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/raid1/www/Hosts/bankrupt/TCRLA_Public/230922.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 22, 2023, Vol. 24, No. 191 Headlines A R G E N T I N A ARGENTINA: Holds Interest Rate Steady Despite Inflation Spike ARGENTINA: To Release Inflation Estimate on a Weekly Basis B A H A M A S FTX GROUP: Gets Court Approval to Sell Crypto Assets B R A Z I L PRUMO PARTICIPACOES: Fitch Affirms BB+ Rating on USD350M Sec. Notes C A Y M A N I S L A N D S CAYMAN ISLANDS: Tourism Execs Scolded Over Tourism Payment Scandal C H I L E CODELCO: Chairman Calls Claims of Insolvency Risk 'Nonsense' LATAM AIRLINES: S&P Upgrades ICR to 'B', Outlook Positive C O L O M B I A GRAN TIERRA: Fitch Gives 'B' Rating on USD540M Sr. Secured Notes D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Interannual Inflation Rose to 4.27% in August G U A T E M A L A NAUTILUS INKIA: S&P Cuts Debt Rating to B+ on Guatemala Assets Sale J A M A I C A JAMAICA: STATIN Reports 6.8% Annual Inflation as at August - - - - - ================= A R G E N T I N A ================= ARGENTINA: Holds Interest Rate Steady Despite Inflation Spike ------------------------------------------------------------- globalinsolvency.com, citing Reuters, reports that Argentina's central bank (BCRA) board members decided to hold the benchmark interest rate steady at 118% at a meeting, a source familiar with the matter said, despite the country's inflation rate hitting an over 30-year high in August. August inflation data published showed annual inflation running at over 124%, with the monthly rate at 12.4%, its highest level since 1991, deepening a cost-of-living crisis ahead of the presidential elections scheduled for October, according to globalinsolvency.com. Earlier, another official source said the political cost of raising the interest rate would be too high, the report notes. Argentina last month raised the benchmark interest rate to 118% from 97% after a shock open primary election in which radical libertarian Javier Milei got 30% of the vote, making him the favorite to win the presidential election in October, the report relays. Analysts have said the benchmark rate ought to be lifted to around 149% to curb price rises, with a central bank poll estimating inflation to end the year at around 169%, the report discloses. The first source, however, said the bank hoped inflation in September would moderate a bit. "August inflation was higher than expected, so September's will come lower than first anticipated . . . according to all high-frequency indicators," the source said, the report says. Argentina is facing a looming recession after drought disrupted its key farm sector, negative foreign currency reserves and a weak peso, while battling to salvage a $44 billion deal with the International Monetary Fund, the report adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. The IMF's executive board completed on August 23, 2023, the fifth and six reviews of Argentina's 30-month Extended Fund Facility (EFF), and approved a US$7.5-billion disbursement to Argentina as part of the larger program, which refinances payments Argentina owes the institution from a previous bailout that failed to stabilize the economy in 2018. Argentina would receive another IMF disbursement in November of about US$2.75 billion pending another staff-level agreement and board approval. S&P Global Ratings, on June 13, 2023, raised its local currency sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed its 'CCC-/C' foreign currency sovereign credit ratings on Argentina. The outlook on the long-term ratings is negative. S&P's 'CCC-' transfer and convertibility assessment is unchanged. None of its rated bond issues are affected. S&P said the negative outlook on the long-term ratings is based on the risks surrounding pronounced economic imbalances and policy uncertainties before and after the 2023 national elections. Divisions within the government coalition, and infighting among the opposition, constrain the sovereign's ability to implement timely changes in economic policy. Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from 'C' and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'. Fitch typically does not assign Outlooks to sovereigns with a rating of 'CCC+' or below. The upgrade of the FC IDR reflects that Fitch no longer deems a default-like process to have begun, as the authorities have not signaled a clear intention to follow through with an intra-public debt swap announced in March. The new 'CC' rating signals a default event of some sort appears probable in the coming years, regardless of the outcome of upcoming elections. The affirmation of the LC IDR at 'CCC-' follows the peso debt swap in June that Fitch did not deem to be a "distressed debt exchange" (DDE). Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. ARGENTINA: To Release Inflation Estimate on a Weekly Basis ---------------------------------------------------------- Buenos Aires Times reports that it seems the pace of Argentina's runaway rate is getting to be too much for even the professionals tasked with measuring it. Following the announcement that consumer prices rose 12.4 percent in August, the government said it would begin reporting on hikes every week, according to Buenos Aires Times. Rather than using the INDEC national statistics bureau, however, the Economy Ministry will release consumer price estimates via its Economy Policy Secretariat (SPE), which is headed by Gabriel Rubinstein, the deputy chief of the portfolio, the report notes. "We will be issuing a weekly inflation report every Friday," Rubinstein posted on the X social media network, the report says. For the first week of