/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/231006.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, October 6, 2023, Vol. 24, No. 201 Headlines A N T I G U A A N D B A R B U D A ANTIGUA & BARBUDA: Economic Activity Continues to Bounce Back A R G E N T I N A BLOCKFI INC: Seeks to Extend Plan Exclusivity to October 16 B R A Z I L BRAZIL: IDB Approves $500MM Loan for Rio Grande do Sul OI SA: Bags $300 Million DIP Financing From BTG Pactual D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Border Closure Impact Not Yet Measured H O N D U R A S INVERSIONES ATLANTIDA: S&P Affirms B ICR & Alters Outlook to Stable P A N A M A PANAMA: IDB OKs $150MM Loan to Expand Small Businesses Financing T R I N I D A D A N D T O B A G O NCB FINANCIAL: CEO Willing to Step Down as Executive TRINIDAD & TOBAGO: Hoping for a Purposeful Budget - - - - - ===================================== A N T I G U A A N D B A R B U D A ===================================== ANTIGUA & BARBUDA: Economic Activity Continues to Bounce Back ------------------------------------------------------------- An International Monetary Fund (IMF) staff team, led by Ms. Emine Boz, visited Saint John's during September 18-29 to hold discussions for the 2023 Article IV consultation with Antigua and Barbuda authorities. At the end of the visit, Ms. Emine Boz issued the following statement. Recent Developments, Outlook, and Risks Economic activity continues to bounce back from the sharp decline seen during the pandemic. Growth is projected at 8.5 percent and 5.7 percent for 2022 and 2023, respectively, with tourism and construction activity proving to be particularly strong. After reaching 9.2 percent at end-2022, inflation fell to 5 percent by July of this year, with core inflation also steadily declining. The current account deficit widened to an estimated 16.2 percent of GDP in 2022 with higher tourism receipts more-than-offset by an increase in goods imports and a worsening in the terms of trade. As a result, the external position in 2022 is assessed to be weaker than the level implied by medium-term fundamentals and desirable policies. The deficit and debt have been declining but gross fiscal financing needs remain high and the cashflow position of the government has been under strain. Fiscal measures put in place to limit the pass through of higher global food and fuel prices have been offset by improved revenue performance and wage restraint. As a result, the primary deficit fell to 1.7 percent of GDP in 2022 (from 2.3 percent of GDP in 2021). The rapid rise in nominal GDP is estimated to have brought public debt to 87 percent of GDP by end-2022 (from 95 percent at end-2021). The inability to access international capital markets has resulted in financing needs being met by issuing securities, mainly in the Regional Government Securities Market (RGSM), borrowing from domestic banks and regional institutions, and accumulating arrears. While RGSM yields have remained low, the shortening of maturities has resulted in significant gross financing needs of around 13 percent of GDP in 2022. Despite some progress in resolving arrears to certain external creditors and domestic suppliers, the stock of outstanding arrears remains large. The financial sector is well capitalized and liquid, but credit growth remains weak. As of 2023Q2, 6.9 percent of bank loans were non-performing loans (NPLs) with 78 percent of NPLs being provisioned for. Bank lending to the private sector has been falling as a share of GDP with weak credit growth for households and for small and medium-sized enterprises (SMEs) due to difficulty meeting documentation and collateral requirements for new loans. On the other hand, credit union lending has continued to grow rapidly (7.6 percent year-on-year), although it still makes up a relatively small share of overall lending (13 percent at 2023Q2). Antigua and Barbuda faces important risks ahead. Growth is expected to moderate and gradually converge to its long-term trend of about 3 percent and price pressures are expected to dissipate in 2024. However, higher global commodity prices would bring renewed price pressures and slower-than-expected growth in trading partners could hinder the strength of tourism demand. Global financial conditions could tighten further and make the government's efforts to access to international capital markets even more difficult, and a strengthening of the U.S. dollar could weaken competitiveness. The cost and availability of fiscal financing through the regional or domestic debt markets could become more restrictive, potentially worsening debt dynamics and increasing the recourse to arrears, particularly if the planned deficit reduction is not realized. Climate change could lead to more frequent and extensive droughts and/or more severe hurricanes. An upside risk is stronger-than-expected FDI inflows that could further boost construction activity. Fiscal Policy The mission welcomes the authorities' plan to reduce the primary deficit through a combination of revenue measures and expenditure restraint. Tax exemptions constituted 47 percent of potential revenues in 2023 (through August). To mitigate the loss of revenues, the authorities have decided to cap discretionary exemptions on import duties and suspend exemptions on other taxes and charges. An update of valuations for property taxes is scheduled to be completed in Fall 2023 and a higher tax rate is planned to be applied to high-end properties (from 0.3 percent to 0.5 percent). The authorities are transitioning to Harmonized System 2022 classifications at customs, which is expected to result in higher revenues from import duties. There is continued effort in containing public sector wages and employment. These combined policy initiatives envisaged by the authorities are likely to generate a small primary surplus and bring debt down to 69 percent by 2028 and to 61 percent by 2035 (marginally above the ECCB Monetary Council's target of 60 percent by 2035). Public debt is assessed to be unsustainable due to the large outstanding stock of arrears and the fact that paying down these arrears appears unfeasible over the medium term without a broader debt restructuring. Limited access to financing is likely to lead to financing gaps even without considering the need to clear the existing arears. The authorities should work toward building stronger fiscal buffers. Bringing debt safely below medium-term targets, reducing gross financing needs and clearing arrears will require additional policy measures equivalent to 0.5-1 percent of GDP. The authorities should broaden the Antigua and Barbuda Sales Tax (ABST) base by reducing items subject to exemptions or zero-rating (those that do not serve social and economic objectives or were introduced in response to the COVID-19 pandemic), applying the standard rate of 15 percent to short-term accommodation (currently at 14 percent), and extending the ABST to online purchases. Excise taxes on tobacco, alcohol, and sugar should be introduced. There is scope to improve collection of property taxes. The authorities should expedite the introduction of a single window system at customs and operationalize systems to allow e-filing, e-payment and e-registration of taxes. Furthermore, the authorities should improve tax compliance through administrative measures to close loopholes and further strengthen auditing capacity. Better cash and debt management would lessen cashflow pressures and reduce the risks to fiscal financing. A sound cash and debt management strategy should focus on lengthening the maturity of debt to lower rollover risk, clearing outstanding debt arrears to external creditors and domestic suppliers, and defining the potential modalities for increasing access to climate financing and insurance against natural disasters. The authorities should also undertake contingency planning for adverse scenarios where the availability of financing falls short of budgetary needs. Improvements are needed so that the social safety net can better support the vulnerable. There are many social assistance programs administered in an uncoordinated way by various public entities. Consolidating these programs would be helpful but, at a minimum, there is a need for a centralized information system to provide an accurate record of all beneficiaries to keep track of the support they receive and identify gaps in coverage and duplication. There is a need to move from generalized subsidies and support (e.g., through broad-based price subsidies for fuel) toward targeted programs whose benefits are periodically recalibrated to reflect cost of living changes. Stronger fiscal institutions would improve the credibility of the fiscal framework. The Medium-Term Fiscal Strategy and Fiscal Resilience Guidelines should be enshrined in legislation. The establishment of the Fiscal Responsibility Oversight Commission should be accelerated and the Commission should be tasked with evaluating the government's fiscal strategy. The Finance Administration Act and the Customs Act should be amended to codify the planned restraint on discretionary tax exemptions and statutory exemptions should be consistent with the Antigua and Barbuda Investment Authority Act with Antigua and Barbuda Investment Authority monitoring the approved projects. Financial Sector Policies Modernizing supervisory and regulatory frameworks is crucial to preserve financial stability. The Financial Services Regulatory Commission (FSRC) should strengthen the oversight and regulation of credit unions. On-site examinations should be targeted at the risks presented by the rapid loan expansion of credit unions. Supervisors should strengthen the standards for recognizing, provisioning for, and resolving NPLs. The FSRC should continue to require credit unions to strengthen governance and risk controls, building on recent efforts to require all institutions to have internal auditing capacity, qualified board members, and (for the larger credit unions) to have dedicated risk managers. The stress testing framework should be further improved, and risk-based capital requirements should be established for credit unions, on a level playing field with banks. Furthermore, the planned incorporation of climate risks into the supervisory and regulatory frameworks should be accelerated. The AML/CFT and Citizenship-by-Investment Program (CIP) frameworks should continue to be strengthened. This should include further improving risk-based AML/CFT supervision of financial institutions and designated nonfinancial businesses and professions, ensuring licensing requirements extend to the beneficial owners of applicants for business and exercising the recently expanded sanctioning powers. The Office of National Drug Control Policy should increase its capacity to supervise these licensees for AML/CFT purposes. The databases of the Financial Intelligence Unit should be leveraged in assessing applicants for CIP agents and consideration should be given to additional mechanisms to mitigate financial integrity risks to maintain the integrity and long-term sustainability of the program. Addressing longstanding constraints to financial intermediation would help bolster credit to the private sector. The upcoming ECCU regional credit bureau should help streamline lending processes and improve credit quality. The Eastern Caribbean Partial Credit Guarantee Corporation has been supporting access to credit by helping SMEs meet documentation requirements (information recording and financial planning) and addressing collateral constraints. Additional efforts to incentivize SMEs to register their businesses would boost their ability to utilize this guarantee scheme. The regional efforts to modernize the national insolvency law will help facilitate the resolution of NPLs and provide greater clarity to lenders. Structural Policies Continued efforts are needed to strengthen the main engines of growth. Efforts should continue to increase flight connectivity and cruise ship homeporting. Operationalizing LIAT would help to further improve intra-regional flight connectivity and complement the recent expansion of other airline companies' presence in Antigua and Barbuda. Efforts should continue to boost tourism during the low season, which would not only smooth hotel occupancy rates throughout the year but also make the country a more attractive destination for airlines. Several cruise lines plan to use Antigua and Barbuda as a homeport starting from 2023, and a further expanded capacity of the Antigua Cruise Port is expected to facilitate the arrival of larger cruise ships. Measures should be taken to accelerate a reduction in unemployment and underemployment. Active labor market policies should be strengthened to help address the slow recovery in formal employment, which has remained almost 12 percent below its 2019 level in 2022. The existing one-stop employment center should enhance its capabilities to match employers with employees. The New Work Experience Programme should be made more effective by evaluating participants and by ensuring their successful exit from the program. The mission welcomes investments in vocational training and local universities, while training opportunities could be further enhanced in vocational education. It will be critical to further mobilize donor support for investments in climate resilience. The authorities are utilizing funding from the Green Climate Fund, Adaptation Fund and Global Environment Facility to support 19 active projects of various sizes. Given fixed costs of developing and reporting, they are shifting their focus towards larger projects, facilitated by upgrading accreditation levels with these funds. The authorities have operationalized the Climate Resilience and Development Fund, which could also help to co-finance climate-related projects. The transition to renewable energy will be challenging. According to the International Renewable Energy Agency, a successful energy transition, which could reduce the country's energy costs by up to 40 percent (and reduce the impact of swings in global energy prices), would require up-front capital costs of up to around 25 percent of GDP (to upgrade the electricity grid, expand the use of electric vehicles, and invest in new wind and solar generation). The limited availability of domestic financing sources makes it important to mobilize donor resources to support these initiatives. The transition has been gradual as regulatory barriers have been slowing the utilization of solar power by households and businesses. However, efforts are being made to explore new solar and wind projects. Upgrading the curriculum at the Antigua and Barbuda Institute of Continuing Education would help train new workers for this transition. Data Issues Progress is being made to improve data quality, but further efforts are needed. Data provision is broadly adequate for surveillance, but with important shortcomings. Work is ongoing to construct a Producer Price Index for services, update the Labor Force Survey, rebase the national accounts data along with methodological improvements, and improve external sector statistics. Rental costs have been reintroduced in the Consumer Price Index using interpolation and surveys will resume once the census is completed next year. Efforts are underway to produce poverty indices based on the results of the Labor Force Survey. Timely reporting on central government and state-owned enterprise operations would help inform policy decisions. The mission team thanks the authorities and other counterparts for their excellent collaboration and the candid and constructive discussions. ================= A R G E N T I N A ================= BLOCKFI INC: Seeks to Extend Plan Exclusivity to October 16 ----------------------------------------------------------- BlockFi Inc. and its affiliates ask the U.S. Bankruptcy Court for the District of New Jersey to further extend their exclusive periods to file a Chapter 11 plan and to solicit acceptances thereof to October 16, 2023 and November 23, 2023, respectively. Unless extended, the Debtors' exclusivity periods expire on August 23, 2023 and September 30, 2023, respectively. The Debtors stated that they have continued to make substantial progress in their Chapter 11 cases since seeking their second extension of exlusivity, including, among othe things: (a) filing a proposed Plan and related Disclosure Statement, (b) obtaining conditional approval of the Disclosure Statement, solicitation materials, and confirmation schedule, (c) commencing solicitation of the Plan, and (d) reaching a global settlement with the Committee that clears the path towards confirmation. The Debtors explained that the requested extension will ensure that all stakeholders can thoroughly review and understand the revised Plan and related Disclosure Statement to decide whether to vote to accept or reject the Plan in an efficient, organized fashion. The Debtors claim that the extension complies with the Court's previous directions and allows the Debtors, and all parties in interest, to focus on solicitation and confirmation of solely one Plan. The Debtors also pointed out that the requested extension is supported by the Committee. BlockFi Inc. and its affiliates are represented by: Michael D. Sirota, Esq. Warren A. Usatine, Esq. COLE SCHOTZ P.C. Court Plaza North, 25 Main Street Hackensack, NJ 07601 Tel: (201) 489-3000 Email: msirota@coleschotz.com wusatine@coleschotz.com - and - Joshua A. Sussberg, Esq. Christine A. Okike, Esq. KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, NY 10022 Tel: (212) 446-4800 Email: jsussberg@kirkland.com christine.okike@kirkland.com - and - Richard S. Kanowitz, Esq. Kenric D. Kattner, Esq. HAYNES AND BOONE, LLP 30 Rockefeller Plaza, 26th Floor New York, NY 10112 Tel: (212) 659-7300 Email: richard.kanowitz@haynesboone.com kenric.kattner@haynesboone.com About BlockFi Inc. BlockFi is building a bridge between digital assets and traditional financial and wealth management products to advance the overall digital asset ecosystem for individual and institutional investors. BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in its early days had backing from influential Wall Street investors like Mike Novogratz and, later on, Valar Ventures, a Peter Thiel-backed venture fund as well as Winklevoss Capital, among others. BlockFi made waves in 2019 when it began providing interest-bearing accounts with returns paid in Bitcoin and Ether, with its program attracting millions of dollars in deposits right away. BlockFi grew during the pandemic years and had offices in New York, New Jersey, Singapore, Poland and Argentina. BlockFi worked with FTX US after it took an $80 million hit from the bad debt of crypto hedge fund Three Arrows Capital, which imploded after the TerraUSD stablecoin wipeout in May 2022. BlockFi had significant exposure to the companies founded by former FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a $400 million credit line from FTX US in an agreement that also gave FTX the option to acquire BlockFi through a bailout orchestrated by Bankman-Fried over the summer. BlockFi also had collateralized loans to Alameda Research, the trading firm co-founded by Bankman-Fried. BlockFi is the latest crypto firm to seek bankruptcy amid a prolonged slump in digital asset prices. Lenders Celsius Network LLC and Voyager Digital Holdings Inc. also filed for court protection this year. Kirkland & Ellis is also advising Celsius and Voyager in their separate Chapter 11 cases. BlockFi Inc. and eight affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on Nov. 28, 2022. In the petitions signed by their chief executive officer, Zachary Prince, the Debtors reported $1 billion to $10 billion in both assets and liabilities. Judge Michael B. Kaplan oversees the cases. The Debtors taped Kirkland & Ellis and Haynes and Boone, LLP as general bankruptcy counsels; Walkers (Bermuda) Limited as special Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley Research Group, LLC as financial advisor; Moelis & Company as investment banker; and Street Advisory Group, LLC, as strategic and communications advisor. Kroll Restructuring Administration, LLC, is the notice and claims agent. =========== B R A Z I L =========== BRAZIL: IDB Approves $500MM Loan for Rio Grande do Sul ------------------------------------------------------ The Inter-American Development Bank (IDB) approved a $500 million loan to boost the fiscal sustainability of the state of Rio Grande do Sul in Brazil. The program will help the state reduce its court-ordered payment obligations. These obligations, known as precatorios, arise when the state misapplies legislation or uses flawed or outdated management instruments and systems. Broadly speaking, the precatorios include fines and/or indemnities for violations of the labor rights of the state's employees or pensioners. This operation is part of the reforms that the state has implemented during the last years and will contribute to reach the goals of the Programa del Régimen de Recuperación Fiscal, agreed between the state and the Federal Government. The IDB financing, approved by the Bank's Board of Executive Directors, will allow the state to pay these obligations at a discount, reducing their total on its balance sheet. It will also help lower the cost of financing the obligations and enable the state to fulfill its duty to pay them to its citizens, which will reinforce the social contract. The savings from this project will strengthen the state's finances, freeing up resources to implement public policies and ensure that the population receives public services. Rio Grande do Sul is the sixth most populous state in Brazil. Historically, it has faced significant fiscal sustainability challenges. As of 2021, the approximately 62,000 precatorios totaled 15.221 billion reals, or 28.8% of the state's current annual net revenue. Also, as part of this project, the state will implement a Transparency Portal to improve public accountability towards the citizens. The project will include steps to strengthen institutions to avoid new precatorios in the future. It will enhance the state's ability to defend itself in court, using artificial intelligence and encouraging alternative means of dispute resolution. It will also improve the payroll and pension systems to reduce errors when paying salaries and mitigate the risks of violating labor and pension rights. The $500 million IDB loan to Rio Grande do Sul, to be disbursed based the program's performance, has a 25-year repayment period, a 3-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian general election. He was sworn in on January 1, 2023, as the 39th president of Brazil, succeeding Jair Bolsonaro. As recently reported in the Troubled Company Reporter-Latin America, Fitch Ratings, in December 2022, affirmed Brazil's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. The ratings are constrained by high government indebtedness, a rigid fiscal structure, weak economic growth potential, and a record of governability challenges that have hampered efforts to address these fiscal and economic issues and clouded policy predictability. The Stable Outlook reflects Fitch's expectation that growth will slow in the coming year and that recent fiscal improvement will erode under a new government, but within a margin consistent with the current rating, and from a better starting point than previously expected. Uncertainty is elevated regarding the plans of the incoming government and the extent to which these could ease or aggravate fiscal and economic challenges. However, Fitch does not expect policies that jeopardize broad economic stability. Standard & Poor's affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil, and the outlook remains stable (June 2022). The stable outlook reflects S&P's base-case assumption that Brazil will maintain its fiscal anchors over the next two years despite an increasing interest burden, preventing significant fiscal slippage and limiting the rise in its already high debt burden. Moody's credit rating for Brazil was last set at Ba2 in 2018 with stable outlook. Moody's affirmed the Ba2 issuer ratings and senior unsecured bond ratings in April 2022. DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). OI SA: Bags $300 Million DIP Financing From BTG Pactual ------------------------------------------------------- Gabriel Araujo at Reuters reports that Brazilian telecom firm Oi SA said it has secured a $300 million debtor in possession (DIP) financing from lender BTG Pactual in order to repay a previous $200 million DIP deal and reinforce its working capital. The new DIP financing is due on Dec. 15, 2024, Oi said in a securities filing. All in costs, including interest and fees, were set at 20% a year in U.S. dollars, added the company, which is under bankruptcy protection, according to Reuters. Oi reiterated it will continue to hold broad negotiations with its main creditors for the approval of a "revised proposal" for its reorganization process at a future shareholders' meeting, the report adds. As reported in the Troubled Company Reporter-Latin America in May 2023, Fitch Ratings has downgraded Oi S.A.'s Long-Term Foreign Currency FC) and Local Currency (LC) Issuer Default Ratings (IDRs) to 'D' from 'C' and its Long-Term National Scale Rating to 'D(bra)' from 'C(bra)'. Fitch has also affirmed Oi's senior unsecured notes due 2025 and senior secured 2026 notes at 'C'/'RR4'. The downgrade reflects the company's ongoing judicial reorganization process. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Border Closure Impact Not Yet Measured ---------------------------------------------------------- Dominican Today reports that the Minister of Economy, Pavel Isa Contreras, has stated that it is currently too early to assess the monetary impacts of the trade interruption with Haiti. He expressed optimism that a solution to the current crisis will be found soon. Contreras emphasized that they have not yet conducted any analyses or studies of this nature because they believe this period is one of transition and adjustment, and they anticipate that the difficulties will be resolved promptly, according to Dominican Today. When asked about the search for new markets for Dominican Republic exports to Haiti, Contreras indicated that it is not a special focus at the moment, the report notes. He stated that exploring new markets is an ongoing priority for the Dominican government, with a focus on larger markets such as Guyana, Trinidad, Jamaica, and Barbados, which have higher income levels and larger populations, the report relays. Contreras reiterated the importance of reestablishing the commercial relationship with Haiti and expressed hope that the interruption would be short-lived, emphasizing the need for dialogue to resolve the trade issues, the report discloses. These comments were made during the opening ceremony of the "First National Meeting on Reform and Modernization of Public Administration: Towards a National Pact for Institutionality in the Dominican Republic," organized by the Ministry of Public Administration and its head, Dario Castillo Lugo, the report says. 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. As reported in the Troubled Company Reporter – Latin America on Sept. 15, 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. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'.The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. =============== H O N D U R A S =============== INVERSIONES ATLANTIDA: S&P Affirms B ICR & Alters Outlook to Stable ------------------------------------------------------------------- S&P Global Ratings revised its outlook on Honduran financial group, Inversiones Atlantida S.A. (Invatlan) and on its core subsidiary, Banco Atlantida S.A., to stable from negative. At the same time, S&P's affirming its global scale issuer credit ratings (ICRs) at 'B' and 'BB-/B' on both entities, respectively. On Sept. 29, 2023, S&P Global Ratings revised its outlook on Honduras to stable from negative and affirmed its 'BB-/B' sovereign credit ratings on the sovereign. The outlook revision on Honduras incorporates S&P's expectation of moderate GDP growth, continued good access to official funding, and a fiscal policy that contributes to a stable net general government debt burden for the next two years. Despite political polarization and a divided Congress, S&P expects the government to continue making gradual progress toward strengthening public finances. S&P said, "The outlook revision on Invatlan and Banco Atlantida stems from our assessment of the credit quality of Invatlan's consolidated operating subsidiaries (group credit profile [GCP]) at the same level as that of Honduras ('BB-'). Therefore, if we take a rating action on Honduras, we might revise the GCP in tandem." Likewise, the 'B' long-term ICR on Invatlan is two notches below the GCP. One notch of this subordination reflects Invatlan's status as a nonoperating holding company and its dependence on dividends from its operating subsidiaries to service debt and other financial obligations. S&P said, "We deduct an additional notch to reflect Invatlan's rising double-leverage ratio, which has remained above 120% in recent years. We believe such a ratio reflects a more vulnerable credit risk profile, given greater dependence on subsidiaries' liquidity. We forecast Invatlan's double leverage will be about 130% in 2023-2024." S&P said, "Finally, the 'BB-/B' ratings on Banco Atlantida incorporate our view of its status as Invatlan's core subsidiary and our expectation that it will keep steadily expanding its loan portfolio, maintaining the leading position in the Honduran financial system, manageable asset quality indicators, and a large and well diversified deposit." Invatlan carried out an expansion plan in Central America through leveraged acquisitions in El Salvador (CCC+/Stable/C), Nicaragua (B/Stable/B), and Panama (BBB/Stable/A-2) during the last few years. This, along the persistent credit growth of Banco Atlantida, which is the main operating subsidiary, have translated in the group's credit growth on a consolidated basis of 41% in the last three years and 72% since 2018. S&P said, "Nonetheless, Invatlan's subsidiaries outside Honduras contributed marginally to the group's bottom-line results for many years, and we forecast that they will continue generating a small percentage of Invatlan's net income in 2023-2024. In this sense, we believe Invatlan's internal capital generation would have to rise sharply to compensate for likely high loan portfolio growth during the next two years." Also, Invatlan didn't strengthen its capital as originally expected, which dented its capital buffer, and consequently, limited its capitalization metrics levels. S&P said, "In this sense, we don't expect the group to increase sharply its capital base during the next 12-24 months to maintain the RAC ratio above 5%, which is our threshold for a moderate capital assessment. Therefore, we're lowering our assessment of Invatlan's capital and earnings to constrained." S&P projects the RAC ratio for Invatlan of about 4.1% for 2023-2024. Our base-case scenario incorporates the following assumptions: -- Honduras' GDP growth of about 3.5% in 2023-2024; -- Invatlan's net interest margin of about 5% for the next two years; -- Nonperforming assets of 2.6%-2.7% and net charge-offs of about 1.0% for the next two years; -- Invatlan's efficiency ratio of about 71% during 2023 and 2024; -- Invatlan's ROAA (measured as core earnings/average adjusted assets) of 0.8%-0.9% for the next two years; and -- No dividend payment and/or acquisition-based growth in the forecasted period. S&P said, "We anticipate Banco Atlantida's broad brand recognition and expertise will enable it to maintain its sound market share and status as the country's largest bank in terms of loans and deposits for the next 12-24 months. We forecast that the bank's credit portfolio growth, driven by the commercial business, with certain sectors--such as construction and manufacturing--that we envision will keep growing steadily in the next two years. Nonetheless, we believe high competition in the bank's main business line, the corporate segment, will continue pressuring its margins and operating revenue. For 2023 and 2024, we project Banco Atlantida to increase its operating revenue at about 8%, while it maintains stable profitability ROAA at about 1.1% in 2023-2024." =========== P A N A M A =========== PANAMA: IDB OKs $150MM Loan to Expand Small Businesses Financing ---------------------------------------------------------------- The Inter-American Development Bank (IDB) has approved $150 million in financing to launch the first guarantee fund to back loans for micro, small and medium-sized enterprises (MSMEs) in Panama. An estimated 2,200 Panamanian MSMEs - primarily in agriculture, commerce, and services - will be able to access financing with the backing of the new guarantees fund. Of the operation's total resources, 20% are expected to guarantee loans for climate adaptation and mitigation and 20% will support women-owned or women-led enterprises. MSMEs are the backbone of Panama's productive sector. They make up 97% of the country's businesses, contribute 17% of its GDP, and account for 57% of employment nationwide. However, these businesses continue to have limited access to financing. In December 2020, large businesses secured over 500,000 loans, while medium sized ones secured just 228,000, small enterprises 126,000, and micro enterprises 56,000. The guarantee fund will be created and implemented according to international best practice. Its aim is to encourage financial intermediaries to expand their loan portfolio for MSMEs to boost productivity in Panama. Additionally, the fund will provide advisory and financial education services to MSMEs on topics like financial statements and technically sound business plans. The $150 million IDB loan to Panama has a 15-year repayment period, a 5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). ===================================== T R I N I D A D A N D T O B A G O ===================================== NCB FINANCIAL: CEO Willing to Step Down as Executive ---------------------------------------------------- RJR News reports that Septimus Blake has said he is willingly stepping down from his post as CEO of National Commercial Bank Jamaica (NCBJ). In a press briefing, Mr. Blake said he was leaving the job to allow Chairman of the NCB Financial Group, Michael Lee-Chin, to "do a total reset," according to RJR News. Mr. Blake will also step down as president of the Jamaica Bankers' Association, the report notes. When asked whether Mr. Blake will fill any other post in the financial group, Mr. Lee-Chin said Mr. Blake will become an "alumnus of NCB," the report relays. The chairman of the NCBFG said the decision is part of the financial group's strategy of "de-layering to get closer to the consumer," the report discloses. Former CEO of Scotia Group Jamaica, Bruce Bowen, will lead National Commercial Bank Jamaica, effective October 1, the report recalls. NCB Financial Group also confirmed that Vernon James, head of TFOB 2021, which operates the country's only digital wallet, Lynk, will also demit office, the report says. It is not clear who will replace him and when, the report notes. The news comes months after the NCB Financial Group announced major leadership changes to top management, the report relays. In July, NCB announced that Robert Almeida was appointed interim Chief Executive Officer for the Group, and Malcolm Sadler, interim group Chief Financial Officer, the report adds. As recently reported in the Troubled Company Reporter-Latin America, Jamaica Observer relayed that the NCB Financial Group is yet to complete negotiations with its former president and CEO Patrick Hylton and his deputy, Dennis Cohen, over the settlement in relation to their separation from the company. At the centre of the negotiations is the size of the separation package for the two men who served the financial conglomerate for the last two decades, including what value the company should compensate the men for shares they were asked to surrender in July 2021, according to Jamaica Observer. Both men were asked to surrender 95.1 million shares valued at $13.8 billion at the time with the understanding that, over time, they would recoup that value, the report noted. Some were recouped in compensation for both men to the tune of $3.6 billion in the last financial year, the report relayed. TRINIDAD & TOBAGO: Hoping for a Purposeful Budget ------------------------------------------------- Juhel Browne at Trinidad and Tobago News report that the president of the Supermarket Association of Trinidad and Tobago, Rajiv Diptee, has expressed the association's desire for the government's fiscal 2024 budget to serve a significant purpose, especially in addressing the current socio-economic situation and the prevailing issue of crime. "The budget is really for me, when I see the budget, I want to think that there's going to be some meaningful projects to appropriately stimulate the economy. I want there to be some thoughtful considerations for the recovery of the business community and, also, we want to see those allocations that can improve what has really become a very desperate crime situation right now," Diptee said, according to Trinidad and Tobago News. Diptee was asked about the impact security measures at local supermarkets are having on the cost of their operations, the report notes. "CCTV security, physical infrastructure, armed security, all of these things are deep running costs to the operation of many retailers," Diptee said, the report relays. He was responding to questions from TV6 News with regard to what the Supermarket Association would like to see in the budget fiscal 2024 for both the association's member supermarkets, their employees and their customers, the report discloses. "I think we want to see some concessions put in place, particularly, where you have the incentives for agriculture where we see certain things that can be done in terms of projects and we would like to see a budget that can create some meaningful purpose particularly where the socio-economics of the situation is considered with crime being a major issue today," Diptee said, the report says. And what else would the Supermarket Association of Trinidad and Tobago like to see addressed in the upcoming budget? "I think when we consider the budget in particular you want to see a budget that really is making the necessary structural allocations to ensure that the economy is not only stimulated, but consolidated for the peak performance coming out of Covid," Diptee said, the report notes. While supermarkets were included in the list of businesses deemed essential while restrictions meant to prevent the spread of Covid-19 had been in effect from March of 2020 until they were lifted about two years later, those businesses that were not in the essential category suffered losses during those periods when much of the economy was locked-down by the State, the report discloses. While the Opposition says there has been little improvement since then, the Government has since said there has been a turnaround in the economy. Diptee said the association wants to see incentives from a tax perspective as well as VAT refunds being addressed, the report notes. "I think that a lot of associations are not keen on that aspect of things," Diptee said, the report says. Prime Minister Dr Keith Rowley addressed the issue of Value Added Tax (VAT)—refunds during a post-Cabinet media conference held on September 14, at the Diplomatic Centre in St Ann's, the report discloses. "Much of the people who populate the VAT had no arrears to get. Yes. The VAT system is one of pay and collect. Government revenues incorporate the VAT system in it and the Government was carrying significant amounts of debt and VAT which they keep paying. When Covid came and acknowledging what you said there that the Government was carrying these arrears for people. What did we do? We borrowed $3 billion dollars and paid most of it," Rowley said, the report relays. The prime minister also said that "since then, we've been trying to keep VAT away from the kinds of levels of debt that it was before," the report discloses. "It's a management of the revenue stream and, of course, if we have to pay VAT debt as against paying public servants at the end of the month, what do you think we'll do? Simple as that," Rowley said, the report says. The Prime Minster also said the government needs to collect the VAT "because the collection of VAT has deteriorated considerably" and added that is why "we need to improve our institutional arrangements," the report notes. "It's an open secret in this country, where a lot of the VAT that is owed to the State is not collected because the collection system is not efficient and there is a fair amount of shenanigans that goes on in VAT. You know that. So we try to improve on those things," Rowley told journalists at his media conference, the report relays. Finance Minster Colm Imbert is scheduled to deliver the statement for the Government's Budget its 2023/2024 on October 2, in the House of Representatives at the Red House in Port of Spain, the report discloses. The government's existing 2022/2023 financial year ends on September 30 and its new 2023/2024 financial year begins on October 1, the report adds. ********* 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 * * *