/raid1/www/Hosts/bankrupt/TCRLA_Public/230530.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, May 30, 2023, Vol. 24, No. 108
Headlines
A R G E N T I N A
ARGENTINA: To Restrict FX Access for Imports of Oil Companies
ARGENTINA: Urged by VP to Ditch IMF Debt Repayment Deal
B E L I Z E
[*] BELIZE: IDB and GPE Partner for Education Funding
B R A Z I L
BRAZIL: President Lula Is Clashing with Brazil's Central Bank
C H I L E
VTR FINANCE: S&P Lowers ICR to 'CCC' on Continued Cash Burn
C O L O M B I A
SIERRACOL ENERGY: Fitch Affirms LongTerm IDRs at B+, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: World Bank OKs $100MM to Support Vulnerables
J A M A I C A
JAMAICA: BOJ Keeps Eye on Talks to Increase US Debt Ceiling
JAMAICA: Prices of Clothes & Shoes Increase
X X X X X X X X
LATAM: JPMorgan Sees Rise in Corporate Defaults in Latin America
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: To Restrict FX Access for Imports of Oil Companies
-------------------------------------------------------------
Buenos Aires Times reports that Argentina's government will tighten
access to the foreign exchange market for oil companies that need
to import amid a severe shortage of dollars, according to people
with direct knowledge.
Central Bank President Miguel Pesce, Energy Secretary Flavia Royon
and other officials informed oil company executives that they will
be required to finance import payments for 90 days, one person
said, according to Buenos Aires Times. The policy makers met with
executives of Raizen, Axion, YPF and Trafigura at the monetary
authority to discuss the changes, the report notes.
Oil companies must now obtain financing from international banks or
their parent companies to pay for their imports, the report relays.
At the same time, the Central Bank may allow companies to deposit
pesos in accounts or assets that adjust with Argentina's official
exchange rate, one person said, the report notes.
Central Bank board members discussed the measure during their
weekly meeting, according to one person. Press offices for the
Central Bank, government and all four companies didn't respond to a
request for comment after business hours, the report discloses.
The Central Bank tightened import controls by requiring many
industries to finance their own imports instead of tapping the
Central Bank's reserves via the official foreign exchange market,
the report says. Oil producers had thus far maintained access to
the reserves as a means of importing, the report says.
The nation has already spent all of its liquid international
reserves, plus another estimated US$1 billion, according to Buenos
Aires-based consulting firm 1816 Economia & Estrategia, the report
notes. A renewed peso sell off in recent months has pushed
Argentina to seek larger disbursements or new loans to shore up
reserves from Brazil, China and the International Monetary Fund,
the report says.
Without easy-to-spend cash on hand, questions are swirling about
how much longer the government can continue to defend the peso from
an all-out collapse, the report discloses. At risk is a currency
devaluation that stands to fan 108.8 percent inflation and
exacerbate high levels of social unrest ahead of October's
presidential elections, 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: Urged by VP to Ditch IMF Debt Repayment Deal
-------------------------------------------------------
globalinsolvency.com reports that Argentina's Vice-President
Cristina Fernandez de Kirchner urged her country to ditch its debt
repayment agreement with the IMF, as she led a rally in Buenos
Aires ahead of presidential elections later this year.
The veteran politician, who was convicted last year of fraud,
headlined the gathering celebrating 20 years since the inauguration
of her late husband Nestor Kirchner as president and promoting the
Frente de Todos coalition, to which she and President Alberto
Fernandez belong, according to globalinsolvency.com.
The report notes Fernandez said earlier this year he will not stand
for re-election and Fernandez de Kirchner, who was president from
2007-2015, has also ruled out a candidacy in October.
Fernandez de Kirchner is a long-time critic of the US$44-billion
IMF loan initially agreed by her liberal successor Mauricio Macri
(as a US£57-billion credit-line) and renegotiated by Fernandez to
help the cash-strapped country from defaulting, the report relays.
"If we don't manage to get this programme that the Fund imposes on
its debtors thrown aside, allowing us to create our own growth and
industrialisation and technological development, it will be
impossible to pay the debt," said Fernandez de Kirchner, the report
discloses.
The 70-year-old evoked a phrase from her late husband to reinforce
the point: "Dead people don't pay debts," the report says.
Crisis-ridden Argentina is grappling with year-on-year inflation of
108 percent, a severe shortage of foreign exchange and a poverty
level of around 40 percent, the report relays..
In front of the government palace on the Plaza de Mayo square,
thousands of supporters defied the rain to show their support, even
chanting "Cristina presidenta," the report notes.
While Fernandez de Kirchner has a large and fiercely loyal base,
far more people in the country either despise her or simply don't
want to see her in the presidency again, the report discloses.
Analysts suggest her refusal to stand in the elections is because
she knows she would be soundly beaten, the report says.
She regularly claims her corruption conviction was political
persecution and accuses the judiciary of pro-opposition bias, the
report relays. Her political movement has yet to decide its
candidate or candidates for the primaries in August, the report
notes.
As a dominant figure in the coalition and left wing, Fernandez de
Kirchner is likely to play a major role in deciding who gets to
stand for the presidency, the report says.
"We are waiting for her to say which candidate to vote for,"
71-year-old retiree Paula Rodríguez said in an interview.
"She will decide the candidate, she is a strategist," added German
Sora, a 50-year-old domestic worker, the report relays.
Next to the vice-preisdent onstage were Interior Minister Eduardo
'Wado' De Pedro and Economy Minister Sergio Massa, both possible
presidential candidates, 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 E L I Z E
===========
[*] BELIZE: IDB and GPE Partner for Education Funding
-----------------------------------------------------
The Inter-American Development Bank (IDB) and the Global
Partnership for Education (GPE) have teamed up to transform
education in Latin America and the Caribbean. As part of this
initiative, the two institutions have approved a total of $20
million in financing to support the Skills for the Future Program
in Belize. The program will accelerate foundational learning,
bridge the skills gap, prepare students for a changing job market,
close gender gaps, and promote inclusive education.
Belize has made enormous efforts to expand primary education and
teacher trainings. Yet, the COVID-19 pandemic caused significant
learning losses, and secondary students faced higher repetition and
dropout rates. These challenges have overwhelmingly affected the
most vulnerable children and exacerbated learning gaps. Belize also
needs a skilled workforce to ensure a low-carbon, sustainable and
competitive economy. The country's reliance on agriculture,
tourism, and fishing, and the exposure of critical infrastructure
on the coast, increases its vulnerability to natural disasters and
climate change.
The partnership between IDB and GPE brings complementary support to
Belize to address those challenges through the $20 million Skills
for the Future Program. The program is comprised of a $15 million
loan from IDB and a $5 million grant from GPE. The government of
Belize is also contributing resources for project management and to
facilitate program execution and monitoring.
The GPE funds will help close learning gaps in foundational skills
at the primary school level, support education for students with
disabilities, close gender gaps, and strengthen the country's
education data system, in particular, to track the progress of
vulnerable groups and monitor gender equality interventions.
The grant will also carry out impact evaluations to scale up
successful interventions. In addition to investing in these areas,
IDB funding will help turn six high schools across the country into
science, technology, engineering, arts, and mathematics (STEAM)
laboratories to develop graduates who possess the fourth industrial
revolution skills needed for the workforce, such as cloud
computing, cyber security, and skills for the XXI century.
The program will have nationwide coverage with investments at the
primary and secondary levels, including technical and vocational
education and training (TVET). It will enable low-performing
students from all government-financed primary schools to
participate. In addition, a third of all secondary students will
benefit from six STEAM laboratories and 15 secondary schools
equipped with Virtual Lab technologies.
"The collaboration between IDB and GPE demonstrates the
acknowledgment of education as a crucial catalyst for social and
economic development in Belize, a goal that the IDB Group entirely
supports," said Rocío Medina Bolívar, IDB Group Country
Representative in Belize.
"The Global Partnership for Education is pleased to collaborate
with the IDB to support the government of Belize in attaining its
education goals," said Laura Frigenti, CEO of the Global
Partnership for Education. "There is no more relevant agenda for
countries than to prepare today's students for the world of
tomorrow, with skills that match the challenges our world is
facing."
"I am pleased to give my endorsement to this program, which forms a
crucial component of the government's plan to establish an
educational framework that equips students to thrive not just
academically but in all aspects of life. One of this ministry's
primary objectives is to stimulate economic development by
equipping the Belizean labor market with the essential 21st-century
skills demanded by the fourth industrial revolution," said Francis
Fonseca, Minister of Education, Culture, Science, and Technology of
Belize.
The IDB loan has a 25-year repayment term, a five-and-a-half-year
grace period, and an interest rate based on the Secured Overnight
Financing Rate (SOFR).
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).
===========
B R A Z I L
===========
BRAZIL: President Lula Is Clashing with Brazil's Central Bank
-------------------------------------------------------------
globalinsolvency.com, citing an analysis in The Washington Post,
reports that when Luiz Inacio Lula da Silva was Brazil's leader
from 2003 to 2011, he didn't have to contend with an independent
central bank.
Reelected president in October, he has resisted the new reality
created by a 2021 law enshrining the bank's power to set monetary
policy autonomously, according to globalinsolvency.com.
He has called the law "nonsense" and publicly criticized the bank's
inflation goals and interest rates, creating tension with its
chief, Roberto Campos Neto, the report notes.
The bank has set its benchmark interest rate at a six-year high and
signaled readiness to hold it there to combat inflation, even as
household debt neared a record high, banks pulled back on lending
and corporate bankruptcies rose, the report relays.
More recently, there have been signs that both sides may be willing
to at least lower the temperature of the debate, the report
discloses.
Brazil's central bank was one of the first to embark on an
aggressive cycle of raising interest rates, moving in 2021 to take
its benchmark Selic rate from historic lows of 2% to 13.75% by
September 2022, the report recalls.
In turn, inflation fell to 4.18% from a peak of more than 12%, the
biggest drop among emerging economies, the report notes.
But with an inflation target of around 3%, the bank's policymakers
aren't finished combating rising prices, especially since much of
slowdown in price gains came from cuts to taxes on gasoline and
sales taxes approved under the previous president, Jair Bolsonaro.
Transportation and food prices began picking up again in 2023, the
report discloses.
Core measures stripping out some of the most volatile items like
energy and food were still running hot, and most analysts expected
consumer price increases to pick up again by December, the report
adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
=========
C H I L E
=========
VTR FINANCE: S&P Lowers ICR to 'CCC' on Continued Cash Burn
-----------------------------------------------------------
S&P Global Ratings lowered its issuer credit rating on Chilean
cable and broadband operator VTR Finance N.V. to 'CCC' from 'B' and
its issue-level rating on its senior unsecured notes to 'CCC-' from
'B-'. At the same time, S&P lowered its rating on VTR
Comunicaciones SpA's secured bonds to 'CCC' from 'B'. Finally, S&P
removed the ratings from CreditWatch with negative implications,
where it placed them on March 27, 2023.
The developing outlook reflects S&P's view that it could raise or
lower its ratings on VTR depending upon its ability to sufficiently
address upcoming debt obligations and if S&P has more clarity on
JV's business plan, potential support to the JV, and ultimately, to
VTR.
For the past two years, the company has experienced a sharp
deterioration of its brand and customer satisfaction, drop in
subscribers, revenue, EBITDA, and cash flow. As of December 2022,
VTR's adjusted EBITDA margin declined to 20.4% from 31% in December
2021 and 38.6% in December 2020. S&P said, "For next year, we
expect intense operating pressures and competition from peers with
a better fiber optic network to persist, which along with Chile's
sluggish economy, could make it difficult for VTR's churn rates and
margins to recover. In this sense, we revised down our 2023
forecast. We now expect VTR's revenue to decrease by 12% in 2023
and by mid-single digits in 2024. We also project EBITDA margin to
remain at 20%-24% in the next two years. At the same time, the
company's network requires sizable upgrades that will prompt
considerable investments in the next few years, which would push up
adjusted debt to EBITDA to 12x-13x for the forecasted period."
S&P said, "In turn, although we believe that VTR could benefit from
the combined operations with Claro, through synergies and a larger
and more diversified business profile, we still don't have clarity
on the JV's business plan and strategic views on VTR, and there has
been no guidance or signs of the JV's potential support that would
enhance VTR's credit quality. Furthermore, at this point we have
concerns over the availability of information to maintain an
updated assessment on JV's credit quality."
The company's cash position was CLP34 billion at the end of 2022,
and VTR faces interest payments for about CLP70 billion and the
maturity of CLP70 billion of short-term vendor financing debt,
which the company has historically rolled over, this year.
Additionally, S&P expects VTR will require large capital
expenditures (capex) to continue upgrading its network to reverse
the loss in subscribers, which coupled with weaker earnings, would
result in free-cash flow deficits in the next two years. These
factors, combined with the company's inability to draw more than
CLP72 billion from its revolving credit facility to avoid a
covenant breach, could strain liquidity in the next 12 months,
increasing the risk of debt restructuring or missed interest
payment.
S&P believes the company might have enough sources to cover
interest payments in July and October, but will require to monetize
some assets or access external financing to meet its liquidity
needs in the next 12-18 months and start improving its currently
unsustainable capital structure.
Environmental, Social, And Governance
ESG credit indicators: To E-2, S-2, G-3 From E-2, S-2, G-2
S&P said, "We believe that VTR's transparency and reporting factors
have weakened and are now a moderately negative consideration in
our credit analysis. As a result, we have revised our governance
credit indicator to G-3 from G-2. Management has failed to
communicate relevant information to various stakeholders on
significant issues such as the JV strategy, financial policy,
investment plans, and link and support to VTR, raising concerns
regarding information availability to maintain an updated credit
assessment on the JV and potential impact on our rating on VTR.
Environmental and social factors continue to have no material
influence on our credit analysis of VTR."
===============
C O L O M B I A
===============
SIERRACOL ENERGY: Fitch Affirms LongTerm IDRs at B+, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed SierraCol Energy Limited's Long-Term
Foreign and Local Currency Issuer Default Rating (IDR) at 'B+'.
The Rating Outlook is Stable. In addition, Fitch has affirmed
SierraCol Energy Andina, LLC's Long-Term senior unsecured ratings
at 'B+'/'RR4'.
SierraCol's ratings reflect its small but stable low-cost
production profile of roughly 44,300 boed in 2022, which is
balanced across its two main asset, Cano Limon and La Cira
Infantas. SierraCol has a long track record operation in Colombia
with solid production expected to average a net 44,000 boed through
the rating horizon, and 1P reserve life to average 8.0 years. The
company has a strong leverage profile, which Fitch expects to
remain at or below 2.0x through the rating horizon.
Despite strong operating metrics, the ratings remain constrained by
the company's relatively small size and the low diversification of
its oil fields.
KEY RATING DRIVERS
Small Concentrated Production Profile: SierraCol's ratings are
constrained by its production size, projected to average 44,000
boed over the next four years, relative to the rating trigger of
75,000 boed. The company has a concentrated production profile
split between its mains assets (CLM and LCI), representing 90% of
total production, which it operates as a joint venture with
Ecopetrol (BB+/Stable).
SierraCol produces high-quality crude with 94% of production having
API between 25-35, which gives it preferential treatment to sell
locally to Ecopetrol, under contracts that guarantee pricing at a
premium to the vasconia discount.
Efficient Cost Producer: SierraCol is one of the lowest-cost
producers in Latin America. Its half-cycle costs were estimated to
be $22/boe in 2022and full-cycle cost of $34/boe in 2022, according
to Fitch's calculation, which is the half-cycle cost plus the
three-year average FD&A for 1P of $10/boe and plus a 15% of return
on capital invested ($2/boe). SierraCol's realized oil price is
higher than peers due to the quality of its crude and its low
transportation cost of $1/boe as per its legacy contract with
Ecopetrol, which compares favorably to most of the peers in the
Region. SierraCol's realized average price was $92/bbl in 2022, a
discount to Brent of $7/bbl.
Strong Leverage Profile: Fitch projects SierraCol's total debt to
EBITDA ratio will be at or below 2.0x over the rating horizon.
Fitch does not assume material addition or decreases in debt
through the rating horizon. Fitch expects the company's debt to PDP
of $11/boe and total debt to 1P of $7/boe in 2023, and then decline
to $10/boe and $6/boe in 2025, respectively.
The latter assumes an average reserves replacement ratio (RRR) of
105% for both PDP and 1P and average reserve life of five years and
eight years, respectively, as the company deploys its 2023-2027
capex plan with aggregate amount close to USD865 million.
Financial Flexibility: SierraCol is fully financed and should be
able to cover all capex projects with internal cash flows. Under
Fitch's price deck and production assumptions, Cash Flow from
Operations (CFO) should cover capex by more than 1x over the next
four years. As of march 2023, the company's liquidity was adequate
with cash and cash equivalents of USD115 million plus USD83 million
in undrawn amounts from committed credit lines. The company's major
debt maturity is its USD600 million bond which matures in June
2028.
The rating case is assuming dividends will be paid each year to its
controlling shareholder, The Carlyle Group; however, Fitch does not
expect dividends to materially exceed FCF.
DERIVATION SUMMARY
SierraCol Energy's credit and business profile is comparable to
other small independent oil producers in Colombia. Geopark
(B+/Stable), Frontera Energy Corporation (B/Stable), and Gran
Tierra Energy International Holdings Ltd. (B/Stable) are all
constrained to the 'B' category or below, given the inherent
operational risk associated with small scale and low
diversification of their oil and gas production.
SierraCol's production profile compares favorably with other 'B'
rated oil exploration and production companies operating in
Colombia. Over the rated horizon, Fitch expects SierraCol's gross
production will average 44,000 boed, slightly lower than Geopark's
48,000 boed, and in line with that of Gran Tierra Energy at 40,000
boed and Frontera's 42,000 boed. SierraCol's PDP reserve life of
4.5 years and 1P reserve life of 7.1 years in 2022 are above the
peer average of 3.6 years and 7.0 years, respectively.
Fitch estimates SierraCol's half-cycle cost, which does not take
into consideration delivery points, was $22/boe in 2022 and
full-cycle cost was $34/boe in line with Geopark, who is the lowest
cost producer in the region at $14 bbl and $39 bbl and below Gran
Tierra at $22/boe and $34/boe, and Frontera at $29/boe and
$59/boe.
SierraCol's has strong capital structure expected to have a gross
leverage that will be at or below 2.0x over the rated horizon and
debt to PDP of $11/boe and total debt to 1P of $7/boe, which is
lower than most peers in LatAm.
KEY ASSUMPTIONS
Fitch Ratings Makes the Following Key Assumptions in the Ratings
Case for the Issuer:
- Fitch's price deck for Brent of $85 for 2023, $75 for 2024,
$65 for 2025 and $53 thereafter;
- Average daily gross production of 44,000 boed from 2023 through
2026;
- Reserve replacement ratio of 105% per annum per rated horizon;
- Lifting and transportation cost average of $16boe over rated
horizon;
- SG&A cost average of $3.25boe over rated horizon;
- Hedging cost average of $0.5boe over rated horizon;
- Consolidated capex of $696 million from 2023 through 2026
averaging $174 million per year;
- Minimum cash balance assumed at $120 million over rated
horizon;
- Effective tax rate of 40% over rated horizon.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Net production rising consistently to 75,000 boed on a
sustained basis while maintaining a total debt to 1P
reserves of USD5.00 barrel or below;
- Reserve life is unaffected as a result of production
increases, at approximately seven to eight years.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Extraordinary dividend payments that exceed FCF and weaken
liquidity;
- Sustainable net production falls below 30,000 boed;
- Reserve life declines to below 6.0 years on a sustained basis;
- A significant deterioration of total debt/EBITDA to 3.0x
or more.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: SierraCol's cash and cash equivalents balance
as of March 2023 was $115 million, plus USD83 million in undrawn
amounts of committed credit lines. Total available liquidity cover
interest expense of the next four years by 1.3x. Furthermore, the
company is fully financed and Fitch projects that capex will be
funded with internal cash flows with no material increases nor
reductions in total debt. SierraCol has a favorable debt maturity
profile, where its USD600 million matures in June 2028.
ISSUER PROFILE
SierraCol Energy Limited (SierraCol) is an independent oil producer
in Colombia that was created after Carlyle acquired Occidental
Petroleum Corporation's operations in Colombia in December 2020.
SierraCol is the third largest oil producer in Colombia with assets
in Llanos, Middle Magdalena, and Putumayo basins in Colombia. Its
key assets are Caño Limon (CLM) and La Cira Infantas (LCI), two of
Colombia's most prolific and long-lived fields, which it operates
in partnership with Ecopetrol. SierraCol's average daily production
is 44,300bbl/d with a 1P reserve life of 7.1 years and total debt
to EBITDA of 0.7x and Total Debt to 1P of $7.03bbl.
ESG CONSIDERATIONS
SierraCol's ESG Relevance Score for GHG Emissions & Air Quality is
'4' due to the growing importance of the continued development and
execution of the company's energy-transition strategy. 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
----------- ------ -------- -----
SierraCol Energy
Limited LT IDR B+ Affirmed B+
LC LT IDR B+ Affirmed B+
SierraCol Energy
Andina, LLC
senior
unsecured LT B+ Affirmed RR4 B+
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: World Bank OKs $100MM to Support Vulnerables
----------------------------------------------------------------
Dominican Today reports that the World Bank has approved a US$100
million loan to support the Dominican Republic in improving the
efficiency of delivering integrated social protection services and
promoting economic inclusion with a focus on youth and households
headed by females and increasing the resilience of the vulnerable
population while responding promptly and effectively in the wake of
a crisis or emergency.
The Dominican Republic has been one of the fastest-growing
economies in the region over the last decade, according to
Dominican Today. However, there are still significant challenges
faced by the poor, especially vulnerable youth and women, who
continue to experience unequal human capital investments such as in
education and training, and less labor market integration, as 80
percent of those aged 25-54 and the poorest are informally
employed, the report notes. Furthermore, over 40 percent of
Dominicans live in vulnerable conditions and are at risk of falling
into poverty due to climate-linked impacts and economic shocks, the
report relays.
The Integrated Social Protection, Inclusion and Resilience Project
(INSPIRE) will be implemented by the country's social protection
program SUPERATE and it will focus on three areas: (i) costs
associated with conditional cash transfers (CCTs) under the program
Alientate to promote human capital, and emergency cash transfers
(Bono de Emergencia) to increase resilience and improve food
security and nutrition, which are affected by increasing climate
change extreme events; (ii) economic inclusion through training,
apprenticeships, and entrepreneurship for disadvantaged youth
-promoting the participation of low-income youth and women -who are
unemployed or working informally so they can find and retain
gainful employment and income generation activities; and (iii)
technical assistance to improve the efficiency of the delivery of
integrated social protection services, by strengthening the social
registry, targeting, and payment, the report discloses.
"The lack of inclusion of women and young people in the Dominican
Republic's 2030 Vision could represent a significant loss for the
country's GDP," said Alexandria Valerio, World Bank Country
Representative for the Dominican Republic, the report says.
"INSPIRE can help the SUPERATE's poverty reduction strategy to
increase employment and income for women and youth and accelerate
economic growth with opportunities for all Dominicans," the report
relays.
About 1.4 million households currently enrolled in SUPERATE CCTs
will benefit from INSPIRE, including around 35,000 young people
18-35 years old from eligible urban municipalities to join the
economic inclusion program, the report notes.
INSPIRE aims to support the Dominican Republic to scale up social
protection and improve the resilience of the poorest against
shocks, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
=============
J A M A I C A
=============
JAMAICA: BOJ Keeps Eye on Talks to Increase US Debt Ceiling
-----------------------------------------------------------
RJR News reports that the Bank of Jamaica (BOJ) says it is keeping
a keen eye on the discussions taking place about the need to
increase the US debt ceiling.
BOJ Governor Richard Byles says if a decision is not reached soon,
the world could face even tighter economic conditions, according to
RJR News.
"We certainly hope it comes to our soft landing during the course
because it is not good for anyone throughout the world to have the
US be in a situation where they may default on payments or be
unable to make payments," he said, the report notes.
He noted that most of Jamaica's reserves are held in US dollars, as
is the case for most countries in the world, "so we all have that
vested interest to see that or to hope that that gets resolved very
quickly," the report relays.
If this is not done, he said, it would be the first time in US
history that they have defaulted, the report discloses.
The US government has been trying to reach a decision to lift the
self imposed US$31.4 trillion debt ceiling, the report says.
If the US Congress and the White House fail to do so, the Treasury
Department says it could start missing payments on its obligations
as soon as June 1.
At that point, Washington would be under severe pressure to keep
making payments on US bonds, which underpin the global financial
system, the report notes.
Missing a payment would trigger a Wall Street meltdown of historic
proportions, 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.
JAMAICA: Prices of Clothes & Shoes Increase
-------------------------------------------
RJR News reports that the price of clothes and shoes went up by six
per cent on an annual basis as at April.
The Statistical Institute of Jamaica (STATIN) says the 'Clothing
and Footwear' division saw prices increase by 0.5 per cent for the
month of April alone, according to RJR News.
The cost of clothes went up by 0.5 per cent, while footwear went up
0.4 per cent for the month, the report notes.
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.
===============
X X X X X X X X
===============
LATAM: JPMorgan Sees Rise in Corporate Defaults in Latin America
----------------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that JPMorgan
increased its corporate default rate forecast for all emerging
markets to 6% from 5.5%, citing in particular growing risk among
Latin American companies as access to credit markets gets tougher.
The bank's forecasted default rate for Latin American corporates,
meanwhile, came in even higher at 6.6%, up from 5%, which if
realized will be the highest default rate for the region since
2016, according to globalinsolvency.com.
Analysts at the bank flagged the challenges facing Latin American
issuers, including a number of potential default candidates in
Brazil, the report notes.
"While we have already seen four defaults and distressed exchanges
in Brazil, more are expected this year," JPMorgan analysts wrote in
a note, the report says.
JPMorgan's forecast default rate provides an estimate for the
percentage of high-yield corporate borrowing that will likely miss
scheduled payments this year, the report notes.
The upwardly revised default risk in the region follows a series of
high-profile credit failures across the region in the past few
months, including Brazilian retailer Americanas — which filed for
bankruptcy - and the non-bank lender Mexarrend, which missed
payments due on local debt and dollar bonds in January, the report
discloses.
Incidents like these have made accessing credit more difficult in
the region, JPMorgan noted, the report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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contact Peter A. Chapman at 215-945-7000.
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