Capital Structure
P U E R T O R I C O
ESJ TOWERS: ESJ HOA's Motion for Relief from Automatic Stay Denied
PUERTO RICO: PREPA's Plan Heads for Creditor Vote
T R I N I D A D A N D T O B A G O
CONSOLIDATED ENERGY: S&P Affirms 'BB-' ICR, Alters Outlook to Pos.
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Inflation Soars Past 100% Mark
-----------------------------------------
Laura Gozzi, writing for BBC News, reports that Argentina's
inflation rate has soared past 100% for the first time since the
end of hyperinflation in the early 90s.
Inflation hit 102.5% in February, the country's statistics agency
said, meaning the price of many consumer goods has more than
doubled since 2022, notes the report.
BBC News relates that Argentina has been in economic difficulty for
years, and many people now live in poverty.
Its government has been trying to stem price rises by capping the
prices of food and other products, BBC relays. But the food and
drink sectors saw the most dramatic recent increase, with prices
growing by 9.8% in February compared to January.
Argentinian media said that this increase could partly be due to a
sharp hike in the price of meat, which rose by almost 20% in the
space of a month, notes BBC News. Adverse weather conditions, a
prolonged heatwave and a drought seriously impacted livestock and
crops, said local news outlet Ambito, adds the report.
Although the symbolism of the inflation rate shooting up past 100%
is striking, the effects of soaring inflation have long been felt
in Argentina, according to BBC.
The report recalls that last September, protesters took to the
streets to demand action to counter rising costs of living, and, in
February, Argentina's central bank said that a new 2,000-peso
(GBP8.13; $9.9) banknote would be issued in response to the jump in
consumer prices.
The Argentinian government has long tried to contain inflation, but
divisions have marred the country's economic policy, BBC notes.
Last summer, three economy ministers succeeded one another in the
space of four weeks as the country's economic crisis deepened, and
President Alberto Fernandez is said to be at odds with his deputy,
Cristina Fernandez de Kirchner, over how to tackle Argentina's
economic problems, BBC relates.
In December, the International Monetary Fund (IMF) approved another
$6 billion (GBP4.9 billion) of bailout money. It was the latest
payout for Argentina in a 30-month programme that is expected to
reach a total of $44 billion, reports BBC.
About Argentina
Argentina is a country located mostly in the southern half of
South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Last March 25, 2022, Argentina finalized agreement with the IMF
for
a new USD44 billion Extended Funding Facility (EFF) intended to
fund USD40 billion in looming repayments of the defunct Stand-By
Arrangement (SBA), with an extra USD4 billion in up-front net
financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
S&P Global Ratings, on Jan. 20, 2023, affirmed its 'CCC+/C'
foreign
currency and 'CCC-/C' local currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings remains negative.
S&P's 'CCC+' transfer and convertibility assessment is unchanged.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy
uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within
the
government coalition and infighting among the opposition
constrains
the sovereign's ability to implement timely changes in economic
policy.
Fitch Ratings, on the other hand, downgraded in October 2022
Argentina's Long-Term Foreign-Currency (FC) and Local-Currency
(LC)
Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade
reflects deep macroeconomic imbalances and a highly constrained
external liquidity position, which Fitch expects to increasingly
undermine repayment capacity as foreign-currency debt service
ramps
up in the coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS confirmed Argentina's Long-Term Foreign Currency Issuer
Rating
at CCC and Long-Term Local Currency Issuer Rating at CCC (high) on
July 21, 2022.
ARGENTINA: To Face Deeper 2023 Contraction on Drought, Itau Says
----------------------------------------------------------------
Carolina Millan at Bloomberg News reports that Argentina's drought
will lead to a larger economic contraction in 2023 than previously
anticipated, according to analysts at Itau Unibanco Holding SA, who
cut their GDP estimates from minus 1.5 percent to minus three
percent.
Analysts, led by Joao Pedro Bumachar, used forecasts from the
Buenos Aires Grain Exchange of a 20 percent drop in soybean and
corn production for their revision, according to a report,
Bloomberg News notes. They also considered the effects of "tighter
import controls" aimed at protecting the country's foreign exchange
reserves, according to Bloomberg News.
The US also pointed to a 20 percent drop in soybean production this
year since its February report, Bloomberg News relays.
Argentina is the world's top exporter of soybean meal and oil and
the lower output will mean a smaller-than-expected inflow of
much-needed dollars to shore up its foreign exchange reserves and
meet a program with the International Monetary Fund, Bloomberg News
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.
Last March 25, 2022, Argentina finalized agreement with the IMF for
a new USD44 billion Extended Funding Facility (EFF) intended to
fund USD40 billion in looming repayments of the defunct Stand-By
Arrangement (SBA), with an extra USD4 billion in up-front net
financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
S&P Global Ratings, on Jan. 20, 2023, affirmed its 'CCC+/C' foreign
currency and 'CCC-/C' local currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings remains negative.
S&P's 'CCC+' transfer and convertibility assessment is unchanged.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within the
government coalition and infighting among the opposition constrains
the sovereign's ability to implement timely changes in economic
policy.