September, the estimate showed price increases of 2.1percent, with an inter-weekly decrease of 0.4 percent, the report notes. The official had replied to a post by the Secretariat concluding that "weekly inflation was easing," after analysing the evolution of prices in recent weeks, the report discloses. The weekly estimates, Rubinstein said, will be made "completely independently" of the INDEC national statistics bureau, which produces the official monthly indicator that serves as a reference point for the updating of contracts and adjusting of wages in Argentina, which "will continue with its usual publications," the report says. Ramiro Castiñera, director of the Econométrica consultancy firm, told the financial newspaper Ámbito Financiero that the decision is "inconsequential" because "it is not a measure of economic policy," the report relays. August's inflation figure was the highest recorded since March 1991, before the era of convertibility, a plan put in place during Carlos Menem's presidency that equated the value of the peso with that of the US dollar, came into effect, the report notes. The last time the INDEC recorded a double-digit figure (10.4 percent) was in April 2002, in the midst of the aftermath of the 2001 economic crisis, the report adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. The IMF's executive board completed on August 23, 2023, the fifth and six reviews of Argentina's 30-month Extended Fund Facility (EFF), and approved a US$7.5-billion disbursement to Argentina as part of the larger program, which refinances payments Argentina owes the institution from a previous bailout that failed to stabilize the economy in 2018. Argentina would receive another IMF disbursement in November of about US$2.75 billion pending another staff-level agreement and board approval. S&P Global Ratings, on June 13, 2023, raised its local currency sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed its 'CCC-/C' foreign currency sovereign credit ratings on Argentina. The outlook on the long-term ratings is negative. S&P's 'CCC-' transfer and convertibility assessment is unchanged. None of its rated bond issues are affected. S&P said the negative outlook on the long-term ratings is based on the risks surrounding pronounced economic imbalances and policy uncertainties before and after the 2023 national elections. Divisions within the government coalition, and infighting among the opposition, constrain the sovereign's ability to implement timely changes in economic policy. Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from 'C' and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'. Fitch typically does not assign Outlooks to sovereigns with a rating of 'CCC+' or below. The upgrade of the FC IDR reflects that Fitch no longer deems a default-like process to have begun, as the authorities have not signaled a clear intention to follow through with an intra-public debt swap announced in March. The new 'CC' rating signals a default event of some sort appears probable in the coming years, regardless of the outcome of upcoming elections. The affirmation of the LC IDR at 'CCC-' follows the peso debt swap in June that Fitch did not deem to be a "distressed debt exchange" (DDE). Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. ============= B A H A M A S ============= FTX GROUP: Gets Court Approval to Sell Crypto Assets ---------------------------------------------------- Dietrich Knauth at Reuters reports that bankrupt crypto exchange FTX received U.S. court permission on Sept. 13 to liquidate cryptocurrency assets, a move the company said would allow it to repay customers in U.S. dollars and minimize risks related to price volatility in crypto markets. U.S. Bankruptcy Judge John Dorsey approved FTX's proposal at a court hearing in Wilmington, Delaware, allowing FTX to sell up to $100 million in cryptocurrency per week and enter into hedging and staking agreements that will allow FTX to minimize the risk of price volatility and earn passive income on more mainstream crypto assets like bitcoin and ether, according to Reuters. FTX's request was supported by the official committee appointed to represent its customers in the bankruptcy, and by an ad hoc committee that represents non-U.S. customers with deposits on FTX.com's international exchange, the report notes. During the hearing, Dorsey overruled concerns raised by two FTX customers who said FTX sales could cause crypto prices to crash and that FTX may not own all of the crypto that it holds in its accounts, the report relays. FTX said in court filings it was keenly aware of the risk that its effort to liquidate coins could move crypto markets, the report notes. It said it had hired U.S. crypto firm Galaxy as an investment advisor in part to manage the risk that "information leakage" would lead to short-selling activity and sharp declines in the price of crypto, the report says. But keeping its current crypto portfolio intact also carries risks, potentially locking FTX into holding certain assets as their prices decline, according to FTX's court papers, the report relays. Dorsey allowed FTX to increase its liquidation pace to up to $200 million per week, if both creditors committees agree, the report discloses. FTX said in a court filing it owns $3.4 billion in cryptocurrencies, including $1.16 billion in Solana, $560 million in bitcoin, and $192 million in ether, the report notes. FTX filed for bankruptcy in November 2022 in the wake of claims that it misused and lost billions of dollars worth of customers' crypto deposits, the report relays. FTX has recovered more than $7 billion in assets to repay customers, and it is pursuing additional recoveries through lawsuits against FTX insiders and other defendants that received money from FTX before it went bankrupt, the report says. FTX founder Sam Bankman-Fried has pleaded not guilty to charges that he defrauded FTX customers by using their funds to prop up his own risky investments, the report notes. Other former FTX executives have pleaded guilty to criminal charges, the report adds. About FTX Group FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests. Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations. At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 million in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10, 2022, showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent, maintaining the page https://cases.ra.kroll.com/FTX/Home-Index The Official Committee of Unsecured Creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the Committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. =========== B R A Z I L =========== PRUMO PARTICIPACOES: Fitch Affirms BB+ Rating on USD350M Sec. Notes ------------------------------------------------------------------- Fitch Ratings has affirmed the 'BB+' rating of the fixed-rate USD350 million senior secured notes issued by Prumo Participacoes e Investimentos S.A. (Prumopar). The Rating Outlook is Stable. RATING RATIONALE The rating reflects Prumopar's stable cash flow, derived from distributions from Ferroport Logistica Comercial Exportadora S.A (Ferroport). Ferroport benefits from a long term take-or-pay (ToP) agreement with a creditworthy counterparty and is a strategic asset for Anglo American plc as the sole export terminal for the iron ore produced by its Brazilian subsidiary's mines in Minas Gerais state. Revenues as well as the debt service are denominated in U.S. dollars (USD), while operational expenses are linked to Brazilian Reais (BRL), exposing the transaction to BRL appreciation. The notes have a fixed rate and include a balloon payment at maturity in 2031. In Fitch's scenarios, the refinancing risk is mitigated by a cash sweep mechanism that fully amortizes the debt, as well as the eight years ToP tail in Fitch's Rating Case. Under the rating case the minimum Project Life Coverage Ratio (PLCR) is 1.8x in 2023 and by the time of the refinance in 2031 the projected PLCR is 7.8x. Despite the metrics being commensurate with a higher rating, the rating is constrained by Brazil's country ceiling due to exposure to transfer and convertibility risk. KEY RATING DRIVERS Dedicated Terminal [Revenue Risk: Volume - Midrange]: Ferroport operates since 2014 and benefits from a long-term ToP agreement with Anglo American Minerio de Ferro Brasil S.A. (AAMFB), subsidiary of Anglo American plc (BBB+/Stable). It is a small port of call, built to suit Anglo's Minas-Rio iron-ore project and handles a specialized type of cargo, with its inbound market access highly dependent on the slurry pipeline from the mine into the port. Long Term Take-or-Pay Agreement [Revenue Risk: Price - Stronger]: The ToP agreement sets forth annual tariffs readjustments that follow two-thirds of U.S. inflation, measured by Producer Price Index (PPI) for Industrial Commodities, and it has been readjusted in a timely manner since the port began operations. Fitch's cases do not include interruptions similar to the suspension of payments under the ToP agreement that occurred in 2018 concurrent with leaks in the AAMFB´s slurry pipeline. The revenues and debt are U.S. dollar-denominated, but operational costs and expenses are denominated in BRL, exposing the transaction to Brazilian Real appreciation scenarios when margin EBITDA is reduced due to higher USD equivalent operational costs and expenses. Ferroport is also entitled to collect port access fees based on the number of vessels berthing, oil transshipment volume and berthing time. Adequate Infrastructure [Infrastructure Development & Renewal - Midrange]: Ferroport's facilities are new and key pieces of equipment are expected to have long useful lives. No replacement requirements are foreseen throughout the life of the transaction. Planned investments comprise predominantly channel dredging, increase of stacking capacity and maintenance works to preserve operational efficiency and environmental compliance. The ToP establishes the potential for expansion, and Ferroport has the option to agree to expand; if it does, the contract establishes an additional tariff for this incremental volume, calculated in order to assure an Internal Rate of Return (IRR) of 15%. Otherwise, AAMFB has the option to make required the capex itself. However, as per transaction documents, capex in excess of USD 0 million requires bondholders' approval. Refinance Risk Mitigated by Cash Sweep [Debt Structure - Midrange]: The debt has a fixed interest rate and its legal amortization comprises a balloon payment of up to 55.1% (USD193 million) in 2031. The debt structure also contemplates a target amortization schedule to allow the debt to be fully amortized in 12 years through a cash sweep mechanism. The debt structure also counts with a six-month offshore DSRA and lock-up provisions that require, among others, compliance with target debt balance coupled for Prumopar to be allowed to distribute dividends. Financial Profile In Fitch's rating case, Prumopar can fully repay the debt at maturity. Refinancing risk is also mitigated by a PLCR, which considers the cash flows available for debt service until the end of ToP agreement, of 7.8x in 2031 in Fitch's Rating Case. Prumopar's Net Debt-to-CFADS peak is 6.2x in 2024, a comfortable level in light of the eight-year ToP tail. Prumopar metrics are commensurate to higher ratings according to Transportation Criteria; nonetheless, its rating is constrained