/raid1/www/Hosts/bankrupt/TCRLA_Public/230330.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, March 30, 2023, Vol. 24, No. 65
Headlines
A R G E N T I N A
ARGENTINA: Economy Contracts by Most Since Pandemic to End 2022
B R A Z I L
AMERICANAS SA: Creditors Want Rich Shareholders to Inject Money
BRAZIL: Cuts GDP Growth Forecast and Raises Inflation Forecast
INTERCEMENT PARTICIPACOES: Fitch Lowers LongTerm IDRs to 'CCC'
[*] BRAZIL: Stiglitz Says Interest Rate Equivalent to Death Penalty
C H I L E
CHILE: Signs Credit Line with IDB for Up to $1 Bil. to Boost SMEs
C O L O M B I A
COLOMBIA TELECOMUNICACIONES: S&P Affirms 'BB' ICR, Outlook Now Neg.
COLOMBIA: Bond Market Will Have a Major New Player, Chief Says
E L S A L V A D O R
BANCO DAVIVIENDA: Fitch Affirms LongTerm IDR at B-, Outlook Neg.
M E X I C O
AZTECA INTERNATIONAL: Creditors Try to Force U.S. Bankruptcy
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A R G E N T I N A
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ARGENTINA: Economy Contracts by Most Since Pandemic to End 2022
---------------------------------------------------------------
Patrick Gillespie at Bloomberg News reports that Argentina's
economy contracted less than expected at the end of last year, as
rising inflation sets the stage for a likely recession in 2023.
Gross domestic product fell 1.5 percent in the fourth quarter from
the previous three-month period, the largest quarterly contraction
since the height of the global pandemic, but below economists'
median estimate of a 1.7 percent decline, according to Bloomberg
News.
Compared with the same period a year earlier, the economy expanded
1.9 percent, according to official data released.
Argentina's economy expanded 5.2 percent in 2022, racking up the
second consecutive year of annual growth for the first time since
2011, Bloomberg News notes. South America's second-largest economy
has contracted in six of the past 11 years, Bloomberg News relays.
The unemployment rate, meanwhile, fell to 6.3 percent in the fourth
quarter, the data showed, 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.
Fitch Ratings, on March 24, 2023, downgraded Argentina's Long-Term
Foreign Currency
Issuer Default Rating (IDR) to 'C' from 'CCC-', and has affirmed
the Long-Term Local Currency IDR at 'CCC-'.
Fitch's downgrade of Argentina's rating to 'C' from
'CCC-' follows an executive decree that forces domestic
public-sector entities into operations involving their holdings of
sovereign debt securities, which would involve unilateral
exchanges
and forced currency conversion that constitute default events
under
Fitch's criteria. The 'C' rating reflects Fitch's view that
default
is thus imminent. Fitch said the rating would be downgraded to
'Restricted
Default' (RD) upon execution of the exchanges.
S&P Global Ratings, on the other hand, affirmed its 'CCC+/C'
foreign currency and 'CCC-/C' local currency sovereign credit
ratings on Argentina on Jan. 20, 2023. 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.
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.
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B R A Z I L
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AMERICANAS SA: Creditors Want Rich Shareholders to Inject Money
---------------------------------------------------------------
Cristiane Lucchesi of Bloomberg News reports that Americanas SA
creditors, including some banks and bondholders, are willing to
close a deal with the distressed retailer's billionaire
shareholders if they agree to inject 12 billion reais ($2.3
billion) into the company, people familiar with the matter said.
Negotiations are advancing, as creditors consider whether to accept
a debt-to-equity swap proposed by Americanas, the people said,
asking not to be identified because discussions are private. The
billionaires -- Jorge Paulo Lemann, Carlos Sicupira and Marcel
Telles -- are the largest Americanas shareholders, and had offered
a payment of 10 billion reais. They declined to comment.
About Americanas SA
Americanas was one of the largest diversified retail chains in
Brazil, with a wide platform of physical stores, robust e-commerce,
fintech, and has just entered into the niche food retail. It is
listed on B3, being indirectly controlled by billionaire Jorge
Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles.
The retailer nosedived in January 2023 after becoming mired in an
accounting scandal. The firm filed for bankruptcy at a court in
Rio de Janeiro on Jan. 19, 2023.
Americanas sought protection under Chapter 15 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25,
2023. White & Case LLP, led by John K. Cunningham, is the U.S.
counsel.
BRAZIL: Cuts GDP Growth Forecast and Raises Inflation Forecast
--------------------------------------------------------------
Richard Mann at Rio Times Online reports that the Brazilian
Government lowered on March 17 the Gross Domestic Product (GDP)
growth forecast for this year from 2.1% to 1.61% and raised it for
inflation from 4.6% to 5.31%.
As the Ministry of Finance disclosed in the Macrofiscal Bulletin,
the previous GDP projection, published in November last year,
minimized the effects of high-interest rates on the economy and the
credit market, according to Rio Times Online.
"These effects (economic slowdown) were already partially verified
during the last quarter of 2022 when the economy retreated 0.2
percent and credit concessions began to decelerate more sharply,"
the report noted, Rio Times Online adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
INTERCEMENT PARTICIPACOES: Fitch Lowers LongTerm IDRs to 'CCC'
--------------------------------------------------------------
Fitch Ratings has downgraded InterCement Participacoes S.A.
(InterCement)'s Long-Term Local and Foreign Currency Issuer Default
Ratings (IDRs) and its wholly owned subsidiary InterCement Brasil
S.A.'s to 'CCC' from 'B-.' to 'CCC' from 'B-.' Fitch has also
downgraded InterCement Financial Operations BV's 2024 notes to
'CCC'/'RR4' from 'B-'/'RR4' and InterCement's national scale rating
to 'CCC(bra)' from 'BB+(bra)'.
The downgrade reflects InterCement's persistently high refinancing
risks and limited refinancing alternatives despite improving
operating cash flow generation and asset divestures. Excluding its
operations in Argentina (IDR 'C'), the cash flow from which cannot
be fully accessed, InterCement has an unsustainable capital
structure. Current tight credit market conditions and increasing
interest rates are further negative headwinds for InterCement as it
approaches sizeable debt maturities in May and July 2024.
KEY RATING DRIVERS
Challenge to Complete Refinancing: InterCement is working with
creditors to extend borrowings that are due within the next 12
months and is expected to be discussing new loans and asset sales,
mainly for its African subsidiaries, while actively assessing
opportunities to execute refinancing of its outstanding 2024 bonds
and local debentures. The company has already announced the sale of
its assets in Egypt, the proceeds of which should be used to
amortize part of its local debenture debt.
As of Sept. 30 2022, InterCement's total consolidated debt was
USD1.7 billion, primarily consisting of USD 548 million of 2024
unsecured bonds and USD864 million of local debentures due 2027.
The Loma Negra shares are collateral for the debentures, which have
the option to move up their maturity date to May 2024 (before the
bonds) if the bonds are not refinanced.
High Leverage Excluding Argentina: InterCement faces currency
control restrictions at its operations in Argentina, which
increases its dependence on the Brazilian operation's cash flow
generation to serve its financial obligations. Loma Negra
C.I.A.S.A., InterCement's 51% owned Argentine subsidiary, generates
around 50% of InterCement's consolidated adjusted EBITDA but holds
only 9% of the net debt. Excluding Loma Negra, InterCement's net
debt to adjusted EBITDA would be approximately 5.9x, per Fitch's
calculations, for the last 12 months period ended on Sept. 30,
2022.
On a proportional basis, excluding the 49% of Loma Negra that
InterCement does not own, leverage was 4.0x for the same period.
That reprsents an improvement over the 2019/2020 period, with an
average of 7.5x in 2019 and 5.8x in 2020, respectively. On
consolidated basis, InterCement's leverage was 3.1x for the last 12
months period ending on Sept. 30, 2022, 2.8x in 2021 and an average
of 5x during 2019-2020. Fitch forecasts InterCement's adjusted net
debt/EBITDA ratio, on a consolidated basis, will move toward
3.0x-3.5x by YE 2022/2023 and to around 5.7x when excluding
Argentina's operations.
Inflationary Pressures: The scenario of soaring oil prices and
overall energy costs challenged InterCement's EBITDA generation
during 2022, and its ability to partially pass costs through to
prices was key. Like the whole cement industry, the company faced
profitability deterioration with 2022 and 2023 adjusted EBITDA
margin forecasted at around 23%-25%. This represents a
deterioration from the 27.4% and 24.3% of 2021 and 2020,
respectively. InterCement's operating margin is one of the highest
among its Latin American peers. For 2022, Fitch expects
consolidated adjusted EBITDA of around USD470 million and flat for
2023 (excluding Egypt). Excluding Argentina, the figures decline to
around USD220 million.
Weak Economic Growth to Limit CFFO Expansion: The scenario of weak
economic growth, high inflation and interest rates places
additional pressure on InterCement's ability to boost its operating
cash flow generation from Brazil. Consumption in Brazil's cement
market declined 3% during 2022 and forecasts indicates flat
performance for 2023. Despite the lower profitability, the company
has improved its conversion of EBITDA to cash, mostly due to
working capital reliefs. In Brazil, InterCement's utilization rate
was around 74% utilization in 2021 and averaged 71% during
2019-2020. The company has around 12.3 million tons in total active
capacity and 5 million tons of hibernated capacity.
Solid Business in Emerging Markets: InterCement is a leading cement
producer in Brazil, which is one of the world's largest cement
markets. It is the leading cement producer in Argentina, with close
to 45% market share. The company also operates in Mozambique, where
it is the largest producer, and in South Africa, where it has a
dominant position in the region where it operates. InterCement's
businesses in Argentina are operated through its 51%-owned Loma
Negra subsidiary. InterCement's EBITDA is split among Brazil (33%),
Argentina (51%) and its African subsidiaries.
Increasing Local Debt Reduces FX Exposure: Foreign exchange
mismatch has been reduced after several local issuances in most of
the countries where InterCement operates. As of Sept. 30 2022, 35%
of total debt was either U.S. dollar-or euro-denominated. This is
an important factor as the company does not generate hard currency
revenue. InterCement mainly relies on its pricing strategy to
offset U.S. dollar cost inflation and revenue weakness resulting
from currency depreciation.
Consolidated Approach: As per Fitch's Parent and Subsidiary Linkage
Rating Criteria, Fitch equalizes the ratings for Intercement and
Intercement Brasil. This mainly reflects effective control and
ample access to strategic and financial decisions, cross
guarantees, asset collaterals (Loma Negra's shares as collateral of
Intercement Brasil's local debentures) and financial covenants. The
operations in Brazil represent 33% of InterCement's EBITDA and 29%
of its debt.
DERIVATION SUMMARY
InterCement's 'CCC' rating reflects substantial credit risk due to
weak cash flows relative to a large debt burden. Meaningful debt
repayment through cash flow is limited and debt refinancing would
likely result in substantially higher interest rates than that of
existing debt. The company has a strong business position in most
of its markets and relatively large scale, particularly in
Argentina and Brazil.
Despite its scale, InterCement's cash flow varies greatly as it
operates in highly volatile markets such as Brazil, Argentina,
Egypt, Mozambique and South Africa. This compares with a greater
exposure to developed markets or highly rated emerging markets of
other cement producers, such as Cemex, S.A.B. de C.V.
(BB+/Stable).
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Brazilian volumes stable in 2022 and low-single digits in 2023;
- Argentine volumes low-single digits in 2022 and 2023;
- Capex levels around USD125 million in 2022 and 2023;
- Dividends to minorities and preferred shareholders of around
USD20 million-USD25 million in 2022 and 2023.
KEY RECOVERY RATING ASSUMPTIONS
Going-Concern (GC) Approach
The GC EBITDA estimate reflects Fitch's view of a sustainable
post-reorganization EBITDA, excluding Loma Negra and allowing
InterCement to cover maintenance capex and interest. The enterprise
value (EV)/EBITDA multiple applied is 5.0x, reflecting
InterCement's a mid-cycle multiple considering its strong market
share in Brazil and Mozambique.
An EV/EBITDA multiple of 5.0x is used to calculate a
post-reorganization valuation and reflects a mid-cycle multiple.
Fitch applies a waterfall analysis to the post-default enterprise
value based on the relative claims of the debt in the capital
structure. Fitch's debt waterfall assumptions take into account the
company's total debt at Sept. 30, 2022. The waterfall results in a
'RR4' Recovery Rating for senior unsecured debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Successful refinancing of capital market debt bonds;
- Additional proactive steps by the company to materially bolster
its capital structure, including asset sale, allowing a smooth
refinancing of its 2024 bonds without material reduction in terms
for its bondholders.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Lack of progress in refinancing the 2024 notes during 2023;
- Further deterioration of InterCement' liquidity position;
- EBITDA Interest coverage below 1,0x
- A downgrade may occur if, in Fitch's judgment, a default appears
probable or if a default or default-like process has begun, which
would be represented by a 'CC' or 'C' rating.
LIQUIDITY AND DEBT STRUCTURE
Limited Financial Flexibility: InterCement has high refinancing
risks. With the increasing interest rates in Brazil, its operating
cash flow will be tight during 2023. The company's financial
flexibility is limited, and it will likely continue to rely on
banks to rollover its short-term debt.
As of Sept. 30, September 2022, InterCement had USD203 million in
cash and USD1.7 billion in total debt. Debt schedule amortizations
were USD136 million in 4Q22, USD177million in 2023, USD788 million
in 2024 (including USD548 million of senior notes), USD239 million
in 2025, USD218 million in 2026 and USD108 million in 2027.
ISSUER PROFILE
InterCement is a large cement producer with 20 million tons of
total consolidated cement sales and annual production capacity of
35 million tons. The company has a diversified portfolio of assets
with operations in Brazil, Argentina, Mozambique and South Africa.
ESG CONSIDERATIONS
InterCement has an ESG Relevance Score of '4' for Governance
Structure due to limited board independence through ownership by
key shareholder Mover Participacoes S.A. This has a negative impact
on the credit profile and is relevant to the ratings in conjunction
with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
InterCement
Financial
Operations BV
senior
unsecured LT CCC Downgrade RR4 B-
InterCement
Brasil S.A. LT IDR CCC Downgrade B-
LC LT IDR CCC Downgrade B-
Natl LT CCC(bra)Downgrade BB+(bra)
InterCement
Participacoes
S.A. LT IDR CCC Downgrade B-
LC LT IDR CCC Downgrade B-
Natl LT CCC(bra)Downgrade BB+(bra)
[*] BRAZIL: Stiglitz Says Interest Rate Equivalent to Death Penalty
-------------------------------------------------------------------
Richard Mann at Rio Times Online reports that the Columbia
University professor and winner of the Nobel Prize in Economics in
2011, Joseph Stiglitz, said that the interest rate in Brazil is
"shocking" and equivalent to a "death penalty".
The statements were made during the seminar "Strategies of
Sustainable Development for the 21st Century", promoted by BNDES,
according to Rio Times Online.
"Your interest rate [in Brazil] is, in fact, shocking. A rate of
13.75%, or 8% real, is the kind of interest rate that will kill any
economy. It is impressive that Brazil has survived this, which
would be a death sentence," he said, the report notes.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
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C H I L E
=========
CHILE: Signs Credit Line with IDB for Up to $1 Bil. to Boost SMEs
-----------------------------------------------------------------
Reuters reports that Chile signed a 15-year credit line for $1
billion with the Inter-American Development Bank (IDB) to promote
the development of small and medium-sized companies, the Ministry
of Finance reported.
The Washington, D.C.-based agency had approved the plan in early
December to "increase productivity and promote sustainable
development," according to the report.