Fitch Ratings, on the other hand, downgraded in October 2022
Argentina's Long-Term Foreign-Currency (FC) and Local-Currency (LC)
Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade
reflects deep macroeconomic imbalances and a highly constrained
external liquidity position, which Fitch expects to increasingly
undermine repayment capacity as foreign-currency debt service ramps
up in the coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS confirmed Argentina's Long-Term Foreign Currency Issuer Rating
at CCC and Long-Term Local Currency Issuer Rating at CCC (high) on
July 21, 2022.
PROVINCE OF ENTRE RIOS: S&P Affirms 'CCC+' LT ICR, Outlook Stable
-----------------------------------------------------------------
On March 15, 2023, S&P Global Ratings affirmed its 'CCC+' foreign
and local currency long-term issuer credit ratings on the province
of Entre Rios. The outlook is stable. S&P also revised upward the
province's stand-alone credit profile (SACP) to 'b-' from 'ccc+'.
Outlook
S&P said, "The stable outlook reflects our expectation of operating
surpluses and balanced results after capital expenditures (capex)
in the next 12-18 months. Our base-case scenario also assumes capex
can be flexible if needed. These factors are counterbalanced by
continued economic and financial challenges in Argentina and
uncertainties about the implications of macroeconomic correction in
the future that could pressure the province's budget and its
capacity to service debt."
Downside scenario
S&P said, "We could downgrade the province of Entre Rios in the
next 12 months if we downwardly revise our T&C assessment of
Argentina because of tighter foreign exchange restrictions amid
scarce reserves that could dent the local and regional governments'
(LRGs) ability to service debt. In addition, we could lower the
long-term ratings on the province if a sharply weaker-than-expected
fiscal performance or liquidity position increases the risk of
default or the likelihood of a distressed debt exchange in the next
12 months."
Upside scenario
S&P said, "While the province's 'b-' SACP is stronger than the
'CCC+' ratings, we cap our ratings at the 'CCC+' T&C assessment for
Argentina. As a result, we could only upgrade Entre Rios if we
upwardly revise the T&C assessment. This would likely have to be
accompanied by an improvement in the creditworthiness of Argentina
(foreign currency: CCC+/Negative/C, local currency:
CCC-/Negative/C) amid clarity about how policy, postelections, will
ease financing challenges in the local market and provide a road
map to correct Argentina's major structural macroeconomic
imbalances."
Rationale
S&P said, "We revised upward the province's SACP to 'b-' from
'ccc+', reflecting our expectation that the recently accumulated
cash, fiscal flows, and precautionary measures to face potential
exchange rate volatility should enable Entre Rios to cover its debt
service payments in 2023-2025. Debt service is increasing because
capital payments from the restructured international bond begin in
2023 (principal and interest of $86.5 million) and will increase to
$129.7 million in 2024 and to $100 million-$120 million annually in
2025-2028, although we expect this to be manageable in our
base-case scenario. However, risks will stem from uncertainty about
the province's capacity to access sufficient foreign currency to
bulk up needed sums to service debt in U.S. dollars, as well as
potential economic instability or correction that could strain its
fiscal flows and cash position. We reflect this in our T&C
assessment for the country and our 'CCC+' ratings on Entre Rios.
"While we expect further pressures on the province's budget, we
assume fiscal results will continue to be moderately positivem
We expect Entre Rios to post operating surpluses averaging 5.5% of
operating revenue in 2023-2025 and moderate surpluses after capex,
given our expectation of somewhat higher capex in 2023, but similar
to historical levels in 2024-2025 at 6% of total spending.
Increases in indexation amid high inflation and/or exchange rate
movements beyond what we currently expect could lead to a volatile
fiscal performance. Over the past two years, economic rebound and
inflation boosted the province's revenue collection, while spending
remained under control. Fiscal results in 2022 moderated compared
to 2021, but remained positive, with an operating surplus of 7.2%
of operating revenue and a surplus after capex of 3% of total
revenue. This compares to average operating deficits of 2.6% and
6.5% after capex in 2015-2019.
"Our forecast assumes Entre Rios' own-source revenue and transfers
from the national government (transfers account for 60% of total
revenue) will increase to be broadly in line with nominal GDP
growth, with lower increases in real estate and automobile taxes
due to tariff adjustments below inflation. We incorporate potential
pressures on operating spending, particularly payroll and pension
payments (75% of the government's outlays)." Public-sector salary
negotiations in 2020 were suspended and increases in 2021 and 2022
were in line with inflation, while other spending items decreased
in real terms. Infrastructure spending has remained at 5%-6% of
total spending, underscoring the limited budgetary flexibility.
Wide pension deficits also pressure the province's budget, given
that they aren't entirely covered by national government transfers.
The annual pension deficit has increased over the past years,
representing 10.1% of operating revenue as of 2022. While the
administration recognizes a need for pension reform, there has not
been any progress except for some specific and minor measures
approved by decree.
S&P said, "We assume international debt markets will remain closed
to Argentine LRGs, and Entre Rios will cover funding needs with
preapproved and potentially new loans from multilateral lending
agencies, as well as with the financing from the national
government. The province hasn't issued short-term notes for several
years, which could also be a funding source in the future.