by Brazil's country ceiling as the notes are denominated in USD and revenues are paid in local currency. PEER GROUP Prumopar's closest peer is North Queensland Export Terminal Pty Ltd (NQXT; senior secured notes; BB+/Stable). Both are single-purpose mineral export terminals, comprise medium- to long-term ToP contracts and present refinance risk. Under Rating case, NQXT presents average net debt/EBITDA of 2.2x over the next five years which is lower than Prumopar's. NQXT's rating is constrained by uncertainty around NQXT's long-term capital structure and its ability to access external funding. Terminales Portuarios Euroandinos Paita's (Paita; secured notes at BBB-/Stable) is also a close peer. Paita is a secondary port of call located in Peru, which is characterized by moderate volatility, concentration in commodities and a pricing mechanism that allows for tariff adjustments above U.S. inflation. Under Fitch's rating case, Paita's minimum and average DSCR are 2.3x and 3.1x, respectively, which is higher than the Prumopar's minimum PCLR of 1.8x justifying the higher rating. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Sustained disruption in operations, negatively affecting cash flows; - A negative rating action on Brazil's Sovereign Rating. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - A strengthening of the credit profile of the Brazilian sovereign, particularly the risk of imposing controls on the transfer of foreign currency; - Achievement of the target amortization schedule on a sustained basis; - Favorable track record of operations without disruption. TRANSACTION SUMMARY Prumopar is a wholly-owned subsidiary of Prumo Logistica S.A. that holds a 50% share of Ferroport, a joint venture between Prumopar and Anglo American Investimentos Minerio de Ferro Ltda., a subsidiary of Anglo American plc. Ferroport is the exclusive export terminal for iron ore produced by Anglo's Minas-Rio project located in Minas Gerais. Ferroport is the owner of an area of 300 hectares in the Acu Port, where iron ore is processed, handled and stored. The facilities include an offshore structure comprising an access bridge, access canal, breakwater and two berths for iron ore loading. Ferroport benefits from a 25-year ToP with AAMFB, until 2039, for 26.6 million wet metric tons per year. Ferroport was also responsible for the construction of the T1 port terminal and signed a Port Access Agreement with the shareholders, also valid until 2039, which establishes that Ferroport is responsible for the maintenance of T1 offshore infrastructure, including the dredging of access channel and breakwater, and will charge port fees based on the number of vessels berthing, oil transhipment volume and berthing time. Ferroport is the last line in the logistics chain and an integral part of Anglo's Minas-Rio iron-ore project, which comprises 5.3 billion tons of mineral resources. The Minas-Rio project is located in the States of Minas Gerais and Rio de Janeiro. It is 100% owned by Anglo American plc, and it is composed of integrated systems of open pit mines, a beneficiation plant, a 529 km slurry pipeline and lastly, Ferroport. CREDIT UPDATE Anglo American's ToP provides for resilient revenues regardless the volume handled. Ferroport handled 21.3 and 11.2 million tons of iron ore in 2022 and in the first half of 2023, respectively. In 2022, Ferroport's adjusted EBITDA increased by 4.6%. As a result, Ferroport was able to distribute dividends of BRL 259.6 million to Prumopar. This allowed Prumopar to meet its debt service obligations in accordance with the amortization schedule. Additionally, Prumopar provided an intercompany loan of BRL100.7 million to its ultimate shareholder in 2022. FINANCIAL ANALYSIS The main assumptions of Fitch's Base Case include: - US PPI: 3.6% in 2023, 2.7% in 2024 and 2.5% from 2025 onwards; - Foreign Exchange Rate (BLR/USD): 5.10 in 2023, 5.20 in 2024, 5.25 in 2025 and 1.25% annual depreciation from 2026 onwards; - Volume: minimum guarantee throughput of 26.6 million tons per year; - Tariffs: adjusted according ToP agreement (67% of US PPI); - Operational and Capital expenses: 5% higher than management's case; - Transshipment volume (Invoiced Operations per year): 192 in 2023, 262 in 2024, 293 in 2025 and 320 in 2026. The same assumptions were used in the rating scenario, with the exception of: - Operational and Capital expenses: 10% higher than management's case; - Transshipment volume (Invoiced Operations per year): 185 in 2023, 251 in 2024, 276 in 2025 and 287 in 2026. In Fitch's Base Case, minimum PLCR is 1.8x, considering the ToP tenor. Maximum leverage (net debt/CFADS) is 5.9x in 2024. In 2031, the PLCR is 8.3x and the debt is fully amortized considering the target schedule. In Fitch's Rating Case, minimum PLCR is 1.8x, also considering the ToP tenor. Maximum leverage (net debt/CFADS) is 6.2x in 2024. In 2031, the PLCR is 7.8x and the debt is also fully amortized considering the target schedule. 