/raid1/www/Hosts/bankrupt/TCRLA_Public/230512.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, May 12, 2023, Vol. 24, No. 96
Headlines
A R G E N T I N A
ARGENTINA: Gets $265M IDB Loan for People w/ Disabilities
ARGENTINA: Neighbors Cross Border to Take Advantage of Low Prices
ARGENTINA: Seeks to Tame Inflation, Peso with Biggest Rate Hike
B A H A M A S
FTX TRADING: Gets OK for LedgerX Sale, Asserts $3.9B Genesis Claim
B R A Z I L
AMERICANAS SA: Minority Shareholders Add Board Member Amid Crisis
BIONIK LABORATORIES: Signs Distribution Agreement With Pro-Med
BRAZIL: Haddad Warns Against High Interest Rates
BRF SA: Fitch Affirms LongTerm Foreign & Local Currency IDRs at BB
RUMO SA: Fitch Affirms BB+ LongTerm Local Curr. IDR, Outlook Stable
C O L O M B I A
CREDIVALORES SA: Fitch Lowers Foreign Curr. IDR to B-, Outlook Neg
E L S A L V A D O R
EL SALVADOR: S&P Ups SCR to 'CCC+/C' on Distressed Debt Exchange
J A M A I C A
[*] JAMAICA: Limestone to Lead Bulk Exports
P A N A M A
BANISTMO SA: Fitch Affirms LongTerm IDR at 'BB+', Outlook Stable
MULTIBANK INC: Fitch Affirms LongTerm IDR at 'BB+', Outlook Stable
P U E R T O R I C O
COOPERATIVA DE SEGUROS: A.M. Best Affirms C (Weak) FS Rating
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Gets $265M IDB Loan for People w/ Disabilities
---------------------------------------------------------
The Inter-American Development Bank (IDB) approved a $265 million
loan to improve the social inclusion of people with disabilities.
Within the framework of a Results-Based Loan, the program will
promote an increase in effective access to rights, services, and
basic benefits by people with disabilities who do not have Obras
Sociales or prepaid coverage.
The IDB loan seeks to increase the number of people with
disabilities who have timely access to basic benefits and services
contemplated in national regulations, through a current Single
Certificate for Disability (CUD), through, among other strategies,
the removal of barriers to its processing or renewal. This
certificate is valid throughout the country. Today only a third of
the estimated population of people with disabilities has a valid
CUD (1.5 million). This occurs partly due to lack of awareness
about the benefits and services to which they are entitled and can
access by obtaining the CUD and the difficulties of accessing the
interdisciplinary evaluation boards that issue the certificates.
The project seeks to benefit the population with disabilities,
estimated at 3.6 million people in the 24 jurisdictions that make
up the Argentine territory.
In addition, the initiative aims to strengthen the capacity of the
National Disability Agency (ANDIS) as the governing body of
policies and programs aimed at improving the social inclusion of
people with disabilities. In this sense, it seeks to update related
statistics, increase knowledge to promote labor and educational
inclusion, and train public officials at the national and
sub-national levels in the perspective of disability.
The $265 million IDB loan has a 3-year disbursement period, a
5.5-year grace period, and an interest rate based on SOFR.
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 March 29, 2023, lowered its long-term
foreign currency sovereign credit rating on Argentina to 'CCC-'
from 'CCC+'. S&P also affirmed its 'C' short-term foreign currency
sovereign credit rating and its 'CCC-/C' local currency ratings on
Argentina. The outlook on the long-term ratings is negative. S&P
also lowered the transfer and convertibility assessment to 'CCC-'
from 'CCC+'.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Divisions across the
political spectrum constrain the sovereign's ability to implement
timely changes in economic policy. Global capital markets are
closed to Argentina. In the local market, swaps are being deployed
to manage large maturities before placing debt through traditional
auctions. The central bank continues to play a key role as a
backstop for local debt management in the secondary market. The
ongoing severe drought has exacerbated pressures in the already
disrupted foreign exchange (FX) market.
Fitch Ratings, on the other hand, 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-' on
March 24, 2023. 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.
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, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
ARGENTINA: Neighbors Cross Border to Take Advantage of Low Prices
-----------------------------------------------------------------
Juan Pablo Estevez at Noticias Argentinas reports that Argentines
have historically crossed over to neighbouring countries, generally
Chile and Paraguay, to buy various products (especially domestic
appliances) at a lower price. That trend, however, is now being
reversed -- it's Argentina's neighbors who are crossing the
frontier to stock up.
The phenomenon is occurring in various border provinces, including
Rio Negro, Mendoza and Entre Rios (the latter linked to Uruguay by
bridges), thus permitting constant traffic flows, according to
Noticias Argentinas. The same thing is also happening in Paraguay
and Brazil, the report notes.
The issue has even been acknowledged by Uruguayan President Luis
Lacalle Pou, who recently declared: “We have frontier problems
with Argentina because their prices are extremely low and consumers
naturally go where it is cheapest. This is creating an imbalance
and our border shops are being punished,” the report relays.
It is not uncommon for Uruguayans, Chileans, Paraguayans and
Brazilians to cross the frontier to shop in Argentina, buying
primary needs such as food and cleaning products but also
cigarettes, books and leather, but numbers are rising, the report
discloses. The Bariloche Chamber of Commerce has even said that
"the Chileans are now overrunning our supermarkets," the report
says.
Cities on the Uruguayan border like Gualeguaychu, Concordia and
Colon are witnessing a peculiar phenomenon whereby Uruguayan
citizens, mainly pensioners, are "crossing the water," not only for
daily shopping but also to rent houses and flats to live in
Argentina, in order to take full advantage of the exchange rate gap
and currency woes, the report notes.
Chileans also spot an encouraging panorama for shopping here with
massive Easter tourism, bearing in mind that Argentine hotels are
cheaper - a four-star hotel in the Santa Cruz provincial capital of
Rio Gallegos costs US$25, for example, as against US$60 in Punta
Arenas or elsewhere across the Andes, the report relays.
Foreigners crossing over into Argentina can find on supermarket
shelves prices of only a third of their own countries, the report
discloses. A Chilean couple recently crossing over told Noticias
Argentinas that they had bought a softener for clothing for 3,500
Chilean pesos when it would have cost 16,000 in their own country,
the report notes.
Due to this phenomenon there are queues of between three and four
hours at Customs checkpoints when the foreigners return to their
countries with their Argentine purchases, the report relays.
Until now no president of the region except Lacalle Pou has
expressed an opinion on this issue, nor spoken of the possibility
of deciding any package of measures to control this situation, the
report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
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 March 29, 2023, lowered its long-term
foreign currency sovereign credit rating on Argentina to 'CCC-'
from 'CCC+'. S&P also affirmed its 'C' short-term foreign currency
sovereign credit rating and its 'CCC-/C' local currency ratings on
Argentina. The outlook on the long-term ratings is negative. S&P
also lowered the transfer and convertibility assessment to 'CCC-'
from 'CCC+'.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Divisions across the
political spectrum constrain the sovereign's ability to implement
timely changes in economic policy. Global capital markets are
closed to Argentina. In the local market, swaps are being deployed
to manage large maturities before placing debt through traditional
auctions. The central bank continues to play a key role as a
backstop for local debt management in the secondary market. The
ongoing severe drought has exacerbated pressures in the already
disrupted foreign exchange (FX) market.
Fitch Ratings, on the other hand, 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-' on
March 24, 2023. 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.
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, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
ARGENTINA: Seeks to Tame Inflation, Peso with Biggest Rate Hike
---------------------------------------------------------------
Reuters reports that Argentina's central bank hiked its benchmark
interest rate a huge 10 percentage points to 91% as it tries to
tame high inflation and steady the peso currency, which has tumbled
in black market trading.
The hike, the biggest since a market meltdown in August 2019, comes
after the central bank (BCRA) had already lifted the rate last week
by 300 basis points to 81% in an effort to control inflation
running at 104% annually, according to Reuters.
The central bank confirmed the hike in a statement after Reuters
earlier reported the move, citing bank sources, the report notes.
News of the sharp hike lifted the peso currency in the black
market, which strengthened 1.5% to 462/467 per dollar, although it
was still over 100% off the official exchange rate of 222 per
dollar, the report relays.
A higher interest rate offers more incentives to savers to keep
their funds in pesos, strengthening the local currency, but weighs
on borrowing and economic growth, the report relays.