"The recent enhancement in Entre Rios' finances has improved its
liquidity position. Per our liquidity calculation, we estimate
available cash is sufficient to cover more than 90% of the debt
service in the next 12 months. This includes accumulated free cash
and our expected fiscal flows. Nevertheless, the coverage ratio
could fluctuate due to anticipated higher debt service in U.S.
dollars and potentially higher exchange rate depreciation compared
to our base case, which could dent recently accumulated cash. Given
limited access to credit markets, building cash buffers and
maintaining their value in real terms is a key challenge for
Argentine provinces.
"The province's debt stock continued to decrease and represented
29.5% of its operating revenue in 2022. We expect the debt burden
to diminish in the coming years largely because financing
conditions remain limited while revenue will increase nominally due
to high inflation. However, about 83% of the province's debt is
denominated in U.S. dollars, which underscores potential currency
risk. We expect the interest burden to average just below 2% of
operating revenues in 2023-2025."
Low institutional predictability and subdued economic growth limit
Entre Rios' financial planning
S&P said, "Our economic outlook for Entre Rios is weak, in line
with that for the sovereign. We expect growth in Argentina to be
flat in 2023 and to be about 2% in 2024-2025. Meanwhile, inflation
is still likely to stay close to 90% year-over-year in 2023, and
will continue to pressure the country's already weak socioeconomic
indicators." Sluggish economic growth plus exchange rate
depreciation resulted in Entre Rios' GDP per capita at $8,400 in
2022, below the estimated national GDP per capita ($13,800).
Entre Rios has shown commitment to curbing spending and reducing
its fiscal gap in recent years. Amid limited access to borrowing
sources, S&P thinks careful financial planning will be key to
avoiding liquidity pressure as amortization payments come due in
2023-2025. The administration recently approved the creation of a
reserve fund with the intention of keeping cash for potential
exchange rate fluctuations or fiscal shortfalls. While resources
are not ringfenced and it could be underfunded in the next few
years, S&P considers the reserve fund to reflect some preparedness
to face risks.
S&P said, "At the same time, our financial management assessment is
hindered by the fact that amid increasingly strained financial
conditions, including very limited access to funding, the
administration decided to prioritize operating and capital spending
over timely debt payments.
"Finally, we assess the institutional framework for Argentina's
LRGs as very volatile and underfunded, reflecting our perception of
the sovereign's very weak institutional predictability and volatile
intergovernmental system that has been subject to various
modifications to fiscal regulations and lack of consistency over
the years. This jeopardizes the LRGs' financial planning and
consequently their credit quality."
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
ENTRE RIOS (PROVINCE OF)
Issuer Credit Rating CCC+/Stable/--
ENTRE RIOS (PROVINCE OF)
Senior Unsecured CCC+
=============
B O L I V I A
=============
BOLIVIA: S&P Places 'B' Long-Term SCR on CreditWatch Negative
-------------------------------------------------------------
On March 15, 2023, S&P Global Ratings placed its 'B' long-term
sovereign credit ratings on Bolivia on CreditWatch with negative
implications. At the same time, S&P affirmed its 'B' short-term
sovereign credit ratings. The 'B' transfer and convertibility
assessment is unchanged.
CreditWatch
The CreditWatch negative reflects the risk of a downgrade due to
potentially increased external vulnerabilities given the ongoing
loss of international reserves and a worsening of the sovereign's
external profile. Failure to restore public confidence in a timely
manner could result in a continued decline in international
reserves, which could further weaken external liquidity.
The exchange rate with the U.S. dollar has been unchanged since
2011, playing a key role in anchoring expectations and sustaining
economic stability. That said, it has also limited the government's
policy flexibility. Potentially adverse or volatile changes in the
exchange rate would likely increase the government's debt and
interest burden as the bulk of government debt is denominated in
foreign currency. Moreover, such developments would likely damage
GDP growth, raise inflation, and threaten the health of the
financial system.
S&P could keep the credit rating at its current level if the
government were to take steps that reinforce policy credibility,
containing the risk to the country's external profile. Among other
things, steps to gain better and timely access to external sources
of liquidity and to correct large fiscal imbalances and curtail
high financing needs could alleviate recent market uncertainty. The
resulting gain in public confidence could help to stabilize the
rating.
S&P expects to resolve the CreditWatch within the next three
months.
Rationale
S&P said, "Our 'B' rating on Bolivia reflects increasing fiscal and
external vulnerabilities. Despite strong export value, we estimate
that the country's current account turned to a deficit of 1.6% of
GDP in 2022 and will likely remain at a similar level in 2023, hurt
by rising fuel imports and the gas sector's reduced export
capacity." External deficits have contributed to falling external
assets, with central bank reserves falling to US$3.5 billion at the
beginning of February 2023 from US$4.7 billion at the beginning of
2022. The outflow of U.S. dollars has changed the composition of
official reserves, with non-gold reserves falling to US$1 billion.
The support to external liquidity that comes from gold reserves is
uncertain as there are legal limitations on the sale of such
assets. The government has been trying to change this regulation
since last year; however, political disagreement within the ruling
Movimiento al Socialismo (MAS) political party has delayed its
approval.
Amid rising demand for hard currency in recent weeks, the central
bank has reinforced its commitment to sustain the exchange rate by
lowering reserve requirements for foreign currency deposits in the
banking system and directly selling U.S. dollars to the public. The
cost of the measures in terms of external assets is uncertain, as
the central bank stopped publishing information on international
reserves on Feb. 8.
Bolivia has around US$800 million of multilateral and bilateral
loan proposals pending approval in the legislature. Part of these
funds would be available for budgetary purposes and would help
stabilize foreign exchange reserves in the coming months. However,
congress has failed to approve these loans. Although MAS has a
simple majority in both chambers of the legislature, divisions
within the party have worsened recently, blocking the loan
approvals.
This political impasse raises the risk that external liquidity will
further erode in a context of tight external market conditions and
still-high government financing needs. The general government
fiscal deficit lowered to 6% of GDP at the end of 2022, from 13% in
2020, but is likely to remain above 5% of GDP in 2023. S&P
estimates this would keep net general government debt above 60% of
GDP in the next two years and the interest burden just above 5% of
revenue.
Only 17% of the sovereign's external debt is owed to commercial
creditors, alleviating its external debt service needs. Moreover, a
debt management operation done in February 2022 reduced 2023 bond
principal payments to $183 million, from $500 originally. That
said, a further drain of reserves would likely increase the
country's external vulnerabilities.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
BOLIVIA (PLURINATIONAL STATE OF)
Transfer & Convertibility Assessment
Local Currency B
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
BOLIVIA (PLURINATIONAL STATE OF)
Sovereign Credit Rating B/Watch Neg/B B/Stable/B
BOLIVIA (PLURINATIONAL STATE OF)
Senior Unsecured B/Watch Neg B
===========
B R A Z I L
===========
AMERICANAS SA: Billionaires Offer $1.9 Bil, Unlocking Debt Talks
----------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that the
billionaire shareholders behind troubled Brazilian retailer
Americanas SA are informally offering to boost a capital injection
to BRL10 billion ($1.9 billion) which is being well received by
bank creditors and could unlock talks.
The last official offer of BRL7 billion was considered too low by
creditors, but negotiations could begin in earnest if Jorge Paulo
Lemann and his partners are willing to put BRL10 billion as a
starting point, according to the report.
A new meeting between Americanas and banks should happen soon, the
report notes.
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.
AMERICANAS SA: Lawmakers Back Probe Into Firm, Congressman Says
---------------------------------------------------------------
Brazilian federal lawmakers plan to investigate Americanas SA after
the troubled retailer disclosed accounting inconsistencies that
prompted a major financial scandal, congressman Andre Fufuca told
Reuters.
Carolina Pulice and Andre Romani at Reuters report that Fufuca
collected 187 signatures from fellow federal lawmakers, of the 171
needed, to create an investigative committee.
The congressional investigation, known by its Portuguese acronym as
a CPI, can result in a number of actions, including the referral of
possible wrongdoing to law enforcement, the report notes. It still
needs to jump through bureaucratic hurdles like legislative
hearings before it can be formally established, the report relays.
Americanas entered bankruptcy protection in January after
disclosing accounting "inconsistencies" worth BRL20 billion ($3.78
billion) and overall debt of more than $8 billion, the report
relays.
Americanas declined to comment on the matter.
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.
AZUL SA: Airline Surge After Financing Deal Ease Cash Woes
----------------------------------------------------------
Vinicius Andrade and Maria Elena Vizcaino at Bloomberg News report
that Brazil's battered airline, Azul SA, got some relief on March
6, after striking an agreement that eased investors' concern over
their liquidity amid deteriorating credit conditions in their home
market.
Azul SA's American depositary receipts closed 41% higher at $5.85
in New York, the most on record, and bonds due in 2026 climbed 16
cents to 67.5 cents on the dollar, according to Bloomberg News.
The moves follow an agreement the company struck with most lessors
allowing it to reduce its payments in exchange for a mix of stocks
and bonds, according to a filing published, the report notes.
The deal "seems to be a powerful vote of confidence in the
carrier's long-term staying power and cash-generating ability,"
Citigroup Inc. analyst Stephen Trent wrote, the report relays.
Despite the agreement, bonds from the company trade deep in
distressed levels as investors weigh refinancing risks and high
borrowing costs in Brazil, the report discloses.
Azul's dollar bonds also rank among the worst in Latin America,
losing more than 15% over the span, the report notes.
Rating firms last month downgraded the company, citing the fact
that the local market had grown more restrictive after retailer
Americanas SA filed for bankruptcy protection, the report adds.
BRF SA: Moody's Downgrades CFR & Senior Unsecured Notes to Ba3
--------------------------------------------------------------
Moody's Investors Service has downgraded to Ba3 from Ba2 the
corporate family rating of BRF S.A. and the ratings on its senior
unsecured notes. The outlook is stable for all ratings.
Downgrades:
Issuer: BRF S.A.
Corporate Family Rating, Downgraded to Ba3 from Ba2
Global Notes due 2023, Downgraded to Ba3 from Ba2
SR Global Notes due 2024, Downgraded to Ba3 from Ba2
Global Notes due 2030, Downgraded to Ba3 from Ba2
SR Global Notes due 2050, Downgraded to Ba3 from Ba2
Outlook Actions:
Issuer: BRF S.A.
Outlook, Remains Stable
RATINGS RATIONALE
The downgrade of BRF ratings to Ba3 reflects the persistent
weaknesses in credit metrics, in particular margins, leverage and
interest coverage, as a consequence of challenging market
conditions and higher input costs. The company's management has
implemented erratic strategies in recent years that did not
translate into improved performance. Although Moody's believes that
the new management appointed by Marfrig Global Foods S.A. (Marfrig)
will be able to turnaround the operations over time, there are
significant challenges that can delay a more substantial recovery
in performance, including the fierce competition in the domestic
market at a time of weaker consumption trends in Brazil, as well as
the risk of bird flu reaching Brazil, which could materially
affect the poultry industry's ability to maintain production, at
the same time that it impacts costs and Brazil's position in
international trade.
BRF ratings remains supported by its strong business profile and
leadership in both processed foods in Brazil and global poultry
exports. The company's good liquidity and comfortable debt
amortization schedule also support the Ba3 ratings. With BRL8.5
billion in cash at the end of 2022, BRF covers all its debt
obligations through 2026.
Offsetting these positive attributes are the relatively low
geographic diversity in terms of production footprint, as most of
BRF's plants and production facilities are in Brazil, and heavy
concentration in poultry, which makes the company strongly exposed
to grain prices and currency volatility, given the large share of
exports in revenues.
The stable outlook indicates that Moody's does not expect to see
further deterioration in credit metrics during 2023. A gradual
recovery in key markets, combined with expected operational
efficiencies, better working capital management and moderation in
grain prices could bring some improvement to credit metrics in the
next 12-18 months. The stable outlook also incorporates Moody's
assumption that BRF will maintain adequate liquidity over the next
12 to 18 months and that the company will maintain its financial
discipline on capital allocation.
ENVIRONMENTAL, SOCIAL & GOVERNANCE CONSIDERATIONS
As a major poultry and pork producer, BRF is less exposed than beef
producers to deforestation risk than its Brazilian peers that
primarily produce beef. Protein producers in Brazil are facing
increasing scrutiny from major stakeholders related to cattle
raising linked to deforestation of the Amazon and other biomes. BRF
maintains a sustainable grain purchasing policy to avoid links with
deforestation. Moreover, traceability of grains and compliance of
the supply chain with social standards are relevant considerations
for BRF's credit profile relative to its exposure to social risk
factors. Exposure to governance risks are primarily related to the
constant changes in management, management credibility and track
record, with uncertainties related to the effective control of
Marfrig and its role in the company's strategy.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade would be considered in case of significant improvement
in operating performance and margins, with BRF showing a resilient
performance regardless the underlying macroeconomic environment and
consumption patterns in key markets. An upward rating movement
would require BRF to maintain a strong liquidity position and
improve credit metrics, with leverage, measured by total adjusted
debt/EBITDA improving towards 3.5x or below, and CFO/debt trending
towards 20%.
A downgrade could result from a deterioration in BRF's operating
performance and liquidity, with weaker cash flow limiting the
company's ability reduce leverage. Quantitatively, a downgrade
could also occur if total adjusted debt/EBITDA remains above 4x on
a sustained basis and CFO/debt stays below 15% on a prolonged
basis.
The principal methodology used in these ratings was Protein and
Agriculture published in November 2021.
BRF S.A. (BRF) is one of the largest food conglomerates globally
and posted consolidated net revenue of BRL53.8 billion ($10.2
billion, considering average exchange rate) for the full year 2022.
The company operates 44 plants, 54 distribution centers and two
innovation centers in the world. BRF exports to more than 150
countries and has a leading position in global poultry exports.
GOL LINHAS: Enters Debt Restructuring Deal with Abra Group
----------------------------------------------------------
Vinicius Andrade and Maria Elena Vizcaino at Bloomberg News report
that Brazil's battered airline, Gol Linhas Aereas Inteligentes
S.A., Gol announced on March 3 a debt restructuring deal with Abra
Group Ltd., a holding company that will control operations of Gol
and Avianca Group International Ltd., and a group of creditors.
The report says that the transaction provides the company with $451
million in cash, lengthens its debt profile and should ease
negotiations with lessors, Bradesco BBI analyst Victor Mizusaki
wrote in a note dated March 5, the report relates.
Bloomberg News says the agreement eased investors' concern over
Gol's liquidity amid deteriorating credit conditions in its home
market.
Gol's ADRs climbed 21% to $2.50, according to data compiled by
Bloomberg.
Despite the agreement, the bond from the company trade deep in
distressed levels as investors weigh refinancing risks and high
borrowing costs in Brazil, the report discloses.
Gol's debt is the worst performer in the region over the last
month, handing investors losses of 27% over that period, according
to a Bloomberg index.
Rating firms last month downgraded the company, citing the fact
that the local market had grown more restrictive after retailer
Americanas SA filed for bankruptcy protection, the report adds.
GOL LINHAS: S&P Upgrades ICR to 'CCC+' on New Capital Structure
---------------------------------------------------------------
S&P Global Ratings raised our global scale issuer credit rating on
Gol Linhas Aereas Inteligentes S.A. (Gol) to 'CCC+' from 'SD' and
national scale rating to 'brBB+' from 'SD'. At the same time, S&P
raised its senior unsecured notes rating to 'CCC' from 'D' and
revised the recovery rating to '5' from '4', indicating its
expectation of a modest recovery (25%) in the event of a payment
default.
S&P said, "The positive outlook reflects our expectation that the
company's prudent capacity growth and strong yield environment will
bolster EBITDA margins and reduce leverage by the end of 2023.
"Earlier this month, the company completed debt restructuring that
we viewed as a distressed exchange. The transaction slashed
liquidity pressures, as Gol will receive $451 million in new funds
to be disbursed until 2028, which could be used for debt repayment
or capital expenditures (capex). Also, the transaction reduced
refinancing risk, as only $72 million of the 2024 notes will remain
outstanding and lowered the cash interest expense as the coupon
will be partly paid-in-kind (PIK). On the other hand, total
interest expense has increased (as coupon is 18% versus 7%-8% in
the exchanged debt), gross debt levels will rise in the next two
years, and we expect leverage to remain very high and free cash
flow after lease payments to be negative. The transaction resulted
in an increase in gross debt, while Gol removed $1.1 billion of
existing bonds from its capital structure through the exchange, it
has placed new debt with Abra (a new holding company) for $1.4
billion. Additionally, amid the fleet renewal, lease liabilities
will increase in 2023 and 2024 and the PIK will result in annual
capitalization of 13.5% of $1.1 billion in new debt. Finally,
although we forecast a much stronger operating cash flow, capex and
lease payments will continue to take a toll on the company's cash
flow, which we believe could remain negative in the next two years,
requiring additional financing. As a result, we expect S&P adjusted
debt to EBITDA to remain between 6.0x and 6.5x and funds from
operations (FFO) to debt below 10% in the next two years. However,
Gol's capital structure could strengthen if Abra eventually
exchanges the new 2028 senior secured notes for exchangeable senior
secured notes to convert them into equity, as it holds about 40% of
Gol's pro forma financial debt.
"We expect domestic passenger capacity to expand about 8% this
year, as Gol hasn't yet reached pre-pandemic levels, and that
international capacity will jump 100%-120% because international
travel remained very weak in 2022. We expect some pressure on
yields starting in the second quarter if Brazilian airlines
continue adding capacity and macroeconomic conditions remain weak
(very low GDP growth, and high inflation and interest rates).
However, we believe airlines will focus on protecting profitability
and operating cash flow, and so we expect a rational market and
average yields in 2023 to remain strong. In addition, we forecast
Gol to benefit from a drop of about 10% in jet fuel prices as crude
oil prices are likely to fall, and we don't expect a sharp
depreciation of the Brazilian real. But fuel prices will remain
higher than normal during an expected global recession this year.
Finally, in line with capacity recovery, we also forecast
efficiency gains and a drop in Gol's cost available seat kilometer
(CASK) excluding fuel costs to pre-pandemic levels in 2023. As a
result, our base-case scenario assumes Gol's EBITDA will jump to
R$4.5 billion - R$4.7 billion this year from R$2.46 billion in
2022. In line with this projection, we forecast adjusted debt to
EBITDA to drop to 6.0x-6.5x (considering operating leases as
reported) from 10.3x in 2022 and FFO to debt of 5%-10% by the end
of 2023. However, our ratings contemplate that the company will
have to rely on relatively favorable economic and industry
conditions to deleverage. This is because an increase of about 10%
in fuel prices or the exchange rate from our base-case scenario
could cause leverage to remain above 7x in 2023."
ESG credit indicators: E-3, S-5, G-2
=====================
P U E R T O R I C O
=====================
ESJ TOWERS: ESJ HOA's Motion for Relief from Automatic Stay Denied
------------------------------------------------------------------
In the case styled IN re ESJ Towers, Inc. d/b/a Mare St. Clair
Hotel, Chapter 11, Debtor, Case No. 22-01676 (ESL), (Bankr.
D.P.R.), Bankruptcy Judge Enrique S. Lamoutte denies the Urgent
Motion for Relief from Automatic Stay filed by ESJ Towers
Condominium Homeowners Association.
The ESJ HOA filed the instant Motion for Relief from Automatic Stay
due to the Debtor's failure to pay its post-petition maintenance
fees for the past four months so that it may proceed to disconnect
the utilities of the Debtors' alleged wholly controlled 124
condominium units out of the 274 units in which the Debtor has an
interest.
ESJ HOA contends that relief from the automatic stay is warranted
due to lack of adequate protection of an interest in property of
ESJ HOA. ESJ HOA's position is that it has a security interest on
the 124 units based on these statutory liens.
Common expense debts are only secured as soon as they are
registered in the Property Registry, albeit the continuous
obligation of an owner to contribute as required by law. The lien
contemplated by Article 41 of the Condominium Act is not
self-perfecting; rather, in order to be perfected and for it to
encumber the apartment, the lien must be recorded in the Registry
of Property.
This Court finds that the bankruptcy estate has a property interest
in the 124 units in which the Debtor was the lessee as of the
petition date and continues to be the lessee until the leases
expire in December 2029 or until the Debtor rejects the same.
Therefore, the Debtor's interest in the leases constitutes property
of the bankruptcy estate.
Moreover, the Court finds and concludes that ESJ HOA does not have
a security interest over the 124 units because the liens need to be
registered, therefore ESJ HOA is not entitled to adequate
protection pursuant to 11 U.S.C. section 361 and it is an
unsecured
claimant.
A full-text copy of the Opinion and Order dated Feb. 27, 2023 is
available at https://tinyurl.com/47dhf6jy from Leagle.com.
About ESJ Towers
ESJ Towers, Inc. owns the ESJ Towers in Carolina, P.R. The luxury
apartments and condo units at ESJ Towers have direct access to Isla
Verde Beach, widely considered one of the best in Puerto Rico.
ESJ sought protection under Chapter 11 of the U.S. Bankruptcy Code
(Bankr. D.P.R. Case No. 22-01676) on June 10, 2022, with as much as
50 million in both assets and liabilities. ESJ President Keith St.
Clair signed the petition.
Judge Enrique S. Lamoutte Inclan oversees the case.
The Debtor tapped Charles A. Cuprill, Esq., at Charles A. Cuprill,
PSC Law Offices as bankruptcy counsel; Ramon Luis Nieves, Esq., at
RL Legal Consulting Services, LLC and Luis Daniel Muniz, Esq., as
special counsels; Dage Consulting CPAS, PSC as financial advisor;
CPA Luis R. Carrasquillo & Co., P.S.C. as financial consultant; and
De Angel & Compania, PA, LLC as auditor.
The U.S. Trustee for Region 21 appointed an official committee of
unsecured creditors on Sept. 12, 2022. MRO Attorneys at Law, LLC
and Dage Consulting CPAS, PSC serve as the committee's legal
counsel and financial advisor, respectively.
PUERTO RICO: PREPA's Plan Heads for Creditor Vote
-------------------------------------------------
Rick Archer of Law360 reports that Puerto Rico utility, PREPA,
reorganization plan is heading for creditor vote.
A New York federal judge sent a $4.3 billion reorganization plan
for the Puerto Rico Electric Power Authority out for a creditor
vote February 28, 2023, overruling arguments from
bondholders that the plan stands no chance of confirmation.
PREPA's PLAN
As reported in the TCR, the Financial Oversight and Management
Board for Puerto Rico in December 2022 filed its proposed Plan of
Adjustment to restructure more than $10 billion of debt and other
claims against the Puerto Rico Electric Power Authority (PREPA).
The Plan, filed with the U.S. District Court for the District of
Puerto Rico, proposes to cut PREPA's
unsustainable debt by 48%, to approximately $5.4 billion, and
should provide the financial stability
necessary to invest in a modern, resilient, and reliable energy
system for Puerto Rico.
Two classes of creditors agreed to support the Plan, which should
satisfy the legal requirement that at least one class of impaired
claims must accept the Plan to allow the Court to make the Plan
binding against all other classes of claims.
There is currently no agreement with the holders and guarantors of
$7.6 billion of other PREPA bonds. The Plan allows those
bondholders to join a settlement class with a guaranteed minimum
distribution, or to join a class whose distribution will depend on
the outcome of litigation the Oversight Board resumed in September
to limit bondholders' lien on PREPA's revenue and to limit severely
their allowable claim on which they may be paid distributions.
The class for bondholders desiring to settle proposes a minimum 50%
recovery for those bondholders subject to additional potentially
large incremental payments if the bondholders desiring to litigate
do not prevail against PREPA. The class for bondholders desiring to
litigate will receive distributions based on the Court's
determinations of two principal issues. The Oversight Board will
continue to negotiate with creditors in the hopes of avoiding
expensive and time-consuming litigation.
The Plan also proposes to distribute to settling bondholders a
contingent value instrument (CVI). If PREPA repays its new bonds
sooner than the expected 35 years, bondholders would receive the
revenue from the connection fee and the volumetric charge through
year 35 if PREPA outperforms the projections of the certified PREPA
Fiscal Plan.
Under the Plan, for most creditors PREPA would issue new bonds with
a 6% annual interest rate (coupon), paid by a hybrid charge
consisting of a flat connection fee and a volumetric charge that
would be added to PREPA customers' electricity bills based on their
electricity usage. The Oversight Board has not finalized how the
charge will be implemented and impact individual households and
businesses, but the average charge under the filed Plan would be
roughly half of what PREPA's existing debt would cost customers for
the duration of the term of the bonds.
The Plan is consistent with the support agreement the Oversight
Board reached with Fuel Line Lenders to reduce their claim of more
than $700 million by 16% and with the support agreement with Vitol
Inc. Fuel provider Vitol would receive 50% of what general
unsecured claimholders ultimately receive. These two classes of
claims agreed in advance to the distributions proposed in the
Plan.
The estimated $800 million General Unsecured Claims will receive
distributions based on the outcome of the bondholder litigation.
Further, the Plan contemplates PREPA issuing to the Commonwealth
$400 million in bonds in exchange for cash to fund payments of
administrative expenses, some of which might be reimbursed by the
Federal Emergency Management Agency (FEMA).
The Plan proposes to treat PREPA's retirees the same as the
Commonwealth’s retirees were treated
under the Commonwealth's Title III Plan of Adjustment. Although
PREPA’s pension plan is gravely underfunded, retirees will
be
paid in full for all benefits earned through the effective date of
the Plan.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States. The chief of state is the President of the
United States of America. The head of government is an elected
Governor. There are two legislative chambers: the House of
Representatives, 51 seats, and the Senate, 27 seats. The
governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the son
of former governor Pedro Rossello.
In 2016, the U.S. Congress passed PROMESA, which, among other
things, created the Financial Oversight and Management Board and
imposed an automatic stay on creditor lawsuits against the
government, which expired May 1, 2017.
The members of the oversight board are: (i) Andrew G. Biggs, (ii)
Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J.
Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii)
David A. Skeel Jr.
On May 3, 2017, the Commonwealth of Puerto Rico filed a petition
for relief under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The case is
pending in the United States District Court for the District of
Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's
PROMESA petition is available at
http://bankrupt.com/misc/17-01578-00001.pdf
On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation
(COFINA) commenced a case under Title III of PROMESA (D.P.R. Case
No. 17-01599). Joint administration has been sought for the Title
III cases.
On May 21, 2017, two more agencies -- Employees Retirement System
of the Government of the Commonwealth of Puerto Rico and Puerto
Rico Highways and Transportation Authority (Case Nos. 17-01685 and
17-01686) -- commenced Title III cases.
U.S. Chief Justice John Roberts named U.S. District Judge Laura
Taylor Swain to preside over the Title III cases.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq.,
at O'Neill & Borges LLC are onboard as attorneys.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
Jones Day is serving as counsel to certain ERS bondholders.
Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General
Obligation Bondholders.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
CONSOLIDATED ENERGY: S&P Affirms 'BB-' ICR, Alters Outlook to Pos.
------------------------------------------------------------------
S&P Global Ratings revised its outlook on Consolidated Energy Ltd.
(CEL), a petrochemicals company with operations in Trinidad and
Tobago and the U.S. Gulf Coast, to positive from stable. S&P also
affirmed its 'BB-' global scale issuer credit and issue-level
ratings on CEL.
S&P said, "The positive outlook reflects our expectation that CEL
will maintain a solid operating and financial performance during
2023, including strong EBITDA. We could upgrade CEL in the next
6-12 months if the leverage metric will remain in the 3.0x (or
below) area, while the company maintains a prudent financial
policy."
While methanol prices continued to strengthen since 2021, with U.S.
methanol contract prices doubling to about $600 per metric ton (MT)
from about $300/MT in 2020, there are now signs of CEL's more
favorable credit metrics. Robust methanol prices and stable
production across CEL's facilities during 2022--despite higher
volatility in commodities and raw material prices, along with
increasing inflationary pressures--boosted the company's financial
results. S&P said, "As a result, we estimate that the 2022 revenue
rose to about $2.3 billion (a 30% increase from 2021), in line with
our previous expectation, and adjusted EBITDA of about $970 million
(up 51%), better than our previous projection. Consequently, we
have revised our projections for CEL and now forecast adjusted net
debt to EBITDA of about 3.0x for 2022, down from our previous
expectation. Moreover, we expect a gradual deleveraging in the next
12-24 months owing to increasing revenue and cash flows, lower
debt, a solid cash balance, and conservative financial policies."
The positive outlook reflects a potential upgrade in the next 6-12
months if adjusted net debt to EBITDA drops to 2.5x (or lower) in
2023 and 2024.
S&P said, "We expect demand for methanol, ammonia, and urea
ammonium nitrate (UAN) across CEL's markets to remain healthy in
2023. This is because methanol is used in various industries and
applications, such as automotive, antifreeze liquid production,
industrial (fuel) and basic consumption products (mainly
pharmaceuticals), and UAN for fertilizers (mainly). We expect a
broadly stable demand for CEL's products in the next 12 months,
despite a potential recession in the U.S. and persistently high
global inflation. The company cut its gross debt level during 2022,
and thanks to stronger EBITDA and our expectation of no significant
debt increase for the forecasted period, we assume that the
leverage metric will drop to about 3.0x for 2022.
"Based on the expectation of favorable credit metrics, we now
believe CEL has improved its financial credit profile that could
result in an upgrade. The company slashed its debt metric from
about 10x in 2020 to about 5x in 2021 thanks to the methanol price
momentum and higher production. However, the rating constraint will
remain until a longer track-record of deleveraging below 3.0x in
the upcoming months amid moderating methanol prices, while CEL
maintains its prudent financial policy.
"We continue to assess CEL's liquidity as adequate, which is
supported by a solid cash balance of about $209 million at the end
of September 2022, undrawn revolving credit facility (RCF) of about
$270 million maturing in 2025 and expected free operating cash flow
(FOCF) of about $350 million for the next 12-24 months. Despite the
amortization of about $1.2 billion in term loans by 2025, we
believe that solid cash flows will enable the company to keep
complying with its upcoming financial commitments."
ESG credit indicators: E-3, S-2, G-2
*********
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
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Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
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