/raid1/www/Hosts/bankrupt/TCRLA_Public/230612.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
Monday, June 12, 2023, Vol. 24, No. 117
Headlines
B R A Z I L
AMERICANAS SA: Bondholders Reject Recovery Plan, Sets New Meetings
BANCO DE BRASILIA: Fitch Lowers LongTerm IDRs to B, Outlook Stable
BANESTES SA: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
BANRISUL: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
BRAZIL MINAS: S&P Affirms 'BB-' Rating on $1.27BB Fixed-Rate Notes
BRAZIL: Bankers See $14 Billion in Auctions Reviving Equity Deals
MINAS GERAIS: Moody's Puts B2 Issuer Rating on Review for Upgrade
SAMARCO MINERACAO: Davis Polk Advises Creditors on Restructuring
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: World Bank Cuts Growth Projection of GDP
J A M A I C A
JAMAICA: Net Remittances Fell in 2022-2023 Fiscal Year
JAMAICA: NIR Increased by US$36 Million in May
P E R U
INRETAIL PHARMA: Moody's Alters Outlook on 'Ba1' CFR to Negative
P U E R T O R I C O
AES PUERTO RICO: Moody's Cuts Rating on Sec. Bonds 2000 to Caa3
X X X X X X X X
[*] BOND PRICING COLUMN: For the Week June 5 to June 9, 2023
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B R A Z I L
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AMERICANAS SA: Bondholders Reject Recovery Plan, Sets New Meetings
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Caio Rinaldi of Bloomberg Law reports that Americanas bondholders
of the 5th, 14th, 15th and 16th issuances disapproved the judicial
recovery plan presented by the company in meetings held on
May 29 and 30, 2023, according to the minutes of the meetings.
The company's judicial recovery plan was the main theme of the
meetings.
"100% of the bondholders present and eligible for voting approved
the suspension of this item," says the minutes.
The proposal will be reopened in new meetings with bondholders of
the respective issuances scheduled for June 26 and 27, 2023.
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.
BANCO DE BRASILIA: Fitch Lowers LongTerm IDRs to B, Outlook Stable
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Fitch Ratings has downgraded Banco de Brasilia S.A.'s (BRB)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
to 'B' from 'B+' and Long-Term National Rating to 'A-(bra)' from
'A(bra)'. The Rating Outlook on the IDRs and Long-Term National
Rating is Stable. In addition, Fitch has downgraded BRB's Viability
Ratings (VR) to 'b' from 'b+' and placed it Rating Watch Negative
(RWN).
The one-notch downgrade of BRB's Long-Term IDRs, VR and National
rating highlights further weakening in the bank's core
capitalization and earnings following the announcement of the
bank's 1Q23 financial statements on May 15, as well as uncertainty
about the sufficiency and timeliness of core capital strengthening
measures.
KEY RATING DRIVERS
BRB's IDRs and National ratings are now driven by shareholder
support of its majority shareholder, the Government of Federal
District (GDF), as per Fitch criteria's "higher of" approach,
reflecting Fitch's assessment that the support is stronger than
BRB's standalone profile (as reflected in its VR) following today's
rating action.
This follows Fitch's recent downgrade action "Fitch Downgrades
BRB's LT IDRs to 'B+'/Stable and LT National Rating to
'A(bra)'/Negative" published on May 08.
Unless noted below, BRB's Key Rating Drivers are those outlined in
the previous rating action commentary.
IDRs, SHAREHOLDER SUPPORT RATING AND NATIONAL RATINGS
BRB's IDRs and Shareholder Support Rating (SSR) are based on
Fitch's expectation of support, reflecting a moderate probability
of support from GDF. This considers GDF's moderate propensity to
support BRB, but also limited ability to do so. BRB is
strategically important for GDF, as it is the local government's
main financial agent and has a meaningful market share in the
Federal District's loans and deposits.
The support assessment is also influenced by its strategic role and
importance as a development bank in BRB's hometown, the Federal
District, by providing consumer and commercial lending and, to a
lesser extent, with municipalities on a development bias. Fitch
also believes that the local regulator would likely favor support
of BRB by the parent state as needed.
BRB's National Ratings have been notched from Fitch's view of GDF's
creditworthiness on the national scale. Fitch believes the bank's
national scale rating better reflects its creditworthiness relative
to its respective supporting entity.
The Stable Outlook on the Long-Term IDR and National Rating reflect
Fitch's view that any downside on the ratings that could
potentially arise from a further weakening of BRB's standalone
profile would be limited given the potential of support from its
majority shareholder.
VR
The downgrade of BRB's VR reflects the continued deterioration in
capitalization in 1Q23 and in operating profitability prospects, as
well as Fitch's expectation that the financial profile will
deteriorate further in the coming quarters. The CET1 ratio of 7.6%
at 1Q23 (7.8% YE22) and the operating profit/ risk-weighted assets
(RWA) ratio of negative 0.5% at the same date (0.8% in 2022) were
lower than Fitch anticipated, bringing the CET1 ratio closer to the
regulatory minimum of 7%.
As a result, Fitch believes that the trend in BRB's core
capitalization and earnings metrics due to the implementation of
remediation actions will take longer to recover relative to prior
expectations. Hence, Fitch no longer views the bank's capital
position, in particular, as commensurate with a 'b+' VR rating.
The Negative Watch indicates that there is a heightened probability
of a negative rating action over the near term and reflects
increased risks of the bank's CET1 ratio breaching the minimum
regulatory requirement of 7.0%, when including the capital
conservation buffer. This has become incrementally challenging in
the context of high loan growth and weaker than expected earnings.
As a result, Fitch has revised its assessment of BRB's
capitalization and leverage score to 'b-'/negative from
'b'/stable.
A sustained deterioration in profitability adds further uncertainty
to BRB's solvency and organic loss-absorption capacity in the near
term. The bank's business model focuses on retail and commercial
banking activities in Brazil, mainly payroll, residential mortgage
and SME lending. Net earnings generation since 2021 has been
largely supported by non-recurring gains, while BRB's core
profitability has been more variable and influenced by a
low-yielding loan book and the impact of higher interest rates on
funding costs.
In addition, the worse than expected performance on the execution
of BRB's digital expansion, exacerbated by the challenging
operating environment in Brazil, negatively affects BRB's future
profit generation capabilities and its assessment of its business
model.
In 1Q23, BRB posted net earnings of BRL74.5 million, which included
extraordinary gains of BRL75.8 million related to a reorganization
in the ownership structure of its credit card subsidiary (BRB
Card). Operating profit, in turn, was a negative BRL27.6 million.
Fitch has revised the outlook on BRB's business profile assessment
of 'bb-' to negative from stable as well as the score on the bank's
earnings and profitability assessment to 'b' from 'b+', to reflect
downside risks for the bank's franchise and profitability from the
implementation of the expansion plan and more limited ability to
write new business.
Management continues to prioritize remediation actions through RWA
optimization, asset sales and operational agreements with some of
its affiliates. In 2Q23, management expects an additional BRL163
million gain related to transferring the ownership of BRB Card.
While this could help to stabilize pressures on its earnings and
capitalization in the near term, the bank's VR would be pressured
if the bank cannot sustain a CET1 ratio above 9% considering its
weaker outlook for BRB's FY23 profitability performance.
Fitch has affirmed the 'bb-' score on its assessment of BRB's
funding and liquidity profile. BRB's funding and liquidity remained
stable since the last review. Reliance on institutional depositors
is modest as BRB benefits from a stable and diversified customer
base. The bank funds its loan book through a combination of
low-cost retail deposits (27% of deposits as of 1Q23), deposits
from its majority shareholder, the Federal District Government
(10%) and judicial deposits (38%), and from corporates/institutions
(18%). The bank's liquidity position is adequate against short-term
maturities.
Fitch expects to resolve the Watch status no later than six months
from now once it has fully assessed the bank's ability to rebuild
its capital metrics and estimated levels going forward.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
IDRs, NATIONAL RATINGS and SSR
Material negative changes in Fitch's assessment of GDF's ability
and willingness to provide support to BRB could affect the
ratings.
If the VR were to be downgraded further from the current level,
then the downside on the IDRs would be limited to the level
indicated by the bank's SSR, given the potential of support from
the GDF.
VR
If BRB fails to restore its CET1 ratio above 9% over the next two
quarters, either due to larger than expected operating losses or a
material increase in RWAs, then the VR would be downgraded. A
weakening of asset quality ratios, steaming from BRB's credit
expansion plans for unsecured lending, would also put negative
pressure on the ratings.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
IDRs, NATIONAL RATINGS and SSR
Positive changes in Fitch's assessment of GDF's ability and
willingness to provide support to BRB could affect the SSR of the
bank.
VR
An upgrade of VR ratings is unlikely in the near term given the
RWN.
A replenishment of BRB's CET1 capital buffer to levels moderately
above requirements, including the capital conservation buffer,
coupled with a stabilization or contained deterioration operating
profit metrics would support the VR to be removed from RWN.
In the event BRB is able to withstand rating pressure on its
standalone profile, upside to the VR would be limited and a stable
outlook would be contingent to its ability to demonstrate a
recurring positive trend in its operating profitability metrics,
coupled with strengthening CET1 ratios, as an indication of the
consolidation and success of the ongoing digital expansion
strategy, and healthier capital structure.
VR ADJUSTMENTS
BRB's 'b' VR has been assigned below the implied 'b+' VR due to a
negative adjustment for the 'weakest link' financial profile Key
Rating Driver: Capitalization and Leverage.
Earnings and Profitability midpoint of "b" is set below the implied
score of "bb", based on an adjustment of historical and future
metrics.
Asset Quality midpoint of "b+" is set below the implied score of
"bb", based on an adjustment of underwriting standards and growth.
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
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BRB - Banco de
Brasilia SA LT IDR B Downgrade B+
ST IDR B Affirmed B
LC LT IDR B Downgrade B+
LC ST IDR B Affirmed B
Natl LT A-(bra)Downgrade A(bra)
Natl ST F1(bra)Affirmed F1(bra)
Viability b Downgrade b+
Shareholder Support b Affirmed b
BANESTES SA: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
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Fitch Ratings has affirmed Banestes SA - Banco do Estado do
Espirito Santo's (Banestes) Long-Term, Foreign- and Local-Currency
Issuer Default Ratings (IDRs) at 'BB-' and the Viability Rating
(VR) at 'bb-'. Fitch has also affirmed bank's National Long-Term
Rating (NLTR) at 'AA-(bra)'. The Rating Outlook on the Long-Term
IDRs and NLTR is Stable.
KEY RATING DRIVERS
IDRs Driven By VR: Banestes's IDRs are driven by its intrinsic
strength, as reflected in its 'bb-' VR. The VR reflects the
continuity of the bank's stable business profile, which has a
robust regional franchise, but limited market share and size in the
national financial system and its solid financial profile. As a
subnational-owned bank, a relevant part of its strategy is focused
on providing services and granting credit to state and municipal
public employees, as well as companies interested in investing in
the State of Espirito Santo. The ratings also reflect Banestes's
risk profile with risk controls aligned with the practices of major
national banks. A full list of rating actions is below.
Operating Environment Outlook Revised to Stable: The operating
environment score for Brazilians Banks is bb-, and is in line with
the implied assessment based on Brazil's GDP per capita of USD8.910
and Fitch's Operational Risk Index of 46 (percentile rank). Fitch
revised the Outlook on its operating environment score to Stable
from Negative given the improving trends in both of these
indicators.
Stable Business Profile: Banestes operates as a commercial bank,
serving both companies and individuals and has a strong presence in
the Espirito Santos State, with a 36% market share in
credit/securities and 41% in total deposits as of December 2022.
Banestes has a stable business profile and offers a wide range of
financial products and services. Like other public entities,
Banestes is potentially subject to political influence, given its
control structure, despite its solid corporate governance
structure. Total operating income averaged USD260 million over the
four-year period 2019-2022.
Moderate Risk Profile: Banestes has a moderate risk appetite, with
underwriting standards in line with major banks. Credit risk is the
most capital consuming, representing 84% of total risk-weighted
assets in March 2023. The portfolio consisted of mainly retail
payroll loans (65%), and working capital corporate (35%). The top
10 largest borrowers represented less than 6% of total loans in the
period. Market risk in relation to risk-weighted assets was lower
(1% in March 2023).
The securities portfolio consisted mainly of federal government
securities Fitch understands that the magnitude of losses is small,
since these securities have stable pricing. The mature of
securities portfolio are distributed 9% of three months until one
year; 33% of one year until three years, 7% of three years until
five years and 54% above five years.
Adequate Asset Quality: The bank's asset quality is adequate;
Banestes's non-performing loans (NPLs) ratio has remained
controlled and adequate at 2.8% in March 2023 (2.1% in 2021 and
1.9% in 2020). Impaired Loans in the 'D-H' risk range totaled 6.0%
of the portfolio in 1Q23, compared with 5.7% in 2022 and 6.0% in
2021. The core metric averaged from 2019 to 2022. Provisions for
loan losses covered 68% of impaired 'D-H' loans in 2022. Fitch
believes that the bank will be able to manage the portfolio quality
and maintain pre-pandemic figures.
Strong Profitability: Banestes's profitability ratios were strong,
with operating profit/risk weighted averages of 3.8% in 2022 and
3.5% in 2021, an average of 3.3% between 2019 and 2022. After the
ratio increase to high 4.5% in 1Q22, due to the rise of interest
rate, it reached a more appropriate level compared to the four-year
average in 1Q23, with a 3.3% increase compared to an average of
3.3%. The expectation is that the bank maintains the current levels
of profitability until the end of the year.
Stable Capitalization: Banestes presents a good and stable
capitalization level. In March 2023, the Common Equity Tier 1
Capital ratio was 14.83% (14.96% at 2022 and 15.6% at 2021). The
expanded loan leverage was conservative, around 3.9x equity
December 2022 and December 2021. Fitch believes that the bank's
capitalization position remains adequate and sufficient to maintain
its strategy over the medium term.
Good Liquidity and Diversified Funding: Banestes's funding
structure is stable and diversified. The bank's main financing
sources come from demand deposits, savings and time deposits.
Banestes's loans/deposits ratio was 39.3% in March 2023 and 39.3%
in 2022 This core metric averaged 35.9% from 2019 to 2022, among
the strongest ratios compared with peers. The bank's liquidity is
adequate and Fitch expects the bank's loans/deposits ratio to
increase over the medium term due Banestes's to plans to increase
its loan portfolio.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
IDRs and VR
The ratings may be downgraded if the bank presents a material
deterioration in its asset quality, which compromises its
profitability indicators, with an operating result/asset weighted
by risk below 2%. In addition, a deterioration in its capital
position with a Tier 1 Capital ratio of less than 11% and
significant outflows in its funding base, compromising its
liquidity can lead to negative actions.
In addition, negative actions in the sovereign's IDRs may result in
similar actions for the bank's IDRs.
NATIONAL RATINGS
Banestes' National Ratings may be raised by a change in Fitch's
perception of the bank's local relativity towards other entities.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
IDRs and VR
There is limited possibility of positive actions in the medium
term, given the current operating environment, but a sustained
recovery of the macroeconomic environment, including the reduction
of vulnerabilities in the Brazilian economy.
Fitch's view about creditworthiness of the state of Espirito Santo
may affect Banestes' ratings, which would therefore be impacted by
any change in the state's financial profile.
NATIONAL RATINGS
Banestes' National Ratings may be raised by a change in Fitch's
perception of the bank's local relativity towards other entities.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Strategically Important to state of Espirito Santos: Banestes'
Shareholder Support Rating (SSR) of 'b+' reflects the limited
likelihood of support from its controlling shareholder, the State
of Espirito Santo. Fitch believes that the state would have a high
propensity but limited capacity to support the bank, if necessary.
Banestes is strategically important for Espirito Santo, as it acts
as its main tax collection agent, making transfers to
municipalities and is responsible for cash management. In addition,
public entities, to which the bank provides services and grants
credit to suppliers, as well as payroll deductible credits to
public employees, make up an important portion of Banestes's
business.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
SSR
- Banestes' SSR can be downgraded if there is any change in its
strategic importance or changes in the capacity or propensity of
the state of Espirito Santo to provide support to the bank.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
SSR
- Banestes' SSR can be upgraded if there is any change in its
strategic importance or changes in the capacity or propensity of
the state of Espirito Santo to provide support to the bank.
VR ADJUSTMENTS
The VR has been assigned in line with the implied VR.
The Funding and Liquidity score of 'bb' has been assigned below the
'bbb' category implied score due to the following adjustment
reasons: Deposit Structure.
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
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Banestes S.A. –
Banco do
Estado do
Espirito Santo LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA-(bra)Affirmed AA-(bra)
Natl ST F1+(bra)Affirmed F1+(bra)
Viability bb- Affirmed bb-
Shareholder Support b+ Affirmed b+
BANRISUL: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
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Fitch Ratings has affirmed Banco do Estado do Rio Grande do Sul
S.A.'s (Banrisul) Long-Term, Foreign Currency and Local Currency
Issuer Default Ratings (IDR) at 'BB-'. The Rating Outlook is
Stable. Fitch has also affirmed the bank's National Long-Term
Rating (NLTR) at 'AA-(bra)'. The Outlook for the NLTR is Stable.
KEY RATING DRIVERS
Banrisuls's IDRs are driven by its intrinsic strength, as reflected
in its 'bb-' Viability Rating (VR). The VR reflects stability of
the bank's business profile and its moderate risk appetite, with
risk controls in line with major banks. Banrisul operates as a
commercial bank, serving both companies and individuals and
presents an adequate financial profile.
Fitch revised the Brazilian banking system's Outlook (operating
environment [OE], 'bb-') to Stable from Negative, reflecting the
banking system's resilience. The OE assessment remains constrained
by the country's sovereign rating. Fitch also analyzed Rio Grande
do Sul's OE given the bank's high regional importance and
concentration in the state; however, the state's impact on the
operating environment has been limited, as evidenced by the bank's
recent satisfactory financial performance.
Banrisul has a resilient and stable business profile and offers a
wide range of financial products and services. The ratings also
reflect adequate management quality and stable strategies. The bank
has a strong presence in Rio Grande do Sul, with a market share of
approximately 20% in credit and a 40% share in term deposits. The
role of the bank is to support the economic and social development
of the State of Rio Grande do Sul. Banrisul operates as a
commercial bank, serving both companies and individuals.
Banrisul has a moderate risk appetite, with risk controls in line
with major banks. Loans to individuals accounts for the majority of
the total portfolio and those are predominately lower-risk
payroll-backed loans. Most of the lending to companies are secured
with various forms of collateral as are the vehicle and real estate
loans. There is concentration in the region, with approximately 95%
of its credit originating in the southern part, mainly from the
state of Rio Grande do Sul. The top 20 borrowers accounted for only
3.5% of total loans; historically this ratio is low. It is expected
that the bank will accelerate credit growth in the second half of
2023.
Fitch considers asset quality to be adequate. The loan credit
portfolio is diversified between retail, commercial, rural and real
estate lending. Retail lending to individuals accounts for about
50% of the loan portfolio and 80% of the retail lending is in the
form of low-risk payroll-backed lending known locally as
"Consignado". The 90-day non-performing loan ratio corresponded to
1.7% of total loans at 1Q23 compared with 2.0% at 1Q22 and 1.6% at
YE 2022.
Impaired loans, in the 'D-H' risk range, totaled 6.9% at 1Q23 and
6.6% at YE 2022. These recent levels are a relevant improvement
from previous years as the Impaired Loan ratio at YE 2021 was 8.5%
and 10.2% at YE 2020. For 2023, management does not expect any
relevant change in its asset quality metrics. Fitch also expects
asset quality ratios to stabilize over its forecast horizon as loan
growth will likely outpace impaired loan formation.
Despite a recent decrease, Banrisul's profitability ratios remain
acceptable, with operating profit/risk weighted averages (RWAs) of
1.5% at 1Q23 and 0.9% at YE 2022. These ratios were below the 2.5%
and 2.3% at YE 2021 and YE 2020 respectively. The decrease in 2022
is explained mainly by a higher expenses, non-recurring expenses
and provisions for credit losses along with a reduction in the
financial margin. Management's guidance for 2023 shows an
improvement in its margins in the range of 19% to 23%. Fitch
believes that these improvements are reasonably achievable due to
asset repricing and given the diverse funding options available to
the bank.
Capitalization was satisfactory with a common equity Tier 1 (CET1)
capital ratio of 14.4% as of March 31, 2023. This was slightly
lower than the 14.8 reported at YE 2022. Total capital at March
2023 was at a comfortable level of 17.1% (17.6% at YE 2022). During
2021, the bank reinforced its regulatory capital with the issuance
of subordinated debt, which continues to contribute to the total
regulatory capital ratio. Fitch expects a small growth in CET1
capital over the next few years given the expected increase in the
return on average equity ratio, (for 2023 management's guidance is
for a growth of 11% to 15%). The growth in CET1 will be partially
mitigated by an expected growth in RWA.
One of Banrisul's strengths is its stable and diversified funding
base with clients with savings accounts and time deposits. In
Fitch's opinion, liquidity is good, and the bank's policy of
minimum cash is conservative. The bank's loans/deposits ratio was a
comfortable 78.6% in 1Q23 compared with a four-year average from
2019 to 2022 of 67.6%. The bulk of the bank's funding comes from
stable time deposits. Deposit concentration is very low as the top
20 depositors only accounted for 8.7% of total deposits. Fitch
expects, over the medium term, that the level of concentration will
remain low given the conservative policies of the bank and as the
top 100 depositors only accounted for 12.2% of the total as of
March 31, 2023.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
IDRs and VR
- A sustained decline in the operating profits/RWAs ratio average
below 1.5% and increase in the four-year average of the impaired
loan ratio above 10.0%;
- A sustained deterioration in the bank's CET1 ratio below 12%;
- Any negative change in Fitch's view of the credit of the State of
Rio Grande do Sul's operating and economic situation, given the
bank's strong presence and concentration in this state;
- A downgrade of the Sovereign Rating of Brazil would result in a
similar action on the bank's Long-Term IDRs.
- If the VR were to be downgraded from the current level, then the
downside on the IDRs would be limited to the level indicated by the
bank's Shareholder Support Ratings (SSR), currently at 'b+' given
the potential support from the state of Rio Grande do Sul.
National Ratings
Banrisul's National Ratings could be downgraded if there is a
worsening in Fitch's perception of the bank's quantitative and
qualitative metrics in comparison to its local peers.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
IDRs and VR
- Although not likely given the sovereign's Stable Outlook and
current fiscal and economic issues, an increase in the SSR above
the bank's VR could lead to a positive rating action;
- Given Banrisul's current credit profile, the bank's VR is
unlikely to be upgraded if the sovereign's ratings are upgraded.
However, over the medium-term, an improvement in the operating
environment combined with a sustained reduction in the bank's
impaired loan ratio below 4.5% and increase in the bank's CET1
ratio above 16%, could be positive for creditworthiness.
National Ratings
Banrisul's National Ratings could be upgraded if there is a change
if Fitch's perception of the bank's metrics in comparison to its
local peers.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The subordinated notes are rated two notches below its VR of 'bb-'.
The notching is driven by the notes' high expected loss severity.
No notching for non-performance is applied because coupons are not
deferrable and the write-off trigger is close to the point of
non-viability. Fitch believes, as a result, that the incremental
non-performance risk is not material from a rating perspective.
These notes, which mature in 2031, are currently eligible as Tier 2
Capital.
Banrisul's 'b+' SSR reflects a limited likelihood of support from
its controlling shareholder based on its view of the state of Rio
Grande do Sul's credit profile. Fitch believes that the state would
have a high propensity but limited capacity to support the bank if
needed. Banrisul is strategically important for Rio Grande do Sul,
acting as its main tax collection agent, making transfers to
municipalities and providing cash management services. In addition,
public entities, to which the bank provides services and grants
credit to suppliers, as well as payroll deductible credits to
public employees, make up an important portion of Banrisul's
business.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
- The subordinated debt rating will be downgraded if Banrisul's VR
is downgraded;
- The subordinated debt rating will be upgraded if Banrisul's VR is
upgraded.
- The SSR is potentially sensitive to any negative change in
Fitch's view of the State of Rio Grande do Sul's propensity or
ability to provide support to the bank should the need arises;
- The SSR is potentially sensitive to any positive change in
Fitch's view of the State of Rio Grande do Sul's propensity or
ability to provide support to the bank should the need arise.
VR ADJUSTMENTS
The Earnings and Profitability score of 'b+' has been assigned
below the implied score of 'bb' due to the following adjustment
reason: Earnings Stability (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 Prior
----------- ------ -----
Banco do Estado
do Rio Grande
do Sul S.A. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA-(bra)Affirmed AA-(bra)
Natl ST F1+(bra)Affirmed F1+(bra)
Viability bb- Affirmed bb-
Shareholder Support b+ Affirmed b+
Subordinated LT B Affirmed B
BRAZIL MINAS: S&P Affirms 'BB-' Rating on $1.27BB Fixed-Rate Notes
------------------------------------------------------------------
S&P Global Ratings affirmed its 'BB-' rating on Brazil Minas SPE's
U.S. $1.27 billion 5.333% fixed-rate notes due 2028.
Brazil Minas SPE, the issuer, is a single-purpose, special-purpose
entity (SPE) registered in the Cayman Islands. The 'BB-' rating on
the notes mirrors the credit quality of the underlying asset of the
structure, which is the loan that Credit Suisse A.G., Nassau branch
(CS) made to the state of Minas Gerais that counts with the
unconditional guarantee from the Federative Republic of Brazil.
Therefore, due to the guarantee structure, S&P's 'BB-' rating on
the notes reflects its long-term sovereign credit rating on
Brazil.
The interest payments on the notes are made on a semiannual basis,
while principal payments are made annually. Both interest and
principal payments are being made on a timely basis upon the
execution of the sovereign guarantee, offsetting the turmoil in
Minas Gerais´s overall credit quality.
S&P said, "We have also reviewed the transaction's expense
structure. We are de-linking the rating on the notes from CS's
credit risk, which is responsible for covering for some of the
costs, fees, and expenses if the operating reserve account is
exhausted; there is no affect on the rating. The transaction´s
expected annual regular expenses, mainly related to the SPE's
trustee/administrator expenses, amounts to $12,500-$13,500 per
year, while the cash position in the operating account in December
2022 was about $418,000.00; the notes mature in 2028. Also,
out-of-pocket expenses are entitled to be reimbursed by the obligor
and/or guarantor. Therefore, we view that the transaction's
expenses are fully funded within the structure."
BRAZIL: Bankers See $14 Billion in Auctions Reviving Equity Deals
-----------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
investment bankers are counting on massive auctions of energy
transmission lines for a pickup in Brazil's share sales.
Projects demanding as much as 70 billion reais (US$14 billion) in
investments are expected to be auctioned through the end of 2024
and lure several publicly traded Brazilian firms, the report notes.
These companies, in turn, will likely need to fund their growth
through local-debt issuances and share offerings, according to
Felipe Thut, the head of Banco Bradesco SA's investment-banking
arm, the report discloses.
"The utilities sector is this year's hottest," Thut said in an
interview. "Companies will have about five years after the auction
to build the power transmission lines and over this time frame they
will need money to fund those investments," he added.
The first auction - featuring nine projects across the Northeast
and Southeast of the country - is scheduled for as soon as June 30,
the report notes.
It's likely to require total capital expenditures of about 16
billion reais, and companies including Centrais Eletricas
Brasileiras SA (Eletrobras), Equatorial Energia SA and Transmissora
Alianca de Energia Eletrica SA (Taesa) are likely to submit bids,
say analysts at Banco Itau BBA SA, the report relays.
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).
MINAS GERAIS: Moody's Puts B2 Issuer Rating on Review for Upgrade
-----------------------------------------------------------------
Moody's Investors Service has affirmed the state of Minas Gerais
Baseline Credit Assessment (BCA) at caa1 and placed on review for
upgrade its B2 issuer rating.
On Review for Upgrade:
Issuer: Minas Gerais, State of
LT Issuer Rating (Foreign Currency), Placed on Review for Upgrade,
currently B2
LT Issuer Rating (Local Currency), Placed on Review for Upgrade,
currently B2
Affirmations:
Issuer: Minas Gerais, State of
Baseline Credit Assessment, Affirmed caa1
Outlook Actions:
Issuer: Minas Gerais, State of
Outlook, Changed To Rating Under Review From Stable
RATINGS RATIONALE
The rating action reflects Moody's assessment of the possibility of
strengthening support from the federal government ahead of Minas
Gerais adhesion to the fiscal recovery regime (RRF) as defined in
the Brazilian complementary laws 159 and 178. The RRF is a
mechanism that supports states to rebuild their fiscal equilibrium.
Minas Gerais and the government of Brazil would agree on some
fiscal consolidation measures and restructure the state's debt with
the federal government.
The state's current B2 rating reflects a baseline credit assessment
(BCA) of caa1 along with an assumption of a strong level of
extraordinary support from the Government of Brazil (Ba2 stable).
An assessment of a higher support level would lead to an increased
notching benefit from the state's BCA on the rating.
During the review period, Moody's will monitor progress on the
adhesion of Minas Gerais to the RRF, that is still pending
approvals by the state assembly and the federal government.
The government of Brazil has built a recent history of support to
the state, servicing its debt since 2018, so that the entirety of
Minas Gerais' direct and indirect debt benefits from an explicit
guarantee of the sovereign government. The state was unable to
service its debt payment due to large cash financing deficits
between 2013 and 2019. During this period, Minas Gerais accumulated
unsustainable debt levels and delayed payments to its suppliers,
employees and other engagements. The portion of the debt serviced
by the government of Brazil, which gradually increased to reach the
entirety of the state's debt service in 2020, has been converted
into a new debt that the state owes towards the federal government.
As of December 2022, the government of Brazil was the main
debtholder with 85% of the state's debt; net direct and indirect
debt reached 163% of the state's total revenues.
In 2019, Minas Gerais announced that it intended to adhere to the
RRF. But it was only in July 2022 that the state effectively
formalized a request to join the regime. Since then, the state has
developed a recovery plan involving an extension of its debt
obligations with the federal government and fiscal consolidation
measures. In December 2022, the federal government already agreed
with the state to refinance BRL41.6 billion of accumulated debt,
over which it forgave BRL6.0 billion lowering the amount of
renegotiated debt to BRL35.6 billion; maintaining the payment of
the state's debt obligations with third parties guaranteed by the
federal government.
While the negotiations with federal government have advanced,
adhesion to the RRF is still pending approval by the state
assembly, which the state expects to happen in July 2023. If
approved, the entirety of the state's debt would be refinanced and
repaid over 30 years, with a progressive ramp-up in debt payments
during the first 10 years that would match the fiscal benefits of
fiscal consolidation measures. Such measures include further
control on expenses, implementation of a spending ceiling, the
elimination of some tax incentives, and the privatization of
Companhia de Desenvolvimento Economico de Minas Gerais.
Moody's also takes into account its assessment that Minas Gerais'
fiscal profile has improved over the last three years reflecting
the state's efforts to increase its own-source revenues while
limiting operating expenses. In 2022, Minas Gerais posted high
operating balance and financing surpluses of 15.1% and 10.1% of
total revenues respectively, which reflected fiscal consolidation
measures and one-off government stimulus during COVID. Last year,
following the filing for the RFF in July 2022, part of the debt
service to the federal government was suspended which also
supported the state's fiscal balance and contributed to an
improvement in the liquidity position. Going forward, new fiscal
consolidation measures as part of the fiscal recovery regime should
alleviate fiscal pressures. Moody's expects the state's fiscal
trajectory to continue improving with financing surpluses slightly
above 10% in 2023 and 2024.
Although the state's improving fiscal situation and increased
visibility on the measures taken by the state to tackle its high
debt are credit positive, Moody's considers that Minas Gerais' BCA
is well positioned at caa1 given the challenges that remain ahead.
Minas Gerais' caa1 BCA reflects its high personnel expenses, large
unfunded pension liabilities that result in elevated pension costs
currently absorbing one third of its operating budget, and its
history of cash financing requirements. Minas Gerais' high debt
burden will remain a key credit challenge for the foreseeable
future; and the fiscal turnover to be implemented over multiple
governments to meet the renegotiated debt amortization schedule
adds execution risks to the state's strategy and still embed
elevated probability of future missed payments.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Minas Gerais is exposed to both environmental, social and
governance risks. These risks are partially offset by the federal
government of Brazil strong support for RLGs. As a result, Moody's
assessment of Minas Gerais' credit impact score (CIS) is CIS-4.
Minas Gerais' environmental issuer profile score (IPS) is E-4. The
state is exposed to the mining industry that results in an
assessment of highly negative natural capital risk. The state's
infrastructure and economic base could be subject to pressure
stemming from environmental concerns due to safety risks in
tailings dams structure with dam collapse accidents experienced in
the past.
The social IPS is S-4, mainly reflecting risks related to health
and safety as well as access to basic services that could be a
potential source of social unrest. Minas Gerais faces moderate
challenges in the provision and quality of education and housing.
Minas Gerais' governance IPS is G-4. Over the past few years, the
state has accumulated fiscal deficits, with high debt and pension
liabilities combined with weak liquidity. Moody's views a high
likelihood of further missed payments on the state's debt and
financial obligations. Nonetheless, these risks are partly offset
by the strong support given by the federal government of Brazil.
Minas Gerais delivers documents in a timely manner; accuracy and
detail of information is overall adequate, and the level of data
transparency is satisfactory.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The adhesion of Minas Gerais to the RRF would trigger a rating
upgrade, providing further evidence of support from the federal
government and improving the visibility into the state's plans to
address its large amount of debt. Otherwise, a sustained
improvement in key financial metrics that results in the state's
ability to service its debt without external support could lead to
an upgrade in Minas Gerais' Baseline Credit Assessment. An upgrade
of Brazil's sovereign rating could also result in upward pressure
on the ratings.
Conversely, a downgrade of the sovereign bond rating or a further
deterioration in Minas Gerais' solvency profile that result in
sustained cash financing deficits, combined with diminished
assumptions of support from the federal government, could lead to a
rating downgrade.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2018.
SAMARCO MINERACAO: Davis Polk Advises Creditors on Restructuring
----------------------------------------------------------------
Davis Polk is serving as U.S. counsel to an ad hoc group of
financial creditors holding approximately $3 billion aggregate face
amount of the outstanding notes and pre-export financing facilities
of Samarco Mineração S.A. in connection with the company's
restructuring. On May 31, 2023, Samarco, members of the ad hoc
group and other stakeholders collectively entered into a
restructuring support agreement (RSA). The RSA contemplates a
holistic restructuring to be implemented through a consensual,
jointly filed judicial reorganization plan in Samarco's ongoing
judicial reorganization (recuperação judicial) proceeding in
Brazil and enforced in the United States through Samarco's pending
chapter 15 proceeding before the United States Bankruptcy Court for
the Southern District of New York.
The RSA represents a significant milestone in Samarco's
restructuring process, which has been one of the longest and most
complex restructurings ever faced by a Brazilian company. The RSA
also reflects the culmination of more than four years of Davis
Polk's involvement in litigation and intermittent negotiations
between the ad hoc group, on the one hand, and Samarco and its
shareholders, on the other hand. Once implemented, the
restructuring will result in the cancellation of Samarco's existing
debt and the issuance of up to $3.82 billion of new notes due 2031,
along with certain other new debt instruments.
The joint plan will be the first creditor-proposed Brazilian
restructuring plan put to a vote following a 2021 amendment to
Brazil's insolvency laws that, for the first time, permits
creditors under certain circumstances to propose restructuring
plans as an alternative to the debtor's plan.
Headquartered in Belo Horizonte, Minas Gerais, Brazil, Samarco is a
mining company with operations in Minas Gerais and Espirito Santo.
Samarco's products include direct reduction and blast furnace
pellets and iron ore fines, which supply various industries in the
Americas, Europe, the Middle East, North Africa and Asia.
The Davis Polk restructuring team has included partners Timothy
Graulich, Angela M. Libby and David Schiff and associates Gene
Goldmintz, Jarret Erickson, Paavani Garg, Moshe Melcer and Mary
Kudolo. Partners Manuel Garciadiaz, Leo Borchardt and Yasin
Keshvargar provided general corporate and capital markets advice.
Members of the Davis Polk team are based in the New York, London
and São Paulo offices.
Davis Polk refers to Davis Polk & Wardwell LLP, a New York limited
liability partnership, and its associated entities.
About Samarco Mineracao SA
Samarco Mineracao SA is a Brazilian mining joint venture between
BHP Group and Vale SA. It serves as an iron ore processing
company.
The company provides blast furnace, direct reduction, sinter feed,
as well as low and normal silica content pellets.
On April 9, 2021, the Debtor filed a voluntary petition for
judicial reorganization in the 2nd Business State Court for the
Belo Horizonte District of Minas Gerais in Brazil pursuant to
Brazilian Federal Law No. 11,101 of Feb. 9, 2005.
Samarco Mineracao filed for Chapter 15 bankruptcy recognition
(Bankr. S.D.N.Y. Case No. 21-10754) on April 19, 2021, in New York,
to seek U.S. recognition of its Brazilian proceedings.
The Debtor's U.S. counsel is Thomas S. Kessler of Cleary Gottlieb
Steen & Hamilton LLP.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: World Bank Cuts Growth Projection of GDP
------------------------------------------------------------
Dominican Today reports that the Dominican Republic's economic
growth projections for 2023 have been revised downward by the World
Bank. Initially estimated to have a solid growth of 4.9%, the
projecti on has been reduced to 4.4% and further revised to 4.1%,
according to Dominican Today. Although the difference is only -0.3
percentage points from the previous update in April, it reflects a
decline of -0.7 percentage points from the January projections, the
report notes.
The World Bank attributes the reduced projection to weaker growth
in exports, the report notes. According to data from the National
Statistics Office, the country's merchandise exports increased by
6.0% in 2022, reaching a value of US$12,390.3 million, the report
relays.
The World Bank's revised projections align with those of other
international organizations, the report discloses. Oxford
Economics indicates a weak start for the Dominican Republic's
economy in 2023, with an estimated average GDP growth of 1.4% in
the first quarter, the report relays. They forecast an
acceleration in the economy, with a growth rate of 3.8% for the
year, the report relays.
In the broader Caribbean subregion, the World Bank predicts that
after strong growth of 7.9% in 2022, the economies will grow by
5.1% in 2023, the report says. However, Haiti is expected to
continue facing contraction due to increased violence and
instability, exacerbating the country's food security situation,
the report relays.
For Latin America and the Caribbean as a whole, the World Bank
projects a further slowdown in growth to 1.5% in 2023, the report
notes. Weak growth in advanced economies and tight monetary
policies, coupled with high domestic inflation, are expected to
impact export demand and financial conditions, the report relays.
However, the World Bank anticipates that domestic monetary policy
in the region will ease towards the end of the year, leading to a
growth increase of 2% in 2024, the report notes. While the
projections for the Dominican Republic have declined, other
countries in the region, such as Panama, Mexico, and Nicaragua,
have seen increases in their GDP growth estimates, the report
discloses. Paraguay, on the other hand, has a revised estimate of
4.8% despite a decrease of -0.4%, 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: Net Remittances Fell in 2022-2023 Fiscal Year
------------------------------------------------------
RJR News reports that net remittances in Jamaica fell in the
2022/2023 fiscal year.
The Bank of Jamaica says at the end of March, US$3.23 billion came
into the country via remittances over the 12 months to that point,
according to RJR News.
That was 0.4 per cent or US$12.4 million less than the 2021/2022
fiscal year, the report notes.
Remittances coming through formal services were flat, the report
relays.
For the month of March alone, Jamaica recorded US$282.3 million in
remittances, the report discloses.
That reflects a 2.1 per cent or US$5.9 million increase, 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: NIR Increased by US$36 Million in May
----------------------------------------------
RJR News reports that Jamaica's Net International Reserves
increased by US$36 million in the month of May.
The Bank of Jamaica says the NIR was valued at US$4.28 billion, up
from US$4.17 billion at the end of April, according to RJR News.
The country's reserves cover 26 weeks of goods and services
imports, 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.
=======
P E R U
=======
INRETAIL PHARMA: Moody's Alters Outlook on 'Ba1' CFR to Negative
----------------------------------------------------------------
Moody's Investors Service has affirmed InRetail Consumer's Baa3
issuer rating. Concurrently, Moody's has affirmed the Baa3 senior
secured rating on its 2028 notes. At the same time, Moody's
affirmed the Ba1 corporate family rating on InRetail Pharma and its
2025 notes. The outlook on all ratings has been changed to negative
from stable.
Affirmations:
Issuer: InRetail Consumer
Issuer Rating, Affirmed Baa3
Senior Secured Global Notes, Affirmed Baa3
Issuer: InRetail Pharma S.A.
Corporate Family Rating, Affirmed Ba1
Backed Senior Unsecured Notes, Affirmed Ba1
Outlook Actions:
Issuer: InRetail Consumer
Outlook, Changed To Negative From Stable
Issuer: InRetail Pharma S.A.
Outlook, Changed To Negative From Stable
RATINGS RATIONALE
The change in outlook to negative reflects Moody's view that
financial risk is high for both, InRetail Consumer and InRetail
Pharma, resulting from shareholder distributions and increasing
reliance on short-term debt, including leases under IFRS 16, which
negatively compares to on-balance-sheet and alternate liquidity.
Both companies maintain strong fundamental credit quality and
access to bank funding, which Moody's expect to continue.
Nevertheless, the action considers their vulnerability should an
abrupt loss of access to the capital and credit markets ocurrs and
Moody's view that these practices tend to favor shareholders over
creditors, which is inconsistent with their ratings.
InRetail Consumer's Baa3 ratings continue to reflect the company's
leading market position and highly recognized brands in the
pharmaceutical and supermarket segments in the Government of Peru
(Baa1 negative) that allowed the company to improve its credit
profile amid an environment of low economic growth, social unrest
and floods that affected consumption. In 2021, Peru's real GDP grew
2.7%. Nevertheless, InRetail Consumer revenues increased close to
10%, driven by a strong performance in both its supermarkets and
pharma divisions. Despite its low prices strategy and expansion of
its cash and carry and hard discount stores, the company was able
to hold to its margins supported by efficiencies in logistics,
increased productivity in stores and improved cash-conversion
cycle; in the pharma business a higher focus in personal care,
wellness and beauty categories also supported strong margins. The
positive performance continues in 2023; for the LTM ended in March
2023, the company continued to reduce debt/EBITDA to 3.4x from 3.6x
in 2022 and 3.7x in 2021. Also in the LTM ended in March 2023, the
company continued to expand its geographic footprint, adding 174
net new Mass stores, 3 new Makro stores and 2 new Plaza Vea stores
as well as 24 net new pharmacies. Stores openings allowed the
company to further reinforce its leading market position amid
strong competitors, mainly in the supermarkets front.
Both companies' liquidity is strained by refinancing risk. InRetail
Consumer's cash and equivalents of PEN797 million negatively
compare with the PEN1.27 billion debt maturing in the short term.
Short term debt includes PEN949 million in loans and borrowings and
PEN325 million related to lease liabilities. Since 2021, the
company has increased short term debt from PEN746 million, partly
reflecting higher lease expense due to an increase in store count.
Recurrent refinancing of short term debt amid high interest rates
environment has prevented the company to improve interest coverage
despite the decline in leverage. EBIT/Interest expense has remained
at 3.4x since 2021. In 2021, the company had an extraordinary
dividend amounting PEN693 million, which coupled with PEN1.3
billion capex – including PEN482 million adjustment related to
leases under IFRS 16 – lead to negative free cash flow
generation. Although dividends in 2022 declined to PEN495 million,
capex remained high, still affecting cash generation. Likewise,
InRetail Pharma's cash position of PEN331 million in the LTM ended
in March 2023, negatively compares to the PEN432 million debt
maturities in the short term, including PEN233 million related to
lease liabilities. Considering only interest bearing loans,
amounting PEN199 million, InRetail Pharma is able to cover them
with cash. Also Moody's note that InRetail Pharma has been able to
consistently reduce leverage from its peak 3.1x in the Q2 2022 to
2.5x in the LTM ended in March 2023. In 2023, Moody's expects the
companies to maintain capex and dividends close to 2022 levels. The
companies' main sources of liquidity are short-term bank lines and
revolving uncommitted bank credit facilities. Similar to most Latin
American companies, InRetail Consumer does not maintain committed
credit facilities. The company faces foreign-currency risk because
most of its debt is in dollars, while revenue is generated in the
local currency. However, it covers its exposure through call spread
instruments. Interest rate risk is also limited as all of the
company's debt is denominated in fixed rate.
RATING OUTLOOK
The negative outlook reflects Moody's view that, absent a liability
management that extends InRetail Consumer and InRetail Pharma
maturities to the long term, its capital structure will remain
inadequate for its current ratings. Although Moody's expects credit
access to remain open to the companies given its blue-chip status
in Peru and positive operating performance, internal cash sources
will continue to be insufficient to cover short term liabilities
should capex and shareholders distributions remain at current
levels.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
The outlook could stabilize if the company are able to improve its
liquidity eliminating refinancing risk while generating positive
free cash flow. Longer term, the ratings could improve if the
companies are able to sustain revenue growth, market position and
operating margins. Also, if it they are able to sustain:
Moody's adjusted debt/EBITDA below 3x
Moody's adjusted EBIT/interest expense above 5x
A rating upgrade would also require a sustained capital structure
in line with investment grade rating and financial practices that
balance shareholders interests with bondholders.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
Sustained current capital structure with heightened refinancing
risk
Negative free cash flow generation
Operating difficulties, or a significant deterioration in its
market-leading position
Adjusted debt/EBITDA above 4x
Adjusted EBIT/interest expense below 3x
The principal methodology used in these ratings was Retail
published in November 2021.
=====================
P U E R T O R I C O
=====================
AES PUERTO RICO: Moody's Cuts Rating on Sec. Bonds 2000 to Caa3
---------------------------------------------------------------
Moody's Investors Service downgraded to Caa3 from Caa2 the rating
assigned to AES Puerto Rico, L.P.'s (AES PR or Project) senior
secured obligations, including approximately $144 million of senior
secured bonds 2000 Series A issued by the Puerto Rico Industrial,
Tourist, Educational, Medical, and Environmental Control Facilities
Financing Authority on behalf of AES PR. The rating outlook is
negative.
Downgrades:
Issuer: AES Puerto Rico, L.P.
Senior Secured Regular Bond/Debenture, Downgraded to Caa3 from
Caa2
Issuer: P.R. Ind Tour Ed Med & Env Ctl Facs Fin Auth
Backed Senior Secured Revenue Bonds, Downgraded to Caa3 from Caa2
Outlook Actions:
Issuer: AES Puerto Rico, L.P.
Outlook, Remains Negative
RATINGS RATIONALE
The rating action follows AES PR's notice that it failed to make
its debt service payment on the 2000 Series A bonds on June 1,
2023. Around $17.9 million of principal amortization was due on
June 1, 2023. At the end of February 2023, AES PR had fully
depleted its debt service reserve account for the 2000 Series A.
The Caa3 rating captures Moody's expectation around the recovery
for senior secured lenders as the power plant continues to have
value to PREPA through 2027 as a reliable, cost effective and
important resource for the island. The Caa3 rating further
acknowledges the fact the existing power purchase agreement (PPA)
between AES PR and the Puerto Rico Electric Power Authority (PREPA)
expires on November 30, 2027, eighteen months after the current
final debt maturity of June 1, 2026 providing incremental
flexibility to parties as part of any financial restructuring.
However, recovery prospects are limited by the lower economic value
of the plant following the expiration of the PPA given the ban that
exists on coal plants in Puerto Rico beginning January 1, 2028.
Before the payment default, AES PR had been negotiating amendments
to the PPA with PREPA to alleviate short-term and medium-term
liquidity concerns but the parties were unable to effectuate the
permanent changes to the PPA in time for the June 1, 2023 debt
service payment. AES PR bondholders have entered into a standstill
agreement with AES PR as parties, including PREPA, continue to work
towards some form of financial restructuring for the project.
Environmental considerations are relevant to the rating action,
causing us to revise AES PR's environmental issuer profile score to
E-5 from E-4 as the payment default largely stems from higher
environmental related operating expenses for coal ash removal.
Coal ash disposal is no longer permitted on the island following a
change in law in 2020. While the PPA has broad change in law
protections, such a change, should it occur, would require changes
to the PPA with PREPA, which is compromised by PREPA's financial
condition as it continues to operate its business in bankruptcy.
Moody's also changed AES PR's governance issuer profile score to
G-4 from G-3 owing to the payment default and related debt
restructuring efforts, including the challenges the project faces
from a governance perspective as it navigates through the
contractual arrangements with an off-taker operating in
bankruptcy.
RATING OUTLOOK
The negative outlook reflects the uncertainty around AES PR's
recovery prospects as the asset will be shut down following the PPA
expiration and the intermediate challenges it faces with the
project's off-taker operating in bankruptcy.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
WHAT COULD CHANGE THE RATINGS UP
Successful amendment to the PPA and the bond indenture which
provides financial viability for the project company through the
remaining life of the PPA strengthening Moody's expectation around
recovery prospects for senior lenders.
WHAT COULD CHANGE THE RATINGS DOWN
Financial restructuring efforts prove to be untenable leading to
lower than expected recovery for bondholders or AES PR bankruptcy
filing.
PROFILE
AES PR, an indirect wholly owned subsidiary of the AES Corporation
(AES, Baa3 stable), owns and operates a 454 megawatt (MW) coalfired
cogeneration facility located in Guayama, Puerto Rico. The project
sells all of its firm energy and capacity pursuant to a 25-year
power purchase agreement to PREPA, a public corporation and
governmental agency of the Commonwealth of Puerto Rico.
The principal methodology used in these ratings was Power
Generation Projects Methodology published in January 2022.
===============
X X X X X X X X
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[*] BOND PRICING COLUMN: For the Week June 5 to June 9, 2023
------------------------------------------------------------
Issuer Cpn Price Maturity Country Curr
------ --- ----- -------- ------- ----
Colombia Bond 7.3 71.3 10/18/2034 CO COP
Colombia Bond 7.3 71.3 10/18/2034 CO COP
Colombia Bond 7.3 61.5 10/26/2050 CO COP
Colombia Bond 7.3 61.5 10/26/2050 CO COP
Colombia Bond 3.9 54.8 02/15/2061 CO USD
Colombia Bond 4.1 61.9 02/22/2042 CO USD
Colombia Bond 5.6 72.7 02/26/2044 CO USD
Colombia Bond 3.1 74 04/15/2031 CO USD
Colombia Bond 3.3 72.1 04/22/2032 CO USD
Colombia Bond 5.2 67.3 05/15/2049 CO USD
Colombia Bond 4.1 58.8 05/15/2051 CO USD
Colombia Bond 5 66.9 06/15/2045 CO USD
Colombia Bond 6.3 63 07/09/2036 CO COP
Colombia Bond 6.3 63 07/09/2036 CO COP
Banco Davivienda SA 6.7 66.5 CO USD
Banco de Chile 2.7 75.4 03/09/2035 CL AUD
Banco de Chile 1.7 69.5 04/26/2032 CL EUR
Chile Bond 1.3 52 01/22/2051 CL EUR
Chile Bond 3.1 66.9 01/22/2061 CL USD
Chile Bond 1.3 65.4 01/29/2040 CL EUR
Chile Bond 1.3 71.2 07/26/2036 CL EUR
Chile Bond 3.3 66.6 09/21/2071 CL USD
China Maple Leaf 2.3 75 01/27/2026 KY USD
China SCE Group 6 29 02/04/2026 KY USD
China SCE Group 7.4 56.2 04/09/2024 KY USD
China SCE Group 7 35.2 05/02/2025 KY USD
China SCE Group 6 42.9 09/29/2024 KY USD
Earls Eight 0.1 63.8 12/20/2031 KY AUD
Earls Eight 2.3 75.2 05/20/2032 KY AUD
Earls Eight 1.7 71.4 06/20/2032 KY AUD
Ecopetrol SA 4.6 75 11/02/2031 CO USD
Ecopetrol SA 5.9 63.9 11/02/2051 CO USD
Ecopetrol SA 5.9 65.5 05/28/2045 CO USD
Lani Finance 3.1 68.6 10/19/2048 KY AUD
Lani Finance 1.9 63.3 10/19/2048 KY EUR
Lani Finance 1.7 60 03/14/2049 KY EUR
Lani Finance 1.9 62.3 09/20/2048 KY EUR
QNB Finance 3.4 75.4 10/21/2039 KY AUD
QNB Finance 13.5 55.7 10/06/2025 KY TRY
QNB Finance 2.9 75.3 12/04/2035 KY AUD
Ruta del Maipo 2.3 53.5 12/15/2024 CL CLP
Santander Consumer 2.9 73.1 11/27/2034 CL AUD
Seagate HDD Cayman 3.4 73.4 07/15/2031 KY USD
Seazen Group 4.5 63.6 07/13/2025 KY USD
Silk Road Investments 2.9 68.8 01/23/2042 KY AUD
Simpar Finance 10.8 73.8 02/12/2028 BR BRL
Simpar Finance 10.8 73.8 02/12/2028 BR BRL
Skylark 1.8 58.2 04/04/2039 KY GBP
YPF SA 1 69.8 01/10/2026 AR USD
YPF SA 7 61.6 12/15/2047 AR USD
YPF SA 7 61 12/15/2047 AR USD
UEP Penonome II SA 6.5 73.6 10/01/2038 PA USD
UEP Penonome II SA 6.5 74.1 10/01/2038 PA USD
Guaranteed 5.4 73.7 01/29/2038 KY USD
Guaranteed 5.3 71.9 03/23/2038 KY USD
Helenbergh China 8 32.9 11/07/2024 KY USD
Agile Group Holdings 6.1 41 10/13/2025 KY USD
Agile Group Holdings 5.5 45 04/21/2025 KY USD
Agile Group Holdings 5.5 39.2 05/17/2026 KY USD
Alfa Desarrollo SpA 4.6 72.1 09/27/2051 CL USD
Alfa Desarrollo SpA 4.6 72.1 09/27/2051 CL USD
Alibaba Group 2.7 67.4 02/09/2041 KY USD
Alibaba Group 3.2 65.2 02/09/2051 KY USD
Agile Group Holdings 5.8 50.2 01/02/2025 KY USD
QNB Finance 11.5 62.1 1/30/2025 KY TRY
SYN prop e tech SA 13.6 20.3 3/15/2024 BR BRL
Yango Cayman 12 3.9 09/15/2023 KY USD
MSU Energy SA 6.9 70.8 02/01/2025 AR USD
MSU Energy SA 6.9 71.2 02/01/2025 AR USD
Itau Unibanco SA 5.8 19.4 05/20/2027 BR BRL
Jamaica Government 8.5 68.9 12/21/2061 JM JMD
Jamaica Government 6.3 72.7 07/11/2048 JM JMD
Kaisa Group Holdings 10.9 9.1 KY USD
Fospar S/A 6.5 1.3 05/15/2026 BR BRL
Frigorifico 7.7 71.1 07/21/2028 PY USD
Frigorifico 7.7 71.4 07/21/2028 PY USD
Galaxy Digital 3 62.5 12/15/2026 KY USD
Generacion 9.9 73.1 12/01/2027 AR USD
Generacion 12.5 0 02/16/2024 AR USD
Gol Finance Inc 8.8 40.5 KY USD
Gol Finance Inc 8.8 42 KY USD
Goldman Sachs 2.3 75.9 06/30/2040 KY EUR
Greenland Hong Kong 10.2 45.9 KY USD
Guacolda Energia SA 4.6 40.8 04/30/2025 CL USD
Guacolda Energia SA 4.6 40.8 04/30/2025 CL USD
Tencent Holdings 3.2 66.2 06/03/2050 KY USD
Tencent Holdings 3.2 66.5 06/03/2050 KY USD
Tencent Holdings 3.3 63 06/03/2060 KY USD
Tencent Holdings 3.3 63.5 06/03/2060 KY USD
Three Gorges Finance 3.2 74.2 10/16/2049 KY USD
VTR Comunicaciones 5.1 55.3 01/15/2028 CL USD
VTR Comunicaciones 5.1 53.6 01/15/2028 CL USD
VTR Comunicaciones 4.4 54.4 04/15/2029 CL USD
VTR Comunicaciones 4.4 54.5 04/15/2029 CL USD
Banco del Estado 3.1 72.5 02/21/2040 CL AUD
Banco del Estado de 1.7 70 03/01/2032 CL EUR
Banco del Estado 2.8 68.9 03/13/2040 CL AUD
Banco del Estado 1.7 69.2 07/05/2032 CL EUR
Banco GNB Sudameris 7.5 73.3 04/16/2031 CO USD
Banco GNB Sudameris 7.5 73.4 04/16/2031 CO USD
Banco Santander Chile 1.3 57.6 11/29/2034 CL EUR
Banco Santander Chile 3.1 72.3 02/28/2039 CL AUD
Panama Bond 4.5 73.5 01/19/2063 PA USD
Panama Bond 4.3 74.8 04/29/2053 PA USD
Panama Bond 3.9 66.8 07/23/2060 PA USD
Pearl Holding III 9 30.5 10/22/2025 KY USD
Pearl Holding III 9 30.5 10/22/2025 KY USD
Peruvian Bond 3.6 68.6 01/15/2072 PE USD
Peruvian Bond 2 69.5 11/17/2036 PE EUR
Peruvian Bond 2.8 61.1 12/01/2060 PE USD
Peruvian Bond 1.3 72.1 03/11/2033 PE EUR
Peruvian Bond 3.2 60.9 07/28/2121 PE USD
Vista Energy 1 73 03/03/2028 AR USD
Voyager II 3.3 74.3 03/23/2034 KY AUD
Transocean Inc 6.8 67.6 03/15/2038 KY USD
Inversiones Latin 5.1 44.6 06/15/2033 CL USD
Inversiones Latin 5.1 44.8 06/15/2033 CL USD
KWG Group Holdings 7.4 15.8 01/13/2027 KY USD
KWG Group Holdings 6 40.8 01/14/2024 KY USD
KWG Group Holdings 5.9 22.2 11/10/2024 KY USD
KWG Group Holdings 6.3 17.6 02/13/2026 KY USD
KWG Group Holdings 7.4 26.5 03/05/2024 KY USD
KWG Group Holdings 6 19.4 08/10/2025 KY USD
KWG Group Holdings 6 16.8 08/14/2026 KY USD
KWG Group Holdings 7.9 27.5 08/30/2024 KY USD
KWG Group Holdings 7.9 60.2 09/01/2023 KY USD
Telecom Argentina SA 1 56.5 02/10/2028 AR USD
Telecom Argentina SA 1 64.2 03/09/2027 AR USD
Tencent Holdings 3.8 74.1 04/22/2051 KY USD
Tencent Holdings 3.8 74.1 04/22/2051 KY USD
Tencent Holdings 3.9 72.3 04/22/2061 KY USD
Tencent Holdings 3.9 72.3 04/22/2061 KY USD
eHi Car Services 7 64.9 09/21/2026 KY USD
El Salvador Bond 6.4 62.3 01/18/2027 SV USD
El Salvador Bond 6.4 62 01/18/2027 SV USD
El Salvador Bond 7.1 48.5 01/20/2050 SV USD
El Salvador Bond 7.1 48.6 01/20/2050 SV USD
El Salvador Bond 5.9 46 01/30/2025 SV USD
El Salvador Bond 7.6 49.4 02/01/2041 SV USD
El Salvador Bond 7.6 49.4 02/01/2041 SV USD
El Salvador Bond 8.6 58.1 02/28/2029 SV USD
El Salvador Bond 8.6 57.9 02/28/2029 SV USD
El Salvador Bond 8.3 56.4 04/10/2032 SV USD
El Salvador Bond 8.3 56.3 04/10/2032 SV USD
El Salvador Bond 7.7 50 06/15/2035 SV USD
El Salvador Bond 7.7 50 06/15/2035 SV USD
El Salvador Bond 9.5 54.6 07/15/2052 SV USD
El Salvador Bond 9.5 54.5 07/15/2052 SV USD
El Salvador Bond 7.6 49.9 09/21/2034 SV USD
El Salvador Bond 7.6 50 09/21/2034 SV USD
Banda de Couro 8 69.1 01/15/2027 BR BRL
Alibaba Group 3.3 63 02/09/2061 KY USD
AMTD IDEA Group 4.5 52.5 KY SGD
AAC Technologies 3.8 68.6 06/02/2031 KY USD
ACEN Finance 4 70.9 KY USD
AES Tiete 6.8 0.7 04/15/2024 BR BRL
Agile Group Holdings 13.5 40.7 KY USD
Agile Group Holdings 8.4 38.1 KY USD
Agile Group Holdings 7.9 31 KY USD
Argentina Bonar Bonds 1 19.8 7/09/2029 AR USD
Argentina Bonar Bonds 1 27.5 08/05/2023 AR USD
Argentina Treasury 2.5 25.3 11/30/2031 AR ARS
Argentine Bond 0.5 19.5 07/09/2029 AR EUR
Argentine Bond 1 23.7 07/09/2029 AR USD
Argentine Bond 0.1 21.5 07/09/2030 AR EUR
Argentine Bonos 16 72.6 10/17/2023 AR ARS
Argentine Bonos 15.5 22.2 10/17/2026 AR ARS
Ascent Finance 3.4 58.4 02/06/2043 KY AUD
Ascent Finance 3.8 59.8 06/28/2047 KY AUD
Ascent Finance 1.2 61.4 07/12/2047 KY EUR
Astra Cumulative 1.5 60.6 11/01/2029 KY USD
*********
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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balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
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