In a statement the bank said it had raised the benchmark rate to
shift toward "real returns on investments in local currency" and to
promote savings in pesos, the report says. The 91% rate would
apply to fixed-term 30-day deposits of up to 30 million pesos, the
report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
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 March 29, 2023, lowered its long-term
foreign currency sovereign credit rating on Argentina to 'CCC-'
from 'CCC+'. S&P also affirmed its 'C' short-term foreign currency
sovereign credit rating and its 'CCC-/C' local currency ratings on
Argentina. The outlook on the long-term ratings is negative. S&P
also lowered the transfer and convertibility assessment to 'CCC-'
from 'CCC+'.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Divisions across the
political spectrum constrain the sovereign's ability to implement
timely changes in economic policy. Global capital markets are
closed to Argentina. In the local market, swaps are being deployed
to manage large maturities before placing debt through traditional
auctions. The central bank continues to play a key role as a
backstop for local debt management in the secondary market. The
ongoing severe drought has exacerbated pressures in the already
disrupted foreign exchange (FX) market.
Fitch Ratings, on the other hand, 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-' on
March 24, 2023. 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.
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, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
=============
B A H A M A S
=============
FTX TRADING: Gets OK for LedgerX Sale, Asserts $3.9B Genesis Claim
------------------------------------------------------------------
Dietrich Knauth at Reuters reports that bankrupt crypto exchange
FTX received U.S. bankruptcy court permission to sell its LedgerX
business for $50 million, raising additional funds to repay
creditors.
At a hearing in Wilmington, Delaware, U.S. Bankruptcy Judge John
Dorsey signed off on FTX's sale of LedgerX, its non-bankrupt crypto
derivatives trading platform, to an affiliate of Miami
International Holdings, according to Reuters.
Miami International Holdings owns the Bermuda Stock Exchange and
several U.S.-registered securities exchanges, including the Miami
International Securities Exchange, the report notes.
FTX is attempting to repay an estimated $11 billion to customers
through a combination of asset sales and clawback actions, the
report relays. Since filing for bankruptcy in November, FTX has
recovered more than $7.3 billion in cash and liquid crypto assets,
the company reported in April, the report discloses.
As part of that broader effort, FTX said it would seek repayment of
nearly $4 billion from Genesis Global Capital (GGC), the bankrupt
lending arm of crypto firm Genesis, the report relays.
FTX said in a court filing that Genesis owes it that money as a
result of transactions that took place shortly before FTX's
bankruptcy filing, the report notes. Under U.S. bankruptcy law,
debtors can try to claw back payments made in the 90 days before a
bankruptcy filing so that those funds can be more equitably
distributed among creditors, the report says.
Genesis was a primary "feeder fund" for FTX-affiliated hedge fund
Alameda Research, loaning Alameda crypto assets that it used for
further loans and investments, according to FTX.
At one point, Alameda held $8 billion in loans provided by Genesis,
according to FTX. Genesis, unlike other creditors, was largely
repaid before FTX went bankrupt, FTX said, the report relays.
Companies in the crypto lending industry were highly intertwined
during a turbulent 2022 that saw many tumble into bankruptcy, the
report notes. FTX, a once-prominent crypto exchange, filed for
Chapter 11 amid allegations that founder Sam Bankman-Fried used FTX
customers' money to prop up Alameda's balance sheet, the report
says.
Bankman-Fried has been indicted on fraud charges for his role in
the company's collapse, and he has pleaded not guilty, the report
relays. Former members of his inner circle have pleaded guilty and
agreed to cooperate with prosecutors, the report adds.
About FTX Trading
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell
itself to its giant rival Binance, but Binance walked away from
the
deal amid reports on FTX regarding mishandled customer funds and
alleged US agency investigations.
At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step
aside, and restructuring vet John J. Ray III was quickly named new
CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
million in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year. According to Reuters, SBF
shared a document with investors on Nov. 10, 2022, showing FTX had
$13.86 billion in liabilities and $14.6 billion in assets.
However,
only $900 million of those assets were liquid, leading to the cash
crunch that ended with the company filing for bankruptcy.
The Hon. John T. Dorsey is the case judge.
The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal
North America, LLC as financial advisor. Kroll is the claims
agent.
The official committee of unsecured creditors tapped Paul Hastings
as counsel, FTI Consulting, Inc., as financial advisor, and
Jefferies LLC as the investment banker. Young Conaway Stargatt &
Taylor LLP is the committee's Delaware and conflicts counsel.
Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory
T. Donilon, Edward L. Schnitzer, and David M. Banker, is
representing Sam Bankman-Fried in the Chapter 11 cases.
White-collar crime specialist Mark S. Cohen has reportedly been
hired to represent SBF in litigation. Lawyers at Paul Weiss
previously represented SBF but later renounced representing the
entrepreneur due to a conflict of interest.
Katherine Stadler, the court-appointed fee examiner, is
represented
by Godfrey & Kahn, SC.
===========
B R A Z I L
===========
AMERICANAS SA: Minority Shareholders Add Board Member Amid Crisis
-----------------------------------------------------------------
Bloomberg News reports that shareholders of embattled Brazilian
retailer Americanas SA voted to ratify most of the names proposed
for its board of directors, after the firm sank into bankruptcy in
January following the revelation of a massive accounting error.
At a general meeting, Carlos Sicupira, one of the billionaire
founders of 3G Capital Inc. that's also among Americanas' largest
shareholders, was reelected to the board, according to the report.
Minority shareholders managed to elect Pierre Moreau. He was
proposed by Bonsucex Holding, Silvio Tini de Araujo, EWZ Brasil
Fundo de Investimentos de Acoes and EWZ Investments LLC, which
collectively hold more than 5% of the shares, the report discloses.
The company’s restructuring plan was also ratified, according to
the meeting’s minutes, the report notes.
Americanas shocked investors and creditors in January when its
incoming chief executive officer resigned after just nine days
following the discovery of a 20 billion real ($4 billion)
accounting hole that doubled the debt load of the company, the
report relays.
Americanas is negotiating with Brazilian banks - its largest
creditors - and an agreement could be reached in the coming weeks,
according to people familiar with the talks, the report says.
The proposal includes a capital injection of 10 billion reais with
a potential for 2 billion reais of additional cash at a later date
depending on a series of financial factors, the report discloses.
3G's billionaire founders, Jorge Paulo Lemann, Marcel Telles and
Sicupira, have already injected some cash into Americanas to ensure
operations can continue during the bankruptcy protection process,
the report says.
The trio said in a statement earlier this year that they were
unaware of the accounting problems at the firm, the report adds.
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.
BIONIK LABORATORIES: Signs Distribution Agreement With Pro-Med
--------------------------------------------------------------
Bionik Laboratories Corp. announced it has entered into a
distribution agreement with Pro-Med Technology LTD, a provider of
medical equipment based in Hong Kong. The agreement between the
two companies will grant Pro-Med Technology with the exclusive
rights to market and sell Bionik's InMotion Arm/Hand robotic device
in Hong Kong.
Bionik's InMotion robots are used in rehabilitation following
stroke and other neurological conditions to help patients regain
arm and hand movement. The robot guides patients through specific
tasks, aiming to improve motor control of the arm and hand by
increasing strength, range of motion and coordination, and
assisting with the provision of efficient, effective, intensive
sensorimotor therapy. InMotion robots assist patients as needed
while measuring the position, speed and acceleration to adjust to
the patient's needs during each session. Extensive clinical data
on more than 1,000 patients has demonstrated that the InMotion
robots provide more effective patient outcomes than traditional
therapy alone.
"By entering into this agreement with Pro-Med Technology, we are
expanding our global footprint into Hong Kong," said Richard Russo
Jr., chief executive officer at Bionik Laboratories. "As stroke
cases continue to impact the Asian community, there is a great need
for advanced rehabilitation technologies to help patients regain
mobility and their independence. Pro-Med Technology is the right
partner to penetrate the market and allow Bionik to become the
standard of care for stroke rehabilitation across Hong Kong and we
look forward to a long-term relationship with the Pro-Med team."
Pro-Med Technology LTD are leaders within rehabilitation and sports
sciences, providing innovative technology solutions for their
customers across leading hospitals, clinics, education institutions
and schools, welfare organizations and fitness centers.
