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/raid1/www/Hosts/bankrupt/TCRLA_Public/230928.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, September 28, 2023, Vol. 24, No. 195 Headlines A R G E N T I N A ARGENTINA: Adviser Details 'Urgent' Economic Measures by Milei B R A Z I L BRAZIL: Economic Activity at Start of 3rd Qtr. Beats Expectations BRAZIL: To Boost Infrastructure Financing to $4 Billion This Year C A Y M A N I S L A N D S KIB SUKUK: Fitch Affirms 'BB-(xgs)' Unsec. LongTerm EGS Rating NU HOLDINGS: S&P Assigns 'BB-' Issuer Credit Rating, Outlook Stable C O L O M B I A TERMOCANDELARIA POWER: S&P Upgrades ICR to 'BB', Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Suspends Banana Exports; Seeks Price Stability M E X I C O ELECTRICIDAD FIRME: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable P E R U PERU: IDB OKs $300MM to Support Competitiveness & Economic Recovery P U E R T O R I C O GRUPO HIMA: U.S. Trustee Appoints New Committee Members LUCENA DAIRY: Files for Chapter 11 Bankruptcy - - - - - ================= A R G E N T I N A ================= ARGENTINA: Adviser Details 'Urgent' Economic Measures by Milei -------------------------------------------------------------- Buenos Aires Times reports that that a top adviser to presidential frontrunner Javier Milei has revealed details of the libertarian lawmaker's economic plans for Argentina. Dario Epstein assured that a potential Milei administration would move "urgently" to a zero fiscal deficit, avoid a Bonex Plan, or hyperinflation and also "solve the issue of Leliq bond liabilities as soon as possible," according to Buenos Aires Times. "We will respect contracts and honour debts. It's no minor thing to say this aloud two months away from December, because many people are talking about a Bonex Plan, or a likely hyperinflation, the report notes. We don't want that to happen, because in both scenarios, you end up hitting small savers or savings in general," the economist highlighted, the report relays. During talks organised by an investment fund, Epstein believed hyperinflation "is the most perverse form of adjustment, because it attacks the underprivileged directly, and they have fewer possibilities. And it leads to enormous levels of poverty," the report discloses. "That scenario doesn't help anyone. Much less Argentina," he stressed. He also held that one of the cyclical issues worrying him the most are the Leliqs issued by the Central Bank, the reprot says. "We need to solve it as soon as possible, because it's repressed inflation, and if I want to avoid hyperinflation, I need to control that," he highlighted. In this respect, he added: "I'm working on this, because if you clean up these securities somehow, it's much easier to think about tidying up international trade firstly, and then currency restrictions," the report notes. On the other hand, Epstein said that "the only anchor we can have initially is fiscal, there is no other. We have no reserves, no credibility, no credit. So it's urgent to bring the fiscal deficit to zero. Actually, if it could be turned into a surplus so much the better, and as soon as possible," the report discloses. "Our estimates are that the country will have a US$20-billion-plus trade surplus in 2024", and that level of income, he claimed, could lead to a "logical exchange rate, not kept behind on purpose," the report says. "I don't have a number (for the value of the exchange rate) but it's clear to me that I can't use one fostering imports and negatively affecting exports, and the gap is no good to me either. Because it doesn't help to devalue either when the gap is 100 percent the next day," he underlined, the report relays. As for the measures announced by Economy Minister Sergio Massa, he assessed: "he was doing 100 kilometres per hour, putting problems off, complicating the future, but avoiding hyperinflation. Now he has pushed the pedal and is doing 240 kilometres per hour. So we're worried that something unexpected might happen over the next few weeks," the report notes. Lastly, he pointed out that from La Libertad Avanza "we would like a normal transition to the Presidency on December 10, whoever it might be, the inauguration must be without a crisis. So we're concerned about what's going on," 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 R A Z I L =========== BRAZIL: Economic Activity at Start of 3rd Qtr. Beats Expectations ----------------------------------------------------------------- globalinsolvency.com, citing Reuters, reports the Brazilian economy kicked off the third quarter with a stronger-than-expected pace, bolstering recent upward revisions in the country's GDP growth forecast for 2023. The IBC-Br economic activity index, a key predictor of gross domestic product, registered seasonally adjusted growth of 0.44% in July from June, surpassing the median forecast of a 0.3% expansion in a Reuters poll of economists, according to globalinsolvency.com. According to the central bank, the IBC-Br was up 0.66% on a non-seasonally adjusted basis from July 2022 and marked a rise of 3.12% in the 12 months, the report notes. The data has revealed a significantly more resilient economy since the beginning of the year, and this trend has been sustained in recent months, said Rafael Perez, an economist at Suno Research, the report relays. However, Perez said he expected greater stability in economic activity by the end of this year, citing the cumulative effects of the central bank's restrictive monetary policy, the report notes. The central bank initiated an easing cycle last month, lowering its key interest rate to 13.25% after keeping it unchanged for nearly a year to combat high inflation in South America's largest economy, the report says. Policymakers are expected to once again reduce rates by half a percentage point, the report adds. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian general election. He was sworn in on January 1, 2023, as the 39th president of Brazil, succeeding Jair Bolsonaro. Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-', with a Stable Outlook. The upgrade reflects better-than-expected macroeconomic and fiscal performance amid successive shocks in recent years, proactive policies and reforms that have supported this, and Fitch's expectation that the new government will work toward further improvements. In mid-June 2023, S&P Global Ratings, revised the outlook on its long-term global scale ratings on Brazil to positive from stable. S&P affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil. S&P also affirmed its 'brAAA' national scale rating, and the outlook remains stable. The transfer and convertibility assessment remains 'BB+'. The positive outlook reflects signs of greater certainty about stable fiscal and monetary policy that could benefit Brazil's still-low GDP growth prospects. Continued GDP growth plus the emerging framework for fiscal policy could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position. Moody's credit rating for Brazil was last set at Ba2 in 2018 with stable outlook. Moody's affirmed the Ba2 issuer ratings and senior unsecured bond ratings in April 2022. DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term Foreign and Local Currency - Issuer Ratings to BB from BB (low). At the same time, DBRS Morningstar confirmed Brazil's Short-term Foreign and Local Currency - Issuer Ratings at R-4. The trend on all ratings is Stable (March 2018). BRAZIL: To Boost Infrastructure Financing to $4 Billion This Year ----------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Brazil's development bank BNDES plans to provide 20 billion reais (USD$4.1 billion) in funds for infrastructure projects this year, two-thirds more than in 2022 and mostly through the purchase of local debt issued by companies that invest in the sector. The strategy is aimed at encouraging private investors to join in the purchase of infrastructure bonds, increasing the impact of financing by BNDES, according to Felipe Borim Villen, deputy managing director of infrastructure at the bank, according to globalinsolvency.com. "BNDES has been able to attract capital markets to that type of investment, which is something infrastructure companies struggle with," Villen said in an interview. "Capital markets usually provide them with working capital, but not with long-term financing," the report notes. The bank has disbursed about 12 billion reais for infrastructure projects so far this year, the same amount provided during all of 2022, the report relays. About 60% of the funds were used in the purchase of infrastructure bonds, according to the director, the report notes. One of the operations helped Igua, one of the largest sanitation companies in Brazil, to obtain 3.8 billion reais through the issuance of local infrastructure bonds maturing in 20 and 29 years. BNDES purchased 1.8 billion reais of the offer, the report adds. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian general election. He was sworn in on January 1, 2023, as the 39th president of Brazil, succeeding Jair Bolsonaro. Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-', with a Stable Outlook. The upgrade reflects better-than-expected macroeconomic and fiscal performance amid successive shocks in recent years, proactive policies and reforms that have supported this, and Fitch's expectation that the new government will work toward further improvements. In mid-June 2023, S&P Global Ratings, revised the outlook on its long-term global scale ratings on Brazil to positive from stable. S&P affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil. S&P also affirmed its 'brAAA' national scale rating, and the outlook remains stable. The transfer and convertibility assessment remains 'BB+'. The positive outlook reflects signs of greater certainty about stable fiscal and monetary policy that could benefit Brazil's still-low GDP growth prospects. Continued GDP growth plus the emerging framework for fiscal policy could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position. Moody's credit rating for Brazil was last set at Ba2 in 2018 with stable outlook. Moody's affirmed the Ba2 issuer ratings and senior unsecured bond ratings in April 2022. DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term Foreign and Local Currency - Issuer Ratings to BB from BB (low). At the same time, DBRS Morningstar confirmed Brazil's Short-term Foreign and Local Currency - Issuer Ratings at R-4. The trend on all ratings is Stable (March 2018). =========================== C A Y M A N I S L A N D S =========================== KIB SUKUK: Fitch Affirms 'BB-(xgs)' Unsec. LongTerm EGS Rating -------------------------------------------------------------- Fitch Ratings has affirmed KIB Sukuk Limited's (KSL) senior unsecured long-term ex-government support (xgs) rating at 'BB-(xgs)' and removed it from Rating Watch Negative (RWN). The senior unsecured short-term ex-government support (xgs) rating has also been affirmed at 'B(xgs)'. All other ratings are unaffected. KIB Sukuk Limited is a special purpose vehicle, fully consolidated by Kuwait International Bank and has been set up solely to issue certificates (sukuk) under the programme to participate in the transactions contemplated by the transaction documents. The rating actions follow the removal of KIB's VR from RWN, which reflected Fitch's view that near-term risks to its standalone credit profile from capital erosion have reduced following the restoration of its capital buffers to a level appropriate for its risk profile. KEY RATING DRIVERS The senior unsecured long-term ex-government support (xgs) rating is in line with the bank's VR. The Senior unsecured short-term ex-government support (xgs) is mapped to the Long-Term IDR (xgs). RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade -- The senior unsecured long-term ex-government support (xgs) is sensitive to a negative change in the bank's VR. -- The bank's senior unsecured short-term (xgs) rating is primarily sensitive to a change in the Long-Term IDR (xgs) and could be downgraded if the latter was downgraded and mapped to a lower short-term rating in accordance with Fitch's criteria. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade -- The senior unsecured long-term ex-government support (xgs) is sensitive to a positive change in the bank's VR. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS KSL's ratings are driven by KIB's IDRs. 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 ----------- ------ ----- KIB Sukuk Limited senior unsecured ST (xgs) B(xgs) Affirmed B(xgs) senior unsecured LT (xgs) BB-(xgs) Affirmed BB-(xgs) NU HOLDINGS: S&P Assigns 'BB-' Issuer Credit Rating, Outlook Stable ------------------------------------------------------------------- S&P Global Ratings assigned its 'BB-' global scale issuer credit ratings to Nu Holdings Ltd. and Nu Financeira S.A. The outlook is stable on both ratings. Nu Holdings Ltd. is a non-operating holding company created in 2016 and headquartered in the Cayman Islands. Its main subsidiaries are Nu Pagamentos S.A., Nu Financeira S.A., Nu Mexico Financiera S.A., and Nu Colombia S.A. S&P's rating on Nu Financeira S.A. reflects its status as a core subsidiary of Nubank, given that the former is one of the group's main operating companies. In September 2022, Nubank achieved breakeven at the holding level and has been reporting stronger results since then. The institution reported $204 million of adjusted annual profit at the end of 2022 and $445 million in the first half of 2023. These results stemmed from the increasing financial margin, stronger operational efficiency, and greater capacity to manage expenses with credit provisions, despite rising risks in the credit card sector since 2022. As a result, Nubank's profitability surpassed those of institutions with a similar business model. S&P thinks Nubank will continue posting above-average results in the next few years. The credit portfolio, 81% of which consists of credit cards and 19% of personal loans, grew 48% annually on an FX neutral basis as of June 2023. This is partly because of its active client base of 68.8 million, which grew 32% at the same date. Additionally, Nubank intends to diversify into new business lines by increasing its participation in payroll-deductible loans and loans to small and midsize enterprises (SMEs). Thanks to portfolio growth and greater focus on products with higher profitability, the entity's financial margins and revenue have risen, bolstering operational efficiency. After an IPO at the NYSE in 2021, Nubank has sufficient capital to support operations in Brazil and to expand its operations in Mexico and Colombia. This, along with Nubank's stronger results, has helped it maintain a healthy capital level. Nu Financeira S.A.'s 20.2% Basel ratio as of June 2023 reinforced Nubank's capital position, giving the entity a solid cushion above the minimum regulatory level in Brazil of 10.5%. S&P's base-case scenario assumptions include the following factors: -- Brazil's GDP growth of 1.7% in 2023 and 1.5% in 2024. -- Loan portfolio growth (including SME lending and personal loans) of 40% in 2023 and 30% in 2024. -- Profitability to continue to improve, reflecting better payback ratio of Nubank's credit models, cost dilution as the entity gains scale, pay-off of high number of clients gathered over the years, lower growth of the number of credit card holders (reducing upfront costs), and revenue diversification from the lending and insurance business. -- Noninterest expenses on nominal basis to be relatively high in line with previous years but to gradually stabilize as the entity expands its capacity. Noninterest expenses are mainly for personnel, storing, processing data and credit-card issuance costs. -- Although deteriorating, nonperforming loans (NPLs) to remain below the industry average in the credit cards segment in the following years. -- No dividend payments to shareholders in the upcoming years. For the past several years, Nubank's asset quality metrics have been stable and better than the industry average, with NPLs of more than 90 days at 5.9% in the second quarter of 2023, versus 5.5% in the first quarter. The growth in the NPL ratio stems from a deterioration in the credit card industry, riskier credit mix on Nubank portfolio and high interest rates in Brazil since 2022. Despite these conditions, S&P thinks the expansion of the client base--which consists of credit card holders focused more on transactional operations and higher net interest margins due to a larger share of personal lending on its balance sheet--mitigates this risk. S&P said, "We expect Nubank's asset quality to continue to slip owing to its rapid growth. However, we expect the entity's delinquency levels to be below the industry average because of its know-how in building credit and risk profiles, improving the accuracy of its collection metrics." In addition, Nubank's loan loss reserves was $2.0 billion in June 2023 and $1.6 billion in March 2023. Therefore, the coverage ratio was 12.6% and 11.6% of the loan portfolio in Brazil and 214% of NPLs during the first and second quarters of 2023, respectively. In recent years, Nubank has been increasing its funding base through deposit growth. In June 2023, deposits reached more than $18 billion on FX neutral basis, representing most of its funding base, with a 23% annual growth. S&P thinks deposits from individuals support Nubank's stability because they're more diversified than wholesale-oriented funding. Also, this type of funding benefits from guarantees from the bank deposit guarantee fund. Nubank also has a robust cash position of $6.2 billion, without concentration of short-term maturities. Nu Holdings Ltd. doesn't hold any debt, but it guarantees debt of its Mexican and Colombian subsidiaries. As of June 2023, the total guaranteed debt was $740 million with maturities between 2023 and 2026. The total guaranteed debt is considerably lower than Nubank's cash position, which mitigates dependence on dividends. As of the same date, the cash available at the holding company was $1.7 billion, considering S&P Global Ratings'-adjusted metrics of broad liquid assets. This is sufficient for Nubank to cover its debts by 2.3x. Therefore, S&P thinks the company currently has enough cash and liquid assets to meet its obligations without depending on dividends or cash flows from its subsidiaries. =============== C O L O M B I A =============== TERMOCANDELARIA POWER: S&P Upgrades ICR to 'BB', Outlook Stable --------------------------------------------------------------- On Sept. 22, 2023, S&P Global Ratings raised the ratings on Colombian power company Termocandelaria Power S.A. (TPL) to 'BB' from 'BB-' and changed the outlook to stable from positive S&P said, "The stable outlook reflects our view that in the next 12 months the company will post EBITDA of around $300 million and debt to EBITDA below 3x, as we forecast capital expenditure (capex) will only go toward maintenance going forward. "We expect TPL's EBITDA to accelerate toward $300 million, backed by a steady first half of 2023 and favorable prospects, including sustained demand in the Atlantic Coast and high spot prices, which favor in-merit generation. "We expect in-merit generation and spot prices to remain solid, influenced by El Niño which settles in the region. On this basis and considering the upgrade completion of the company's TECAN plant, we believe TPL's leverage--as measured by debt to EBITDA--will improve to below 3.0x. "Nonetheless, our analysis continues to capture historical volatility in TPL's financial metrics stemming from the variations in the energy demand of Colombia's Atlantic coast, and spot prices." One of TPL's plants, TECAN, is being converted into a combined-cycle gas turbine with an installed capacity of 566 megawatts (MW) from a 324 MW open-cycle gas turbine. In August and September 2023, the plant completed the regulatory capacity, heat rate, and electrical tests, so we expect the process to achieve formal completion shortly. As such, TECAN will be in the position to sell energy to the market at high spot prices, in addition to about $45 million in extra reliability charges related to its increased capacity, which provide more stability and predictability to TPL's cash flow. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Suspends Banana Exports; Seeks Price Stability ------------------------------------------------------------------ Dominican Today reports that the Minister of the Presidency, Joel Santos Echavarria, headed an extraordinary session with the National Council for Food and Nutritional Sovereignty and Security (Conassan), in which he suspended the export of whole bananas in the Dominican Republic, to guarantee the stability of the prices of this product. The decision, taken through Resolution 05-2023, establishes that the measure will take effect from September 18 and will be reviewed in 30 days; it instructs the Ministry of Agriculture to notify, through the corresponding channels, the companies involved in the production of the musacea, the report notes. It also instructs the forwarding of the resolution to the Directorate General of Customs (DGA), the Ministry of Defense (MIDE), and the Specialized Corps for Land Border Security (Cesfront), as well as its publication on the website of the ministries that make up the National System for Food and Nutritional Sovereignty and Security in the Dominican Republic, in compliance with the provisions of the General Law on Free Access to Public Information, the report relays. This measure is by Law No. 1-12 of the National Development Strategy 2030, which establishes that the Dominican State must guarantee the productivity, competitiveness, and environmental and financial sustainability of agro-productive chains to contribute to food security, the report notes. Present at the Conassan meeting were Rafael-Blanco-Peralta, secretary of Conassan, as well as representatives of the ministries of Agriculture, Economy, Planning and Development, Public Works, Public Health, Education, Finance, Women, Industry, Commerce and MiPymes, Higher Education, Science and Technology, Environment and Proconsumidor, among others, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican Today 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. Moody's Investors Service, on Aug. 10, 2023, 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 wealth levels 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 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. =========== M E X I C O =========== ELECTRICIDAD FIRME: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Electricidad Firme de Mexico Holdings, S.A. de C.V. (EFM) Local Currency and Foreign Currency Long-Term Issuer Default Rating (IDR) at 'BB'. The Rating Outlook is Stable. The ratings also apply to the USD350 million senior secured notes due in 2026. The notes are secured by the first-priority lien on EFM and Electricidad Cometa de Mexico, S.A. de C.V. shares. The ratings affirmation incorporates EFM's credit quality of its subsidiary Cometa Energia's (Cometa, BBB-/Stable). EFM indirectly owns 100% of Cometa and is EFM's only source of dividends to service debt. The ratings are constrained by EFM's high leverage and structural subordination to Cometa's creditors. KEY RATING DRIVERS Stable Dividend Stream: EFM's ratings are supported by the quality of the dividends received from its indirect 100% ownership of Cometa. The company's cash flow is supported by strong and stable cash flows in the generation business and predictable dividend streams. Fitch forecasts dividends and distributions received from Cometa to be around USD40 million in 2023 and USD60 million in 2024. EFM benefits from Cometa's good market position as an efficient independent power producer in Mexico, its adequate capital structure and improving credit metrics. Structural Subordination: EFM's outstanding notes are structurally subordinated to Cometa 's senior secured USD706 million outstanding notes as of June 2023, due in 2035. EFM is a holding company that depends on dividends received from Cometa to service its own financial obligations. Therefore, a substantial increase in leverage at Cometa could increase the structural subordination of EFM's creditors. This risk is mitigated by Cometa's track record of stable cash distributions to EFM. During 2022 the California gas crisis affected La Rosita I's combined cycle generation power plant synthetic natural gas cost pass through. As a result, Cometa decreased the amount of cash distributions to EFM; moreover, in order to ultimately support Cometa's financial profile, Saavi Energia (EFM's HoldCo) made an equity injection of USD11 million. Going forward the projected dividend stream should be more than sufficient to cover interest expense resulting from the issuance. High Consolidated Leverage: EFM's consolidated leverage level as of YE2022 is high at 6.0x. The California gas price crisis will lead to a reduction in Cometa's distribution to EFM during 2023, which will increase the latter's leverage level (measured by holdco debt/cash distributions) to 9.4x. Fitch expects EFM's holdco leverage to be near 5.0x in the next four years. Fitch forecasts EFM's total debt to EBITDA will trend downward and reach 5.2x in 2023. It should continue gradually declining as Cometa's notes amortize. Fitch projects a consolidated gross leverage metric in the range of 4.7x to 5.2x in the medium term. The amortizing structure of Cometa's notes reduces the group's exposure to refinancing risk. Parent Subsidiary Linkage: A Parent and Subsidiary linkage exists between EFM and its stronger operating subsidiary Cometa. On Fitch's Linkage Factor Assessment, there is an insulated legal ring-fencing relationship because Cometa has a covenant restricting dividend distribution to a minimum of 1.2x debt service coverage ratio (DSCR) after distribution. In addition, there is an insulated access and control relationship. Despite EFM's 100% ownership of Cometa, each entity has its own treasury and funding strategies. EFM provides a LOC in the total amount of USD60 million until the amortization of Cometa's notes in 2035 in order to comply with the fulfilment of the subsidiary's debt service reserve account. Off-Taker Risk Limits Cometa's Ratings: Cometa's ratings are constrained by the credit profile of its main off-takers under long-term Power Purchase Agreements (PPAs) and compression service agreements and by the Mexican operating environment. Comision Federal de Electricidad (BBB-/Stable) and CENAGAS will represent around 36% of EBITDA, while merchant energy from Mercado Electrico Mayorista will represent around 10% of EBITDA in 2023, exposing the company to off-taker risk or the Mexican market despite its deleveraging trajectory. Fitch views positively the company's off-taker diversification and energy exports to the CAISO system in California and its mobile units located in Puerto Rico. Together they will represent around 30% of Cometa's EBITDA in 2023. DERIVATION SUMMARY EFM's ratings compare well to those of other holdco utility companies in the region, such as A.I. Candelaria (BB/Stable) and Nautilus Inkia Holdings SCS (BB/Stable). These holdcos depend on the cash distributions of its main subsidiary, Cometa (BBB-/Stable), OCENSA (BB+/Stable) and Kallpa Generacion (BBB-/Stable), respectively, to service its financial obligations. EFM is rated at the same level as A.I. Candelaria. A.I. Candelaria's ratings are supported by the quality of the dividends received from its 27.354% stake in OCENSA. The amortizing notes will contribute to leverage at the holdco level, which Fitch estimates to trend towards 4.5x in the medium term, while EFM's leverage should be in the 4.7x-5.2x range throughout the life of the transaction. EFM is rated at the same level as Inkia. Fitch expects both companies to operate with similar consolidated leverage of 4.7x-5.2x in the medium term, although Inkia's holdco leverage is much stronger at around 2.5x. While Inkia is more geographically diversified, this benefit is offset by its subsidiaries' locations in lower-rated countries. KEY ASSUMPTIONS - EFM's Average annual consolidated EBITDA after associates at above USD200 million; - Capex of USD20 million in 2023 and 2024; - Annual Cash distribution of Cometa of USD40 million in 2023 and USD60 in 2024 contingent on meeting the required debt service reserve account and 1.2x DSCR. - Excess cash is used for capex, acquisition or distribution to shareholders. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade of Cometa Energia's credit ratings; - Leverage measured as holdco debt/cash distributions below 4.5x over the rating horizon while consolidated leverage measured as total debt/EBITDA is below 4.5x on a sustained basis. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A downgrade of Cometa Energia's credit ratings; - A significant additional debt at Cometa Energia's level, which increases the structural subordination of EFM; - Leverage measured as holdco debt/cash distributions above 5.0x over the rating horizon while consolidated leverage measured as total debt/EBITDA is above 5.0x on a sustained basis. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: EFM's liquidity is adequate and supported by readily available cash and consistently cash distribution from its single subsidiary, Cometa Energia. EFM's debt service is limited to the interest payments through the medium term and the notes mature in 2026. The debt service reserve account represents a liquidity buffer over the medium term which must cover the payment in full of interest and principal, if any, due on the notes on the next one succeeding payment. As of June 2023, the group reported USD25 million of cash and cash equivalents of which USD16 million were at Cometa level. ISSUER PROFILE EFM is the indirect owner of 100% of the equity interest in Cometa, which has USD706 million debt outstanding under its senior secured notes as of June 2023 and is its sole cash flow contributor. 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 ----------- ------ ----- Electricidad Firme de Mexico Holdings, S.A. de C.V. LT IDR BB Affirmed BB LC LT IDR BB Affirmed BB senior secured LT BB Affirmed BB ======= P E R U ======= PERU: IDB OKs $300MM to Support Competitiveness & Economic Recovery ------------------------------------------------------------------- As part of its efforts to boost competitiveness and productivity in Latin America and the Caribbean, the Inter-American Development Bank (IDB) approved a $300 million loan to help the Peruvian government reactivate its economy and accelerate growth. The Reform Program to Support Economic Recovery and Competitiveness will facilitate the alignment of public innovation programs with national productive challenges, particularly those related to economic, social and environmental sustainability. Additionally, it will promote private and public investment in infrastructure and improve access to financing to continue production. The economic effects of the COVID-19 pandemic in Peru had negative consequences for innovation and investment. The health emergency ended two decades of growth in the country. Its GDP shrunk by 11% in 2020, and then rebounded by 13.6% in 2021 and continued to grow by 2.9% in 2022. This operation will help Peru cement its economic recovery and enhance its business environment to foster the investment and innovation needed to sustain its growth. The program will promote regulatory and tax reforms to improve the way private and public investments are implemented. It will also strengthen channels for public-private dialogue to unlock investments and launch new financial tools to address the liquidity problems of microenterprises and small businesses. The program will also create a fund to fill the financing gap for entrepreneurship. It will also promote formalization and digitalization of micro and small businesses. The reform program will generally benefit formal-sector businesses in Peru, especially microenterprises and small businesses participating in the economic recovery and digitalization program, as well as businesses that are working to transition to more complex formal production models through the services of the network of centers for productive innovation and technology transfer (CITE, its Spanish acronym). It will also benefit companies participating in government research and development programs. Other direct beneficiaries include venture capital funds and entrepreneurs that secure investments from those funds. In terms of inclusion, the operation will help close gender gaps in the use of digital technologies by deploying flexible and easy-to-access training strategies like bootcamps. It will also encourage the participation of indigenous communities by taking steps like a project to boost resilience and livelihoods in the Loreto region. The $300 million IDB loan has a 20-year repayment period, a 5.5 year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). ===================== P U E R T O R I C O ===================== GRUPO HIMA: U.S. Trustee Appoints New Committee Members ------------------------------------------------------- The U.S. Trustee for Region 21 appointed Angelica Perez Garcia and Laura Davila Otero as new members of the official committee of unsecured creditors in the Chapter 11 cases of Grupo HIMA San Pablo, Inc. and its affiliates. Meanwhile, Puerto Rico Hospital Supply resigned as committee member. The members of the committee are now composed of: 1. Grupo de Radioterapia del Norte, PSC P.O. Box 3145 Guaynabo, PR 00970 c/o Angel E. Portilla, Esq. External counsel Tel: (787) 408-7777 (External Counsel) E-mail: aps.law@live.com 2. Herminio Colon, Elizabeth Amaro, Jose Miguel Amaro, Ivette Delgado, and minors Y.J.A., Z.S.G.A., and Y.M.G.A. 207 Del Parque St, 3rd Floor San Juan, Puerto Rico 00912 c/o Jeffrey Williams, Esq. Counsel Tel: (787) 641-4545/4544 (Counsel) E-mail: jeffrey.williams@indianowilliams.com 3. Grupo Intensivo Pediátrico, CSP 252 San Jorge San Jorge Bldg, Suite 406 San Juan, PR 00912 c/o Juan Martinez, Esq. External counsel Tel: (787) 274-7404 (External counsel) E-mail: jmartinez@gmlex.net 4. Neyza Cruz Cedeno and Savier Vazquez Oyola 203 Berry Tree P1 Brandon, FL 33510 c/o Juan Martinez, Esq. Counsel Tel: (787) 274-7404 (Counsel) E-mail: jmartinez@gmlex.net 5. Angelica Perez Garcia and Laura Davila Otero PMB 733 1353 Luis Vigoreaux Ave. Guaynabo, PR 00966 c/o Humberto Guzman, Esq. Counsel Tel: (787) 403-2292 E-mail: hguzman@grllaw.net About Grupo HIMA San Pablo Inc. Grupo HIMA San Pablo, Inc. serves as a diversified healthcare services holding company pursuant to a corporate reorganization of several businesses related by common ownership. Through its subsidiaries and affiliates, the Company primarily owns and operates hospital facilities and other healthcare related businesses. As of August 2023, the HIMA GROUP operates four hospitals, with over 1,200 licensed beds, including an Oncological Hospital, a multi-specialty physician practice management company, Home Care Service (including infusion therapies and wound care), a free-standing Ambulatory Center and a 16-Ambulance Service Company. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. P.R. Case No. 23-02510-EAG11) on August 15, 2023. In the petition signed by Armando J. Rodriguez-Benitez, chief executive officer, the Debtor disclosed up to $1 billion in assets and up to $500,000 in liabilities. Judge Enrique S. Lamoutte Inclan oversees the case. Wigberto Lugo Mender, Esq., at Lugo Mender Group, LLC, represents the Debtor as legal counsel. The U.S. Trustee for Region 21 appointed an official committee of unsecured creditors on Sept. 7, 2023. LUCENA DAIRY: Files for Chapter 11 Bankruptcy --------------------------------------------- Lucena Dairy Inc. filed for Chapter 11 protection in the District of Puerto Rico. According to court filing, Lucena Dairy listed between $1 million and $10 million assets and between $1 million and $10 million in debt owed to 1 and 49 unsecured creditors. The petition states funds will be available to unsecured creditors. A telephonic meeting of creditors under 11 U.S.C. Section 341(a) is slated for October 2, 2023, at 11:00 A.M. About Lucena Dairy Inc. Lucena Dairy Inc. is located in Hatillo, Puerto Rico. This organization primarily operates in the Dairy Farms business. Lucena Dairy sought relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No.Case No. 23-02835) on Sept. 8, 2023. In the petition filed by Jorge Lucena Betancourt, as president, the Debtor reported assets and liabilities between $1 million and $10 million. The Debtor is represented by: Carmen D. Conde Torres, Esq. C. Conde & Associates CARR 635 BO DOMINGUITO ARECIBO, PR 00612 ********* 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. 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