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 ----------- ------ ----- Prumo Participacoes e Investimentos S/A Prumo Participacoes e Investimentos S/A/Notes/1 LT LT BB+ Affirmed BB+ =========================== C A Y M A N I S L A N D S =========================== CAYMAN ISLANDS: Tourism Execs Scolded Over Tourism Payment Scandal ------------------------------------------------------------------ Royal Gazette reports that Cayman Islands Tourism officials have been ordered to hand over documents linked to a controversial sponsorship strategy, following a 20-month freedom of information battle with the Cayman Compass, the news organisation has reported. An article written by former Bermudareporter James Whittaker details how the Cayman ombudsman has rejected the government's claim that requested information was commercially sensitive or protected as trade secrets that could not be shared with the public, according to Royal Gazette. The Compass reported that the department used more than half-a-million dollars of taxpayer funds to sponsor British sports teams over a period of three years in an apparent effort to boost tourism from the UK, the report notes. Some of the deals involve televised teams including London Irish Rugby Club, Portsmouth FC and Gloucestershire County Cricket Club, the reprot says. But others include small amateur sports clubs that "attract almost no media coverage or support beyond a small coterie of family and friends". Chief among those is the Old Cranleighan Hockey Club, the report discloses. While some redacted information had been previously supplied, the ombudsman reprimanded the Cayman Department of Tourism for its slow and selective response, saying it was not an acceptable way to answer freedom of information requests, the report says. The Compass reported: "One of the teams sponsored was a recreational field hockey team, with no fanbase, linked to Adrian White, Cayman's senior tourism official in the UK, the report notes. "Those details emerged in February of this year following a Compass open records request, filed 12 months earlier. However, the department withheld details of the contracts, what it got in return and any business case or value for money analysis in its response, the report relays. "Tourism leaders said at that time that they were unaware of the connection between White and the Old Cranleighan Hockey Club, which received GBP10,000-a-year from government over the three years covered in the response, until the Compass‘s investigation," the report relays The Compass added that: "White is linked to the club, has played for its teams and coached in its junior programme. His LinkedIn profile indicates he attended the affiliated Cranleigh School, the report notes. "White's involvement with the Surrey hockey team raises serious questions about how the teams that benefited from Cayman Islands sponsorship money were selected, the report notes. "While the records provided in response to the Compass FOI request included the annual payments made by the Department of Tourism to each club, there were limited details about what the department or the country got in return," the report discloses. A Department of Tourism spokesperson said it took potential conflicts of interest seriously and was reviewing the matter, the report says. It has 45 days to indicate if it intends to appeal the ombudsman's ruling, the report adds. ========= C H I L E ========= CODELCO: Chairman Calls Claims of Insolvency Risk 'Nonsense' ------------------------------------------------------------ Fabian Andres Cambero at Reuters reports that the chairman of Chilean state-owned Codelco, the world's largest copper producer, told lawmakers that the company was "financially solid," rejecting an industry body report that had said it was at risk of insolvency. "Do any of you believe that Codelco is truly at risk of insolvency? I mean, that seems like nonsense to me," chairman Maximo Pacheco said, according to Reuters. Pacheco was responding to a report last month from copper studies center CESCO that said if production promises are not met, high levels of debt could lead to insolvency, the report notes. "It is not appropriate for us to say that Codelco is a company that has financial problems or balance sheet problems," Pacheco said, the report relays. "In a year when production fell and we are behind schedule with projects, Codelco's EBITDA will exceed $5 billion," the report notes. Beset by operational problems and delays in its key upgrade projects, Codelco reported its lowest levels of production in a quarter century in 2022, the report discloses. In July, the company lowered its production estimate for this year to 1.31-1.35 million metric tons of copper, down from 1.35-1.45 million previously forecast, the report says. Meanwhile, its debt has risen to around $20 billion, the report adds. As reported in the Troubled Company Reporter-Latin America in October 2017, Moody's Investors Service affirmed Corporacion Nacional del Cobre de Chile's (CODELCO) A3 long-term senior unsecured ratings and changed the outlook to stable from negative. At the same time, Moody's raised CODELCO's baseline credit assessment (BCA) to ba1 from ba2. LATAM AIRLINES: S&P Upgrades ICR to 'B', Outlook Positive --------------------------------------------------------- S&P Global Ratings, on Sept. 20, 2023, raised its issuer credit rating on Latam Airlines Group S.A. to 'B' from 'B-' and raised its ratings on senior secured notes and term loan B to 'BB-' from 'B+'. The positive outlook reflects the increased potential for an upgrade in the next 6-12 months, as S&P believes Latam could generate and maintain funds from operations (FFO) to debt firmly above 20%. S&P upgrades of Latam follows the sharp improvement in its credit measures through the first half of 2023 and the upward revision of its base-case scenario for the next two years. Demand for air travel remains healthy, which coupled with rational supply, kept yields high and underpinned Latam's earnings and cash flow in the first half of 2023. The company is on track to exceed pre-pandemic revenue and EBITDA. S&P forecasts S&P-adjusted EBITDA close to $2.4 billion in 2023 and $2.5 billion in 2024, up from $962 million in 2022 and $2.2 billion in 2019. Furthermore, it expects the company will generate free operating cash flow (FOCF) of more than $750 million in 2023 and close to $400 million in 2024. As a result, S&P estimates the company's FFO to debt between 24% and 26% and S&P-adjusted gross debt to EBITDA of 3x in 2023 and dipping below that level in 2024. These measures are stronger than our previous forecasts and consistent with better credit quality. Demand for air travel has remained strong despite subdued economic growth, and high inflation and interest rates. Additionally, capacity deployment has been somewhat slower, which kept Latam's yields about 14% higher than in the first half of 2022. For 2024, we expect modest economic growth but inflation and interest rates to fall, which should continue supporting travel demand in a still underpenetrated region. Furthermore, supply will likely remain constrained amid delays in aircraft deliveries, retirement of less efficient aircraft, exit of competitors in some markets (particularly in Perú and Colombia), and tight financial conditions for some of Latam's competitors that are focusing on improving profitability and cash flow. Thus, S&P expects a rational air travel market, minor drops in yields in the next two years from the record levels this year, but yield and revenue passenger kilometer (RPK) growth to remain healthy supporting top-line revenue. During its Chapter 11 proceedings, Latam was able to both slash debt and improve its cost structure. S&P said, "We estimate Latam's adjusted debt (including operating leases) will be about $7.3 billion by the end of 2023, down from $10.4 billion in December 2019. There could be minor debt reductions in next two years if the company uses free cash flow to pay down debt. Between 2020 and 2021, Latam implemented initiatives that resulted in $1.3 billion in annual cost savings, including a 27% reduction in workforce, comprehensive renegotiation of supplier contracts, digitalization, and automatization. As a result, we expect cost per available seat kilometer (CASK; excluding fuel) to remain between 4.6 and 4.8 cents in 2023 and 2024, compared with 4.53 cents in 2019 despite higher inflation and slightly lower capacity than in 2019. Finally, Latam renegotiated its leases, reducing fleet cash cost by about 40%. We believe all of these give comfort to our base case, will support the company's profitability, cash flow, and leverage reduction in the next two years." S&P said, "Given ample revolving credit facilities (RCFs) for $1.1 billion that Latam signed upon its emergence from bankruptcy, robust operating cash flow, and no significant maturities, we expect the company to maintain a very comfortable liquidity in the next two years for the rating level. As a result, we revised our liquidity assessment on Latam to adequate from less than adequate. However, the company's cost of debt remains high." The challenge ahead for the company is to refinance the emergence capital structure with better conditions and lower costs during the next few years, reflecting the improved credit quality, and for instance, currently improved bond yields. =============== C O L O M B I A =============== GRAN TIERRA: Fitch Gives 'B' Rating on USD540M Sr. Secured Notes ---------------------------------------------------------------- Fitch Ratings has assigned 'B'/'RR4' ratings to Gran Tierra Energy Inc.'s (GTE) proposed issuance of up to USD540 million of amortizing senior secured notes due in 2029. Net debt proceeds will be used to exchange any and all of the outstanding 6.25% senior unsecured notes due 2025 issued by Gran Tierra Energy International Holdings Ltd. and 7.75% senior unsecured notes due 2027 issued by Gran Tierra Energy Inc. GTE's ratings and Outlook reflect an adequate capital structure and low-cost operating profile, constrained by small scale of operations and limited geographic diversification. Fitch forecasts the company's gross production will grow at a CAGR of 15% over the next three years, reaching an average of 47,000boed by YE 2025, while maintaining PDP and 1P reserve life at 4.0 years and 7.0 years, respectively. Fitch estimates GTE's debt/1P should be at or below USD7/boe, and gross EBITDA leverage at or below 2.0x, over the rating horizon. KEY RATING DRIVERS Proposed Exchange: The existing 2025 notes will be exchanged at an exchange ratio of 108% of par and will include a USD60 million of cash consideration over the USD272 million outstanding amount. There will be no cash considerations for the 2027 notes and will be exchanged at at an exchange ratio of 102% of par. The new notes will bear interest at an annual rate of 9.50% on the outstanding principal amount, payable semi-annually in arrears, and will be secured by a pledge over 100% of the equity interest in the operating entities Gran Tierra Energy Colombia GmbH (GTEC) and Gran Tierra Operations Colombia GmbH (GTOC). This transaction is voluntary and subject to bondholder participation. Small Concentrated Production Profile: GTE's ratings are constrained by its production size, projected to increase to 47,000boed by YE 2025, in line with Fitch's positive sensitivity trigger of 45,000boed. The company has a concentrated production profile where the Midas block accounted for 55% of total production as of 2Q23. GTE's PDP and 1P reserve life is stable and is expected to be close to 4.0 years and 7.0 years, respectively in 2023. Ambitious Growth Strategy: Fitch expects total production to reach 47,000boed by YE 2025, at a CAGR of 15% from YE 2022 production. Growth will come mainly from the Acordionero field as the company continues its development drilling plan while expanding its oil recovery program through waterflooding and the polymer injection. In August 2023, GTE renegotiated the agreement with Ecopetrol (BB+/Stable), extending the effective duration of Suroriente Block by 20 years. Low-Cost Production Profile: GTE's is well positioned compared with peers with half-cycle cost of production of USD22/boe in 2022 and expected to remain at or below USD20/boe over the next three years, down from USD25.0/boe in 2021. The company's half-cycle cost decreased in 2022 as interest expenses declined by USD7.3 million. GTE's production profile allows the company greater financial flexibility to absorb shocks in pricing, as lower cost of production has allowed GTE to sell at a deeper discount than peers. The rating case is assuming GTE will sell at an average discount to Brent of USD12.0/bbl over the rated horizon. Adequate Capital Structure: GTE's gross leverage is projected to be 1.5x in 2023, assuming an EBITDA of USD390 million and total debt of USD590 million, and is expected to remain at or below 2.0x over the rating horizon. Debt/1P is expected to be at or below USD7.0/boe assuming 1P replacement of 105%. In terms of capex, the company completed most of its development program in 1Q23, incurring in USD71 million and adding 12 new production wells. Fitch's base case assumes that the 2023-2026 USD696 million capex plan will be funded with internal cash flows without additional debt. DERIVATION SUMMARY Gran Tierra Energy's (GTE) credit and business profile is comparable with other small independent oil producers in Colombia. The ratings of SierraCol Energy (B+/Stable) and GeoPark (B+/Negative) are constrained to the 'B' category or below, given the inherent operational risk associated with the small scale and low diversification of their oil and gas production. GTE's improved production profile would be the highest among the 'B'-rated Colombian oil exploration and production companies. Fitch expects GTE's production will average 47,000boed by YE 2025. GTE's PDP reserve life is expected to be 4.0 years with a 1P reserve life 7.0 years, which compares well with SierraCol's PDP reserve life of 4.5 years and 1P reserve life of 7.1 years in 2022, and GeoPark's 4.0 years and 5.4 years, respectively. GTE's half-cycle production was USD22.1/boe in 2022 and the full-cycle cost is of USD38.3/boe. This is in line with SierraCol's half-cycle production cost of USD22.4/boe in 2022 and but higher than its full-cycle cost of USD34.2/boe and GeoPark, which is the lowest cost producer in the region at USD12.7/bbl and USD24.4/bbl. GTE's 2023 leverage is expected to be 1.5x, and total debt to PDP is expected to be USD11/boe and total debt to 1P be USD6/boe in 2023. KEY ASSUMPTIONS Fitch's Key Assumptions Within the Rating Case for the Issuer: - Fitch's price deck for Brent of $80 for 2023, $75 for 2024, $70 for 2025 and $65 thereafter; - Average daily gross production of 42,000 boed from 2023 through 2026; - Reserve replacement ratio of 105% per annum per rated horizon; - Lifting and transportation cost average of $16boe over rated horizon; - SG&A cost average of $3.25boe over rated horizon; - Hedging cost average of $0.5boe over rated horizon; - Consolidated capex of $696 million from 2023 through 2026 averaging $174 million per year; - Minimum cash balance assumed at $120 million over rated horizon; - Effective tax rate of 40% over rated horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Net production maintained at 45,000boed or more, while maintaining a 1P reserve life of seven years or greater; - Maintenance of a conservative financial profile with gross leverage of 2.5x or below and total debt/1P reserves of USD8/bbl or below. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Sustainable production size declines to below 30,000boed; - 1P reserve life declines to below seven years on a sustained basis; - A significant deterioration of credit metrics to total debt/EBITDA of 3.5x or more; - A persistently weak oil and gas pricing environment that impairs the longer-term value of its reserve base; - Sustained deterioration in liquidity below USD200 million and operating profile, particularly in conjunction with more aggressive dividend distributions than previously anticipated. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: GTE reported USD69 million in cash and equivalents as of 2Q23, plus a credit facility agreement with a borrowing base of up to USD50 million, that the company expects to draw to finance a portion of the cash consideration for the exchange of the 2025 Notes validly tendered. The rating case assumes GTE's FCF will be positive between 2023 and 2026 and that the company will end 2023 with USD100 million in cash, with coverage ratios above 5.0x and liquidity is expected to be at a minimum of USD200 million over the rated horizon. ISSUER PROFILE Gran Tierra is an independent energy company with an average oil production of approximately 33,000boed onshore in Colombia. GTE's blocks are located in the Middle Magdalena, Llanos and Putumayo basins. The company had 84MMboe of 1P reserve and 7.5-year reserve life as of FY 2022. ESG CONSIDERATIONS Gran Tierra Energy Inc. has an ESG Relevance Score of '4' for GHG Emissions & Air Quality due to the growing importance of policies designed to limit the greenhouse gas (GHG) emissions from the production of oil and gas and potentially lessening demand, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. 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 Recovery ----------- ------ -------- Gran Tierra Energy Inc. senior secured LT B New Rating RR4 =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Interannual Inflation Rose to 4.27% in August ----------------------------------------------------------------- Dominican Today reports that the Central Bank of the Dominican Republic (BCRD) has released its latest report on inflation for August 2023. The consumer price index (CPI) experienced a monthly increase of 0.52% in August, according to Dominican Today. This brought the annual inflation rate, measured from August 2022 to August 2023, to 4.27%. This rate falls within the target range of 4.0% ± 1.0% set by the monetary program, Dominican Today notes. The report emphasizes the effectiveness of the Central Bank's monetary policy in maintaining price stability within the established objective, Dominican Today relays. It also highlights that the Dominican Republic's interannual inflation rate is among the lowest in Latin American countries, showcasing the country's successful efforts in managing CPI variation within target ranges, Dominican Today says. The underlying inflation rate for August 2023 stood at 4.82%, also within the target range of 4.0% ± 1.0%, the report discloses. This rate has shown a downward trajectory in recent months, averaging a monthly variation of 0.32% over the past seven months, the report says. This trend is expected to continue, providing room for implementing monetary stimulus measures authorized by the Monetary Board, the report notes. The downward trajectory in underlying inflation allows for further initiatives to promote a decrease in bank interest rates, expand credit to the private sector in the national currency, and support productive activities and economic growth, Dominican Today relays. The report also breaks down the variation in prices by different categories, Dominican Today notes. The Food and Non-Alcoholic Beverages group had the most significant contribution to inflation in August, with a 1.27% increase, driven by price increases in items like fresh chicken, green bananas, potatoes, eggs, and sugar, Dominican Today says. Other groups, such as Education, Transportation, Housing, and Miscellaneous Goods and Services, also had impacts on inflation, with varying rates of increase, Dominican Today notes. The Central Bank's report underlines the importance of effective monetary policies in managing inflation and ensuring price stability in the Dominican Republic, ultimately contributing to a healthy economic environment, Dominican Today adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. On August 14, 2023, the TCR-LA reported that Moody's Investors Service 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. In September 2023, 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. 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 ================= NAUTILUS INKIA: S&P Cuts Debt Rating to B+ on Guatemala Assets Sale ------------------------------------------------------------------- On Sept. 18, 2023, S&P Global Ratings lowered its issuer credit rating on Nautilus Inkia Holdings SCS (Inkia) to 'BB-' from 'BB' and its issue-level rating to 'B+' from 'BB-', as the notes continue to be structurally subordinated. The negative outlook reflects S&P's view that it could downgrade Inkia further by one or more notches in the next 6-12 months if its parent company continues to adhere to its divestment strategy, for example, through the sale of new subsidiaries that represent a vast majority of consolidated EBITDA. This would further pressure the group's business risk profile. Moreover, a downgrade could follow a deterioration of the group's financial risk profile, which could occur if Inkia distributes the new sales proceeds as dividends instead of repurchasing debt at the holding level. I Squared Capital Advisors LLC, Nautilus Inkia Holdings SCS' (Inkia's) ultimate shareholder, recently announced the sale of its power transmission and distribution business in Guatemala to Threelands Energy Ltd. Inkia will distribute the sale proceeds as dividends to its shareholder. S&P said, "Nautilus consolidates several subsidiaries, which are co-issuers and jointly responsible for Inkia's $218 million existing bullet notes, which we now rate at 'B+'. In addition, Nautilus consolidates the financial results of Orazul Energy Peru S.A. (BB-/Stable/--) and other operating companies located in Latin America. We treat Nautilus as a single economic entity bearing the same default risk, given the level of integration and synergies among the group's entities, as well as the sharing of the top management and controlling shareholder." ============= J A M A I C A ============= JAMAICA: STATIN Reports 6.8% Annual Inflation as at August ---------------------------------------------------------- RJR News reports that the cost of goods and services in Jamaica increased by 6.8 per cent on an annual basis as at August. The Statistical Institute of Jamaica says the inflation rate was influenced by increases in the cost of the heavily weighted divisions: 'Food and Non-Alcoholic Beverages' and 'Restaurants and Accommodations Services,' according to RJR News. A further increase in costs was halted by a 1.2 per cent drop in the costs associated with 'Transportation,' the report notes. The rate of price increases was just outside the Bank of Jamaica's four to six per cent target range, the report relays. For the month of August alone, STATIN says prices went up by one per cent, the report discloses. The main contributor to this movement was a 1.4 per cent rise in the cost of 'Food and Non-Alcoholic Beverages'. There was also higher rates for mobile communication services, the report says. The BOJ projects that inflation will return to it target range by the end of the calendar year, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. S&P Global Ratings raised on September 13, 2023, 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. This is the best credit rating that Jamaica has received from S&P since it started rating the country's sovereign debt in 1999, according to The Gleaner. In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *