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/raid1/www/Hosts/bankrupt/TCRLA_Public/230720.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, July 20, 2023, Vol. 24, No. 145 Headlines A R G E N T I N A AES ARGENTINA: S&P Affirms 'CCC-' ICR on Debt Exchange Offer ARGENTINA: Net Reserves at Record Low, Savings in the Spotlight B A H A M A S FTX GROUP: Files Suit to Recover US$323M in Failed EU Expansion B E R M U D A TEEKAY TANKERS: Egan-Jones Hikes Senior Unsecured Ratings to BB B R A Z I L BRAZIL: Eyes Sending Income Tax Reform Proposal to Congress BRAZIL: General Price Index Declines 1.45% in June SANTA CATARINA: S&P Upgrades ICR to 'BB-', Outlook Stable D O M I N I C A N R E P U B L I C [*] DOMINICAN REPUBLIC: Grants RD$4.3BB+ Loans to Entrepreneurs J A M A I C A JAMAICA: Gov't Exceeds Tax Collection Target for April and May JAMAICA: Seeks Loan Extension for Highway Improvement Project M E X I C O TOTAL PLAY: Fitch Lowers IDRs to 'B+', On Rating Watch Negative P A N A M A MULTIBANK INC: S&P Withdraws 'BB+/B' Issuer Credit Ratings V E N E Z U E L A PETROLEOS DE VENEZUELA: App. Ct. Upholds Creditors' Ability to Sue - - - - - ================= A R G E N T I N A ================= AES ARGENTINA: S&P Affirms 'CCC-' ICR on Debt Exchange Offer ------------------------------------------------------------ On July 18, 2023, S&P Global Ratings affirmed its 'CCC-' issuer credit and issue-level ratings on Argentine energy company AES Argentina Generacion S.A. (AAG). S&P also assigned a 'CCC-' issue-level rating to the proposed senior unsecured notes. The negative outlook on AAG follows that on Argentina, reflecting potentially harsher restrictions to access and/or transfer funds abroad in the near future, including additional central bank regulations forcing Argentine entities to unilaterally push forward payments in foreign-currency debt. AAG announced an offer to exchange its outstanding $274 million 7.75% senior unsecured notes due Feb. 2, 2024, for the applicable amount of 9.5% notes due 2027. S&P said, "Given the proposed compensation for creditors to exchange their 2024 notes for the ones with a longer tenor, we don't believe that investors would receive less value than in the 2024 notes' original promise. However, we view the proposed exchange as distressed, rather than opportunistic, because of the current transfer and convertibility (T&C) restrictions in Argentina." This is because the exchange offer won't result in a loss in value to investors, compared with the original promise. S&P said, "Our value consideration is related to investors' receiving a premium over the face value of the original obligation in any of the alternatives proposed, as well as an increase in interest rate to compensate for exchanging their notes for the new ones with a longer tenor. Therefore, we don't consider the exchange offer tantamount to default." ARGENTINA: Net Reserves at Record Low, Savings in the Spotlight --------------------------------------------------------------- Ignacio Olivera Doll at Bloomberg News reports that Argentina's Central Bank's net reserves have fallen into record negative territory, intensifying investor concerns about a possible run on the financial system in the midst of an election cycle. Net reserves, the difference between the Central Bank's assets and its short-term liabilities, fell to US$6.45 billion, the lowest negative level in history, according to a research note by Martin Rapetti, executive director of Buenos Aires-based consultancy Equilibra, according to Bloomberg News. While Rapetti said the monetary authority currently could handle a significant drop in private-sector dollar deposits, he also warned that investors are nervous, Bloomberg News notes. "The market refocused its attention on the risk of repayment of dollar-denominated bank deposits," Rapetti wrote. "There are fears of a massive withdrawal which could further deplete the Central Bank's liquid reserves. In such a context, pressure on foreign exchange markets would lead to instability and even higher inflation," Bloomberg News discloses. A Central Bank spokesman said that the monetary authority "proved to have liquidity to face the country's financial commitments" and that "market calculations do not reflect its financial position," Bloomberg News says. The Central Bank does not publicly disclose net reserves figures, nor daily dollar sales in foreign exchange markets to prop up the peso, Bloomberg News notes. Net reserves have fallen by about US$14 billion so far this year, affected mainly by a drought cutting agricultural dollar revenues by almost half in early 2023, Bloomberg News relays. Payments to private creditors and the International Monetary Fund (IMF) help explain some of the decline, Bloomberg News discloses. Import financing and foreign exchange intervention are other key factors, Bloomberg News notes. Some analysts believe the Central Bank is tapping into savers' deposits to intervene in foreign exchange markets, a highly unusual move, Bloomberg News notes. "It is very likely that they are using embedded dollars from people's deposits,because we don't see movements in gold reserves. It's hard to know this because money is fungible. But they can always manage dollars," said Juan Pablo Rotger, an analyst at Banco Mariva, in a telephone interview, Bloomberg News notes. Argentina's elections could put further pressure on the bank's reserves, Bloomberg News relays. Four years ago, a shocking primary election result triggered financial panic when Argentines withdrew more than 40 percent of dollar deposits in a three-month period, Bloomberg News discloses. Today, the financial system has less