"We look to provide the best solutions in technology, products, and
services to all our customers. We are pleased to partner with
Bionik to bring the InMotion devices to those who need them the
most," said Terence Yu, Founder & CEO, Pro-Med Technology. "We
look forward to showcasing how InMotion can provide positive
outcomes to patients affected by strokes to our customers, and the
opportunity to grow our sales pipeline."
Bionik InMotion devices are now present across 20 countries
worldwide. This recent distribution agreement follows the
Company's continued efforts to expand InMotion's presence in Hong
Kong, as well as other new markets including the EU, Canada, and
Brazil. To learn more about the Company and its InMotion devices,
visit https://bioniklabs.com/
About BIONIK Laboratories
Bionik Laboratories Corp. -- http://www.BIONIKlabs.com-- is a
robotics company focused on providing rehabilitation and mobility
solutions to individuals with neurological and mobility challenges
from hospital to home. The Company has a portfolio of products
focused on upper and lower extremity rehabilitation for stroke and
other mobility-impaired patients, including three products on the
market and three products in varying stages of development.
Bionik reported a net loss and comprehensive loss of $10.41 million
for the year ended March 31, 2022, compared to a net loss and
comprehensive loss of $13.62 million for the year ended March 31,
2021. As of Dec. 31, 2022, the Company had $3.68 million in total
assets, $4.21 million in total liabilities, and a total
stockholders' deficit of $521,906.
In its Quarterly Report for the three months ended Dec. 31, 2022,
Bionik Laboratories said, "There can be no assurance that necessary
debt or equity financing will be available, or will be available on
terms acceptable to us, in which case we may be unable to meet our
obligations or fully implement our business plan, if at all. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern."
BRAZIL: Haddad Warns Against High Interest Rates
------------------------------------------------
Reuters reports that ahead of Brazil's next monetary policy
decision, the Finance Minister expressed apprehension about the
economic impact of high interest rates, while the central bank's
chief continued to emphasize inflation concerns.
Speaking at a Senate debate session on interest rates, inflation,
and economic growth, Finance Minister Fernando Haddad warned that
failure to integrate the country's monetary and fiscal policies
would create "a lot of difficulty" in achieving the Brazilian
economy's needs, according to Reuters.
"If the economy continues to slow down for reasons related to
monetary policy, we are going to have fiscal problems because the
tax revenue will be impacted," he said, the report notes.
Haddad said that the government has taken tough decisions to ensure
public account sustainability but stressed that harmonizing
policies is "absolutely essential," the report relays.
The leftist government of President Luiz Inacio Lula da Silva has
pushed for lower borrowing costs to boost economic growth, while
the central bank has maintained its benchmark interest rate at a
six-year high of 13.75% since September, signaling no room for
monetary easing to kick off, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
BRF SA: Fitch Affirms LongTerm Foreign & Local Currency IDRs at BB
------------------------------------------------------------------
Fitch Ratings has affirmed BRF S.A.'s (BRF) Long-Term Foreign and
Local Currency Issuer Default Ratings (IDRs) and senior unsecured
notes at 'BB'. In addition, Fitch has affirmed BRF's National
Rating and debentures at 'AA+(bra)'. The Rating Outlook remains
Stable.
The affirmation reflects BRF's expected deleveraging during the
rating horizon after peaking in 2022, as well as sound liquidity
and comfortable debt amortization schedule.
KEY RATING DRIVERS
Deleveraging Trend: Fitch expects BRF S.A.'s net leverage to
decrease toward 3.5x-4.0x in 2023, compared to 5.4x in 2022 (which
was weak for the rating level), thanks to a recovery of EBITDA,
neutral FCF and asset sale. Fitch forecasts high-single digit
revenue growth driven by price increases and a recovery of
performance of BRF's Brazilian operations. Fitch's net debt/EBITDA
ratio is around 1.7x higher than the ratio reported by BRF due to
IFRS16 adjustments, as well as the inclusion of securitized
receivables.
Gradual EBITDA Recovery: Fitch projects EBITDA of BRL4.5billion to
BRL5 billion (before IFRS adjustments) in 2023, an increase from
BRL3.9 billion in 2022, based on an improved performance of the
Brazilian division, less cost pressure from grains, and improved
operational efficiency measures such as better feed conversion
management, reduced logistics costs and increased productivity.
Performance in Brazil recovered quarter by quarter in 2022, while
profitability in international markets was negatively impacted due
to lower chicken prices as a result of global chicken oversupply.
Export poultry prices are expected to recover gradually during the
year thanks to greater demand with the reopening of the Chinese
market and a more balanced global supply.
Cash Preservation Measures: Fitch expects BRF to implement cash
preservation measures such as lower capex, better working capital
management, no dividends payment, and asset sales to reduce net
leverage in 2023. This follows a BRL5.4 billion capital injection
in early 2022. Capex is forecast at about BRL2.4 billion in 2023
compared to about BRL2.9 billion (excluding leases) in 2022. The
company expects to divest it PET division and other non-core assets
for a total amount of about BRL4 billion, with proceeds used to
reduce debt.
Strong Brands and Geographic Diversification: BRF has strong
brands, such as Sadia, Perdigao, and Banvit, which combined with
its extensive distribution capacity, allows it to sustain strong
market shares in multiple market despite strong competition and low
barriers to entry. BRF's product segmentation in processed foods in
Brazil lowers its business risk due its better pricing power
compared to its commodity (in-natura) poultry segment, which is
more cost and price sensitive to the global supply and demand for
poultry and grain costs.
The company's diversification, in terms of sales (50% outside
Brazil) mitigates risks, such as potential restrictions on exports
that may occur in particular regions of the country due to sanitary
concerns.
Positive Chicken Meat Demand: Fitch expects long-term fundamentals
for the protein sector to remain positive due to growing demand for
chicken, given its lower pricing points relative to other proteins
such as beef or pork, and good demand from export markets. The USDA
forecasts Brazilian chicken meat domestic consumption to grow by
about 1 % yoy and exports to remain strong at about 6.8% yoy in
2023. The sector remains exposed to high grains costs, sanitary
risks, including avian influenza that could temporary shutdown
exports, and environmental issues, including deforestation from
grain suppliers in Brazil.
DERIVATION SUMMARY
BRF S.A.'s ratings reflect the group's business profile as one of
the largest poultry exporters in the world, with a solid processed
foods business and strong brand awareness in Brazil, and a vast
distribution platform. The company is also leader in the Halal
market with a market share of about 38.1% in the Gulf Cooperation
Council (GCC) countries.
BRF's ratings are tempered by the company's large exposure to
Brazil and high business, execution and sanitary risks associated
to the commodity part of the business. The company has weaker
credit metrics compared to other international peers, such as Tyson
Foods Inc. (BBB/Stable), and JBS SA (BBB-/Stable), which operate
with lower gross and net leverage ratios.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within The Rating Case for the Issuer:
- Revenue growth driven by high-single digit prices;
- EBITDA of about USD4.5billion to USD5billion in 2023;
- Net debt/EBITDA trending towards 3.5x-4x in 2023;
- Divestment of the PET division;
- No dividends.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Net leverage at or below 3x for a sustained period of time and
gross leverage below 4.5x for a sustained basis period of time;
- Positive FCF.
Factors that could, individually or collectively, lead to a
negative rating action/downgrade:
- Net debt/ EBITDA above 4x or Gross debt/ EBITDA above 5x for a
sustained period of time;
- Sustained negative FCF generation;
- EBITDA (excluding IFRS16) margin below 8%;
- Weak liquidity;
- Failure to divest the PET division and allocate proceeds to
reduce gross debt;
- A multi-notch downgrade of Brazil would put pressure on BRF's
ratings.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: BRF's liquidity remains adequate. As of Dec.
31, 2022, BRF had BRL8.1 billion of cash and cash equivalents and
BRL4.8 billion of short-term debt (mainly trade finance and working
capital lines). Approximately 49% of the total debt is foreign
currency denominated. The company's liquidity was bolstered by an
additional BRL5.4 billion following the capital increase in
February 2022.
ISSUER PROFILE
BRF S.A. (BRF) is one of the largest food companies in the world,
with strong brands such as Sadia, Perdigao, Qualy, Banvit, Perdix.
Its products are sold in more than 120 countries in Americas,
Africa, Asia, Europe, Eurasia and Middle East.
ESG CONSIDERATIONS
BRF has an ESG Relevance Score of '4' for Governance as a result of
ownership concentration due to the influence of Marfrig on BRF
board and its 33.27% shares of the company. Fitch expects both
companies to operate separately as they have different operations,
brands, limited synergies, no legal ties (guarantees or debt
cross-default) and substantial shareholders float. The
shareholder's strong influence upon management could result in
decisions being made to the detrimental to the company's creditors.
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 Prior
----------- ------ -----
BRF S.A. LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AA+(bra)Affirmed AA+(bra)
senior
unsecured LT BB Affirmed BB
senior
unsecured Natl LT AA+(bra)Affirmed AA+(bra)
BRF GmbH
senior
unsecured LT BB Affirmed BB
RUMO SA: Fitch Affirms BB+ LongTerm Local Curr. IDR, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Rumo S.A.'s Long-Term Local Currency
(LC) Issuer Default Rating (IDR) at 'BB+', Long-Term Foreign
Currency (FC) IDR at 'BB' and unsecured bonds issued by Rumo
Luxembourg S.a.r.l. at 'BB'. Fitch has also affirmed Rumo and its
subsidiaries' National Long-Term Ratings and unsecured debentures
at 'AAA(bra)'. The Rating Outlook for the corporate ratings is
Stable.
Rumo's ratings incorporate its solid business position as one of
the largest railroad operators in Brazil, with expected strong and
increasing operating cash generation. The risk of concentrating
operations in the agribusiness sector is mitigated by the strong
competitive advantages in the cargo transportation in Brazil. Fitch
expects the group will maintain strong liquidity and low to
moderate net leverage despite the forecasted negative FCF for the
coming years. Rumo has a high capex program, which should
strengthen its network and add volumes transported.
Rumo's ratings consider its standalone credit profile (SCP), due to
the porous linkage with the weaker parent, Cosan S.A. (FC IDR
BB/Stable; LC IDR BB/Stable; National Scale Rating
AAA(bra)/Stable), as per application of Fitch's Parent and
Subsidiary Linkage Rating Criteria. The 'BB' FC IDR is capped by
Brazil's country ceiling.
KEY RATING DRIVERS
Solid Industry Fundamentals: Railroad sector risks are low due to
strong demand and limited competition. Rumo benefits from its
market position as the main rail transportation company in the
South and Midwest regions of Brazil, with ample network through
five concessions to operate more than 13,000 km of tracks and
access to three ports. Due to a low-cost structure, the company has
solid competitive advantages over truck transportation, which
supports stable demand, mitigates operating concentration in
agribusiness and limits volume volatility over cycles.
Strengthening Business Profile: The recent projects of Rumo Malha
Central line and expansion of Rumo Malha Norte up to Lucas do Rio
Verde are credit-positives, as these lines offer opportunities for
capturing greater grain volumes. Rumo should transport 81 billion
revenue ton kilometer (RTK) in 2023, compared to 75 billion RTK in
2022. Volumes should increase by approximately 7.5% annually from
2024 to 2026, driven by the ramp-up of Rumo Malha Central network,
combined with market share gains in other rail nets. Rumo's primary
cargo is agricultural products that are predominately exported,
mainly soybean and soymeal (43%), corn (30%), fertilizers (7%) and
sugar (6%).
FCF Remains Under Pressure: Rumo's robust EBITDA margin is likely
to increase to the 45%-48% range over the next years, while Rumo
Malha Central matures and the group gains scale. Fitch's rating
case forecasts EBITDA and funds from operations (FFO) of BRL5.2
billion and BRL2.9 billion in 2023, and BRL5.8 billion and BRL3.5
billion in 2024, respectively, as per Fitch's criteria. New capex
requirements from the concession renewal at Rumo Malha Paulista and
for extension of Rumo Malha Norte will likely pressure FCF. Fitch
projects high capex levels of around BRL21 billion in 2023-2026 to
result in negative FCF of roughly BRL7.5 billion in the period.
Low To Moderate Leverage: Rumo should present low to moderate
leverage ratios even during the high investment period. Base case
scenario expects improvements in Rumo's operating cash flow
generation, with gains of scale from investments, resulting in net
debt-to-EBITDA ratio limited at 2.5x from 2023-2026. Gross leverage
should also decline towards 3.0x over the medium term compared to
4.1x in 2022.
Credit Linkage Incorporated: Rumo's ratings reflect its SCP,
despite of the linkage with the parent. Rumo's legal ring fencing
to avoid Cosan to access its cash is viewed as porous, as debt
instruments limit dividends distribution and leverage metrics.
Fitch also assessed Cosan's effective control over Rumo as porous
and the issuer's funding and cash management policy as insulated.
This analysis allows Rumo's rating to be higher than Cosan's 'BB'
LC IDR.
The ratings of Rumo and its subsidiaries are equalized mainly due
to strong legal ties among them relative to guarantees and
cross-default clauses on their debt. Medium or high strategic and
operational incentives for Rumo to support its subsidiaries, if
needed, also reinforce the ratings equalization.
DERIVATION SUMMARY
Rumo's LC IDR is lower than Brazilian peer MRS Logistica S.A.'s
(MRS) 'BBB-'/Outlook Stable LC IDR. MRS is the best-positioned
railroad in Brazil, due to its more resilient cargo profile, track
record of positive FCF, captive customer base who also are
shareholders, and lower net leverage. Rumo's and MRS's LC IDRs are
lower than those of other mature, more geographically diversified
and less leveraged rail companies in Mexico, the U.S. and Canada,
such as Kansas City Southern.
Rumo's LC IDR is above that of Hidrovias do Brasil S.A. (HdB; LC
IDR BB-/Stable) due to Rumo's ability to generate more stable
operating cash flow and to finance its large investments to
increase volumes. Fitch expects HdB's net leverage to remain higher
than Rumo's over the next two to three years.
KEY ASSUMPTIONS
- Agricultural volumes in North and South networks to increase by
average 10% in 2023, and 8% in 2024;
- Central network volume to reach 10.8 billion RTK in 2023 and 11.7
billion RTK in 2024;
- Industrial volumes to increase by GDP from 2023 onwards;
- Average tariffs to increase by 20% in 2023 and 3.9% in 2024;
- Total capex of BRL21 billion in 2023-2026, with BRL3.9 billion in
2023;
- 25% of net income as dividends from 2023 onwards.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upgrades to Rumo's LC IDR depend on positive FCF trends and
maintenance of net leverage below 3.0x;
- Positive actions on the sovereign rating may lead to positive
actions on Rumo's FC IDR, which is limited by the Brazilian Country
Celling;
- Positive actions on National Long-Term Rating do not apply, as
the rating is at the top of the national scale;
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- An inability to finance capex with long-term and low-cost debt,
pressuring Rumo's debt amortization schedule;
- Substantial weakening of its EBITDA margins;
- Net adjusted leverage trends above 3.5x on a sustained basis;
- If Cosan LC IDR is downgraded to 'B+' or below, Rumo's LC IDR
would be downgraded to Cosan's rating plus two notches, in case
Cosan's access to Rumo's cash remains unchanged.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Fitch expects Rumo's liquidity to remain healthy
even during the higher investment cycle. Cash-to-short-term debt
ratio has been strong and above 2.0x since 2018. Rumo's ability to
raise long-term funds to finance negative FCF and preserve its
liquidity is a positive credit consideration. On Dec. 31, 2022,
Rumo had cash and equivalents were BRL8.3 billion, which favorably
compare with BRL4.0 billion maturing until YE 2024. Consolidated
total debt was BRL18.1 billion, mainly comprised of senior notes of
BRL4.8 billion (net of derivatives), debt with Banco Nacional de
Desenvolvimento Economico e Social (BNDES) of BRL2.5 billion and
debentures of BRL8.5 billion.
ISSUER PROFILE
Rumo is Latin America's largest independent rail-based logistics
operator, offering complementary services of railroad
transportation, port terminal and warehousing services. Its service
area extends over Mato Grosso, Sao Paulo and other southern states
in Brazil. The company is the logistics arm of Cosan Group.
SUMMARY OF FINANCIAL ADJUSTMENTS
- Confirming (reverse factoring) operations adjusted Rumo's debt.
- Fitch considers restricted cash (including long term) as readily
available liquidity.
- Net derivatives adjusted to debt; D&A excluded from COGS;
Dividends from associates and minorities are adjusting EBITDA.
- Fitch considers as operating expenses, impacting EBITDA, the
lease and concession expenses.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Rumo Luxembourg
S.a.r.l
senior
unsecured LT BB Affirmed BB
Rumo Malha
Paulista S.A. Natl LT AAA(bra) Affirmed AAA(bra)
senior
unsecured Natl LT AAA(bra) Affirmed AAA(bra)
Rumo Malha
Norte S.A. Natl LT AAA(bra) Affirmed AAA(bra)
Rumo Malha
Sul S.A. Natl LT AAA(bra) Affirmed AAA(bra)
Rumo S.A. LT IDR BB Affirmed BB
LC LT IDR BB+ Affirmed BB+
Natl LT AAA(bra) Affirmed AAA(bra)
senior
unsecured Natl LT AAA(bra) Affirmed AAA(bra)
===============
C O L O M B I A
===============
CREDIVALORES SA: Fitch Lowers Foreign Curr. IDR to B-, Outlook Neg
------------------------------------------------------------------
Fitch Ratings has downgraded Credivalores-Crediservicios S.A.'s
(Credivalores) Long-Term Foreign Currency Issuer Default Rating
(IDR) to 'B-' from 'B' and the senior debt to 'B-'/'RR4' from
'B'/'RR4'. Fitch has affirmed the Short-Term Foreign Currency IDR
at 'B' and assigned a Long-Term Local Currency IDR of 'B-' and
Short-Term Local Currency IDR of 'B'. The Rating Outlook is
Negative.
Fitch has also downgraded Credivalores' Long- and Short-Term
National Scale ratings to 'BBB-(col)'/'F3(col)' from
'A-(col)'/'F2(col)'; Outlook Negative. Fitch has downgraded the
company's partial credit guarantee (PCG) local issuance national
rating to 'A(col)' from 'AA(col)' keeping the four notches
relativity above Credivalores' Long-Term National Scale rating.
KEY RATING DRIVERS
The downgrade reflects the materialization of Credivalores' ratings
sensitivity regarding pre-tax income to average assets due to the
net losses suffered in 2022 and the material breach of the tangible
leverage sensitivity, which reflects a very low loss absorption
capacity and a structural deterioration. These metrics had been
under pressure for the rating level for several years due to almost
null profitability and high appetite for growth.
Although the company has announced a capital injection of USD55
million to restore its capital levels as well as a new funding
structure that reduces pressures in the short term, the Negative
Outlook reflects Fitch assessment that downside risk remains if the
company is not able to generate organic capital through sustainable
earnings and business growth.
Challenging Operating Environment: Colombian non-bank financial
institutions (NBFIs) continue to face multiple headwinds, including
reduced investor and creditor confidence, tighter economic
conditions, high and rising inflation, and weaker growth prospects
for 2023. Funding and liquidity will continue to weigh on NBFIs'
growth and profitability, especially given investor risk aversion
and more limited access to local debt markets.
Concentrated Business Model: Credivalores is the largest NBFI in
Colombia engaged in consumer lending to the low-to-mid income
population that is not served by traditional banks in small and
mid-sized cities. The company has been able to generate relatively
stable total operating income (TOI) in the last four years with an
average of USD27 million from 2019 to 2022. However, the latest TOI
was a negative USD45 million, driven by structural issues. As part
of 2022 stress situation and limited investor confidence for Latam
NBFI, Credivalores served 100% (approximately USD218 million) of
its financial commitments and found different funding alternatives
including own resources, asset-backed funding sources and
shareholders credit for around USD37 million.
Strategy Focus on Payrolls Loans: Fitch expects Credivalores
announced strategies to focus on payrolls loans and the capital
injection will help to overtake last year's crisis and shown
shareholders trust in the operation. Changes to government
structure also contribute with a strategy to achieve long-term
sustainability of the company, which still need to be proven.
Credivalores management and strategy assessment is aligned with its
business profile, remarking an acceptable degree of depth, and
experience and elevated key person risk, however, a weak execution
was exacerbated during the NBFI crisis presented in 2022.
Credivalores capital injection include a new shareholder, a change
in the shareholders structure and the appointment of a new CEO that
will be defined in the coming months.
Higher Risk Profile: Credivalores has developed robust underwriting
standards for the payroll business similar to other local
competitors and following Colombian regulation for this segment.
The niche target is characterized for a low risk profile
(pensioners and government employees). However, high appetite for
growth on unsecured loans underpinned weak asset quality, meanwhile
refinancing risk boosted market risk exposures, reflecting poor
stability of financial results throughout the cycle and weak risk
controls.
Weak Asset Quality: Asset quality remains a challenge as the level
of impaired loans (over 60 days) to total loans continued high at
19.7% at YE 2022. The reserve coverage ratio decreased to 94% given
the semi-secured portion of the portfolio, a level that compare
below the average of the banking system of 240% at YE 2022. The
expected slowdown of the economy is likely to impact the metrics,
mainly for the unsecured segment. NPLs will likely remain above 17%
and asset quality will gradually improve once the company focus on
payrolls start to gain weight on the loan portfolio.
Weak Profitability: The company reported significant losses in 2022
that magnified the historical weak internal capital generation. The
pre-tax ROAA of -14.36% compares with its low average in 2018-2021
of 0.4%. A strong contraction on business volumes as a consequence
of its 2022 payment of the financial commitments, FX impact and
reduction on the interest income to increase its cash position
undermined Credivalores' financial performance. Fitch expects the
trend in profitability to change gradually in an 18 to 24 months
period, supported by the payroll focus strategy and the use of
asset-backed founding sources. Short-term profits should remain
close to breakeven as the operating environment and inflationary
pressures, higher interest rates and slowing economic growth, will
weigh on Credivalores' earnings generation.
Tight Capitalization and Leverage: Credivalores' high leverage
remains the company's main credit weakness due to almost null
profitability and high appetite for growth. At YE 2022, the
company's capital and leverage metrics were impacted by negative
profitability. As a result, the company's shareholders committed to
capitalize USD55 million to be received in May 2023 once local
regulations approvals are complete. Fitch expects that the new
capital injection, a better debt maturity structure including
long-term bonds due in2025 and a gradual improvement on internal
capital origination will improve leverage in the next 12 to 18
months, with a debt to tangible equity ratio around 10x at YE
2023.
Improved Funding and Liquidity: During 2022, Credivalores' payment
of around USD218 million, including USD160 million 2022 bond
maturity, implied a change in its funding structure to asset-backed
facilities, local issuances with partial guarantee from Fondo
Nacional de Garantias, longer tenors and a better mix between local
and foreign funding. Although debt maturity is now concentrated in
2025, Fitch expect part of the proceeds of the new capital
injection along with different funding alternatives allowed a
comfortable funding and liquidity structure commensurate with a 'B'
rating level.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The inability of the company to generate organic capital that
leads to a tangible leverage, measured as debt/tangible equity,
consistently above 15x and consistently low or null profitability
not explained by a structural change in Credivalores business
model, could pressure ratings downward.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Credivalores' ratings could be positively impacted if the company
is able to show a sustained improvement in its profitability and
asset quality metrics while reducing pressure on its tangible
leverage metrics. A more consistent, conservative and demonstrated
liquidity risk management track record could also contribute to
future positive rating momentum.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
PCG Issuance
Credivalores partial guarantee bond local issuance for COP160.000
million is rated four notches above its national long term-rating.
The level of enhancement above the base recovery correspond to the
additional recovery that the guarantee gives to the notes which
improves the recovery rate for the bond holders is case of default.
The notes has an irrevocable partial guarantee for 70% for payment
of interest or principal from Fondo Nacional de Garantias rated
'AAA(col)'.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
- The company's senior unsecured debt is expected to move in line
with the Long-Term IDR, although a material increase in the
proportion of secured debt could result in the unsecured debt being
notched down from the IDR.
PCG Issuance
- The four-notch relativity of the PCG issuance above Credivalores'
Long-Term National Scale rating could be reduced in the event of
future increases in the issuer rating or by an improvement in its
intrinsic recovery, in accordance with Fitch's methodology.
- A downward move in Credivalores' Long-Term National Scale rating
would negatively affect the PCG ratings.
ADJUSTMENTS
Fitch has assigned a Business Profile score of 'b' that is below
the 'bb' category implied score due to the following adjustment
reasons: Business Model (negative) and Historical and Future
developments (negative).
Fitch has assigned an Earning and Profitability score of 'b-' that
is above the 'ccc' category implied score due to the following
adjustment reasons: Historical and future metrics (positive).
Fitch has assigned a Capitalization and leverage score of 'b-' that
is above the 'ccc' category implied score due to the following
adjustment reasons: Historical and future metrics (positive).
Fitch has assigned a Funding, Liquidity and Coverage (Core 1) score
of 'b' that is below the 'bb' category implied score due to the
following adjustment reasons: Business model /funding market
convention (negative).
Fitch has assigned a Funding, Liquidity and Coverage (Core 2) score
of 'b' that is below the 'bb' category implied score due to the
following adjustment reasons: Business model /funding market
convention (negative).
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Credivalores-
Crediservicios
S.A. LT IDR B- Downgrade B
ST IDR B Affirmed B
LC LT IDR B- New Rating
LC ST IDR B New Rating
Natl LT BBB-(col)Downgrade A-(col)
Natl ST F3(col) Downgrade F2(col)
senior
unsecured LT B- Downgrade RR4 B
guaranteed Natl LT A(col) Downgrade AA(col)
=====================
E L S A L V A D O R
=====================
EL SALVADOR: S&P Ups SCR to 'CCC+/C' on Distressed Debt Exchange
----------------------------------------------------------------
On May 10, 2023, S&P Global Ratings raised its long-term and
short-term sovereign credit ratings on El Salvador to 'CCC+/C' from
'SD/SD'. The outlook on the long-term rating is stable. S&P also
affirmed its 'CCC+' long-term issue ratings. The transfer and
convertibility assessment remains 'AAA'.
Outlook
S&P said, "The stable outlook reflects our view of balanced risks
between El Salvador's limited financing alternatives and decreasing
financing needs, following better-than-expected fiscal results,
recent pension debt exchange, and two Eurobonds partial repurchases
in the last year. We believe the government could tap alternative
sources of liquidity to meet its debt service payments over the
next 12 months."
Downside scenario
S&P said, "We could lower the ratings over the next six to 18
months if we perceived a weakening of the government's ability to
secure adequate funding for its fiscal deficits and rollover needs
or of its capacity to undertake fiscal adjustment needed to
stabilize its very high debt burden. We would look at any further
debt exchanges on a case-by-case basis, considering the prevailing
macroeconomic context, to determine whether we would consider these
to be distressed and tantamount to default. In general, at the
current ratings level, we tend to consider debt exchanges as
distressed. Furthermore, higher refinancing risks or potential
signs of the government being less willing to service its long-term
debt would also lead to a downgrade."
Upside scenario
S&P would raise the ratings over the next six to 18 months if
comprehensive policies led to a combination of improved debt
management, continued economic recovery, and greater clarity about
fiscal policies, in turn reducing the medium-term financing gap and
bolstering the country's payment culture.
Rationale
S&P said, "We raised our sovereign credit ratings on El Salvador to
'CCC+/C' because we consider the distressed debt exchange to be
cured, following the delivery of the new securities to the pension
funds by end of April. According to our criteria, we viewed the
pension debt exchange as distressed, rather than opportunistic,
owing to the country's pronounced macroeconomic vulnerabilities and
the government's limited financing alternatives."
The 'CCC+' long-term rating reflects that the country depends on
favorable business, financial, and economic conditions to meet its
financial commitments, which appear to be unsustainable in the long
term but which S&P does not expect to face nonpayment in the next
12 months.
Financing needs have decreased following better-than-expected
fiscal results in 2022, the pension debt exchange, and two debt
repurchases last year. The pension debt exchange will provide
capital and interest payment relief on pension debt over the next
four years, with estimated savings of around $500 million per year
over that period. On the other hand, the two Eurobond partial
repurchases last year have decreased the next sizable bullet bond
amortization to $348 million from $800 million, due January 2025.
Furthermore, the government reduced the fiscal deficit to 2.6% of
GDP in 2022, from 6% in 2021 and 10% in 2020. However, financing
alternatives remain constrained as market access is limited and
funds from some multilateral lending institutions might be able to
maintain only the current exposure. S&P assumes the government will
continue rolling over its short-term debt with local banks,
although the space to further increase it, if needed, is
narrowing.
The rating also incorporates the country's institutional
weaknesses, reflected in long-standing difficulties in predicting
policy responses amid poor checks and balances, low per capita GDP
at $5,200, and only moderate GDP growth due to persistently low
investment. In addition, the sovereign has weak public finances and
a very high debt burden, around 70% of GDP. It also lacks monetary
flexibility because of dollarization.
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
EL SALVADOR
Transfer & Convertibility Assessment
Local Currency AAA
EL SALVADOR
Senior Unsecured CCC+
UPGRADED; CREDITWATCH/OUTLOOK ACTION
TO FROM
EL SALVADOR
Sovereign Credit Rating CCC+/Stable/C SD/--/SD
=============
J A M A I C A
=============
[*] JAMAICA: Limestone to Lead Bulk Exports
-------------------------------------------
Javaughn Keyes at RJR News reports that Jamaica Mining Minister
Audley Shaw said limestone is to lead the country's bulk exports.
Speaking at an event to mark the second visit of a large bulk
carrier for the mineral, Mr. Shaw said there is space for far more
investment in limestone exports, according to RJR News.
"Yes, oxide is going up. But here's an industry that has a growth
capacity because God has been good to Jamaica. We have a very,
very large, extensive reserve," he noted, the report notes.
Mr. Shaw said there is scope for annual limestone exports to reach
four million tonnes per year, the report relays.
As at November 2022, the export of material in the 'other mining'
category, in which limestone falls, increased by 71 per cent year
over year, the report says.
Jamaica is estimated to have about 150 billion tonnes of limestone
deposits, with about 50 billion considered recoverable, the report
adds.
As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
P A N A M A
===========
BANISTMO SA: Fitch Affirms LongTerm IDR at 'BB+', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Banistmo, S.A.'s (Banistmo) Long-Term
Issuer Default Rating (IDR) at 'BB+', with Stable Rating Outlook,
its Short-Term IDR at 'B' and Shareholder Support Rating (SSR) at
'bb+'. Fitch has also downgraded the bank's Viability Rating (VR)
to 'bb' from 'bb+'.
Fitch has also affirmed the National Long- and Short-Term Ratings
for Banistmo and its subsidiary, Leasing Banistmo, S.A. (Leasing
Banistmo), at 'AA(pan)' with a Stable Outlook and 'F1+(pan)',
respectively, as well as their debt issuances.
The VR downgrade reflects the expectation of potential pressures on
the bank's asset quality in the foreseeable future, especially
stemming from debtor concentrations, as well as a slight recovery
in profitability that is still expected to gradually reach
pre-pandemic levels. This, together with robust business and
funding profiles, denotes a performance more consistent with a VR
of 'bb'.
KEY RATING DRIVERS
Solid Shareholder Support: Banistmo's IDRs, SSR and national
ratings reflect Fitch's assessment on the strong ability and
willingness of its parent, Bancolombia, S.A. (Bancolombia;
BB+/Stable), to support its subsidiary. The national rating
reflects Bancolombia's relative creditworthiness with respect to
other rated entities in Panama. The Stable Outlook on the bank's
long-term ratings mirrors the same Outlook as its owner.
Relevant Contribution to Parent's Strategy: Banistmo, the group's
second largest operation, plays a key and integral role for
Bancolombia's diversification and business strategy in its core
market, the Central American region, representing a significant
expansion potential. This factor weighs heavily in Fitch's support
propensity analysis, resulting in Banistmo's IDR being equalized to
its shareholder's IDRs.
Integration and Reputation with Moderate Influence: In the agency's
support analysis, the high level of integration between the
entities is also incorporated. This has translated into operational
and management synergies, benefiting Banistmo's business and risk
profile. In addition, the ratings moderately weight the huge
reputational risk that a potential default from Banistmo would
constitute for Bancolombia, damaging its franchise.
Stable Operating Environment, but With Risks: Fitch's 'bb+'
assessment of the Panamanian banking system's operating environment
(OE) weighs the challenges related to growth and quality of credit
in an economic slowdown environment, with GDP growth of 4.5% in
2023 from 10.8% in 2022, increasing interest rates and still
weakened capacity of borrowers. The management of these risks will
be one of the main challenges in 2023 to prevent impacts on the
banks' current financial performance.
Robust Business Profile: Banistmo's inherent creditworthiness is
captured in its 'bb' VR that is equal to its implied VR, which
reflects the bank's sensitive asset-quality, a mild recovery of
profitability, adequate loss absorption and its sound funding
profile. Banistmo has a recognized franchise in the country backed
by its belonging to Bancolombia, which has also been evidenced in
its consistent business model, broad deposit base and access to
different funding sources in local and international markets.
Banistmo is the second largest bank in Panama in terms of local
loans and customer deposits, with market shares of 13.2% and 12.5%,
respectively, as of December 2022.
Asset Quality Sensitive to Pressure: Fitch estimates Banistmo's
loan quality will remain at levels close to those observed in 2022,
and further deterioration would be due to a distinct, individual
event, a variable already incorporated into its current rating
assessment. In 2022, the core metric stage 3 loans to gross credits
decreased to 8.3% from 10.1% in 2021, derived from the initiatives
carried out by the bank. Meanwhile, the +90 days impaired credits
to gross loans ratio stood at 3.1% in 2022 (2021: 2.7%), which in
Fitch's view is susceptible to the concentration by debtor and an
OE with a business volatility slow down and with lack of full
recovery of debtors' payment capacity, but offset by the level of
collateral in its loans.
Reasonable Profitability: In 2022, an increase in loan impairment
charges (LICs) mildly affected the performance improvement achieved
in 2021, as the operating profit to risk weighted assets (RWA)
ratio move to 0.9% (industry: 1.1%) from 1.1% (2020: negative 1.1%;
2017-2019: 1.5%), levels that Fitch considers to be commensurate
with the current rating category. However, higher income and better
net interest margin coupled with stable operating expenses favoring
efficiency, offset the higher LICs related to particular events.
Fitch expects profitability to gradually return to pre-pandemic
levels in the foreseeable future, although it remains sensitive to
loan impairment.
Adequate Loss Absorption: Banistmo's capitalization metrics
exhibited a decline in 2022 due to higher RWAs related to moderate
loan expansion, which surpassed the equity's increase. The Common
Equity Tier 1 (CET1) to RWA ratio was 11.9%, below 12.5% in 2021
and equal to the average from 2018 to 2020. In Fitch's view, CET1
levels together with regulatory reserves would provide the bank an
adequate buffer to absorb unexpected losses. In addition, the
agency favorably weighs potential ordinary and extraordinary
support from its shareholder Bancolombia. The agency estimates the
ratio will reverse its trend, reaching levels close to those
previously observed.
Sound and Diversified Financing Structure: Banistmo's funding and
liquidity profile denotes its solid local franchise, backed by the
support of its shareholder along with the synergies generated
between them. This is reflected in a broad deposit base (78.6% of
total financing), a strong relationship with local and
international institutions, as well as good access to resources
from alternative sources in the local and global markets, which in
Fitch's view provides room to withstand OE challenges. In 2022, the
loans-to-deposits was 111.4%, given similar growth for both.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Any negative action on Bancolombia's IDRs would lead to a similar
action on Banistmo's SSR. In addition, IDRs, SSR and national
ratings could be downgraded if Fitch's assessment of its parent's
propensity and ability to provide support the bank diminishes;
- A further deterioration in asset quality that denotes a weakening
in the bank's risk profile could put pressure on Banistmo's VR.
Also, its VR could be downgraded as a result of a sustained
deterioration of profitability and asset quality ratios that
undermine the bank's financial performance, driving a decline in
its CET1 ratio consistently below 10% and/or its operating
profitability/RWA metric consistently below 0.5%.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A positive rating action on Bancolombia's IDRs could trigger
similar rating action on Banistmo's IDRs, SSR and national
ratings;
- Positive rating actions on Banistmo's VR could be driven by the
sustained strengthening of the asset quality reflected in its risk
profile, along with profitability ratios consistently above 1.25%
and a CET1 ratio of at least 15%.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Banistmo's senior unsecured debt rating is equal to the bank's
ratings on both the international and local scales. This is due to
Fitch's belief that the bank's probability of default is the same
as that of the issuer, since senior obligations have average
recovery prospects.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Banistmo's senior unsecured debt would mirror any potential
downgrade on the bank's international and national ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Banistmo's senior unsecured debt would mirror any potential
upgrade on the bank's ratings.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
Leasing Banistmo: The Leasing Banistmo national ratings are based
on the potential support that the Panamanian subsidiary would
receive from its ultimate shareholder, Bancolombia if needed. In
its propensity for support evaluation, Fitch weighs with high
importance the key strategic role the entity plays in Bancolombia's
model and strategy by providing complementary financial services to
those offered by the bank in a relevant market. The willingness to
help is moderately influenced by the high integration with the
group and the huge reputational risk that the default of this
subsidiary would incur, both for Banistmo and Bancolombia.
Leasing Banistmo's national ratings and its issuances are at the
same level as Banistmo's national ratings.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Negative action on Bancolombia's IDRs would lead to a downgrade
in Leasing Banistmo's national ratings;
- National ratings could also be downgraded if Fitch's perceives
that its parent's propensity and/or ability to support the
subsidiary is reduced;
- Leasing Banistmo's senior unsecured debt would reflect any
potential downgrade of the entity's national ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action on Bancolombia's IDRs would trigger a
similar action on Leasing Banistmo's national ratings;
- Leasing Banistmo's senior unsecured debt would reflect any
potential improvement in the entity's national ratings.
VR ADJUSTMENTS
The Operating Environment Score of 'bb+' has been assigned below
the 'bbb' implied score due to the following adjustment reason:
Reported and future metrics (negative).
The Asset Quality Score of 'bb-' has been assigned above the 'b &
below' category implied score due to the following adjustment
reason: Collateral and reserves (positive).
The Capitalization and Leverage Score of 'bb-' has been assigned
above the 'b & below' category implied score due to the following
adjustment reason: Capital flexibility and ordinary support
(positive).
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Leasing
Banistmo S.A. Natl LT AA(pan) Affirmed AA(pan)
Natl ST F1+(pan)Affirmed F1+(pan)
senior
unsecured Natl LT AA(pan) Affirmed AA(pan)
Banistmo S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Natl LT AA(pan) Affirmed AA(pan)
Natl ST F1+(pan)Affirmed F1+(pan)
Viability bb Downgrade bb+
Shareholder Support bb+ Affirmed bb+
senior
unsecured LT BB+ Affirmed BB+
senior
unsecured Natl LT AA(pan) Affirmed AA(pan)
MULTIBANK INC: Fitch Affirms LongTerm IDR at 'BB+', Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Multibank Inc.'s Long- and Short-Term
Issuer Default Rating (IDR) at 'BB+' and 'B', respectively. Fitch
has also affirmed the bank's Shareholder Support Rating (SSR) at
'bb+' and Viability Rating at 'bb'. The bank's National Long- and
Short-Term Ratings were affirmed at 'AA(pan)' and 'F1+(pan)',
respectively. The Rating Outlook for long-term ratings is Stable.
KEY RATING DRIVERS
Shareholder Support: Multibank IDRs, national and debt ratings are
based on the potential support it would receive from its
shareholder Banco de Bogota, S.A. (Bogota), if required, as
reflected in the Shareholder Support Rating (SSR) of 'bb+'. The
bank's Long-Term IDR and SSR are equalized to Bogota's Long-Term
IDR, reflecting Fitch's assessment of the high propensity of
support from its parent. The Stable Outlook on Multibank mirrors
that on the parent.
Parent's Ability to Support: Bogota's ability to provide support to
Multibank is closely linked to its IDR of 'BB+' as well as the
relevant size of Multibank, as it represents 17.9% of Banco de
Bogota's consolidated assets.
Core Subsidiary: In Fitch's view, Multibank supports its group's
regional franchise and market position and contributes to the
group's business model and diversification strategy, providing key
products and services in Panama which is considered a core market
for the group.
Reputational Risk and Integration: Growing integration with Bogota
improves Multibank's local franchise, provides business model
stability and benefits the subsidiary's business generation. Fitch
also weighs with high importance the reputational risk that an
event of default by Multibank would constitute to its shareholder,
as it would constitute a huge damage to Bogotá's reputation and
franchise.
Viability Rating: Multibank's VR is primarily driven by its
diversified business model, sound risk profile, pressured asset
quality and broad funding access. Its business profile weighs the
moderate four-year average total operating income of USD 149
million, which is lower than international peers as well as
diversified business model that result in stable revenue generation
and relevant market position in some lending segments.
Multibank is the seventh largest bank in Panama, with market shares
of 5.9% and 4.2% in local loans and local private deposits,
respectively, as of February 2023. However, its franchise is
particularly relevant in segments such as auto lending, in which
its market share is 16.6%, construction (10.7%) and commerce
(7.9%). Fitch also considers that the bank's business profile
benefits from the increasing integration to Bogota as reflected in
growing, strong customer relationships and more robust risk
management framework.
Increased Credit and Market Risks: Fitch's assessment of
Multibank's risk profile takes into account the growing integration
with the risk management structure of its parent, prudent
underwriting practices, and sound credit risk control framework.
However, it also considers its less conservative loan loss
allowances position than some of its peers, which are lower due to
its highly collateralized portfolio, and its exposure to interest
rate risk which, despite benefiting its net interest margin, have
had a negative impact on its capital due to unrealized losses from
securities fair-value.
Pressured Asset Quality: Multibank's asset quality still reflects
post-pandemic relief applied to some loans, even though these loans
have shown healthy payment behavior over the last six months. Thus,
the bank's Stage 3 loans accounted for 8.3% of the gross portfolio
at YE 2022, while its 90+ days past-due loans ratio was 2.7%. Fitch
estimates that with the revision of its portfolio expected for
2Q23, its Stage 3 portfolio ratio will approach closer that of
past-due loans. Collateral levels positively weigh on the agency's
asset quality assessment as roughly 70% of its commercial portfolio
is backed by guarantees, therefore the reserve coverage of gross
loans stood at a low 23.0% as of 2022.
Improving Profitability, but Still Below Peers: Multibank's
profitability trend at YE 2022 continued to improve due to a
stronger net-interest income (NII) as the bank's loan growth
continued with higher interest rates and the priority to reduce
funding costs through customer deposits. Lower loan impairment
charges (LICs) from high levels during the pandemic and cost
efficiencies after BAC International Bank's spin-off (i.e. closure
of banking branches and focus on digitalization) also benefited the
profitability.
At YE 2022, Multibank's operating profit to risk weighted assets
(RWA) ratio was 0.9%, but still below peers and pre-pandemic
levels. Despite the OE challenges, Fitch's considers Multibank's
profitability will continue to show gradual improvements and will
be maintained in line with the current rating level.
Ordinary Support Benefits Loss Absorption Capacity: The bank
maintains lower loss absorption capacity compared with regional
peers, which is offset by ordinary or extraordinary support from
its ultimate shareholder, in case of need. Fitch also considers the
lower than peers CET1-to-RWAs ratio and LLAs coverage of Stage 3
loans. At YE 2022, Multibank's CET1-to-RWAs ratio declined to 9.6%
due to moderate earnings and the negative impact from the AFS
portfolio due to the increased interest rates. Fitch also takes
into account the additional loss absorption provided by regulatory
countercyclical buffer (CCyB).
Fitch does not anticipate any significant changes in Multibank's
overall capital structure. The agency expects the CET1 ratio to
remain adequate below 11%, driven by moderate assets growth and
improvement in earnings.
Sound Funding and Liquidity: Multibank's funding structure
continues to rely on its stable customer deposit base, but lags in
comparison with larger peers due to higher concentrations per
depositor and to its deposit base concentrated in term deposits
that highly influence the NIM. Fitch's assessment of funding and
liquidity consider as positive the support from a strong regional
group. The bank's strategy is to continue growing the deposit
franchise. The loans to deposit ratio at YE22 was 123% (avg.
YE21-YE18: 116.4%) reflecting sound loan growth. Fitch expects the
core metric to be maintained below 120% due to the bank's moderate
expected loan growth while the bank's liquidity position will
remain sound.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Multibank's IDR, SSR and National Ratings could
result from a downgrade of Banco de Bogota's IDR or from a reduced
propensity of Banco de Bogota to support its subsidiary, both of
which are unlikely at present;
- Multibank's VR could be downgraded as a result of a sustained
deterioration of profitability (operating profit to RWAs below
0.5%) and asset quality ratios that undermine the bank's financial
performance, driving a decline in its CET1 ratio consistently below
10%.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Positive rating actions on Multibank's IDRs, National Ratings,
senior unsecured debt rating and SSR could be driven by positive
rating actions on Banco de Bogota's IDR;
- Positive rating actions on Multibank's VR could be driven by the
sustained strengthening of the Business Profile along with
profitability ratios consistently above 2.5% and a CET1 of at least
15%.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Senior Unsecured Debt: The ratings of Multibank's outstanding
short- and long-term senior unsecured obligations are at the same
level as the issuer's ratings as the likelihood of default of the
obligations is the same as that of Multibank.
Subordinated Debt: The subordinated debt issuance rating is two
notches below Multibank's long-term national anchor rating of
'AA(pan)'. The discount is due to its subordination and the lower
expected recovery of the subordinated debt in case of default.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Multibank's senior unsecured debt would mirror any potential
downgrade on its ratings;
- A downgrade in the subordinated debt national rating would be in
the same magnitude as a negative action on Multibank's national
ratings, as it would remain two notches below from the issuer's
rating.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Multibank's senior unsecured debt would mirror any potential
upgrade on the bank's ratings.
- An upgrade in the subordinated debt national rating would come
from a positive action on Multibank's long-term national ratings.
VR ADJUSTMENTS
The Operating Environment score has been assigned at 'bb+', below
the implied score of 'bbb' due to the following adjustment reasons:
Reported and Future Metrics (negative);
The Business Profile score has been assigned at 'bb', above the
implied score of 'b' due to the following adjustment reasons:
Business Model (positive), Group Benefits and Risks (positive);
The Capitalization & Leverage score has been assigned at 'bb-',
above the implied score of 'b' due to the following adjustment
reasons: Capital Flexibility and Ordinary Support (positive).
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Multibank, lnc. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Natl LT AA(pan) Affirmed AA(pan)
Natl ST F1+(pan)Affirmed F1+(pan)
Viability bb Affirmed bb
Shareholder Support bb+ Affirmed bb+
senior
unsecured LT BB+ Affirmed BB+
senior
unsecured Natl LT AA(pan) Affirmed AA(pan)
subordinated Natl LT A+(pan) Affirmed A+(pan)
senior
unsecured Natl ST F1+(pan)Affirmed F1+(pan)
=====================
P U E R T O R I C O
=====================
COOPERATIVA DE SEGUROS: A.M. Best Affirms C (Weak) FS Rating
------------------------------------------------------------
AM Best has revised the outlooks to stable from negative and
affirmed the Financial Strength Rating of C (Weak) and the
Long-Term Issuer Credit Rating of "ccc" (Weak) of Cooperativa de
Seguros de Vida de Puerto Rico (COSVI) (San Juan, Puerto Rico).
The Credit Ratings (ratings) reflect COSVI's balance sheet
strength, which AM Best assesses as very weak, as well as its
adequate operating performance, limited business profile and weak
enterprise risk management (ERM).
COSVI's absolute level of capital continued to increase as of
year-end 2022 by $2.1 million or 9.5% as compared with the prior
year, as a result of an operating income of $4 million. There was a
material decline in 2020 due to a decrease in the discount rate
used to determine the unfunded pension obligations in the defined
benefit pension plan. As a result, the company's risk-adjusted
capital in 2022, as measured by Best's Capital Adequacy Ratio
(BCAR), improved but continues to be assessed at very weak. A
capital management plan, approved in 2021 by COSVI's board of
directors, outlining actions for increasing risk-adjusted capital
has been somewhat effective in 2022, with absolute capital
increasing slightly. These actions include a 2023 capital-raise
campaign directed at COSVI's shareholders. The outlooks have been
revised to stable from negative, with AM Best acknowledging that
COSVI's continued efforts to improve capitalization and overall
risk management processes, alleviate immediate pressure impacting
risk-adjusted capitalization given the history of one-off events.
Unadjusted financial leverage remains just within AM Best's
tolerances, and quality of capital remains neutral to COSVI's
ratings. AM Best notes that COSVI will need to demonstrate
continued execution of its capital management plan and support by
the shareholders before any potential movement in the balance sheet
strength assessment. COSVI also is continuing to work with a third
party to strengthen the company's overarching ERM framework and
capabilities. AM Best will continue to monitor progress closely on
all initiatives presented.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *