/raid1/www/Hosts/bankrupt/TCRLA_Public/230915.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, September 15, 2023, Vol. 24, No. 186
Headlines
B E L I Z E
BELIZE: IDB OKs $7M-Loan to Grow Sustainable Blue Economy
B R A Z I L
AMERICANAS SA: Former CEO Says He is Scapegoat for Powerful People
C H I L E
LATAM AIRLINES GROUP: Aircraft Auction Rigged, Say Creditors
C O L O M B I A
UNE EPM: Fitch Lowers LongTerm IDRs to BB, Placed on Watch Negative
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: S&P Rates $1.25BB DOP-Linked Bonds 'BB'
[*] DOMINICAN REPUBLIC: Banks Project Rapid Improvement in Economy
[*] DOMINICAN REPUBLIC: Fear of Rising Food Prices After Storm
G U A T E M A L A
ENERGUATE TRUST: Fitch Affirms LongTerm IDR at 'BB', Outlook Stable
J A M A I C A
JAMAICA: S&P Raises Long-Term Sovereign Credit Rating to 'BB-'
P A N A M A
LA HIPOTECARIA FOURTEENTH: Fitch Hikes B Notes Rating to 'BBsf'
P E R U
NAUTILUS INKIA: Fitch Affirms LongTerm IDR at 'BB', Outlook Stable
P U E R T O R I C O
GUR-MEAT INC: Court OKs Cash Collateral Access Thru Nov 10
PUERTO RICO: Oversight Board Reaches Deal With PREPA Bondholders
X X X X X X X X
LATAM: IDB and CONAFIPS Design Project to Promote Bio-Businesses
- - - - -
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B E L I Z E
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BELIZE: IDB OKs $7M-Loan to Grow Sustainable Blue Economy
---------------------------------------------------------
The Inter-American Development Bank (IDB) approved a $7 million
loan to Belize to help it sustainably expand its blue economy. The
program's overall objectives are to increase the earning potential
of artisanal fishers and keep fishery exports high while promoting
sustainable use of the country's commercial marine resources.
The Government of Belize demonstrated its commitment to this
project during a ceremonial signing held by John Briceno, Prime
Minister of Belize, and Tomas Bermudez, IDB's General Manager for
Central America, Mexico, Panama, the Dominican Republic and Haiti,
at the recent Belize Investment Summit in San Pedro, Ambergris
Caye.
The loan is designed to strengthen the government's capacity to
sustainably manage Belize's economically important commercial fish
species, like conch, lobster, and finfish. It will also help prompt
the country's artisanal fishers to adopt sustainable and
climate-resilient technologies.
"IDB Group remains committed to supporting Belize to achieve
sustainable and inclusive growth and one of our priorities is
climate action. Conservation initiatives aimed at preserving and
rejuvenating marine ecosystems are integral cornerstones in our
efforts to mitigate climate change and facilitate the restoration
of biodiversity," stated Tomas Bermudez.
The fishing industry has played a major role in Belize's
development, providing the country with jobs, food security, and
revenue and foreign currency reserves. On average, fisheries and
aquaculture accounted for 12% of total exports from 2015 to 2021.
The fishing industry directly employs over 3,000 fishers and
indirectly provides livelihoods for more than 15,000 people, or
around 10% of the country's labor force.
"Almost 50% our productive sector is dependent on the Blue Economy
as this space is vital towards our national development and the
successful implementation of Plan Belize. Fisheries has
traditionally played an important role in the Belizean economy and
continues to do so. As such, we need to work hand in hand with our
Belizean people to sustainably manage our ocean's resources" said
John Briceno.
This operation is expected to improve the way Belize's fishing
industry is managed by using technology and science to process
information on fisheries. This data will in turn help the country
design and implement science- and evidence-based policies to
maintain the biological health of the country's fisheries and the
profitability of its fishing industry. The approved loan will also
boost the quality of life of artisanal fishers through a grant
program that finances business plans for implementing sustainable
and resilient fishing technologies. The implementation will be done
using a centralized executing scheme for project administration
with the strong technical leadership of the Ministry of Blue
Economy and Civil Aviation.
The IDB loan has a 25-year repayment period and a 5.5-year grace
period.
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B R A Z I L
===========
AMERICANAS SA: Former CEO Says He is Scapegoat for Powerful People
------------------------------------------------------------------
Cristiane Lucchesi and Vinacius Andrade of Bloomberg News report
the former chief executive officer of embattled Brazilian retailer
Americanas SA Miguel Gutierrez spoke out for the first time since
the company sank into bankruptcy protection and pointed a finger
at the firm's billionaire shareholders.
Gutierrez, who worked at the retailer for more than two decades and
has been signaled by current and former executives as the architect
behind a massive accounting fraud that caused the firm's debt to
double, sent his comments in a document to a court in Sao Paulo.
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.
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C H I L E
=========
LATAM AIRLINES GROUP: Aircraft Auction Rigged, Say Creditors
------------------------------------------------------------
Rick Archer of Law360 reports that a group of LATAM Airlines Group
creditors have filed a suit in New York state court alleging wealth
management firm Wilmington Trust Co. held a rigged auction of the
bankrupt Chilean airline's planes to benefit private equity firm
Ares Management and Ares' aircraft leasing affiliate.
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The ad hoc group of LATAM bondholders tapped White & Case, LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
ad hoc committee of shareholders.
===============
C O L O M B I A
===============
UNE EPM: Fitch Lowers LongTerm IDRs to BB, Placed on Watch Negative
-------------------------------------------------------------------
Fitch Ratings has downgraded UNE EPM Telecomunicaciones S.A.'s
(Tigo UNE) Long-Term (LT) Foreign Currency (FC) and Local Currency
(LC) Issuer Default Ratings (IDRs) to 'BB' from 'BBB-', National LT
Rating to 'AA-(col)' from 'AAA(col)' and COP unsecured notes to
'AA-(col)' from 'AAA(col). In addition, Fitch has placed these
ratings on Rating Watch Negative (RWN).
Fitch has also placed on RWN Tigo UNE's National Short-Term Rating
of 'F1+(col)' and its CP rating under the 'Programa de Emisión y
Colocación de Bonos Ordinarios y Papeles Comerciales' of
'F1+(col)'.
The downgrade is due to heightened financial pressure as well as
governance concerns that has impaired the ability of Tigo UNE to
rollover bank debt in a timely manner and has resulted in questions
about the willingness of the shareholders to provide support to the
company during a period of negative FCF due to pricing pressure,
high interest expenses, and elevated capex.
The RWN reflects Tigo UNE's weak liquidity position relative to its
financial obligations coming due during the next three months.
Absent shareholder support or a rescheduling of the timing of
spectrum payment within the next month, a multi-notch downgrade
will likely occur.
KEY RATING DRIVERS
ESG - Governance: The dynamics between Tigo UNE's shareholders,
Millicom and Empresas Publicas de Medellin (EPM), has resulted in
the Ministry of Telecommunications interceding with the company's
shareholders to seek a solution to Tigo UNE's liquidity problems.
The ministry has given them a roughly one-month deadlines for a
solution, which could involve cash injections or a sale by EPM of
its stake in the company. Absent these measures, the government
would consider stronger measures including a corporate
reorganization.
Elevated Refinancing Risk: With limited cash and negative FCF, Tigo
UNE will not be able to meet its upcoming financial obligations
absent cash injections by its shareholders or the rolling over of
debt by its creditors. Tigo UNE's upcoming debt maturities consist
primarily of a COP85 billion loan with Bancolombia and a COP150
billion note both due in October 2023. Tigo UNE is also obligated
to make the initial payment on the renewal of its spectrum holdings
in the 1900Mhz band later this year. The company's shareholders,
Millicom and EPM, have agreed to hold an EGM on September 13th to
discuss potential financing options to address the company's
pressured liquidity position. While Tigo UNE is reportedly seeking
equity injections from both shareholders, the outcome of the EGM is
uncertain at this time.
Cash Flow Compression: Fitch expects Tigo UNE's EBITDA margins to
be constrained in the mid-20% range in the medium term as strong
post-paid subscriber growth is offset by competitive pressures on
average revenue per user (ARPU) in both post-paid mobile and fixed
home. Fitch also expects the company to post protracted negative
FCF over the rating horizon as continued large network investments,
including spectrum costs, will likely lead to additional debt
financing.
Fitch expects capital intensity to surpass 26% in 2023 from 24% in
2022, as the company faces renewals of its 40MHz in the 1900Mhz
band and 30MHz in the AWS band. Deployment of 5G will add to the
company's investment needs over the coming years. Due to these
trends, Fitch expects the company's leverage profile to gradually
weaken from historical levels, with debt/EBTIDA and net debt/EBITDA
near 2.8x and 2.6x, respectively, in 2023.
Intense Price Competition: Fitch expects the Colombian mobile
market to continue to show significant pricing pressure as
incumbent operators maintain promotional activity. Industry ARPU is
likely to be particularly pressured in the post-paid segment as WOM
Colombia S.A.S. seeks to become a significant player. The country's
mobile penetration, which is above 150% compared with 135% in 2019,
is also contributing to lower ARPU. Competition is also growing in
fixed broadband. Competitors Movistar and Claro have continued
their aggressive promotional strategy to gain share to fill out
network capacity as demand for broadband services has slowed
post-pandemic.
Defending Market Position: Tigo UNE demonstrates relative strength
in the fixed home segment, a strong spectrum position aligned with
its coverage strategy, and a mobile network buildout with strong
post-paid data user growth. Fitch believes these factors will help
the company weather WOM Colombia's entry into the country's mobile
market and aggressive promotional activity in the home segment from
competitors Movistar and Claro.
Broad Service Offerings: The company's service diversification
compares well with other operators in the region. Tigo UNE is
well-diversified across fixed, mobile, and B2B, with respective
service revenue shares of approximately 38%, 39% and 20% during
2022. Tigo UNE operates entirely within the Colombian
telecommunications market, which has continued to grow more
competitive following the entry of WOM Colombia.
Parent Subsidiary Linkages: Fitch assesses Tigo UNE to have a
weaker standalone credit profile compared to Millicom. Based on
Fitch's Linkage Factor Assessment, legal, strategic, and
operational incentives are assessed as low, and accordingly no
uplift is considered in the rating of Tigo UNE. The company's
ratings incorporate weak linkages with both Empresas Publicas de
Medellin E.S.P. (EPM; BB+/RWN) and Millicom International Cellular
S.A. (BB+/Stable). The ratings of these two entities are limited by
sovereign risks, the first as a Colombian government related entity
and the second by the majority of its cash flows from speculative
grade countries. Although UNE EPM is structured as a 50/50 joint
venture (JV), of the two parent entities, Millicom exerts greater
influence.
DERIVATION SUMMARY
Tigo UNE's overall business is similar to that of direct competitor
Colombia Telecomunicaciones (BBB-/Negative), with similar revenue
shares of the overall Colombian market, although Tigo UNE has a
longer history of maintaining lower leverage. Tigo UNE is also
relatively stronger in the fixed broadband and pay-TV business,
which could imply more subscription like cash flows, as the
Colombian mobile market is still mostly prepaid.
Tigo UNE has a similar business profile to Empresa Nacional de
Telecomunicaciones S.A. (ENTEL; BBB/Stable). ENTEL's credit profile
has strengthened due to increased penetration in the Peruvian
market and debt reduction. ENTEL benefits from its status as the
largest Chilean mobile operator with leading post-paid market share
and ARPUs, while continuing to operate in two very competitive
markets. Relative to Entel, Tigo UNE has a higher cash burn rate
and weaker liquidity position.
Similarly, Tigo UNE's overall credit profile is somewhat stronger
than 'BB' category domestic telecom peers, such as Empresa de
Telecomunicaciones de Bogota, S.A., E.S.P. (ETB; BB+/Stable). Fitch
estimates ETB will find it difficult to improve EBITDA performance
given its low network penetration and rapidly contracting cash
flow. Another 'BB' category peer, Telefonica del Peru, S.A.A. (TdP;
BB-/Negative), has a relatively strong market share but falling
market share in fixed, while Peru's relatively even four-operator
mobile market is even more competitive than Colombia's. Tigo UNE
carries lower leverage than TdP as TdP's profitability has suffered
in recent years and has been burdened by an unfavorable outcome
from a dispute with the Peruvian tax authority. Both issuers face
uncertain refinancing risks.
Tigo UNE's 'BB' ratings are three notches below Telefonica Moviles
Chile S.A. (BBB/Stable), the leading integrated telecommunications
service provider in Chile. In comparison, Tigo UNE holds a
secondary position in Colombia behind Claro in the fixed business
and is the third largest mobile player, by market share. Both
telcos operate in highly competitive markets.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
Include
- Broadband and pay-TV revenue gaming units contract slightly in
2023 due to heightened competition, and grow by low single digits
in 2024 and 2025;
- Home ARPU growth roughly flat due to competitive pressures in
broadband and pay-TV and secular declines in fixed voice;
- B2B revenue growth in the mid-single digits on growing demand for
digital services;
- Total mobile subscriptions grow in the low single digits as
conversion of customers from prepaid to post-paid continues;
- Blended mobile ARPUs growing modestly in the low to
mid-single-digit range due to mix-shift effects from strong
post-paid growth; overall mobile revenues grow by high single
digits in 2023;
- EBITDA margins mostly flat from 2022, and will remain constrained
due to high levels of competition;
- Capex of around COP1.4 trillion in 2023, at roughly 26% of
revenue, higher than historical averages due mainly to spectrum
renewals; capital intensity declining to around 19% over time;
- Gross debt/EBITDA of around 2.8x-3.0x and net debt to EBITDA of
around 2.6x-2.8x, higher than historical levels;
- No material dividends over the rating horizon as the company
focuses on investments.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade is unlikely absent a material improvement in liquidity
and FCF trajectory.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Inability to strengthen liquidity position in a timely manner
could lead to a multi-notch downgrade;
- Meaningful deterioration in market position due to higher than
expected increase in competition;
- Persistent worsening of negative FCF due to greater than expected
competitive pressures on ARPUs and/or capex.
LIQUIDITY AND DEBT STRUCTURE
Pressured Liquidity: Tigo UNE has tight liquidity, with COP43
billion in cash and equivalents as of June 30, 2023. Despite having
a relatively conservative capital structure and well-spread
maturity schedule, the company faces uncertain prospects for
refinancing its upcoming debt maturities in 2023. Additionally,
Fitch expects the company to generate continued negative FCF as
competitive pressures and investment requirements (including
spectrum renewals and a new 5G auction) pressure cash flow, which
will demand additional debt financing sources, absent an equity
injection from the company's shareholders. As of June 30, 2023, the
company's debt totaled COP3.1 trillion, of which 93% was Colombian
peso-denominated, with the remainder comprised of a USD50 million
syndicated loan. The company's debt is evenly split between bank
loans and COP bonds.
ISSUER PROFILE
Tigo UNE is an integrated telecommunications services provider in
Colombia. The company offers mobile, broadband internet, fixed
telephony, and Pay-TV. The company operates as a JV between
Millicom International Cellular S.A. and Empresas Publicas de
Medellin (EPM).
SUMMARY OF FINANCIAL ADJUSTMENTS
Standard lease adjustments have been applied.
ESG CONSIDERATIONS
UNE EPM Telecomunicaciones S.A. has an ESG Relevance Score of '5'
for Governance Structure due to the dynamics between its Tigo UNE's
shareholders, Millicom and Empresas Publicas de Medellin (EPM),
that have impacted their ability to address the company's
capitalization needs. This has a negative impact on the credit
profile, resulting in a change to the rating outcome lower than the
company's standalone credit profile, which would be consistent with
a 'BB+' rating if the company's shareholders addressed its
capitalization needs.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
UNE EPM
Telecomunicaciones
S.A. LT IDR BB Downgrade BBB-
LC LT IDR BB Downgrade BBB-
Natl LT AA-(col)Downgrade AAA(col)
Natl ST F1+(col)Rating Watch On F1+(col)
senior
unsecured Natl LT AA-(col)Downgrade AAA(col)
senior
unsecured Natl ST F1+(col)Rating Watch On F1+(col)
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: S&P Rates $1.25BB DOP-Linked Bonds 'BB'
-----------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue rating to the Dominican
Republic's 11.25% Dominican peso (DOP) linked bond for DOP71
billion (equivalent to US$1.25 billion) maturing in 2035. The
rating on the bond is the same as the long-term local currency
sovereign credit rating on the Dominican Republic (BB/Stable/B).
The country used about 57% of the DOP-linked bond to roll over a
peso-denominated bond maturing in 2026, and will use the rest of
the proceeds for general budgetary purposes.
S&P said, "Our 'BB' long-term rating on the Dominican Republic
reflects its fast-growing and resilient economy. Despite its
vulnerability to external shocks, the country has proven its
capacity to rapidly bounce back in the aftermath, thanks to
somewhat predictable economic policies. The ratings also
incorporate the country's historical political and social
challenges in passing structural reforms to contain fiscal
deficits, despite recent improvements in advancing the fiscal
responsibility law. Relatively high debt, a hefty interest burden,
and limited monetary-policy flexibility constrain the ratings. The
stable outlook reflects our expectation of continued favorable GDP
growth and policy continuity that will likely stabilize the
government's debt burden."
[*] DOMINICAN REPUBLIC: Banks Project Rapid Improvement in Economy
------------------------------------------------------------------
Dominican Today reports that credit projections within the
financial sector are experiencing an approximate 16% increase,
indicating significant activity in productive sectors despite the
relatively low economic growth observed in the country in 2023. The
rising trend in financing has led Rosanna Ruiz, the executive
president of the Dominican Association of Multiple Banks (ABA), to
suggest that the country might return to its potential economic
growth range of 4.5% to 5.5% sooner than anticipated, spanning the
remainder of the year and into 2024, according to Dominican Today.
Ruiz, in discussions with journalists specializing in economics,
emphasized that the Central Bank's estimates are on target, the
report notes. However, she highlighted the credit behavior as a
key indicator reflecting the progress in various economic sectors,
including MSMEs, construction, and real estate, the report relays.
Although economic activity grew by 2.9% year-on-year in July, with
an accumulated growth of 1.4% in the first seven months, the
government revised its growth outlook for 2023 downward, the report
discloses. The revision lowered the projected growth rate from
4.25% to 3%, attributing the adjustment to economic uncertainty on
both the international and local fronts, the report says.
Julio Lozano, Director of Economic Studies at ABA, discussed the
behavior of credits and mentioned that the Bank Credit Expectations
Index (IEC) reached 55.1 in the second quarter of the year,
indicating positive statistics for loan demand in the financial
sector, the report notes. Lozano noted that the change in the
Central Bank's monetary policy is beginning to be felt, allowing
for reductions in monetary interest rates, the report says.
Regarding the gradual process of implementing these changes,
executives stated that adjustments to passive and active rates will
be applied directly, with possible effects to be observed as early
as November, the report relays. This transfer process aims to
harmonize rates to avoid imbalances in the financial system, the
report discloses.
The ABA is working on initiatives to facilitate easier access to
formal banking for Micro, Small, and Medium Enterprises (MSMEs),
the report notes. They are collaborating with the Dominican
Confederation of Micro, Small and Medium Enterprises (Codopyme) on
a pilot plan involving 1,000 MSMEs, focusing on education and
analysis to create more specialized projects, the report relays.
During discussions, Ruiz also emphasized the need for a
comprehensive tax reform in the country, explaining that simpler
and lower tax structures can help reduce tax evasion and encourage
formal economic activity, the report notes. She expressed the
ABA's opposition to a general rule proposed by the General
Directorate of Internal Taxes (DGII), which designates certain
entities as withholding and collection agents for various taxes,
citing potential negative impacts on formality and incentives, 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 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.
On August 14, 2023, the TCR-LA reported that Moody's Investors
Service has changed the outlook on the Government of Dominican
Republic's ratings to positive from stable and affirmed the
local and foreign-currency long-term issuer and senior unsecured
ratings at Ba3.
Moody's said the key drivers for the outlook change to positive
are: (i) sustained high growth rates have enhanced the scale and
wealthclevels of the economy; and (ii) a material decline in the
government debt burden coupled with improved fiscal policy
effectiveness will support medium-term debt sustainability
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively
contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which
include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
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.
[*] DOMINICAN REPUBLIC: Fear of Rising Food Prices After Storm
--------------------------------------------------------------
Dominican Today reports that leaders and vendors believe that there
could be a shortage of bananas in the market in the coming days.
Although the government assures that there will be no food shortage
due to the passage of the storm Franklin, leaders and vendors of
the Mercado Nuevo consider that in the following weeks, there will
be a decrease in products since the goods that have been entering
the commercial plaza are those that the rains affected, so that in
a few days they will be exhausted, according to Dominican Today.
They pointed out that the drop would occur primarily in bananas and
bananas, leading to price increases, the report notes.
"In the province of Azua, many bananas were felled, and the Price
Stabilization Institute is going to buy them, so these bananas will
not enter the market," explained Miguel Minaya, president of the
Federation of Traders of the New Market, the report relays.
He specified that when eventualities occur, the product is cut, the
market is crowded, but then this product is already exhausted, and
there is a shortage, 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 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.
On August 14, 2023, the TCR-LA reported that Moody's Investors
Service has changed the outlook on the Government of Dominican
Republic's ratings to positive from stable and affirmed the
local and foreign-currency long-term issuer and senior unsecured
ratings at Ba3.
Moody's said the key drivers for the outlook change to positive
are: (i) sustained high growth rates have enhanced the scale and
wealthclevels of the economy; and (ii) a material decline in the
government debt burden coupled with improved fiscal policy
effectiveness will support medium-term debt sustainability
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively
contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which
include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
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.
=================
G U A T E M A L A
=================
ENERGUATE TRUST: Fitch Affirms LongTerm IDR at 'BB', Outlook Stable
-------------------------------------------------------------------
Fitch Ratings affirms Energuate Trust's (Energuate) Long-Term Local
and Foreign Currency Issuer Default Ratings (IDRs) and its USD330
million bond due in 2027 at 'BB'. The Rating Outlook is Stable.
Energuate relies on elevated and systemic government subsidization,
accounting for approximately 61% of the Fitch-estimated EBITDA as
of fiscal 2022. Energuate's ratings further reflect the combined
operations of Distribuidora de Electricidad del Oriente S.A.
(DEORSA) and Distribuidora de Electricidad del Occidente S.A.
(DEOCSA), two rural electricity distribution companies.
Energuate's sale to Threelands Energy, Ltd., will have a neutral
impact to the credit profile as the 100% equity purchase adds no
debt to the balance sheet, and the company's rating will remain
strongly linked to that of the Guatemalan sovereign rating and
bolstered by solid annual cash flow.
KEY RATING DRIVERS
Energuate Sale Considered Credit Neutral: Fitch views the
acquisition of Energuate by Threelands Energy, Ltd., (a special
purpose vehicle) as neutral to the company's credit profile.
Fitch's rating case for the scenario assumes a 100% equity purchase
with no new debt, and on a proforma basis, estimates that
Energuate's gross leverage, defined as total debt to EBITDA, will
continue to sustain a downward trajectory.
This is based on the company's strong cash flow backed by the
regulatory value added from distribution (VAD) tariff system,
well-defined capital spending needs, and a modestly growing
customer base. Importantly, the rating will remain strongly linked
to the Guatemalan sovereign, as government subsidies account for a
material average 72% of Energuate's historical EBITDA.
Leverage to Improve: YE 2023 leverage will close at 3.6x, slightly
higher than YE 2022 leverage of 3.4x due to a potential additional
USD175 million loan acquired to fund capex. Following the 2023
increase, leverage is expected to steadily decline yoy, ending 2026
at 2.5x, in line with previous estimates and on account of
amortizing debt and regularly adjusted tariffs. EBITDA to interest
expense is estimated to exceed a favorable 4.0x over the rated
horizon.
VAD Tariff Supports Strong Cash Flow: Energuate's gross margin is
primarily driven by the regulated VAD charges to customers,
representing around 99% of total rate payers and leading to a
favorable average of 22% in EBITDA margin over the past five years.
The VAD tariff is set by the independent regulator Comision
Nacional de Energia Electrica (CNEE), and is determined to recover
the company's operating expenses, capex and cost of capital. The
five-year VAD (through 2024) adjusts semi-annually to reflect
inflation and local currency exchange rates against the U.S.
dollar. Electricity charges adjust on a quarterly basis to reflect
fuel cost increases and variations in the actual cost of
electricity purchased versus projected costs.
Challenging Structural Inefficiencies, Cost Savings Plan: The rural
service area presents financial and operational challenges,
including high energy theft, violent crime and an underdeveloped
formal economy. Energy losses amounted to 18.7% in 2022 and have
averaged a high 19.7% since fiscal 2017. Energuate employs cost
savings initiatives and technology-based energy theft reduction
improvements to improve repair response times when theft occurs.
The VAD compensates for 14% of energy losses, anything above which
is a loss for the company.
Geographic Factors Discourage Competition: The low population
density of Energuate's service area, coupled with high investment
requirements to reach new clients, disincentivizes competition and
mitigates risks related to the non-exclusivity of the concession.
The concession includes 21 of 22 departments in Guatemala, all
except Sacatepéquez. The area includes 92,774 km of distribution
lines that delivered 3,088GWh of electricity in 2022 across a
dispersed area of approximately 101,914 km2.
DERIVATION SUMMARY
Energuate's profitability continues to compare favorably to Elektra
Noreste S.A. (ENSA; BBB/Stable), a state-owned distribution company
in Panama that is also closely linked to the sovereign. Its EBITDA
margin continued a steady upward trajectory in 2022, estimated at
24%, higher than that of peers, which tend to have EBITDA margins
of 13%-14%. Energuate's leverage remains comparable to the 3.2x for
ENSA. The distribution model generally supports higher leverage
than other industries, and Energuate's deleveraging trajectory is
in line with the 'BB' category.
Similar to AES Espana B.V. (fka AES Andres) of the Dominican
Republic, Energuate derives a material component of its cash flow
from government subsidies. The Guatemalan government, through the
Instituto Nacional de Electrificación, has maintained a strict
30-day payment cycle, and Energuate will shut off service should
non-payment occur for two months. Nevertheless, Energuate's central
rating sensitivity remains its exposure to a fraught political
environment and material government counterparty risk.
KEY ASSUMPTIONS
- VAD tariff prices benchmarked off of 2022 average annual prices;
- 4% annual average consolidated revenue growth through 2027;
- Annual average inflation of around 3.6% from 2023 through 2026;
- Annual taxes averaging around 25% of income;
- Average energy losses of 18% in the next four years;
- Minimal foreign exchange fluctuation, reflecting Guatemala's
managed float;
- Average capex of around USD57 million annually through the medium
term, supported by FCF;
- 100% equity financing of purchase cost;
- Refinancing of Energuate's bonds and certain term loans before
2027;
- Maintenance of minimum cash balance of USD25 million per annum;
- Dividends averaging USD112.5 million through 2027.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Considering Energuate's geographically limited operations and
fundamental exposure to macroeconomic conditions, an upgrade is
unlikely barring a positive rating action on the sovereign in
combination with sustained debt/EBITDA below 3.5x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade to Guatemala's sovereign rating;
- A significant weakening in the country's electricity regulation
system, either regarding tariff adjustments or a material change in
subsidies received by Energuate;
- Weaker operational results due to higher than expected energy
losses and lower than anticipated tariff increases;
- A significant interference in Energuate's capital structure that
results in sustained debt/EBITDA of 5.5x or greater.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Energuate Trust's liquidity is supported by
stable cash flow generation, comfortable amortization profile and
committed credit lines. As of March 2023, its main financial
obligations include a USD330 million bond and a local currency long
term loan with USD76 million outstanding, both due in 2027, as well
as a local currency long term loan with USD228 million outstanding,
due in 2034. Long-term indebtedness totals around USD819 million,
including the USD175 million development agency funding secured in
July 2023. The company has short-term revolving lines of credit for
working capital purposes for a total of USD80 million, of which
USD40 million are committed and the remaining USD40 million are
uncommitted.
Cash on hand as of March 31, 2023 was USD11.6 million. Fitch
expects the company's 2027 bond to be rolled over prior to
maturity.
ISSUER PROFILE
Energuate Trust is the holding trust of Guatemala's two largest
rural electricity distribution companies, DEORSA in the northeast
and DEOCSA in the west. The service area covers 73% of the
population, excluding Guatemala City, with approximately 2.3
million regulated customers across 21 of the country's 22
departments at YE 2022.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Energuate Trust LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
senior
unsecured LT BB Affirmed BB
=============
J A M A I C A
=============
JAMAICA: S&P Raises Long-Term Sovereign Credit Rating to 'BB-'
--------------------------------------------------------------
S&P Global Ratings raised its long-term foreign and local currency
sovereign credit ratings on Jamaica to 'BB-' from 'B+', and
affirmed its short-term foreign and local currency sovereign credit
ratings at 'B'.
The stable outlook reflects S&P's expectation that the government
will remain committed to prudent fiscal policies and reducing debt,
as well as supportive economic policies including a flexible
exchange rate regime and effective monetary policy.
Rating Action
S&P Global Ratings raised its long-term foreign and local currency
sovereign credit ratings on Jamaica to 'BB-' from 'B+', and its
transfer and convertibility assessment to 'BB' from 'BB-'. At the
same time, S&P Global Ratings affirmed its 'B' short-term foreign
and local currency sovereign credit ratings on Jamaica. The outlook
is stable.
Outlook
S&P said, "The stable outlook reflects our expectation that Jamaica
will continue to pursue cautious macroeconomic policy and maintain
its commitment to prudent public sector finances and debt
reduction. We assume that small fiscal surpluses will sustain a
decline in debt over the next one-two years. Furthermore, we expect
tourism will continue to support external balances and GDP
growth."
Downside scenario
S&P said, "We could lower the ratings during the next two years if
we believed a changing fiscal policy would lead to sustained
deficits, reversing debt reduction and resulting in a persistently
higher debt burden; or if the economy fails to perform as expected,
weakening the country's external position."
Upside scenario
S&P could raise the ratings over the next two years if Jamaica's
trend economic growth rate rose consistently and converged with
that of peers at a similar level of economic development. That,
along with continuity in fiscal policy, would increase the
sovereign's economic resilience.
Rationale
Flexibility and performance profile: S&P expects continued fiscal
surpluses this year; however, Jamaica remains vulnerable to
external shocks
Jamaica remained committed to meeting its ambitious debt reduction
targets during the pandemic and related contraction, and S&P
believes the government remains committed to debt reduction and
prudent public finances. After eroding in 2020, the country's
debt-to-GDP balance is trending down to new historical lows,
supported by a return of fiscal surpluses and growing economy.
S&P said, "We expect the government will report a small surplus in
the current fiscal year (ending March 31, 2024), of J$10 billion,
or 0.3% of GDP, similar to the surplus in the previous fiscal year.
We expect the average annual change in net government debt will be
0.8% over the next three-four years, reflecting future surpluses as
well as the negative effect of a likely depreciating Jamaican
dollar on the value of the country's large external debt."
Jamaica's net debt to GDP is falling and reached a historical low
of 64% in 2022. S&P said, "We believe this ratio will continue to
decline, to just below 60% by the end of 2024. The government's
interest burden remains high but is also decreasing. We expect it
will fall modestly to 17.5% of government revenues in fiscal 2024
and to less than 15% by 2026. The government estimates its
financing needs will be J$139 billion this year, and we expect it
will meet them through a combination of predominantly concessionary
multilateral funding and domestic borrowing."
Jamaica's debt burden has significant exposure to exchange rate
movements, as approximately 60% of general government debt is
denominated in foreign currency. This exposure and the depreciation
of the Jamaican currency are significant to S&P's assessment of the
change in net general government debt, as currency depreciation can
offset debt reduction somewhat.
S&P said, "We assess Jamaica's contingent liabilities from the
financial sector and all nonfinancial public enterprises as
limited. The limited assessment of contingent liabilities of banks
is based on our Banking Industry Country Risk Assessment score of
'8' (with '1' being the lowest-risk category and '10' the highest)
and the ratio of banking sector assets to GDP of less than 100%."
Jamaica's external accounts returned to a small deficit position of
0.8% current account as a percent of GDP in 2022. This is lower
than the surplus reported in the previous year, but in line with
our expectations. Remittances continued to bolster external
balances, reaching $3.4 billion (about 20% of GDP) in 2022. S&P
said, "We expect remittances to gradually return to previous levels
over the next one-two years. We expect the current account will
remain at levels more in line with Jamaica's historical trends,
with a deficit of 0.6% of GDP in 2023. Nevertheless, a growing
economy (including continued strength in tourism) will support
external balances and foreign exchange, and current account
deficits will average about 0.9% of GDP over the next four years."
S&P said, "We expect the external debt of the public, private, and
financial sectors, net of usable reserves and financial sector
external assets, will be about 57.5% of current account receipts in
2023, and the country's gross external financing needs will remain
fairly steady at 99.5% of current account receipts and usable
reserves in 2023." Jamaica's net external liability position is
substantially larger than its net external debt position, which
could expose the country to elevated risk of disruptions to
external funding.
External shocks are a risk for Jamaica. To address the country's
vulnerabilities to weather-related events, the government has
created a disaster risk policy framework to build resiliency and
respond faster in the aftermath of a disaster, which served Jamaica
well at the onset of the pandemic. The multilayered approach to
mitigating the fiscal risks associated with a disaster includes a
contingency fund, insurance, a disaster line of credit with a
multilateral institution, and the issuance of a catastrophe bond.
Although Jamaica has made progress on mitigating these risks, its
economy and infrastructure remain vulnerable to physical risks.
As in other parts of the world, inflation in Jamaica remained
elevated in 2023. The central bank has responded to rising
inflation with a series of increases to the policy interest rate,
which is now 7%, compared with 0.5% in August 2021. The Statistical
Institute of Jamaica's most recent data show annual point-to-point
inflation of 6.6%, which is above the Bank of Jamaica's target of
4%-6%. S&P believes that the bank will maintain cautious monetary
policy and, combined with tight fiscal policy, this will support
the return of lower inflation over the next several years.
Although the central bank has a relatively short track record under
its recently enhanced autonomy from the government, S&P believes it
will likely continue facilitating orderly movements in the floating
exchange rate, as shown by the two-way movement recorded against
the U.S. dollar in the past year. Although dollarization is still
high in the financial system, it has declined during the past
couple of years. In July 2023, about 37% of financial assets were
denominated in U.S. dollars, down from 46% at the end of 2016.
Institutional and economic profile: Jamaica's economy will continue
growing and the government will maintain its commitment to
sustainable public sector finances
Jamaica's economy has recovered well following a sharp contraction
in 2020, and we expect it will continue to grow, albeit at a slower
pace, over the next few years. The economy is relatively well
diversified; the 9.9% contraction in 2020 was less than that of
some other Caribbean countries. Tourism fueled the post-2020
recovery and continues to support GDP growth. S&P said, "We expect
slowing growth year over year as the dramatic impact of 2020 fades
and the country returns to more normal growth. We expect real GDP
growth of 2.1% in 2023, spurred by tourism and mining, followed by
1.6% growth in 2024, returning to pre-pandemic levels. Under our
base-case scenario, we expect nominal GDP per capita will increase
to $6,800." Tourism, agriculture, mining, and manufacturing make
Jamaica diversified for a small open economy, but its economy is
vulnerable to hurricanes, flooding, and droughts. The government is
pursuing legislation designed to further support diversification
and economic growth. Nevertheless, growth is constrained by high
security costs, perceived corruption, low productivity, low
business competitiveness, and vulnerability to external shocks
including weather-related ones.
Structural barriers historically impeded strong economic growth in
Jamaica. Real GDP per capita had slowly begun to increase before
2020, and we expect the country's 10-year, weighted-average growth
rate will be 1.29%, which, while increasing, remains below that of
sovereigns in the same GDP category. Although the government is
trying to boost trend growth through its reform agenda, the
dividends of these efforts will take time to translate into higher
GDP.
National elections were held in September 2020 and the incumbent
Jamaica Labor Party (JLP) won a strong majority of 49 seats out of
63. Jamaica's two main political parties--the ruling JLP and the
opposition People's National Party--share a similar outlook on
economic policymaking and commitment to fiscal consolidation. S&PP
said, "This political commitment has survived changes in government
and we believe is representative of bipartisan consensus on the
general direction of macroeconomic policies. We expect the
government will remain focused on its commitment to fiscal
consolidation, which will foster macroeconomic stability."
Although S&P views Jamaica's policymaking as relatively effective,
crime continues to aggravate civil society. This, in addition to
concerns about the prevalence of corruption and the enforcement of
contracts, hampers the country's productivity and growth
prospects.
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
TO FROM
JAMAICA
Transfer & Convertibility Assessment
Local Currency BB BB-
JAMAICA
Senior Unsecured BB- B+
AIR JAMAICA LTD.
Senior Unsecured BB- B+
NATIONAL ROAD OPERATING AND CONSTRUCTING CO. LTD
Senior Unsecured BB- B+
UPGRADED; RATINGS AFFIRMED
TO FROM
JAMAICA
Sovereign Credit Rating BB-/Stable/B B+/Stable/B
===========
P A N A M A
===========
LA HIPOTECARIA FOURTEENTH: Fitch Hikes B Notes Rating to 'BBsf'
----------------------------------------------------------------
Fitch Ratings has affirmed all notes issued by La Hipotecaria
Panamanian Mortgage Trust 2010-1, La Hipotecaria Trust 2019-1, La
Hipotecaria Trust 2019-2, La Hipotecaria Panamanian Mortgage Trust
2014-1, La Hipotecaria Tenth Mortgage Trust Series A Notes and La
Hipotecaria Twelfth Mortgage-Backed Notes Trust.
For La Hipotecaria Fourteenth Mortgage-Backed Notes Trust, Fitch
has affirmed the series A and C notes and upgraded the series B
notes to 'BBsf' from 'B+sf'. For La Hipotecaria Sixteenth
Mortgage-Backed Notes Trust Series A and La Hipotecaria Panamanian
Mortgage Trust 2021-1, the ratings were affirmed at 'BBB-sf' and
the Rating Outlook was revised to Negative from Stable. The Series
B and C of Hipotecaria Sixteenth Mortgage-Backed Notes Trust were
affirmed at 'CCCsf' and 'CCsf', respectively.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
La Hipotecaria
Trust 2019-2
Series 2019-2
Certificates LT BBB-sf Affirmed BBB-sf
La Hipotecaria
Tenth Mortgage
Trust Series A
Notes
Interest Only LT A-sf Affirmed A-sf
Series A LT A-sf Affirmed A-sf
La Hipotecaria
Panamanian
Mortgage Trust
2021-1
Series 2021-1
Certificates LT BBB-sf Affirmed BBB-sf
La Hipotecaria
Panamanian
Mortgage Trust
2010-1
2010-1
Certificates LT AA+sf Affirmed AA+sf
2010-1
Certificates ULT A-sf Affirmed A-sf
La Hipotecaria
Fourteenth
Mortgage-Backed
Notes Trust
A LT BBB-sf Affirmed BBB-sf
B LT BBsf Upgrade B+sf
C LT CCCsf Affirmed CCCsf
La Hipotecaria
Sixteenth
Mortgage-Backed
Notes Trust
Series A LT BBB-sf Affirmed BBB-sf
Series B LT CCCsf Affirmed CCCsf
Series C LT CCsf Affirmed CCsf
La Hipotecaria
Panamanian
Mortgage Trust
2014-1
Class A-1
50346EAA5 LT AA+sf Affirmed AA+sf
Class A-2
50346EAB3 LT BBB-sf Affirmed BBB-sf
La Hipotecaria
Trust 2019-1
Series 2019-1
Certificates LT AA+sf Affirmed AA+sf
La Hipotecaria
Twelfth
Mortgage-Backed
Notes Trust
Series A
PAL3006961A4 LT BBB-sf Affirmed BBB-sf
KEY RATING DRIVERS
RMBS Transactions
La Hipotecaria Tenth Mortgage Trust Series A Notes (BLH 10th), La
Hipotecaria Twelfth Mortgage-Backed Notes Trust (BLH 12th), La
Hipotecaria Fourteenth Mortgage-Backed Notes Trust (BLH 14th), La
Hipotecaria Sixteenth Mortgage-Backed Notes Trust (BLH 16th)
Higher Stresses Applied Due to Macroeconomic Adjustments: Fitch
expects Panama's real GDP growth will reach 4.5% in 2023, and
unemployment will decrease to 7.5%, from 9.9% at YE22. Fitch
continues to apply higher stress scenarios as described in "Fitch
Ratings Revises Macroeconomic Adjustment for La Hipotecaria RMBS in
Panama," considering the underperformance of loans after pandemic
economic shock. In the additional stress scenario analysis, the
'Bsf' representative pool weighted average foreclosure frequency
(WAFF) for BLH in Panama increased to 8.8% from 8.2% in the current
assumption. As adjustments were maintained at 1.0x at 'A(cat)',
given that Fitch does not envisage changes to the SF Rating Cap
(Asf), rating multiples were compressed.
Operational Risk Mitigated (Latin America RMBS Rating Criteria):
Grupo ASSA, S.A. (BBB-/Stable; primary servicer) has hired Banco La
Hipotecaria, S.A. (the sub-servicer) to be the servicer for the
mortgages. Fitch has reviewed Banco La Hipotecaria's systems and
procedures and is satisfied with its servicing capabilities.
Additionally, Banco General S.A. (BBB-/Stable) has been designated
as back-up servicer in order to mitigate the exposure to
operational risk, and will replace the defaulting servicer within
five days of a servicer disruption event.
La Hipotecaria Tenth Mortgage Trust Series A Notes
Country of Assets Determine Maximum Achievable Ratings: Panama's
IDR is 'BBB-'/Stable and its Country Ceiling (CC) is 'A-'.
According to Fitch's 'Structured Finance and Covered Bonds Country
Risk Rating Criteria' the ratings of Structured Finance notes
cannot exceed the CC of the country of the assets, unless the
transfer and convertibility (T&C) risk is mitigated. While the
transactions have sufficient credit enhancement to be rated above
the country's IDR, the T&C risk is not mitigated, so the ratings
remain constrained by the country ceiling and ultimately linked to
the ratings of Panama.
Frequency of Foreclosure Assumptions Similar to Previous Review:
Asset characteristics have been stable throughout the years. In an
'A-sf' scenario, the A note and the Interest Only note would need
to support a weighted average foreclosure frequency (WAFF) of 36.6%
and a weighted average recovery rate (WARR) of 92.7%, compared with
a WAFF of 36.0% and a WARR of 91.6% from last annual review, in
October 2022.
These assumptions consider the main characteristics of the assets,
where OLTV is 93.4%, the seasoning averages 187 months and
remaining term 185 months, WA current loan-to-value is 57.0% and
half of borrowers (50.0%) pay through payroll deduction mechanism.
The assumptions also consider a Performance Adjustment Factor of
0.7x considering the historical performance of the portfolio.
Transaction Performance Supports Assigned Ratings: CE has increased
during the last year due to the sequential nature of the structure.
As of June 2023, CE has increased to approximately 64.2% up from
57.5% observed in June 2022. CE continues to build due to the
sequential nature of the transaction structure. The transaction
also benefits from a reserve account of 1% of the outstanding
balance of the series A notes, which is sufficient to cover almost
three months of senior expenses and interest payment on series A
and IO.
La Hipotecaria Twelfth Mortgage-Backed Notes Trust
Country of Assets and Counterparty Determine Maximum Achievable
Ratings: The rating is constrained by Panama's sovereign rating
(BBB-/Stable) due to the portfolio's exposure to the sovereign.
Over 30% of the residential mortgages were granted to public sector
employees and about 69% of the pool benefits from Panama's
Preferential Treatment Law, whereby the government provides lenders
a subsidy, through fiscal credits, for originating mortgages below
market interest rates for a definite period of 10 or 15 years.
Also, as the reserve account is in the form of a letter of credit
provided by Banco General (BBB-/Stable), the transaction is also
exposed to this entity.
Frequency of Foreclosure Assumptions Affected by the Macroeconomic
Adjustments: To gauge the impact of the macroeconomic
underperformance, Fitch reviewed its Foreclosure Frequency (FF)
parameter. Under Fitch's updated assumptions in an 'BBB-sf'
scenario, the A note would need to support a WAFF of 22.0% and a
WARR of 91.5%, compared to a WAFF of 21.5% and a WARR of 90.5% from
last annual review, in October 2022.
These assumptions consider the main characteristics of the assets,
where OLTV is 90.8%, the seasoning average 144 months and remaining
term 225 months, WA current loan-to-value is 61.6% and the majority
of performing borrowers (61.0%) pay through payroll deduction
mechanism. The assumptions also consider a Performance Adjustment
Factor of 0.7x considering the historical performance of the
portfolio.
Robust Credit Enhancement Supports Assigned Ratings: CE has
returned to previous levels, being stable in the past year. As of
June 2023, CE has increased to 21.5% from 20.6% observed in July
2022. Fitch expects CE to keep building due to the sequential
nature of the transaction structure. The transaction also benefits
from a reserve account of 1% of the outstanding balance of the
series A notes in the form of a letter of credit, which is
sufficient to cover almost three months of senior expenses and
interest payment on the Series A notes.
La Hipotecaria Fourteenth Mortgage-Backed Notes Trust
Country of Assets and Counterparty Determine Maximum Achievable
Ratings: The rating of the series A notes is constrained by
Panama's sovereign rating (BBB-/Stable) due to the portfolio's
exposure to the sovereign. Around a quarter of the residential
mortgages were granted to public sector employees. Also, as the
reserve account is in the form of a letter of credit provided by
Banco General, the series A notes are also exposed to this entity.
Frequency of Foreclosure Assumptions Affected by the Macroeconomic
Adjustments: To gauge the impact of the macroeconomic
underperformance, Fitch reviewed its FF parameter. Under Fitch's
updated assumptions in an 'BBB-sf' scenario, the A note would need
to support a WAFF 20.5% and a WARR of 81.8%, compared with a WAFF
19.9% and a WARR of 81.6% from last annual review, in October 2022.
Under Fitch's updated assumptions in a 'BBsf' scenario, the Series
B notes would need to support a WAFF of 16.4% and a WARR of 86.0%,
compared with a WAFF of 15.9% and a WARR of 85.7% from last annual
review. For the expected scenario, the Series C notes would need to
support a WAFF of 9.1% and a WARR of 92.5%, compared with a WAFF of
8.8% and a WARR of 92.0% from last annual review.
These assumptions consider the main characteristics of the assets,
where OLTV is 84.2%, the seasoning average 132 months and remaining
term 226 months, WA current loan-to-value is 64.1% and the majority
of performing borrowers (64.9%) pay through payroll deduction
mechanism. The assumptions also consider a Performance Adjustment
Factor of 0.7x considering the historical performance of the
portfolio.
Transaction Performance Supports Assigned Ratings: CE has increased
during the last year due to the sequential nature of the structure.
As of June 2023, CE has increased to approximately 11.9%, up from
11.1% observed in July 2022 for the Series A notes, to 3.6% from
3.4% for the Series B notes, and for series C it increased to 0.9%
from 0.8%. The consistent increase in series B notes, which started
at 2.0%, allows the transaction to support higher stresses, which
leads the upgrade of this series to 'BBsf'. The series A notes
benefits from a reserve account equivalent to 3x its next interest
payment in the form of a letter of credit.
La Hipotecaria Sixteenth Mortgage-Backed Notes Trust
Country of Assets and Counterparty Determine Maximum Achievable
Ratings: The rating of the series A notes is constrained by
Panama's sovereign rating (BBB-/Stable) due to the portfolio's
exposure to the sovereign. Around a third of the residential
mortgages were granted to public sector employees and almost 100%
of the pool benefits from an interest rate subsidy provided by the
Republic of Panama. Also, as the reserve account is in the form of
a letter of credit provided by Banco General, the series A notes is
also exposed to this entity.
Frequency of Foreclosure Assumptions Affected by the Macroeconomic
Adjustments: To gauge the impact of the macroeconomic
underperformance, Fitch reviewed its FF parameter. Under Fitch's
updated assumptions in a 'BBB-sf' scenario, the A note would need
to support a WAFF of 17.8% and a WARR of 58.2%, compared with a
WAFF of 15.5% and a WARR of 57.3% from last annual review, in
October 2022. At the expected scenario, the WAFF was updated to
7.5%, from 6.0%, and the WARR changed to 75.0%, from 74.4%. These
assumptions consider the main characteristics of the assets, where
OLTV is 90.1%, the seasoning average 70 months and remaining term
291 months, WA current loan-to-value is 74.6% and the majority of
performing borrowers (82.8%) pay through payroll deduction
mechanism.
Transaction Performance Supports Assigned Ratings: The series A
notes benefit from a sequential pay structure wherein target
amortization payments for this series are senior to interest and
principal payments on the series B and C notes. Series A notes also
benefit from CE of 5.9%, an interest reserve account equivalent to
3x its next interest payment and excess spread, which is still
consistent to the assigned ratings, although it puts additional
pressure on cash flow modelling, given the low amount of fiscal
credits sold up to now.
Series B and C notes have a CE of -3.4% and -5.9%, respectively,
and none of them are able to surpass the WAFF and WARR defined at
the expected level by Fitch. The decrease in the credit enhancement
is a consequence of delays on the sale of fiscal credits. Fitch
expects that CE will return to initial levels in the near future,
although a Negative Outlook indicates that if this situation is not
addressed soon, the series A rating could be downgraded.
CLN Transactions
La Hipotecaria Panamanian Mortgage Trust 2010-1, 2014-1 A-1, La
Hipotecaria Trust 2019-1
DFC's Credit Quality Supports Rating: The rating assigned to the La
Hipotecaria Panamanian Mortgage Trust 2010-1, La Hipotecaria
Panamanian Mortgage Trust 2014-1 A-1, and La Hipotecaria Trust
2019-1 certificates is commensurate with the credit quality of the
guarantee provider. The credit quality of U.S. International
Development Finance Corporation (DFC) is directly linked to the
U.S. sovereign rating (AA+/F1+/Stable), as guarantees issued by,
and obligations of, DFC are backed by the full faith and credit of
the U.S. government, pursuant to the Foreign Assistance Act of
1969. The ULT rating assigned to the 2010-1 certificates is
commensurate with the credit quality of the series A notes of La
Hipotecaria's Tenth Mortgage-Backed Notes Trust.
Reliance on DFC Guaranty: Fitch assumes the payment on the La
Hipotecaria Panamanian Mortgage Trust 2010-1, La Hipotecaria
Panamanian Mortgage Trust 2014-1 A-1, and La Hipotecaria Trust
2019-1 certificates will rely on the DFC guaranty. Through this
guaranty, DFC will unconditionally and irrevocably guarantee the
receipt of proceeds from the underlying notes in an amount
sufficient to cover timely scheduled monthly interest amounts and
the ultimate principal amount on the certificates.
Ample Liquidity: The La Hipotecaria Panamanian Mortgage Trust
2010-1, La Hipotecaria Panamanian Mortgage Trust 2014-1 A-1 and La
Hipotecaria Trust 2019-1 certificates benefit from liquidity, in
the form of a five-day buffer between payment dates on the
underlying notes and payment dates on the certificates.
Additionally, the certificates benefit from liquidity in the form
of an interest reserve account or a letter of credit at the
underlying note level. Fitch considers this sufficient to keep debt
service current on the guaranteed certificates until funds under a
claim of DFC are received.
La Hipotecaria Panamanian Mortgage Trust 2014-1 A-2 Certificates,
La Hipotecaria Trust 2019-2, La Hipotecaria Panamanian Mortgage
Trust 2021-1
Credit Quality of the Underlying Notes Support Ratings: The 2014-1
A-2, 2019-2 and 2021-1 certificates are a repackaging of the
BLH12th, BLH 14th and BLH 16th Series A notes, respectively,
therefore the rating assigned to the certificates is commensurate
with the credit rating of the series A notes of each transaction,
which carry a rating of 'BBB-sf'/Outlook Stable for 2014-1 A-2 and
2019-2, and 'BBB-sf'/Outlook Negative for 2021-1. The interest
received from the underlying notes is expected to be sufficient to
cover the expenses and coupon payments due for the certificates.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The ratings of the La Hipotecaria Tenth Mortgage Trust Series A
notes and interest-only notes, La Hipotecaria Twelfth
Mortgage-Backed Notes Trust Series A notes, La Hipotecaria
Fourteenth Mortgage-Backed Notes Trust Series A Notes and La
Hipotecaria Sixteenth Mortgage-Backed Notes Trust Series A Notes
are sensitive to changes in the credit quality of Panama.
A downgrade of Panama's ratings, and for BLH Tenth its Country
Ceiling, could lead to a downgrade on the notes. In addition, the
ratings of the La Hipotecaria Twelfth Mortgage-Backed Notes Trust
Series A Notes and La Hipotecaria Fourteenth Mortgage-Backed Notes
Trust Series A Notes are sensitive to changes in the credit quality
of Banco General as the Letter of Credit provider. Finally, severe
increases in foreclosure frequency as well as reductions in
recovery rates could lead to a downgrade of the notes.
In addition, the ratings of the La Hipotecaria Twelfth
Mortgage-Backed Notes Trust Series A Notes and La Hipotecaria
Fourteenth Mortgage-Backed Notes Trust Series A Notes are sensitive
to changes in the credit quality of Banco General as the Letter of
Credit provider.
The series B and C of La Hipotecaria Fourteenth Mortgage-Backed
Notes Trust as well as series B of La Hipotecaria Sixteenth
Mortgage-Backed Notes can be downgraded if there is a relevant
increase in foreclosure frequency as well as reductions in recovery
rates.
The series A of La Hipotecaria Sixteenth Mortgage-Backed Notes can
also be downgraded if credit enhancement continues to deteriorate
to a level that is not able to be considered sufficient to converge
to current level stresses.
For series C of La Hipotecaria Sixteenth Mortgage-Backed Notes
Trust, rating can be downgraded if the C notes is irrevocably
impaired such that it is not expected to pay interest and/or
principal in full in accordance with the terms of the obligation's
documentation during the life of the transaction. This assessment
would be consistent to a C category.
DFC Guaranteed Notes: In the case of La Hipotecaria Panamanian
Mortgage Trust 2010-1, La Hipotecaria Panamanian Mortgage Trust
2014-1-A-1 Tranche and the La Hipotecaria Mortgage Trust 2019-1
notes, the rating assigned could be downgraded in the case of a
downgrade of the U.S. sovereign rating.
The unenhanced rating of the La Hipotecaria Panamanian Mortgage
Trust 2010-1 is sensitive to changes in the credit quality of the
La Hipotecaria Tenth Mortgage Trust Series A Notes, hence, a
negative rating action of the series A notes would trigger a
negative rating action of the unenhanced rating on the notes in the
same proportion.
The La Hipotecaria Panamanian Mortgage Trust 2014-1 A-2
certificates' ratings are sensitive to changes in the credit
quality of the La Hipotecaria Twelfth Mortgage-Backed Notes Trust
Series A notes. If La Hipotecaria Twelfth Mortgage-Backed Notes
Trust Series A notes are downgraded, that could lead to a downgrade
of the certificates.
The La Hipotecaria Mortgage Trust 2019-2 certificates' ratings are
sensitive to changes in the credit quality of the La Hipotecaria
Fourteenth Mortgage-Backed Notes Trust Series A notes. If La
Hipotecaria Fourteenth Mortgage-Backed Notes Trust Series A notes
are downgraded, that could lead to a downgrade on the
certificates.
The La Hipotecaria Panamanian Mortgage Trust 2021-1 certificates'
ratings are sensitive to changes in the credit quality of the La
Hipotecaria Sixteenth Mortgage Backed Notes Trust series A notes.
If La Hipotecaria Sixteenth Mortgage-Backed Notes Trust Series A
notes are upgraded, that could lead to an upgrade of the
certificates.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The ratings of the La Hipotecaria Tenth Mortgage Trust Series A
Notes & Interest-Only Notes, La Hipotecaria Twelfth Mortgage-Backed
Notes Trust Series A Notes, La Hipotecaria Fourteenth
Mortgage-Backed Notes Trust Series A Notes and La Hipotecaria
Sixteenth Mortgage-Backed Notes Trust Series A Notes are sensitive
to changes in the credit quality of Panama. An upgrade of Panama's
ratings, and for BLH Tenth its Country Ceiling, could lead to an
upgrade on the notes.
The ratings of La Hipotecaria Fourteenth Mortgage-Backed Notes
Trust Series B and C Notes and La Hipotecaria Sixteenth
Mortgage-Backed Notes Trust Series B and C Notes could be upgraded
in case of a future improvement of CE.
DFC Guaranteed: In the case of La Hipotecaria Panamanian Mortgage
Trust 2010-1, La Hipotecaria Panamanian Mortgage Trust 2014-1-A-1
Tranche and the La Hipotecaria Trust 2019-1 notes, the ratings
could be downgraded in the case of an upgrade of the U.S. sovereign
rating.
The unenhanced rating of the La Hipotecaria Panamanian Mortgage
Trust 2010-1 is sensitive to changes in the credit quality of La
Hipotecaria Tenth Mortgage Trust Series A notes, hence, a positive
rating action of the series A notes would trigger a positive rating
action of the unenhanced rating on the notes in the same
proportion.
The La Hipotecaria Panamanian Mortgage Trust 2014-1 A-2
certificates' ratings are sensitive to changes in the credit
quality of the La Hipotecaria Twelfth Mortgage-Backed Notes Trust
Series A notes. If La Hipotecaria Twelfth Mortgage-Backed Notes
Trust Series A Notes are upgraded, that could lead to an upgrade of
the certificates.
The Hipotecaria Trust 2019-2 certificates' ratings are sensitive to
changes in the credit quality of the La Hipotecaria Fourteenth
Mortgage-Backed Notes Trust Series A notes. If La Hipotecaria
Fourteenth Mortgage-Backed Notes Trust Series A notes are upgraded,
that could lead to an upgrade of the certificates.
The La Hipotecaria Panamanian Mortgage Trust 2021-1 certificates'
ratings are sensitive to changes in the credit quality of the La
Hipotecaria Sixteenth Mortgage Backed Notes Trust Series A notes.
If La Hipotecaria Sixteenth Mortgage-Backed Notes Trust Series A
notes are upgraded, that could lead to an upgrade of the
certificates.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
- The LT rating of the 2010-1 certificates issued by La Hipotecaria
Panamanian Mortgage Trust 2010-1 is directly linked to the credit
quality of the DFC and the ULT rating of the 2010-1 certificates
issued by La Hipotecaria Panamanian Mortgage Trust 2010-1 is
directly linked to the rating of the Series A Notes issued by La
Hipotecaria Tenth Mortgage Trust.
- The rating of the A-1 certificates issued by La Hipotecaria
Panamanian Mortgage Trust 2014-1 is directly linked to the credit
quality of the DFC and the rating of the A-2 certificates issued by
La Hipotecaria Panamanian Mortgage Trust 2014-1 is directly linked
to the rating of the Series A Notes issued by La Hipotecaria
Twelfth Mortgage-Backed Notes Trust.
- The rating of the 2019-1 certificates issued by La Hipotecaria
Trust 2019-1 is directly linked to the credit quality of the DFC.
- The rating of the 2019-2 certificates issued by La Hipotecaria
Trust 2019-2 is directly linked to the rating of the Series A Notes
issued by La Hipotecaria Fourteenth Mortgage-Backed Notes Trust.
- The rating of the 2021-1 certificates issued by La Hipotecaria
Panamanian Mortgage Trust 2021-1 is directly linked to the rating
of the Series A Notes issued by La Hipotecaria Sixteenth
Mortgage-Backed Notes Trust.
- The ratings of the La Hipotecaria Tenth Mortgage Trust Series A
and Interest Only Note are driven by Panama's credit quality as
measured by its Country Ceiling.
- The ratings of the La Hipotecaria Twelfth Mortgage-Backed Notes
Trust A Notes, La Hipotecaria Fourteenth Mortgage-Backed Notes
Trust A Notes and La Hipotecaria Sixteenth Mortgage-Backed Notes
Trust A Notes are driven by both BG's and Panama's credit quality
as measured by their LT FC IDR.
=======
P E R U
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NAUTILUS INKIA: Fitch Affirms LongTerm IDR at 'BB', Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Nautilus Inkia Holdings SCS's (Inkia)
Long-Term Foreign and Local Currency Issuer Default Ratings at
'BB'. The rating action affects USD218 million senior unsecured
notes due in 2027 (previously USD600 million prior to two tenders
in 2022). The Rating Outlook is Stable.
Inkia's ratings reflect the consolidated credit profile of its
subsidiaries, underpinned by stable cash flow generation, a strong
business position and adequate liquidity. Kallpa Generacion S.A.
(BBB-/Stable) is the company's main cash flow subsidiary and
mitigates other subsidiaries' relatively weaker credit profiles.
Fitch views the sale of Inkia's distribution company Energuate
(BB/Stable) of Guatemala (BB/Stable) to Threelands Energy Ltd., a
special purpose vehicle, as credit neutral to Inkia's overall
credit profile. Though Energuate added material cash flows and
business diversification to Inkia's consolidated profile, Fitch
estimates that the total deconsolidation of Energuate's debt
coupled, and in concert with additional divestments, will de-lever
Inkia to less than 4.0x near term.
KEY RATING DRIVERS
Energuate Sale Neutral to Inkia: The 100% equity sale will
deconsolidate USD870 million of debt (roughly 36% of Inkia's total
outstanding debt at YE 2022) and provide a cash equity injection
that will be paid in dividends directly to the shareholder. Fitch
forecasts that leverage, measured by debt to EBITDA, will decline
to an average 3.0x over the next four years and for EBITDA/interest
coverage to exceed 5.0x. Declining leverage is due to a lower
remaining debt position, as Energuate's deconsolidated debt load
includes debt used to finance two separate tenders of Inkia's 2027
bond (August and November 2022) that reduced Inkia's original
USD600 million principal to USD218 million. Improved leverage will
also result from additional divestments and debt deconsolidation,
as well as from the strength of Kallpa cash flows, which following
the Energuate sale will account for 97% of consolidated company
EBITDA.
Debt Structurally Subordinated to Levered OpCos: Inkia's holding
company debt remains structurally subordinated to operating company
(OpCo) debt, and Inkia's cash flow depends on cash distributions
from subsidiaries and associated companies. Total subsidiary debt
will amount to approximately USD1.18 billion, or approximately 84%
of total expected consolidated debt at YE 2023.
Solid Business Position, Stable Cash Flows: Inkia's ratings have
reflected a diversified portfolio of businesses, mostly comprising
companies with low business risk profiles and stable and
predictable cash flow generation operating across six countries.
The sale of Energuate and other Central American assets has reduced
the company's geographic footprint and will result in nearly 97% of
future EBITDA to be concentrated in Peru (BBB/Negative), from
Kallpa operations. The balance of EBITDA will come from Chile
(A-/Stable) and Bolivia (B-/Negative). Fitch expects Inkia will
continue to report ongoing neutral to negative FCF due to ongoing
significant cash outflow to shareholders averaging nearly USD200
million.
Historically Aggressive Shareholder Strategy: Inkia historically
pursued an aggressive growth strategy, prioritizing high short-term
dividend flows over capitalizing on deleveraging opportunities.
While not currently contemplated, a negative rating action could
result if additional cash distributions were funded by debt without
an offsetting debt reduction.
DERIVATION SUMMARY
Inkia has a generally weaker capital structure relative to its
large, multi-asset energy peers in Latin America. Its nearest peer
in this group is Chilean generator AES Andes S.A. (BBB-/Stable),
which is also in a deleveraging trajectory, with leverage remaining
between 3.5x and 4.0x over the rating horizon.
Colbun S.A. (BBB+/Stable) and Engie Energia Chile S.A.
(BBB+/Stable) operate with stronger capital structures than Inkia,
with leverage consistently at or below 2.0x, comfortably within the
investment-grade rating category.
In Peru, Inkia is rated two notches below Kallpa based on Inkia's
greater exposure to countries with weak operating environments,
indicating higher business risk. Kallpa has a diversified asset
base in Peru and expected lower leverage through the rating
horizon. Inkia has the capacity to reduce leverage below 4.0x after
completion of the investment cycle.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
Include:
Kallpa Generacion S.A.
- Average Monomic Price of USD64/MWh over rating horizon;
- An increase in average regulated PPA prices to USD66/MWh and
unregulated PPA prices to USD44/MWh in the next four years;
- Spot injection prices average USD44/MWh, and average withdrawal
prices of USD45/MWh through 2026;
- 10.6% annual average revenue growth through the rating cycle,
primarily front-loaded with added capacity and higher PPA prices;
- Average load capacity of 79% across all three generation plants
(average 60% for hydro and 88% for combined cycle gas-fired
thermal);
- Contracted capacity and generation increase around 5% in 2023 and
2024 then stabilize;
- Annual average COGS is 45% of revenues over the rating horizon;
- 2023-2026 average capex at USD35 million, primarily for
maintenance work;
- Average annual dividends of USD235 million, while maintaining a
minimum year-end cash balance of USD20 million.
Nautilus Inkia Holdings
- Annual dividend payments of around USD200 million over next four
years;
- Annual capex averaging USD117 million over next four years;
- Further divestment of assets over the next one to two years;
- Annual YE cash balance approximating USD50 million-USD60 million
each year.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A positive rating action could be triggered by conservative cash
flow management, leading to total debt/EBITDA below 4.0x on a
sustained basis while moving the portfolio of assets to
investment-grade countries.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Consolidated gross leverage remains above 5.0x through the rating
horizon following additional investment opportunities undertaken
without an adequate amount of additional equity;
- Reduced cash flow generation due to adverse regulatory issues,
deterioration of its contractual position and/or deteriorating
operating conditions for the distribution company business;
- An aggressive dividend policy funded by debt.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Inkia's liquidity is adequate due to strong
cash flows from subsidiaries, adequate cash on hand, a comfortable
amortization profile and adequate access to the debt capital
markets. The company held approximately USD132 million in readily
available cash at March 31, 2023, and USD123 million at YE 2022,
mostly in hard currency in the U.S. Cash should remain within the
stated policy of USD100 million on hand at year end.
Inkia's senior unsecured notes due in 2027 are structurally
subordinated to all existing and future indebtedness, and other
liabilities of the company's subsidiaries. In addition, the 2027
notes are effectively subordinated to all existing and future
secured indebtedness of the company and any subsidiary to the
extent of the value of the assets securing such indebtedness. The
original 2027 note issuance of USD600 million was reduced twice
through two separate tenders in August and November of 2022 to
USD218 million. The debt used to fund the tenders was reconfigured
among the company's subsidiaries, therefore, did not improve the
company's overall credit profile.
ISSUER PROFILE
Inkia is a company focused on the electric power generation sector.
The company is based in Latin America with international operations
in Peru, Chile and Bolivia.
Inkia owns, operates and develops power plants to generate and sell
electricity to distribution companies and unregulated consumers
under short- and long-term purchase power agreements and to the
spot market.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Nautilus Inkia
Holdings SCS LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
senior
unsecured LT BB Affirmed BB
=====================
P U E R T O R I C O
=====================
GUR-MEAT INC: Court OKs Cash Collateral Access Thru Nov 10
----------------------------------------------------------
The U.S. Bankruptcy Court for the District of Puerto Rico
authorized Gur-Meat, Inc. to use cash collateral in accordance with
its agreement with Banco Popular de Puerto Rico, through November
10, 2023.
BPPR agreed to an extension on the use of the cash collateral under
the Credit Agreement and the Loan Documents until November 10,
2023.
During the period the Debtor is permitted to use the cash
collateral solely to satisfy the permitted expenditures detailed
and described in the Budget. BPPR's consent to the use of cash
collateral and the Debtors' right to use the cash collateral on a
consensual basis will terminate automatically on the earlier of:
(a) the occurrence of an Event of Default; or,
(b) the culmination of the Extended Stipulation Period, in the
event the Parties are unable to reach a written agreement to
further extend the Stipulation.
Although no adequate protection payments will be made to BPPR
during the Extended Stipulation Period, BPPR has stated to the
Debtor that it expects to commence receiving payments from Debtor
starting on November 15, 2023, and that any further extensions of
the Extended Stipulation End Date will be conditioned on the
receipt thereof.
A copy of the stipulation and the Debtor's budget is available at
https://urlcurt.com/u?l=5NiJPI from PacerMonitor.com.
The Debtor projects total operating expenses, on a monthly basis,
as follows:
$98,991 for September 2023; and
$120,541 for October 2023.
A copy of the order is available at https://urlcurt.com/u?l=58uKia
from PacerMonitor.com.
About Gur-Meat Inc.
Gur-Meat Inc. is engaged in the business of processing meat
products and the selling of pre-packaged food products to fast food
restaurants and other constituents of the food industry since March
2009.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. P.R. Case No. 23-01914) on June 23,
2023. In the petition signed by Mariely Ramos Rojas, president, the
Debtor disclosed $292,906 in assets and $3,598,904 in liabilities.
Judge Maria De Los Angeles Gonzalez oversees the case.
Javier Vilarino, Esq., at Villarino and Associates, represents the
Debtor as legal counsel.
PUERTO RICO: Oversight Board Reaches Deal With PREPA Bondholders
----------------------------------------------------------------
Rick Archer of Law360 reports that the Financial Oversight and
Management Board for Puerto Rico announced Aug. 25, 2023, that it
filed the third amended Plan of Adjustment to reduce more than $10
billion of total asserted claims by various creditors against the
Puerto Rico Electric Power Authority (PREPA) by almost 80%, to the
equivalent of $2.5 billion, excluding pension liabilities.
The third amended Plan includes a Restructuring Support Agreement
(RSA) with funds and accounts managed by BlackRock Financial
Management Inc. and its affiliates, with Nuveen Asset Management
LLC, Franklin Advisers, Whitebox Advisors LLC, and Taconic Capital
Advisors LP, who together hold over 40% of the uninsured PREPA
bonds. The Oversight Board also amended its previous agreement with
bond insurer National Public Finance Guarantee Corp. Combined with
other previous agreements and settlements that remain in place,
approximately 43% of PREPA's creditors support the third amended
Plan.
"This third amended Plan is truly a breakthrough," said the
Oversight Board's Chairman David Skeel. "After the most intense
negotiations and mediation in the entire Puerto Rico debt
restructuring process, we built a Plan with substantial support
from creditors that will enable PREPA to end its long bankruptcy.
This Plan will provide creditors with a fair recovery given the
difficult circumstances PREPA finds itself in but without
overburdening the people of Puerto Rico. The amended Plan we are
proposing is necessary for PREPA to remain a sustainable utility,
continue critical investments, and complete the transformation of
Puerto Rico's energy system to provide reliable energy and support
Puerto Rico's economic growth and fiscal stability."
The Oversight Board would like to thank the Honorable Shelley C.
Chapman and her mediation team for their assistance in the process
to reach consensual agreements to support the third amended Plan.
The amended Plan reflects the recent order by the U.S. District
Court for the District of Puerto Rico reducing the total bondholder
claims from around $8.5 billion to an allowed claim amount of
approximately $2.4 billion. It also conforms to the previously
disclosed debt sustainability analysis in the revised PREPA Fiscal
Plan certified in June 2023 that is based on the most recent
projections of PREPA's operating costs and future demand for its
services.
Under the amended Plan, bondholders who sign the RSA would receive
a base recovery of 44.4% on their claim as allowed by the court (or
12.5% of their asserted claim at the time PREPA entered the
bankruptcy proceedings under Title III of PROMESA). The
bondholders agree to support the amended Plan and not object to
confirmation by the U.S. District Court or appeal after
confirmation.
Bondholders who decline to sign the RSA will receive 12.5% of their
allowed claim (3.5% of their asserted claim).
Under the amended agreement with National, the bond insurer would
recover a base amount of 68.4% of its share of the allowed bond
claim (or 19.27% of its asserted claim).
The Plan includes two contingent value instruments (CVI).
Bondholders would receive the revenue from the fixed fee element of
the PREPA legacy debt charge if PREPA repays its new bonds sooner
than the expected 35 years and electricity demand exceeds the PREPA
Fiscal Plan projections.
Bondholders would also receive a share of the savings in the cost
of fuel generated by the operator of PREPA's power plants for the
term of the operator's agreement.
General unsecured creditors would recover approximately 13.5% of
their claims, which was unaffected by the U.S. District Court's
ruling on bondholder claims.
The prior Plan Support Agreement (PSA) with PREPA's Fuel Line
Lenders to receive new Series A bonds, a Settlement Agreement with
holders of approximately $75 million in uninsured PREPA bonds, and
a plan support commitment from Vitol Inc. remain in place.
The BlackRock managed funds and accounts, Nuveen, Taconic,
Whitebox, and Franklin have committed to purchase the new Series B
Bonds to be issued by PREPA under the amended Plan for $1.6 billion
in cash. This will enable PREPA to pay certain creditors under the
Plan in cash rather than in new bonds. The Series B Bonds will
carry an average annual interest rate (coupon) of approximately 7%
and will be paid by a hybrid legacy charge consisting of a flat
connection fee and a volumetric charge that would be added to PREPA
customers' electricity bills based in part on their electricity
usage.
In the third amended Plan, this PREPA legacy charge is
substantially reduced from the previous Plan.
The estimated PREPA legacy charge for customers not currently
benefiting from subsidized electricity rates would now be, on
average, about $8.71 a month, a 5% increase in the overall
electricity bill based on the updated data in the PREPA Fiscal
Plan.
The PREPA legacy charge would exclude qualifying low-income
residential customers from the connection fee and the volumetric
charge for up to 425 kilowatt hours (kWh) per month, the usage for
median income households in Puerto Rico according to data provided
by LUMA Energy and other sources. Almost half of PREPA's roughly
1.4 million residential customers would not pay any PREPA legacy
charge if their consumption remains under 425 kWh per month.
For non-subsidized residential customers, the proposed PREPA legacy
charge would be:
* A flat $1 per month connection fee.
* $0.007 per kWh for up to 425 kWh per month of electricity
provided by PREPA, and $0.027 per kWh for electricity above 425 kWh
per month.
For commercial, industrial, and government customers, the PREPA
legacy proposed charge would be:
* A connection fee of $1.25 per month for small business
customers and smaller industrial companies, and up to $112.50 per
month for large businesses proportional to their current rate.
* Between $0.013 and $0.027 per kWh per month for electricity
provided by PREPA.
The proposed PREPA legacy charge remains subject to approval by the
Puerto Rico Energy Bureau (PREB), the independent energy
regulator.
The Oversight Board took many factors and significant data into
consideration to determine the PREPA legacy charge, and carefully
analyzed how much Puerto Rican households pay for their energy
needs as a share of their income.
In June, the Oversight Board certified a revised Fiscal Plan for
PREPA that reflect updated projections for electricity demand and
costs. The projections PREPA and grid operator LUMA Energy
submitted to the Oversight Board for the new Fiscal Plan included a
higher cost forecast than previously projected, including costs
related to the mandated energy efficiency initiatives.
The PREPA pension treatment remains unchanged under the third
amended Plan. PREPA retirees will be paid in full for all benefits
earned through the effective date of the Plan. After that date, no
further benefits can be earned under the defined benefit plan by
existing or new participants.
Current PREPA employees and those who previously moved to
government employment but remained in PREPA's plan will be able to
enroll in the government's defined contribution plan.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States. The chief of state is the President of the
United States of America. The head of government is an elected
Governor. There are two legislative chambers: the House of
Representatives, 51 seats, and the Senate, 27 seats. The
governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the son
of former governor Pedro Rossello.
In 2016, the U.S. Congress passed PROMESA, which, among other
things, created the Financial Oversight and Management Board and
imposed an automatic stay on creditor lawsuits against the
government, which expired May 1, 2017.
The members of the oversight board are: (i) Andrew G. Biggs, (ii)
Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J.
Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii)
David A. Skeel Jr.
On May 3, 2017, the Commonwealth of Puerto Rico filed a petition
for relief under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The case is
pending in the United States District Court for the District of
Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's
PROMESA petition is available at
http://bankrupt.com/misc/17-01578-00001.pdf
On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation
(COFINA) commenced a case under Title III of PROMESA (D.P.R. Case
No. 17-01599). Joint administration has been sought for the Title
III cases.
On May 21, 2017, two more agencies -- Employees Retirement System
of the Government of the Commonwealth of Puerto Rico and Puerto
Rico Highways and Transportation Authority (Case Nos. 17-01685 and
17-01686) -- commenced Title III cases.
U.S. Chief Justice John Roberts named U.S. District Judge Laura
Taylor Swain to preside over the Title III cases.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq.,
at O'Neill & Borges LLC are onboard as attorneys.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains the case Web site
https://cases.primeclerk.com/puertorico
Jones Day is serving as counsel to certain ERS bondholders.
Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General
Obligation Bondholders.
===============
X X X X X X X X
===============
LATAM: IDB and CONAFIPS Design Project to Promote Bio-Businesses
----------------------------------------------------------------
The Inter-American Development Bank (IDB) and the Corporacion
Nacional de Finanzas Populares y Solidarias (CONAFIPS) are
preparing a new project that will promote the bioeconomy -
nature-based productive activity that does not degrade the
environment - in the Ecuadorian Amazon.
The project was announced during the Finance in Common Summit
(FiCS). The project includes $21.3 million in IDB financing for
CONAFIPS and is subject to approval by the IDB's executive board.
The Ecuadorian Amazon holds bio-businesses potential with an
estimated $124 million in initial demand for financing. This demand
is concentrated mainly in micro and small enterprises that are part
of the popular and solidarity economy. However, lack of supply from
the local financial system continues to be a major barrier to the
development of bio-businesses.;
In this context, the project will increase access to credit and
investment in bio-businesses through CONAFIPS. This initiative will
benefit an estimated 2,000 bio-businesses in the country's popular
and solidarity economy, including microenterprises and small
producers, producer associations and cooperatives, and medium-sized
companies.
The project includes an innovative combination of different IDB
financial instruments, including loans and non-reimbursable
resources for investment and technical assistance. CONAFIPS will
channel the credit through savings and loan cooperatives located in
the Ecuadorian Amazon.
The project will have three components. The first will focus on
financing bio-businesses, with terms and conditions that match
their risk profiles. The second will establish a loss coverage fund
administered by CONAFIPS to help reduce the perception that
bio-businesses are high-risk. The third will focus on strengthening
the institutional capacity of CONAFIPS and the savings and loan
cooperatives.
This initiative is part of the IDB-led Green Coalition that was
formed to help implement critical sustainable development
objectives. The coalition brings together development banks
operating in the Amazon region under the umbrella of the Amazonia
Forever program and creates a space for collaborative and
coordinated solutions.
*********
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
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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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