than half of the dollar deposits it had in 2019, but an unexpected outcome could again trigger another wave of withdrawals, Bloomberg News relays. Carlos Melconian, a leading economist who has placed his proposals at the disposal of all presidential candidates, says the Central Bank's balance sheet and the stability of the peso depend on the government reaching a new staff-level agreement with the IMF, Bloomberg News notes. Talks between the IMF and the Argentine government on reworking the US$44-billion programme have dragged on for months, Bloomberg News relays. "The Central Bank is dependent on closing a deal with the IMF to avoid a devaluation before the elections. We don't know if they are using reserve requirements from the financial system, the Basel Bank or deposit insurance, because money is fungible," Bloomberg News adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. In 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+'. S&P's 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 March 24, 2023, downgraded Argentina's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'C' from 'CCC-', and has affirmed the Long-Term Local Currency IDR at 'CCC-'. Fitch's downgrade of Argentina's rating to 'C' from 'CCC-' follows an executive decree that forces domestic public-sector entities into operations involving their holdings of sovereign debt securities, which would involve unilateral exchanges and forced currency conversion that constitute default events under Fitch's criteria. The 'C' rating reflects Fitch's view that default is thus imminent. Fitch said the rating would be downgraded to 'Restricted Default' (RD) upon execution of the exchanges. Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. ============= B A H A M A S ============= FTX GROUP: Files Suit to Recover US$323M in Failed EU Expansion --------------------------------------------------------------- Dietrich Knauth at Reuters reports that bankrupt crypto exchange FTX sued insiders at FTX Europe AG late on July 12, seeking to recover US$323 million that FTX had invested in an ill-fated expansion into European crypto markets. FTX's acquisition of Zurich, Switzerland-based Digital Assets DA AG, now known as FTX Europe, was one of many "dubious investments" made with FTX customer funds and primarily meant to enrich FTX founder Sam Bankman-Fried and his associates, according to a complaint filed in Delaware bankruptcy court, Reuters relates. After FTX filed for bankruptcy in November, it sought to sell FTX Europe, only to conclude that no buyer would offer meaningful value for the company, according to FTX, Reuters discloses. FTX acquired Digital Assets for nearly US$400 million in three transactions in 2020 and 2021, hoping to obtain regulatory approvals and expand into European markets, Reuters recounts. At Mr. Bankman-Fried's direction, FTX moved forward with the "massive overpayment" despite knowing that the company had little more than a business plan and was "not up and running yet," according to FTX's complaint. The lawsuit seeks to recover payments made to Patrick Gruhn and Robin Matzke, who co-founded Digital Assets and stayed on to lead FTX Europe after FTX acquired their company, and from Brandon Williams, a managing director at Cosima Capital who helped facilitate the acquisition, Reuters notes. The lawsuit also targets Lorem Ipsum Holding UG, a German holding company owned by Matzke, Reuters states. The case is FTX Trading Ltd v. Lorem Ipsum UG et al, U.S. Bankruptcy Court for the District of Delaware, No. 23-ap-50437. ============= B E R M U D A ============= TEEKAY TANKERS: Egan-Jones Hikes Senior Unsecured Ratings to BB --------------------------------------------------------------- Egan-Jones Ratings Company on July 14, 2023, upgraded the foreign currency and local currency senior unsecured ratings on debt issued by Teekay Tankers Ltd. to BB from BB-. EJR also withdraws rating on commercial paper issued by the Company. Headquartered in Hamilton, Bermuda, Teekay Tankers Ltd. provides oil transportation services through a fleet of mid-size tankers, including Suezmax and Aframax crude oil tankers and Long Range 2 product tankers. =========== B R A Z I L =========== BRAZIL: Eyes Sending Income Tax Reform Proposal to Congress ----------------------------------------------------------- Reuters reports that President Luiz Inacio Lula da Silva's government will not wait for Brazil's Congress to finish voting on a tax reform related to consumption before submitting its proposal for an income tax reform, Finance Minister Fernando Haddad said. Haddad said in an interview with podcast "O Assunto" that the planned change in income tax, a long-standing agenda item for Lula's leftist Workers' Party, represents a crucial element of the government's plans to zero its primary budget deficit next year, Reuters notes. "I will need Congress to consider this second phase (of tax reform) along with the budget bill," said Haddad, referring to the budget proposal that, by law, the government must submit by the end of August. Brazil's lower house last week approved a groundbreaking reform in consumption taxes, setting the stage for an overhaul of the current intricate and costly system that has eluded success for decades. The measure still requires final passage in the Senate, with no date yet set for a vote, notes the report. According to the report, Haddad also said the government was crafting an ecological transition plan that has won positive feedback from Lula and could become the "flagship initiative" of his third non-consecutive term in office. Reuters relates that the plan encompassing more than 100 actions to be implemented over a four-year period, Haddad said, has been formulated following an evaluation of various possibilities including carbon credits, lithium exploration and rare earths. According to Haddad, a carbon credit bill is set to be presented to Congress in August. Additionally, the government has scheduled an official presentation to attract companies interested in making products labeled as "clean energy," Haddad said, the report notes. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian general election. He was sworn in on January 1, 2023, as the 39th president of Brazil, succeeding Jair Bolsonaro. In mid-June 2023, S&P Global Ratings, revised the outlook on its long-term global scale ratings on Brazil to positive from stable. S&P affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil. S&P also affirmed its 'brAAA' national scale rating, and the outlook remains stable. The transfer and convertibility assessment remains 'BB+'. The positive outlook reflects signs of greater certainty about stable fiscal and monetary policy that could benefit Brazil's still-low GDP growth prospects. Continued GDP growth plus the emerging framework for fiscal policy could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position. 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. Fitch, 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 2023 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. DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). BRAZIL: General Price Index Declines 1.45% in June -------------------------------------------------- The Rio Times reports that IGP-DI, the General Price Index - Domestic Availability in Brazil, declined by 1.45% in June, following a 2.33% drop the previous month. The index has experienced a cumulative decrease of 4.96% year-to-date and a decrease of 7.44% over the past 12 months, according to The Rio Times. Notably, prices of corn and soybeans showed less significant declines, helping contain deflationary pressures for producers, the report notes. The Consumer Price Index (IPC) also decreased by 0.10%, with food prices and reduced taxes on new vehicles contributing to the decline, adds the report. 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. In mid-June 2023, S&P Global Ratings, revised the outlook on its long-term global scale ratings on Brazil to positive from stable. S&P affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil. S&P also affirmed its 'brAAA' national scale rating, and the outlook remains stable. The transfer and convertibility assessment remains 'BB+'. The positive outlook reflects signs of greater certainty about stable fiscal and monetary policy that could benefit Brazil's still-low GDP growth prospects. Continued GDP growth plus the emerging framework for fiscal policy could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position. 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. Fitch, 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 2023 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. DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). SANTA CATARINA: S&P Upgrades ICR to 'BB-', Outlook Stable --------------------------------------------------------- On July 18, 2023, S&P Global Ratings raised its global scale issuer credit rating on the state of Santa Catarina to 'BB-' from 'B+' and its national scale issuer credit rating to 'brAA+' from 'brAA'. The outlook on both scale ratings is stable. Outlook S&P said, "The stable outlook reflects our view that Santa Catarina will implement measures to curb operating and capital expenditures to offset the slowdown in revenue caused by the 2022 reduction of the Industry and Commerce state tax (known by its Portuguese acronym of ICMS) and still weak economic growth. Prudent fiscal policies will allow Santa Catarina's fiscal performance to remain relatively balanced and debt burden to continue declining. The outlook also reflects our expectation that the approval of the VAT tax reform discussed at the federal level should have limited impact on the state's revenue." Downside scenario S&P said, "We could lower our ratings on the state in the next 12 to 18 months if lower commitment or capacity to curb expenditures leads to sustained deficits after capital accounts. Santa Catarina is allowed to access guaranteed borrowing; however, the approval of new loans has been slow and weaker fiscal performance could erode the state's liquidity coverage. Given that we don't believe the Brazilian local and regional governments (LRGs) meet our criteria to be rated above the sovereign, we could also lower our global scale rating on Santa Catarina if we were to lower the sovereign local and foreign currency ratings." Upside scenario S&P could raise the rating on the state in the next 12 to 18 months if its economic growth improves, aligning closer with those of international peers with similar levels of economic development, or if it sees a track record of policies that strengthen finances. In particular, the ability to maintain cash reserves would allow the state to face unexpected shocks, given the very rigid fiscal and debt framework in which it operates. Any upgrade of Santa Catarina would also be contingent upon an upgrade of the sovereign. Rationale S&P said, "The upgrade reflects the state's strengthening financial profile thanks to prudent fiscal policies, which we expect to continue following a strong revenue recovery after the pandemic. Santa Catarina has kept robust operating results and positive after capex results in the past four years, despite higher spending on public works. We expect the liquidity coverage to remain above 100% of debt service