Chilean Finance Minister Mario Marcel signed the agreement for the
establishment of a conditional credit line for investment projects
(CCLIP) during an annual IDB meeting in Panama, the report notes.
"This operation will basically provide loans to (state development
office) Corfo as a second-tier bank to channel to SMEs through
non-banking institutions," the official was quoted as saying in a
statement, the report says. The initiative seeks to promote
sustainable development in the finance and climate action sectors,
he added.
===============
C O L O M B I A
===============
COLOMBIA TELECOMUNICACIONES: S&P Affirms 'BB' ICR, Outlook Now Neg.
-------------------------------------------------------------------
On March 28, 2023, S&P Global Ratings revised its outlook on
Colombia Telecomunicaciones S.A. E.S.P. (Coltel) to negative from
stable and affirmed its 'BB' issuer credit and issue-level ratings
on it.
The company's S&P Global Ratings-adjusted EBITDA margins dropped to
19.2% in 2022 from 29.2% in 2021, below those of peers and the
industry average of 30%. This is mainly due to Coltel's overhauled
operating model through which it intends to reduce capital
expenditures (capex) through higher operating costs for fiber
deployment, focusing more on cash generation than on EBITDA margin
stability. This is illustrated by 2022 reported capex 45% lower
than our expectations, which allowed the company to mitigate the
drop in EBITDA. S&P will continue to evaluate whether cash
generation is sufficient to compensate for lower profitability and
the company is able to deleverage in the next 12 months.
In 2022, the company generated about COP1 trillion in operating
cash, including proceeds from the sale of infrastructure assets to
KKR. Coltel used 50% of operating cash for debt amortizations,
capex (40%), and extraordinary dividends (10%). This led the
company to seek financing from the Ministerio de Tecnologias de la
Informacion y las Comunicaciones de Colombia (a government entity)
to cover the renewal of its 1,900 Mhz spectrum license, increasing
the company's adjusted debt by 17% to COP5.4 trillion from our 2022
base-case assumption of COP4.6 trillion. This caused a significant
deviation in the company's leverage metrics, with debt to EBITDA
rising to 3.6x in 2022 from S&P's expectation of 2.7x. Therefore,
its negative outlook on Coltel reflects a higher probability of its
financial risk profile remaining pressured in the next 12 months.
On the other hand, in terms of market share, Coltel remained the
second-largest player in Colombia's mobile segment, despite
increased competition, including the entrance of WOM S.A.
(B+/Stable/--) into the market. Moreover, the company's
fiber-to-the-home (FTTH) deployment acceleration positions Coltel
as the primary provider in the country with about 3.6 million homes
passed with the fastest download speed in the market. In addition,
the co-investment agreements and Onnet have allowed the company to
accelerate deployment, capture the market opportunity, generate
greater value from existing infrastructure, and optimize
investments. We believe that these efforts to remain competitive
mitigate low selling prices and that, as Coltel increases prices
and maintains market share, its cash generation will strengthen.
ESG credit indicators: E-2, S-2, G-2
COLOMBIA: Bond Market Will Have a Major New Player, Chief Says
--------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
Colombia's ambitious overhaul of its pension system will create a
major new player in the local market and shore up demand for the
nation's bonds, according to Finance Minister Jose Antonio Ocampo.
The pension bill that will be sent to congress this month will give
birth to a savings fund that can invest in local debt, Ocampo said,
in a wide-ranging conversation that also touched on his own future,
as well as this month's central bank decision, according to
globalinsolvency.com.
The bill has been designed to prevent any drop in the national
savings rate or in demand for government peso bonds known as TES,
he said, the report notes.
"From the Ministry of Finance's point of view, in all the
discussions with the Minister of Labor, one of our first principles
is that there can not be a reduction in the demand for TES," Ocampo
said, in an interview in Panama City, the report relays.
"There will be no effect. In fact, there might be a slightly
positive effect on demand for TES," the report notes.
The bill, part of leftist President Gustavo Petro's radical attempt
to transform Colombia's welfare state, would move into the state
pension system a large majority of the workers who currently
contribute to private pension funds, the report relays. Since
these funds own about a quarter of outstanding TES, many investors
are fretting about the risks to this market from weakening one of
its biggest players, the report adds.
=====================
E L S A L V A D O R
=====================
BANCO DAVIVIENDA: Fitch Affirms LongTerm IDR at B-, Outlook Neg.
----------------------------------------------------------------
Fitch Ratings has affirmed Banco Davivienda Salvadoreno, S.A.'s
(Davivienda Sal) Long-Term Issuer Default Rating (IDR) at 'B-' with
a Negative Rating Outlook, its Short-Term IDR at 'B', Viability
Rating (VR) at 'cc' and Shareholder Support Rating (SSR) at 'b-'.
Fitch has also affirmed Davivienda Sal's and its holding company,
Inversiones Financieras Davivienda, S.A.'s (IF Davivienda) Long-
and Short-Term National Ratings at 'AAA(slv)'/Stable Outlook and
'F1+(slv)', respectively. In addition, Fitch has affirmed
Davivienda Sal's Long- and Short-Term senior secured and unsecured
debt ratings at 'AAA(slv)' and 'N-1(slv)', respectively.
Fitch has assigned Long- and Short-Term National Ratings to
Davivienda Sal's senior secured and unsecured debt denominated
CIBDAV04 of 'AAA(slv)' and 'N-1(slv)', respectively.
KEY RATING DRIVERS
Shareholder Support-Driven Ratings: Davivienda Sal's IDRs and
national ratings are driven by its SSR, which reflects Fitch's
assessment of the ability and propensity of its owner Banco
Davivienda S.A. (Davivienda; BB+/Stable) to provide support to its
subsidiary, if required. Davivienda's credit strength in relation
to other rated issuers in El Salvador allows Davivienda Sal's
national ratings to reach the highest point of the national rating
scale with a Stable Outlook.
Country Risks Limit Support: In Fitch's view, the shareholder's
ability to provide support is strongly influenced by El Salvador's
country risks, which are captured in its 'B-' Country Ceiling and
incorporate transfer and convertibility risks under Fitch's
criteria. Fitch believes country risks could restrict the
subsidiary's ability to use shareholder support. The Country
Ceiling constrains the bank's IDRs, resulting in a rating five
notches below its shareholder's IDRs. However, Fitch believes that
the owner's sound commitment to support its subsidiary supports
Davivienda Sal's IDR at a level above the 'CC' sovereign rating.
The Negative Outlook indicates that the bank's IDR could be
impacted by downgrades of the Salvadoran sovereign rating and the
Country Ceiling.
High Reputational Risk: In its support propensity analysis, Fitch
highly weights the significant reputational risk that a potential
default by Davivienda Sal would represent to its shareholder and
subsidiaries. A default would seriously damage the franchise in the
region as they share the same brand.
Operating Environment Pressure the VR: Davivienda Sal's VR is two
notches below the implied VR of 'ccc' and reflects Fitch's
assessment of the challenging operating environment (OE). El
Salvador's sovereign rating has a strong negative influence on this
assessment. Despite this, the bank's financial profile has been
resilient in recent years. Some of the sovereign key factors, such
as the tight liquidity position and extremely constrained market
access, could influence the operational conditions of the financial
industry, including Davivienda Sal.
Strong Business Profile: Davivienda Sal's VR also incorporates its
solid local market position and its well-developed and diversified
business model although operating in a high-risk jurisdiction such
as El Salvador. As of February 2023, the bank had 14.8% and 13.4%
market shares by loans and deposits, respectively.
Steady Asset Quality: Loan quality has remained stable due to the
bank's moderate risk appetite, which Fitch estimates will continue
over the rating horizon. As of December 2022, the non-performing
loans (NPL)-to-gross loans metric registered 2.0%, equal to the
previous four-years average, and similar to the banking system
(1.8%), while the reserve coverage for NPL reached 131% in 2022
(2018-2021 average: 125%). The bank's high exposure to government
debt of 0.9x its Fitch Core Capital (FCC) is credit negative.
Improved Profitability: In 2022, the bank achieved a better
profitability exhibiting an operating income to risk-weighted
assets (RWA) metric of 1.2%, after a modest 0.02% in 2021
(2018-2020 average: 0.8%), although below the system (1.7%). This
was primarily driven by a higher net interest margin along with
lower loan impairment charges. Fitch estimates this ratio will
remain at a similar level in 2023 given the bank's initiatives and
expected stable loan quality.
Sufficient Capital Levels: In 2022 the Fitch Core Capital (FCC) to
RWA ratio of 14.0% remained similar to 2021, driven by lower RWA
growth than capital expansion and loans and despite the resumption
of dividend distributions. While metrics could be affected by the
negative market valuation of El Salvador's sovereign debt
instruments, Fitch believes the bank has sufficient capital to
absorb losses in a stress scenario. Fitch also views favorably the
parent's ordinary and extraordinary support, when needed.
Pressured Liquidity: Fitch considers in its assessment the
liquidity pressures that large banks in the country could face due
to the risks associated with a local governmental securities market
due to the financing needs of the government. In turn, the bank's
sound funding profile continued underpinned by its strong deposit
franchise, good access to alternative sources of financing and
support from its shareholder. In 2022 the loans-to-deposits ratio
reached 106.4%, which was in line with the prior four-year average
but higher than the system (96.6%) and the bank's closest peers.
Holding Company: IF Davivienda's national ratings at the highest
level on Fitch's national rating scale, reflecting the relative
credit strength of its parent, Davivienda compared to other rated
issuers in El Salvador. This is based on the potential support that
IF Davivienda would receive from its shareholder, if needed. IF
Davivienda's consolidated financial profile mirrors Davivienda
Sal's financial performance, which made up about 89% of IF
Davivienda's assets (before eliminations) in 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Negative changes in the bank's IDRs and SSR would mirror negative
movements in El Salvador's sovereign rating and Country Ceiling;
- Davivienda Sal's IDRs and SSR could be downgraded following a
multi-notch downgrade of Davivienda's IDRs; however, this scenario
is unlikely in the rating horizon given the parent's Stable
Outlook;
- Any perception by Fitch of a relevant reduction of the strategic
importance of Davivienda Sal for its parent could trigger a
downgrade of its SSR, IDRs and national ratings. This perception
would also apply to IF Davivienda's national ratings;
- The VR is sensitive to changes in the sovereign rating or to
further deterioration of the local OE that leads to a material
deterioration of the bank's financial profile. Given the current
low levels of the VR, downside potential would only arise if the
worsening OE and/or the government's policy framework materially
increases the likelihood of this bank defaulting on its financial
obligations over the short term.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The Negative Outlook for Davivienda Sal's IDR indicates that
positive rating actions are highly unlikely in the foreseeable
future. However, in the medium term, Davivienda Sal's IDR, SSR and
VR could be upgraded following an upgrade of El Salvador's
sovereign rating and its Country Ceiling since the bank's IDR is
capped by the Salvadoran Country Ceiling;
- The Outlook could be revised to Stable if the sovereign rating is
upgraded closer to the Country Ceiling, thereby reducing its
likelihood of a downgrade;
- The upside potential for Davivienda Sal's VR is limited due to
Fitch assessment's that the OE is trending negatively; Davivienda
Sal's VR could only be upgraded over the medium term given an
improvement of the OE, while maintaining its good company and
financial profiles;
- Davivienda Sal's and IF Davivienda's national ratings are at the
highest level of the national rating scale and therefore have no
upside potential.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Senior Debt: The current and new senior unsecured and secured debt
is rated at the same level as Davivienda Sal's national ratings,
since Fitch considers the likelihood of default of these issuances
is equal to the bank.
Davivienda Sal is in the process of registering within the local
regulator a new bond issuance (Emision de Certificados de
Inversion) denominated 'CIBDAV04'. The issuance is for an amount of
up to USD200 million with a term of one to 20 years at a floating
interest rate.
Each of the CIBDAV04 tranches may not have a special guarantee
(unsecured) or may be guaranteed (secured) with a mortgage loans
portfolio. The resources obtained from this issuance will be
invested by the bank to finance credit operations; fund short-,
medium- and long-term investments; and for debt restructuring.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Davivienda Sal's senior secured and unsecured debt national
ratings would be downgraded in the event of any negative rating
action on the bank's national ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Davivienda Sal's senior debt ratings are at the highest level of
the national rating scale and therefore have no upside potential.
VR ADJUSTMENTS
The bank's 'cc' VR has been assigned below the 'ccc' implied VR,
due to the following adjustment reason: Operating
Environment/Sovereign Rating Constraint (negative).
The Operating Environment score of 'cc' has been assigned below the
implied score of 'b', due to the following adjustment reason:
Sovereign Rating (negative).
The Business Profile score of 'ccc' has been assigned below the
implied score of 'b', due to the following adjustment reason:
Business Model (negative).
SUMMARY OF FINANCIAL ADJUSTMENTS
Davivienda Sal: Fitch reclassified prepaid expenses as intangibles
and deducted them from the total equity to reflect their low
absorption capacity.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Davivienda Sal's and IF Davivienda's ratings are based on the
potential support they would receive from their parent, Banco
Davivienda, if needed.
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(ies), either due to their nature or the way in which they
are being managed by the entity(ies).
Entity/Debt Rating Prior
----------- ------ -----
Banco
Davivienda
Salvadoreno,
S.A. LT IDR B- Affirmed B-
ST IDR B Affirmed B
Natl LT EAAA(slv)Affirmed EAAA(slv)
Natl ST F1+(slv) Affirmed F1+(slv)
Viability cc Affirmed cc
Shareholder Support b- Affirmed b-
senior
unsecured Natl LT AAA(slv) Affirmed AAA(slv)
senior
secured Natl LT AAA(slv) Affirmed AAA(slv)
senior
secured Natl LT AAA(slv) New Rating
senior
unsecured Natl LT AAA(slv) New Rating
senior
secured Natl ST N-1(slv) New Rating
senior
unsecured Natl ST N-1(slv) New Rating
senior
unsecured Natl ST N-1(slv) Affirmed N-1(slv)
senior
secured Natl ST N-1(slv) Affirmed N-1(slv)
Inversiones
Financieras
Davivienda,
S.A. Natl LT EAAA(slv)Affirmed EAAA(slv)
Natl ST F1+(slv) Affirmed F1+(slv)
===========
M E X I C O
===========
AZTECA INTERNATIONAL: Creditors Try to Force U.S. Bankruptcy
------------------------------------------------------------
Jill R. Shah of Bloomberg News reports that a cohort of TV Azteca
SAB's creditors filed a petition to force the Mexican broadcaster
into involuntary bankruptcy in the US, the latest twist in
drawn-out debt talks.
Holders of about $63 million of unsecured Azteca bonds filed an
involuntary Chapter 11 petition against the company in New York,
according to court papers.
The move marks the second attempt by bondholders to get traction
for their claims against Azteca after it defaulted on the $400
million of notes in 2021. Negotiations have been thorny between
creditors and the media company, which is controlled by Mexico's
third-richest man.
About TV Azteca SAB
TV Azteca SAB is a Mexican multimedia conglomerate owned by Grupo
Salinas. It is the second-largest mass media company in Mexico.
Azteca International Corporation was subject to an involuntary
chapter 11 bankruptcy petition (Bankr. S.D.N.Y. Case No. 23-10392)
on March 21, 2023. The petition was signed by alleged creditors
Plenisfer Investments SICAV - Destination Value Total Return, Cyrus
Opportunities Master Fund II, Ltd., and Sandpiper Limited.
The petitioning creditors are represented by:
Michael S. Stamer
Akin Gump Strauss Hauer & Feld LLP
212-872-1025
mstamer@akingump.com
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Chapman, Editors.
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