for the next 12 months, and debt burden to decline to 50% of operating revenues by 2025 from more than 80% in 2020." The 'BB-' rating also reflects the state's socio-economic conditions that are among the strongest in Brazil, although economic expansion is still linked to the sovereign's only modest growth prospects. The rating also reflects the volatile and unbalanced institutional framework for Brazilian LRGs under which Santa Catarina operates. Stronger socio-economic conditions and the administration's commitment to fiscal discipline should help comply with fiscal rules. S&P said, "We estimate Santa Catarina's GDP per capita to be $12,400 in 2023, above the $9,660 national average, and well above the state's pre-pandemic level. The state's strong economic recovery in 2021-2022 has pushed unemployment down to 3.8%, the lowest level in the past five years, and which is lower than the national average. The state's and Brazil's economic growth has outperformed expectations since 2020; however, the growth pace is still lower than those of countries with similar level of development. Following a 2.9% expansion in 2022, we expect growth to slow to 1.7% in 2023.' The federal government is working on a bill to reform the country's complicated consumption tax framework. Simplifying the tax system could bolster economic growth prospects over the medium to long term. That said, structural rigidities in Brazil's intergovernmental framework would remain, such as constitutional mandates that link revenue increases to higher spending on health and education, and automatic indexation rules. S&P believes these factors reduce LRGs' capacity to address crucial long-term spending trends and respond to economic shocks. Over the years, Santa Catarina's various administrations have shown commitment and expertise to fiscal prudent policies while aligning with the strict rules of the fiscal framework. Governor Jorginho Mello was elected with 70% of the votes in the second round. Since taking office in January 2023, the administration has been working on a broad fiscal adjustment program, aiming to align expenditure priorities to a scenario of slowing revenue. However, our management assessment of Santa Catarina reflects our concerns about how the state prioritizes timely debt service payment in periods of stress, as the administration has resorted to legal challenges to suspend debt payments in the past. S&P expects operating surplus to fall, although surplus after capex should remain stable and debt will continue to decline. S&P expects Santa Catarina' operating surplus to average 7.4% of operating revenues in 2023-2025, down from 15% last year amid slower revenue growth. Strong nominal GDP growth in 2022 and extraordinary revenue collection owing to delayed taxes in 2021 more than compensated for the reduction of the ICMS tax since July 2022. Nevertheless, lower ICMS taxes on gasoline, electricity, and diesel have taken a toll on the state's first-half 2023 revenue. S&P expects operating revenue to grow 2% this year, below its forecast of inflation averaging 5%. Given an expectation of weaker revenue than in 2022, the administration has been working to implement a fiscal adjustment program (PAFISC) since the beginning of the year. The program includes both revenue and expenditure measures, although mostly consisting of expenditure reductions. The bulk of the revenue windfall of 2020-2022 was directed to expanding infrastructure spending that pushed capex to a record of nearly R$6 billion in 2022 compared with an average of R$1.9 billion in 2019-2020. We expect the public works spending to return to historical levels of about R$3 billion (7% of revenues) in 2023-2025 as the state focuses on upgrading local roadways. This adjustment in capex should keep after-capex results balanced. That said, if the state can access new borrowings despite strict debt oversight and controls for Brazilian LRGs, it could result in moderate deficits. Santa Catarina's unbalanced pension system remains a source of fiscal pressure, despite reforms passed over recent years. Unfunded yearly benefits at about 10% of operating revenues will continue to pressure annual budgets. Record-high capex in 2022 have eaten into the state's cash reserves; however, liquidity covers more than 100% of Santa Catarina's debt service over our forecast period. In the absence of a target for maintaining cash reserves, we believe the coverage ratio could fluctuate if there were to be delays in the approval of new loans. The federal government restricts the proceeds from LRGs' borrowings for funding infrastructure projects and any new loan needs to undergo a lengthy authorization process involving various institutions involving the state and federal government levels. Santa Catarina's new borrowings have remained below R$100 million over the last few years. Santa Catarina has been working with public banks to widen its access to loans, especially after it improved its CAPAG rating in 2021, allowing central government-guaranteed borrowing. We expect borrowings to increase to R$250 million on average in the forecasted period, though still below amortizations. Under these assumptions, we expect Santa Catarina's debt burden to decrease to 50% of operating revenue in 2025. This is down from an average of 100% in 2016-2018. The state's main creditor is the federal government (43% of total debt). After Santa Catarina paid the last amortization of the Bank of America loan, its debt's exposure to foreign exchange dropped to 8% from 12% a year before. Key Statistics Table 1 Selected Indicators 2020 2021 2022 2023BC 2024BC 2025BC (MIL. R$) Operating revenues 27,933 32,277 40,256 41,080 43,452 45,869 Operating Expenditures 24,120 27,876 34,191 38,443 40,272 41,964 Operating Balance 3,814 4,401 6,064 2,637 3,180 3,905 Operating balance (% of operating revenues) 13.7 13.6 15.1 6.4 7.3 8.5 Capital revenues 52 133 171 176 184 191 Capital Expenditures 1,458 2,633 5,837 2,470 2,968 3,593 Balance after capital accounts 2,408 1,901 399 343 395 502 Balance after capital accounts (% of total revenues) 8.6 5.9 1.0 0.8 0.9 1.1 Debt repaid 849 1,507 1,554 936 1,028 1,051 Gross borrowings 164 28 74 60 300 400 Balance after Borrowings 1,724 422 (1,082) (533) (333) (149) Direct debt (outstanding at year-end) 24,245 22,973 22,327 22,146 21,981 21,828 Direct debt (% of operating revenues) 86.8 71.2 55.5 53.9 50.6 47.6 Tax-supported debt (outstanding at year-end) 24,245 22,973 22,327 22,146 21,981 21,828 Tax-supported debt (% of consolidated operating revenues) 86.8 71.2 55.5 53.9 50.6 47.6 Interest (% of operating revenues) 1.3 2.6 2.5 2.8 2.5 2.2 Local GDP per capita (USD) 9,342 10,318 11,592 12,416 N/A N/A National GDP per capita (USD) 6,924 7,697 8,916 9,659 10,016 10,373 The data and ratios above result in part from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. The main sources are the financial statements and budgets, as provided by the issuer. bc--Base case reflects S&P Global Ratings' expectations of the most likely scenario. N/A--Not applicable. Ratings Score Snapshot Table 2 State of Santa Catarina Ratings Score Snapshot KEY RATING FACTORS SCORES Institutional framework 5 Economy 4 Financial management 4 Budgetary performance 3 Liquidity 4 Debt burden 2 Stand-alone credit profile bb- Issuer credit rating BB- S&P said, "S&P Global Ratings bases its ratings on non-U.S. local and regional governments (LRGs) on the six main rating factors in this table. In the "Methodology For Rating Local And Regional Governments Outside Of The U.S.," published on July 15, 2019, we explain the steps we follow to derive the global scale foreign currency rating on each LRG. The institutional framework is assessed on a six-point scale: 1 is the strongest and 6 the weakest score. Our assessments of economy, financial management, budgetary performance, liquidity, and debt burden are on a five-point scale, with 1 being the strongest score and 5 the weakest." In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List UPGRADED; CREDITWATCH/OUTLOOK ACTION TO FROM SANTA CATARINA (STATE OF) Issuer Credit Rating BB-/Stable/-- B+/Positive/-- Brazil National Scale brAA+/Stable/-- brAA/Positive/-- =================================== D O M I N I C A N R E P U B L I C =================================== [*] DOMINICAN REPUBLIC: Grants RD$4.3BB+ Loans to Entrepreneurs --------------------------------------------------------------- Dominican Today reports that under the leadership of President Luis Abinader, the Dominican government, in collaboration with the Entrepreneurship Laboratory and the Fairs of the Ministry of Youth (MJ), has provided loans totalling more than RD$4.3 billion pesos to young people. This achievement marks a record in the creation and expansion of business ideas, according to Dominican Today. Benefitting a total of 51,784 young individuals between the ages of 18 and 35 across various provinces in the country, these loans were made possible through the National Council for the Promotion and Support of Micro, Small, and Medium Enterprises (Promipyme), the report notes. The Entrepreneurship and Policies Laboratory of the First Youth Employment, in conjunction with the Ministry of Youth's Entrepreneurship and Youth Fair, facilitated the allocation of funds and acted as a platform for young entrepreneurs to access offerings from various banking institutions, the report relays. The financial support provided has led to the creation of 35,627 jobs and the strengthening of 222,671 existing positions, the report discloses. This has made a significant impact on the job market, with a total of 258,298 jobs being positively affected from August 16, 2020, to June 5, 2023, the report notes. Minister of Youth, Rafael Jesus Feliz Garcia, expressed his gratitude to President Abinader, describing him as the primary ally of Dominican youth due to his unwavering support, the report relays. "President Abinader has gone above and beyond in supporting the youth of our country like never before. He is a president who defends and empathizes with the Dominican youth," said Minister Feliz Garcia, the report says. The funds provided by Promipyme were disbursed to eligible applicants under the category of "entrepreneurship loans," further demonstrating the government's commitment to fostering youth entrepreneurship and economic growth in the Dominican Republic, 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. S&P Global Ratings, in December 2022, raised its long-term foreign and local currency sovereign credit ratings on the Dominican Republic to 'BB' from 'BB-'. The outlook on the long-term ratings is stable. S&P affirmed its 'B' short-term sovereign credit ratings. S&P also revised its transfer and convertibility (T&C) assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12-18 months that will likely stabilize the government's debt burden. In February 2023, S&P said its BB ratings reflect the country's fast-growing and resilient economy. It also incorporates the country's historical political and social challenges in passing structural reforms to contain fiscal deficits, despite recent improvements in the electricity sector. The ratings are constrained by relatively high debt, a hefty interest burden, and limited monetary policy flexibility. Fitch Ratings, in December 2022, affirmed the Dominican Republic's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Rating Outlook. 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: Gov't Exceeds Tax Collection Target for April and May -------------------------------------------------------------- RJR News reports that government collected more taxes than budgeted for the first two months of the 2023/2024 fiscal year. Keith Duncan, Chairman of the Economic Program Oversight Committee (EPOC), said for April and May, government revenues and grants amounted to $129.8 billion, according to RJR News. This exceeded the budget target by $12.3 billion or 10.5 per cent, as tax revenues grew by $18.7 billion or 18.3 per cent higher than the previous year, the report notes. "So therefore, tax revenues and grants were $22 billion above the same period of last year of $107 billion. So the economy continues to show underlying strength," he noted, the report relays. Mr. Duncan said one category of tax that saw increased inflows - PAYE - is linked to increased compensation. PAYE is ahead of target by 35 per cent or $5.7 billion, the report discloses. "Travel tax, because our visitor arrivals continue to exceed targets, is higher by $1.3 billion, 33 per cent higher than budget. Tax on interest, because of the higher interest rates, were ahead of budget by 32 per cent or $1.3 billion. GCT imports, others showing that there's underlying strength in the economy was up by $1.2 billion. Non-tax inflows also increased significantly," he outlined, the report says. The Pay As You Earn (PAYE) or income tax rate for individuals is 25 per cent of one's annual salary, where income is between $1.5 million and $6 million, the report relays. Thirty per cent is charged on one's taxable income, once it exceeds J$6 million, the report notes. No income tax is charged where one's income is below $1.5 million, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. Standard & Poor's credit rating for Jamaica stands at B+ with negative outlook (April 2020). Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). Fitch's credit rating for Jamaica was last reported at B+ with stable outlook (April 2020). In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. JAMAICA: Seeks Loan Extension for Highway Improvement Project ------------------------------------------------------------- RJR News reports that the Government of Jamaica is seeking a loan extension for the Southern Coastal Highway Improvement Project due to delays caused by the pandemic. The request has been made to the China Ex-Im Bank regarding the 2016-procured loan of US$384 million, according to RJR News. Bilateral loans are usually stipulated to be spent within a specific timeline, failing which the funds can be recalled, the report notes. Prime Minister Andrew Holness broke ground for the project in November 2019, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. Standard & Poor's credit rating for Jamaica stands at B+ with negative outlook (April 2020). Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). Fitch's credit rating for Jamaica was last reported at B+ with stable outlook (April 2020). In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. =========== M E X I C O =========== TOTAL PLAY: Fitch Lowers IDRs to 'B+', On Rating Watch Negative --------------------------------------------------------------- Fitch Ratings has downgraded Total Play Telecomunicaciones S.A.P.I de C.V. (Total Play) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B+' from 'BB-'. Fitch has also downgraded the company's senior unsecured debt ratings to 'B+'/'RR4' from 'BB-'. In conjunction with these rating actions, Fitch has also placed all of the ratings on Rating Watch Negative (RWN). The downgrades are the result of the company's aggressive YE 2022 capex that was 60% above Fitch expectations and was funded primarily by secured short-term debt. As of March 2023, secured debt represented 48% of the company's total debt. The use of secured short-term debt further limits Total Play's financial flexibility, which is weaker than peers given the default with the cross-border creditors at its related company, TV Azteca. The RWN reflects Fitch's concerns about the ability of the company to refinance its debt maturities given current financing conditions coupled with market access that is weaker than peers given TV Azteca's ongoing restructuring situation. Resolution of the issues driving the RWN could extend beyond a year. If a comprehensive refinancing of short-term debt that extends maturities and creates space to address the 2025 bond does not occur, a multi-notch downgrade could occur within the next six to 12 months. Approximately 36% of the residential revenues flow through the trusts that service the debt secured by receivables. The senior notes have the guarantee of its subsidiary Total Box, S.A. de C.V. (37% of total debt). KEY RATING DRIVERS Refinancing Uncertainty: Total Play had a readily available cash and equivalents of MXN2.0 billion as of March 2023 and restricted cash of MXN2.3 billion compared to short-term debt of MXN12 billion (including factoring and leasing of MXN4.6 billion). The ability to access financial resources and limit the cash burn are critical factors in the short term. Total Play is working with creditors to extend borrowings that are due within the next months. The company managed to refinance around MXN4.2 billion of its short-term debt during April- July 2023 and has continued its efforts to close around MXN3 billion in loans shortly. Total Play's liquidity position is tempered by its still elevated capex for 2023 that will pressure its FCF generation and a difficult market environment as the company aims to execute on refinancing its short-term debt. Negative FCF: Total Play's expected additions of subscribers driven by investments needed to improve uptake rates. As a result, liquidity is going to continue to be pressured as Fitch expects FCF to be negative due to capex of around MXN13.5 billion in 2023. Cash interest expense are also expected to increase following the company's refinancing plan. Fitch projects the company's capital intensity measured by capex/sales to be near 33% in 2023 and near 30% in 2024, consuming the projected cash flow from operations (CFO). Fitch does not expect any dividend payment or shareholder distribution in the short to medium term. Total Play invested MXN70 billion, mainly in network deployment in the last five years, which allowed the company to grow its market share to 17% in 2022 from 7% in 2018, with capex/revenue ratios of 62% in 2022, 64% in 2021 and 73% in 2020. Profitability Continuously Improving: The company's operational performance has been in line with Fitch expectations, and have enable the company to generate positive CFO. Total Play services have been performing well with a solid revenue and EBITDA expansion in recent years, backed by extensive network deployment that has increased its homes passed, business scale and profitability. Increased network penetration, while maintaining a low-cost structure and working capital requirements, is key to growing revenues and expanding margins. Network penetration is expected to increase to 28% as of YE 2023 versus 13.9% in 2018, while EBITDA margins are expected to be around 42% in YE 2023. Fitch expects the company's EBITDA should continue to improve in 2023 maintaining leverage ratios around 3.5x. Market Share and Diversification: Total Play has positioned itself as an important player in the industry in terms of network coverage, homes passed and RGU. The company has managed to maintain strong growth despite operating in a competitive industry. The company reached 17.5 million of homes passed by 1Q23. Now its strategy focus is to increase its subscriber base to leverage the network deployment. Total Play has a balanced revenue mix and customer and service diversification. As of YE 2022, 84% of the company's revenue comes from the residential segment and 16% from the Enterprise segment. ESG - Governance Structure: Fitch has moved Total Plays ESG Relevance Score to '5' from '4' for Governance Structure resulting from its ownership concentration and Grupo Salinas' aggressive treatment toward different stakeholders and arrangements with related companies that benefit shareholders, but affect creditors' interests. In Fitch opinion, this limits Total Play access to funding sources, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. DERIVATION SUMMARY Total Play's 'B+' ratings reflect the company's market position and capital structure versus its peers in the rating category. Total Play has a tight liquidity position and faces refinancing risk. Compared with the consolidated Mexican rival Televisa, which has a more diversified business, Total Play has higher leverage levels, smaller market share and lower network penetration. Cable and Wireless (C&W; BB-/Stable) has similar leverage level than Total Play and a solid liquidity position with a long-dated debt amortization profile and better service and geographical diversification. C&W benefits from its operations in a series of mostly duopoly markets (excluding Panama mobile). Also, the company's revenue mix per service is well balanced, with mobile accounting for approximately 26% of total sales, fixed-line with 26% and business to business with 48% of revenues in 2022. C&W strengths are tempered by Limited Latin America Ltd.'s (LLA) financial management, which limits any material deleveraging. Compared with WOM Mobile S.A. (WOM; B+/Negative), Both companies have scaled rapidly taking market share from larger incumbents, both have generated positive revenue and EBITDA growth in recent years, and both have consistently generated negative FCF. The recent downgrade of WOM reflect a shift in the company's financial policy suggesting a less clear path to deleveraging. This change followed the company's announcement that it plans to make a minority equity investment of USD100 million into WOM Colombia as well as WOM Chile's material usage of its USD100 million factoring facility with IDB Invest. The Negative Outlook also incorporates that WOM will continue to generate FCF negative mainly due to elevated capex. KEY ASSUMPTIONS -- Revenue growth of 13% in 2023 and 2024 due to the company's strategy of increasing in network penetration ratio; -- EBITDA margins of 42% in 2023 improving to 43% in 2024; -- Capex to sales ratio at around 33% in 2023 and 30% in 2024, capex should be more aligned to customer increases; -- Negative FCF generation in 2023 turning neutral in 2024; -- No dividend payments. Fitch Criteria consider bespoke recovery analysis for issuers with IDRs of 'B+' and below. The bespoke recovery analysis assumes that Total Play would be considered a going concern in bankruptcy and that the company would be reorganized rather than liquidated. Going-Concern Approach: Total Play's going-concern EBITDA of MXN10.8 billion is based on Fitch's expectation of a sustainable, post-reorganization EBITDA level. This compares with an LTM EBITDA of MXN15.5 billion and reflects the increased competition in the Mexican market. The enterprise value (EV)/EBITDA multiple applied is 5.0x; this figure reflects Total Play's market position. Fitch applies a waterfall analysis to the post-default EV based on the relative claims of the debt in the capital structure. Fitch's debt waterfall assumptions consider the company's total debt at March 31, 2023. The waterfall results in a 'RR4' Recovery Rating for senior unsecured debt. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Shareholder support that strengthens financial flexibility. -- Ability to refinance its short-term debt and extend its debt maturity profile; -- Liquidity ratio calculated as (cash + undrawn portion of committed facilities+ FCF)/12-month debt maturities consistently above 1.0x; -- Neutral to Positive FCF generation thought the cycle. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Inability to turn out the bank debt beyond 2025; -- Weaker liquidity position; -- Weak operating performance; -- Loss of market share; -- Debt-funded acquisitions that change the company's capital structure; -- Unfavorable regulatory changes. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Limited Financial Flexibility: Total Play has high refinancing risks and its ability to continue to secure funding in the short term is uncertain. As of March 31, 2023, Total Play reported financial debt of MXN57 billion, MXN12 billions of which was due in 2023. From the MXN12 billion, the company manage to refinance MXN4.2 billion during April 2023, leaving MXN2 billion of market debt, MXN1.1 billion of bank debt and MXN4.6 billion of factoring and leases. The company has a committed credit lines of MXN9 billion, of which MXN5.4 billion is available. Fitch estimates the company will need additional borrowing in 2023 to maintain its elevated capex. Fitch includes nonrecourse factoring of accounts payable of approximately MXN2.4 billion in its debt calculations. The factoring adjustment allows Fitch to compare issuers that may use different sources of funding, as immediate replacement funding is required if the payables financing shuts down. ISSUER PROFILE Total Play Telecomunicaciones, S.A.P.I de C.V. (BB-/Stable) is a Mexican provider of fixed telecommunications services to residential and enterprise customers including government entities. The company offers pay-television, fixed-broadband and fixed-voice services through its competitive fiber-to-the-home (FTTH) via a gigabit passive-optical network (GPON) network. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS Fitch has revised Total Play's ESG Relevance Score of Governance Structure to '5' from '4' due to the ownership concentration and the company's related party's aggressive treatment toward different stakeholders, which in Fitch opinion can limit the company´s access to funding sources. This has a negative impact on the credit profile and is highly relevant to the rating 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. =========== P A N A M A =========== MULTIBANK INC: S&P Withdraws 'BB+/B' Issuer Credit Ratings ---------------------------------------------------------- S&P Global Ratings withdrew its long-term 'BB+' and short-term 'B' issuer credit ratings on Multibank Inc. y Subsidiarias at the issuer's request. At the time of the withdrawal, the outlook was stable. ================= V E N E Z U E L A ================= PETROLEOS DE VENEZUELA: App. Ct. Upholds Creditors' Ability to Sue ------------------------------------------------------------------ Reuters reports that a U.S. court of appeals rejected Venezuela's bid to prevent six companies from joining a proposed court auction of shares in a Citgo Petroleum parent to enforce judgments for past expropriation of assets. The decision allows the six to move ahead with their about $3 billion in combined claims against Venezuela state oil firm PDVSA in a Delaware federal court, according to Reuters. That court is in the initial steps of preparing an auction as soon as September, the report notes. "For the second time in five years, we conclude that PDVSA is the alter ego of Venezuela, and we will affirm the District Court's denial of sovereign immunity to PDVSA," the three-judge panel ruled, the report relays. It also declined to consider PDVSA's request to bar the attachments from the district court case, the report notes. The companies had won conditional attachments to a federal case in which the judge has approved a process to auction the shares to pay a $970 million judgment won by miner Crystallex, the report discloses. Since March, creditors including a unit of O-I Glass, Huntington Ingalls Industries, ACL1 Investments, Koch Minerals and mining firms Rusoro Mining and Gold Reserve, have been granted rights to seize shares in the parent of Venezuela-owned refiner Citgo, PDV Holding, the report adds. About PDVSA Founded in 1976, Petroleos de Venezuela, S.A. (PDVSA) is the Venezuelan state-owned oil and natural gas company, which engages in exploration, production, refining and exporting oil as well as exploration and production of natural gas. It employs around 70,000 people and reported $48 billion in revenues in 2016. In May 2019, Moody's Investors Service withdrew all the ratings of Petroleos de Venezuela, S.A. including the senior unsecured and senior secured ratings due to insufficient information. At the time of withdrawal, the ratings were C and the outlook was stable. Citgo Petroleum Corporation (CITGO) is Venezuela's main foreign asset. CITGO is majority-owned by PDVSA. CITGO is a United States-based refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. However, CITGO formally cut ties with PDVSA at about February 2019 after U.S. sanctions were imposed on PDVSA. The sanctions are designed to curb oil revenues to the administration of President Nicolas Maduro and support for the Juan Guaido-headed party. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *