/raid1/www/Hosts/bankrupt/TCRLA_Public/231107.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
Tuesday, November 7, 2023, Vol. 24, No. 223
Headlines
A R G E N T I N A
ARGENTINA: Inflation Likely Exceeded 10% in October
ARGENTINA: Massa Threatens to Cut Fuel Exports Amid Shortage
ARGENTINA: Pushes Oil Companies Amid Fuel Shortages, Protests
B R A Z I L
BRAZIL: Business Start-up Pace in Brazil Decreases in 2023
OI SA: Fitch Affirms 'D' LongTerm Issuer Default Ratings
UNIGEL PARTICIPACOES: S&P Cuts ICR to D on Missed Interest Payment
C A Y M A N I S L A N D S
ITTIHAD INTERNATIONAL: Fitch Assigns B+(EXP) Rating on Unsec. Debt
C H I L E
ALUPAR CHILE: Fitch Assigns BB+/BBB- LongTerm IDRs, Outlook Stable
VTR FINANCE: Fitch Affirms 'CCC-' Issuer Default Ratings
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Border is Open for Commercialization
DOMINICAN REPUBLIC: Ex Pres Advocates a New Way of Collecting Taxes
E C U A D O R
GUAYAQUIL DPR: Fitch Assigns Final 'BB-' Rating on 2023-1 Notes
J A M A I C A
JAMAICA: Egg Glut Worries Farmers
P A R A G U A Y
PARAGUAY: Fitch Affirms 'BB+' Foreign Currrency IDR, Outlook Stable
P U E R T O R I C O
PUERTO RICO: CVI Holders Receive $388 Million Payment
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Inflation Likely Exceeded 10% in October
---------------------------------------------------
Buenos Aires Times reports that inflation in October was 10.6
percent, taking the year-on-year variation to 149.7 percent, a new
study by the Orlando Ferreres consultancy firm has forecast.
Hikes last month were led by leisure (up 18.2 percent), household
goods and appliances (12.2 percent) and food and drinks (11.2
percent), said the research firm, according to Buenos Aires Times.
Education also rose significantly, by 9.8 percent, said the report,
Buenos Aires Times notes.
According to Orlando Ferreres, core inflation reached a monthly
10.6 percent, rising to 149.4 percent year-on-year. Cumulative
inflation was 121.4 percent, the report relays.
As for seasonal goods and services, the monthly variation was 16.6
percent, while regulated goods and services had a seven-percent
monthly rise, forecast the firm, the report discloses.
"The Retail Price Estimation consists in the daily collection of
over 15,000 prices of goods and services in Greater Buenos Aires,
which feed to the database, which in turn helps estimates by means
of weighting the overall increase of retail prices," the report
explained, the report says.
Argentina's official inflation data is set to be published by the
INDEC national statistics bureau on November 13, just six days
prior to the presidential run-off between Economy Minister Sergio
Massa and libertarian lawmaker Javier Milei, 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
0its 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: Massa Threatens to Cut Fuel Exports Amid Shortage
------------------------------------------------------------
Scott Squires at Bloomberg News reports that Argentina's oil
producers will be barred from exports unless they increase fuel
supplies to address shortages in the country, Economy Minister and
presidential candidate Sergio Massa said.
"If the fuel supply is not resolved by midnight, companies will not
be able to send out export ships starting," Massa told reporters in
Tucuman Province. "Argentines' oil belongs first to Argentines,"
according to Bloomberg News.
Massa added that some companies were holding onto fuel supplies on
bets the government would devalue the official exchange rate after
presidential elections, Bloomberg News notes.
The comments come amid fuel shortages that have sparked long lines
at the pump and gas station closures, as the government's dollar
shortage stranded ships at sea that were waiting to import fuel,
Bloomberg News relays.
Argentina's oil and gas producers said in a joint statement that
the fuel shortages will "normalize" in the next few days, Bloomberg
News discloses. Argentina said last week it would import 10 tanker
fuel ships shipments in coming days to address shortages after a
spike in demand, as well as increase refining capacity, Bloomberg
News says.
Argentina produces the majority of fuel it uses domestically, but
is still a net importer of natural gas, Bloomberg News adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
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
0its 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: Pushes Oil Companies Amid Fuel Shortages, Protests
-------------------------------------------------------------
Buenos Aires Times reports that long car queues to fill up and
stations with "no petrol" signs have been part of the landscape in
recent days in Argentina and the government is pressuring oil
companies to speed up supply.
The shortages come with unrest building among car users and
businesses, according to Buenos Aires Times. Agricultural
producers are already warning about protests just three weeks ahead
of the presidential run-off, the report notes.
The lack of petrol is due to programmed halts in two refineries, a
seasonal peak and greater demand from the countryside, a joint
press release from the main oil companies stated, which forecast a
normalization of the supply "over the next few days," the report
relays.
Economy minister and ruling coalition presidential candidate Sergio
Massa has delivered an ultimatum for companies to speed up
distribution, under threat of closing exports, the report
discloses.
"If by midnight the fuel supply of is not solved, they won't be
able to get a single export ship out," he warned at a rally in
Tucuman, the report says.
Yet companies cited "extraordinary demand levels, especially over
the last two weeks with a long weekend, an election with peak
mobility, the start of sowing time and greater dependency on fuel
imports with programmed halts in some refineries, plus excessive
demand caused by an expectation of shortages" in a press release
challenging the rhetoric, the report notes.
The government has blamed the shortages on speculation by firms
over the result of the presidential election. The next head of
state will be defined in a run-off on November 19 that pits Massa
against libertarian lawmaker Javier Milei, the report relays.
"There were some who speculated that according to the electoral
result [first round] there would be devaluation, so maybe they
hoarded fuel," speculated Massa, the report notes.
In the presidential first round on October 22, Massa got nearly 37
percent of the votes, followed by Milei with 30 percent.
Milei is running on a platform promising to dollarise Argentina's
economy, eliminate the Central Bank and introduce large cutbacks in
public spending as a remedy for recession, an annual inflation rate
of almost 140 percent and 40 percent poverty, the report relays.
"The petrol shortages is a postcard of the future Massa will bring
us as president," Milei said in a television interview over the
weekend, the report discloses.
In Argentina, the price of fuel is regulated via a pact with the
main oil-producing firms that allows for periodic adjustments. The
litre of premium petrol is nearly US$1 at the official exchange
rate (365 pesos), the report says.
Supply problems started several weeks ago in several cities outside
Buenos Aires, and over the weekend they got worse in the capital,
where long car queues at petrol stations exhausted what remained in
a matter of hours, causing nervousness among consumers, the report
relays.
"They fill up the tank and load more petrol in drums, bottles,
anything," said one worker at a YPF petrol station in Caballito,
Buenos Aires, the report discloses.
Argentina produces its own fuel and has recorded record production
levels this year. In September alone, 645,500 barrels of oil were
produced daily, a seven-percent increase from the same month in
2022, yet supply is not enough to reach demand at peak times, the
report relays.
The Energy Secretariat has announced the import of the equivalent
of 10 tankers to tackle bottlenecks, the report notes.
During the weekend "they already unloaded two ships, and the third
one is being unloaded to cater to peak demand," explained Energy
Secretary Flavia Royón, in a radio interview, promising
normalisation of supply in the coming days, the report relays.
Agricultural employers voiced their concern over the situation,
which complicates the sowing of corn and soy and the upcoming wheat
harvest, the report notes.
"Rather than standing by the tractor until the imported ships
arrive, let's go out on the road to express our outrage," read a
press release signed by several large firms, 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
0its 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: Business Start-up Pace in Brazil Decreases in 2023
----------------------------------------------------------
Richard Mann at Rio Times Online reports that in Brazil, from
January to September this year, 1.4 million new companies came into
existence.
This marks a 22.2% reduction compared to the previous year's 1.8
million during the same period, signaling a market contraction,
according to Rio Times Online.
Specifically, in September, 132.7 thousand new companies began,
after factoring in both openings and closures, the report notes.
That month witnessed the launch of 305.5 thousand businesses while
172.9 thousand concluded their operations, a significant decrease
of 25.7, 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).
OI SA: Fitch Affirms 'D' LongTerm Issuer Default Ratings
---------------------------------------------------------
Fitch Ratings has affirmed Oi S.A.'s Long-Term Foreign Currency
(FC) and Local Currency (LC) Issuer Default Ratings (IDRs) at 'D'
and its Long-Term National Scale Rating at 'D(bra)'. Fitch has also
affirmed Oi's senior unsecured notes due 2025 and senior secured
2026 notes at 'C'/'RR4'.
The ratings reflect the ongoing bankruptcy protection of Oi that
was filled on March 2023. Since then, the company has not reached a
final agreement with creditors. Once Oi completes its restructuring
plan and exits bankruptcy protection, Fitch will reassess Oi's
credit profile and issue ratings based upon the company's new
capital structure.
As of June 2023, Oi had face value debt of BRL35.3 billion and fair
value of BRL23.7 billion.
KEY RATING DRIVERS
Bankruptcy Protection: Oi continues to negotiate with creditors a
restructuring of its debt to preserve cash and remain a going
concern. Since the company filed a petition for bankruptcy
protection in March 2023, Oi has solved the arbitration with the
three buyers of its mobile assets and received slightly over BRL800
million.
The company also sold SPE Torres 2 to the Highline Group for a
total cash-in of BRL905 million. Additionally, Oi signed a new
debtor-in-possession (DIP) loan of USD300 million with BTG, giving
95% of its shares in V.tal as collateral. As the company was able
to receive the cash from the arbitration, the principal of the new
DIP Loan has been reduced to US$200 million. Proceeds will be used
to pre-pay the previous DIP in the same amount, plus interests
accrued and not paid and fees. Upon completion of the
restructuring, Fitch will reassess Oi's credit profile and issue
ratings based upon the company's new capital structure.
Recovery Ratings: Fitch estimates a recovery consistent with an
'RR4' Recovery Rating, which is mainly driven by the value of Oi's
31.2% stake in wholesale fiber-optic network operator, V.tal and to
a lesser extent by the value of Oi's post-restructuring remaining
businesses.
DERIVATION SUMMARY
Oi's 'D' IDRs reflect the fact that the company has filed for
bankruptcy protection on March 1, 2023, which was granted by the
court on March 16.
RECOVERY ANALYSIS
Fitch's estimate of recovery is based on a going concern EBITDA of
BRL1.2 billion, which is considered achievable in the medium term.
Fitch uses a multiple of 4x. This is at the low end of the range of
telecom multiples and reflects the heavy competition in Brazil's
fixed broadband market.
Fitch estimates the value of Oi's stake in the V.tal at
approximately BRL8.0 billion. Based on these assumptions, the
forecast recovery rate for Oi is consistent with an 'RR4'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Positive rating action is unlikely until a debt restructuring is
completed and the company exits the bankruptcy protection.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Negative rating actions are not possible as the company is at the
lowest level of the rating scale.
LIQUIDITY AND DEBT STRUCTURE
Weak Liquidity: The company is in judicial recovery to address debt
obligations of BRL35 billion at face value as of June 2023, when
the cash position of BRL2.5 billion covered 1.2x the short-term
debt of BRL2 billion. In September 2023, Oi obtained better terms
on a new debtor-in-possession (DIP) financing to replace the
previous DIP of USD200 million. The exchange of DIP loans is
expected for November. The company also managed to conclude the
arbitration with the three buyers of its mobile assets (Vivo,
Claro, and TIM), resulting in little over BRL800 million cash
collection that shall be used in operations (opex and capex).
ISSUER PROFILE
Oi provides broadband to more than 4 million households and other
digital solutions to corporate customers, using its own copper
telecommunications infrastructure and an affiliate fiber-optic
network.
ESG CONSIDERATIONS
Oi S.A. has an ESG Relevance Score of '4' for Financial
Transparency. Reporting is adequate, but the complexity of the
financial and operational restructuring weighs on the overall
assessment of Transparency. This has a negative impact on the
credit profile, and is relevant to the ratings 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 Prior
----------- ------ -------- -----
Oi S.A. LT IDR D Affirmed D
LC LT IDR D Affirmed D
Natl LT D(bra) Affirmed D(bra)
senior
unsecured LT C Affirmed RR4 C
senior secured LT C Affirmed RR4 C
UNIGEL PARTICIPACOES: S&P Cuts ICR to D on Missed Interest Payment
------------------------------------------------------------------
S&P Global Ratings, on Nov. 2, 2023, lowered its global scale and
national scale issuer credit ratings on Brazilian chemical producer
Unigel Participacoes S.A. to 'D' from 'CCC-' and 'brCCC-',
respectively. S&P also lowered its issue-level ratings on the
company's 2026 senior unsecured notes and debentures to 'D' from
'CCC-' and 'brCCC-', respectively, and withdrew the '3' recovery
rating.
Unigel did not pay the $23.2 million coupon on its $530 million
2026 senior unsecured notes due Oct. 2, within the 30-day grace
period in the notes' indenture, which we view as a default. As a
result, S&P lowered its rating on the company's senior notes to
'D'.
S&P said, "We also lowered the rating on the company's debentures
to 'D' from 'brCCC-'. In early September, Unigel negotiated a
90-day extension with debenture holders to hold discussions and
revise debentures' terms. The agreement included the extension of
the debentures' interest payment of about R$40 million that was due
on Oct. 8 until Dec. 5. We don't believe that Unigel will make this
interest payment by Nov. 7, 30 calendar days after the original due
date. We also view this as a default."
For the past few months, Unigel has been negotiating with creditors
to adjust its capital structure and contain the cash burn. It is
also negotiating asset sales and adjustments in its operations and
cost structure.
===========================
C A Y M A N I S L A N D S
===========================
ITTIHAD INTERNATIONAL: Fitch Assigns B+(EXP) Rating on Unsec. Debt
------------------------------------------------------------------
Fitch Ratings has assigned Ittihad International Investment LLC
(Ittihad) a first-time expected Long-Term Issuer Default Rating
(IDR) of 'B+(EXP)' and an expected senior unsecured debt rating of
'B+(EXP)'/RR4. The Outlook on the IDR is Stable.
Fitch has also assigned Ittihad's proposed sukuk trust
certificates, to be issued through Ittihad International Ltd
(Ittihad International), an expected rating of 'B+(EXP)' with a
Recovery Rating of 'RR4'.
The ratings reflect Ittihad's high but improving leverage, and
moderately negative free cash flow (FCF) as working capital (WC)
normalises. Rating strengths are a strong regional presence in
paper, cement, building materials and copper production, with a
competitive position in the local market.
Fitch rates Ittihad on a consolidated basis using the generic
approach due to its diversified portfolio of companies spread
across the industrials, healthcare and utilities sectors. The
expected IDR and the senior unsecured debt rating reflect Fitch's
expectation that the sukuk issues will be used to refinance debt at
various group and subsidiaries. The final ratings are reliant on
the partial refinancing of its senior secured debt and partial
release of encumbered assets.
KEY RATING DRIVERS
Competitive Regional Position: Ittihad's paper businesses benefit
from geographic connectivity and competitive advantage, while
allowing it to build long-standing relationships with global
companies across 25 markets. It has a diversified pool of suppliers
in Latam, North America and Europe, adding further visibility in
its value chain while reducing dependency risk on single supplier.
Diversified Portfolio Mix: Ittihad operates under four key sectors
with two sub-sectors - paper and building materials - being the
biggest contributors to revenues and earnings. These two
sub-sectors contributed 58% and 21%, respectively, of consolidated
gross profit in 2022. The group's paper and tissue manufacturer
operates to global standards and is the largest producer of
uncoated wood-free paper and the largest importer of pulp in the
Middle East. The building materials operations comprise the largest
standalone producer of copper rods in the region and an established
distributor of straight steel bars.
On pulp and steel commodities, the group maintains around 35 to 60
days worth of inventory backed by customer orders. It has long
order backlog visibility and faces minimal cancellations on client
orders. The impact of rising raw material cost is mitigated by
price increase.
Evolving Capital Structure: Ittihad's funding is fairly
centralised, but substantial debt obligations were raised at
operating companies (opco) on a secured and guaranteed basis. It
expects its sukuk issue to materially reduce prior-ranking debt at
opcos by nearly 50%. The unencumbered asset cover will remain below
1x post sukuk issue. Fitch expects the impact on leverage to be
neutral. As of end-2022, Fitch-adjusted readily markatble inventory
(RMI) gross leverage stood at 5.7x, which Fitch expects to
gradually decline to 4.6x in 2025.
FCF Under Pressure: Fitch expects negative FCF margins in 2023-2024
following capex and WC outflows. Post 2025, Fitch forecasts low
maintenance capex as a share of revenue in single digits. Capex is
committed and prefunded by external debt. Fitch expects WC outflows
in 2023 and 2024, driven by high inventory levels at subsidiary
UCR, due to back-to-back contracts, and by increased receivables
from the paper and pulp businesses. The group has stable but thin
consolidated EBITDA margins (2022: 4.4%), which Fitch expects to
improve to average 4.8% by 2026, supported by high revenue
visibility from its consumer goods and business services segments.
Enhanced Operating Environment: Ittihad benefits from strong market
fundamentals in the UAE and in the Middle East. Underlying demand
in its businesses remains robust. Demand for copper rods is
expected to increase to support growth in electrical cables and
utilities in the region. UCR produces on average 220,000 MT per
year, representing nearly half of the UAE's copper rods production
capacity. Similarly, the steel rebar market in the Gulf Cooperation
Council is expected to benefit from increased momentum in
infrastructure projects primarily in the UAE and Saudi Arabia.
Low Commodity Price Exposure: Ittihad operates a physical
arbitrage-based model for its copper operations, enabling it to
hedge against swings in commodity prices. It has back-to-back
contracts with suppliers and customers, ensuring full pass-through
of price risk. Exposure to price volatilities of copper is limited
by the LME copper price being a fairly modest component of its
products. In addition around 80% of copper is procured through
annual contracts with global companies and the balance is sourced
via recycled copper.
DERIVATION SUMMARY
Ittihad's asset portfolio consists of investments in various
sectors including steel, copper, cement, paper, energy, and medical
services. It does not have close publicly rated peers. Ittihad has
conservative financial and investment policies, strong operational
oversight over subsidiaries and a high leverage profile, leading to
commensurate leverage metrics for its rating category.
Unlike other commodity trading peers, Ittihad has stable margins
and power in the value chain with hedged exposure to commodities.
Fitch analysed Ittihad's subsidiaries based on their respective
peers in each sector. Fitch used Mytilineos S.A. (BB+/Stable) and
JSC Uzbek Mettalurgical Plant (BB-/Stable) for peers in the steel
and copper segment. Mytilineos operates on a larger scale than
Ittihad with a stronger financial profile and higher margins. JSC
Uzbek has similar scale to Ittihad's but a stronger financial
profile.
KEY ASSUMPTIONS
Key Assumptions Within Its Rating Case for the Issuer are:
- Revenue to decrease 2% in 2023 on copper price declines, before
growing on average 3.5% for 2024- 2027
- Stable recovery of EBITDA margin to 2027 on an improved product
mix and price increases
- Higher WC outflow in 2023 on increases in inventory and
receivables, followed by flat WC to 2027 after cash collection and
destocking
- Increased capex for 2023 and 2024 due to expansion of new plants,
followed by declines in 2025 to 2027
- No M&A planned
- Common dividends of AED20 million paid annually
- Release of AED184 million of restricted cash after debt
repayment
- Gradual deleveraging to 2027 after debt repayments and on
improved profitability
RECOVERY ANALYSIS
- The recovery analysis assumes that Ittihad would be liquidated
rather than restructured in bankruptcy
- Its estimate of liquidation value (LV) value available for
creditor claims is about AED2.7 billion due to high-value assets in
contrast to its low EBITDA margins
- A 10% administrative claim
- Fitch estimates the total amount of senior debt claims at AED1.7
billion, which comprises the WC facilities, AED2.2 billion of
unsecured debt, assuming a fully drawn revolving credit facility
(RCF), and the proposed sukuk
- The allocation of value in the liability waterfall results in
recoveries corresponding to 'RR2' and a 'BB' debt rating for the
senior secured notes and 'RR4' and a 'B+' instrument rating for the
senior unsecured debt
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- RMI-adjusted EBITDA gross leverage below 4x on a sustained basis
- EBITDA interest coverage above 3x on a sustained basis
- FCF margin above 2% on a sustained basis
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- RMI-adjusted EBITDA gross leverage above 5x on a sustained basis
- EBITDA interest coverage below 2x on a sustained basis
- Negative FCF margin on a sustained basis
- Adoption of a more aggressive financial policy with a lower
percentage of inventories hedged or pre-sold
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Ittihad had AED478 million of readily available
cash as of June 2023, supported by an undrawn committed facility of
AED385 million. Fitch expects a further release of restricted
deposits of AED184 million during 2023, which will strengthen the
group's liquidity.
Low Refinancing Risk: The group will have no significant maturities
to 2027 post sukuk issue, refinancing of its term loans and partial
repayment of its WC facilities. Its capital structure relies on WC
facilities as part of their commodity trading businesses. Those
facilities are short term and generally self-liquidating on receipt
of payments against commodity delivery. Fitch assesses the credit
risk of these facilities as low, as they are marked to market and
hedged. The refinancing risk for the short-term facilities is low
as Fitch assumes them to be continuously rolled over each year.
ISSUER PROFILE
Ittihad is based in UAE, with investments in consumer goods (paper
and chemicals), infrastructure and building materials (copper rods,
steel bars and cement), healthcare and utilities.
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 Recovery
----------- ------ --------
Ittihad
International Ltd
senior
unsecured LT B+(EXP) Expected Rating RR4
Ittihad
International
Investment LLC LT IDR B+(EXP) Expected Rating
senior
unsecured LT B+(EXP) Expected Rating RR4
=========
C H I L E
=========
ALUPAR CHILE: Fitch Assigns BB+/BBB- LongTerm IDRs, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has assigned Alupar Chile Inversiones SpA's (Alupar
Chile) Long-Term Foreign Currency (FC) and Local Currency (LC)
Issuer Default Ratings (IDRs) of 'BB+' and 'BBB-'. The Rating
Outlook is Stable.
Fitch equalizes the IDRs for Alupar Chile and its fully controlling
shareholder Alupar Investimentos S.A. (Alupar, FC IDR BB+, LC IDR
BBB-, both with a Stable Outlook) based on the high legal
incentives of Alupar to support the subsidiary, if needed, as per
Fitch's Parent and Subsidiary Linkage Criteria (PSL). Fitch
considers the strategic incentives of support as low due to the
small contribution of Alupar Chile within Alupar group, and the
operational incentive as medium due to the same brand and
integrated decisions.
KEY RATING DRIVERS
High Legal Incentives: The high legal incentives of Alupar to
support Aupar Chile is based on legal document stating that Alupar
will be a co-guarantor of all Alupar Chile's obligations, debts,
guarantees and fines, as well as for any company that Alupar Chile
may establish, if a new entity is created as a result of winning a
bid to build a power transmission line in Chile. Alupar Chile will
be also contemplated by cross-default clauses from debt instruments
of the parent and of other debt instruments from subsidiaries where
the parent is also the guarantor.
Low Strategic Incentives: Alupar has no assets in Chile. The
company already operates assets in Peru and Colombia. Chile offers
some opportunities for greenfield and/or brownfield initiatives,
but will remain a small contributor to Alupar's revenues and cash
generation considering its main region (Brazil). In case of success
in the current bidding process, Alupar Chile contribution in the
parent's consolidated revenues and EBITDA will not be relevant
(below 1% in 2028). Despite being part of the group's core
business, Alupar Chile will also not bring competitive advantage to
the parent in its Brazilian operations.
Medium Operating Incentives: Alupar Chile is consolidated in
Alupar's financial reports and there are fully integrated
management decisions and branding, which justifies a medium
operational incentive of support by the parent. Alupar Chile will
bring small dilution in the regulatory and operational risks for
Alupar, even combined with the other international subsidiaries,
with no reasonable avoidance costs for the parent.
Parent Presents Strong Credit Quality: Alupar's ratings reflect its
low business risk relative to its diversified portfolio of power
transmission assets in Brazil, with predictable revenues and high
operating margins. The company also benefits from its generation
activity, which adds to dilution of operational and regulatory
risks. Alupar should continue to present a robust consolidated
financial profile. The company's FC IDR is constrained by Brazil's
country ceiling of 'BB+'.
DERIVATION SUMMARY
Alupar's financial profile is stronger than Latin American peers
Interconexion Electrica S.A. E.S.P. (FC IDR BBB/Stable) and
Consorcio Transmantaro S.A. (FC IDR BBB/Stable), in Colombia, and
Transelec S.A. (FC IDR BBB/Stable), in Chile. All these peers have
low business risk profiles and predictable cash flow generation,
characteristic of transmission electricity companies in a regulated
industry. The main difference in the IDRs of Alupar and those
companies is the country where they generate their main revenues
and the location of assets.
While its peers are located in countries with higher IDRs, Alupar's
ratings are negatively affected by Brazil's country ceiling of
'BB+'. In the case of Transmissora Alianca de Energia Eletrica
S.A.'s (FC IDR BB+/Stable), also located in Brazil, both have
similar credit profile, with a diversified portfolio of
transmission companies and a robust financial profile, with some
expected decrease in leverage metrics due to reduction in
investments.
KEY ASSUMPTIONS
Fitch's main assumption in its base case scenario for the issuer
includes future corporate guarantees from Alupar to Alupar Chile
for all obligations, debts, guarantees and fines that Alupar Chile
may assume, or to any other company that Alupar Chile may establish
for the investment purpose.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upgrade of Alupar's IDRs.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Downgrade of Alupar's ratings;
- Weakening in the incentives of support from the parent to Alupar
Chile.
LIQUIDITY AND DEBT STRUCTURE
Robust Liquidity: Alupar group presents a sound liquidity profile
and should continue to benefit from a high cash and equivalents
position and broad access to the banking and capital markets.
Foreign subsidiaries are typically funded in local currencies or
USD. On a consolidated basis, the group's cash position of BRL2.6
billion at the end of June 2023 covered its short-term debt of
BRL1.3 billion by 2.0x. Total debt was BRL11 billion, mainly
comprised of debentures (BRL9.2 billion, or 83%). Alupar Chile had
no debt by the end of 2022, with CLP46 million in cash.
ISSUER PROFILE
Alupar Chile is a subholding company based in Chile fully
controlled by Alupar and currently has no assets. Alupar is a
Brazilian holding company that operates in the power transmission
and generation segments, mainly in Brazil, with small operations in
other Latin America countries.
Entity/Debt Rating
----------- ------
Alupar Chile
Inversiones SpA LT IDR BB+ New Rating
LC LT IDR BBB- New Rating
VTR FINANCE: Fitch Affirms 'CCC-' Issuer Default Ratings
--------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Local Currency and Foreign
Currency Issuer Default Ratings (IDRs) of VTR Finance N.V. (VTR) at
'CCC-'. Fitch has also downgraded VTR Finance's senior USD483
million notes due in 2028 to 'C'/'RR6' from 'CC'/'RR5' and VTR
Comunicaciones SpA's revolving credit facilities, senior secured
notes of USD474 million (2028) and senior secured notes for USD391
million (2029) to 'CC'/'RR5' from 'CCC'/'RR3'.
The downgrades of the senior notes ratings are based on the weaker
recovery prospects due to the deterioration in operating
performance, and a lower going concern EBITDA estimate.
The affirmation of the IDRs is based on limited financial
flexibility as of 1H23 and lower cash flow generation than
previously expected by Fitch. The rating considers Fitch's
expectation of weak operational performance in 2024 due to the
continuation of a highly competitive environment in Chile and
sustained negative FCF.
KEY RATING DRIVERS
High Leverage, Negative FCF: Fitch projects net leverage for the JV
of around 7.0x and 8.4x, and a standalone net leverage for VTR of
around 19x and 23xin 2023 and 2024, respectively. The ability to
access liquidity, through the use of its committed RCF, as well as
through asset monetization and/or shareholders' contributions, is a
critical factor in the short term, considering the strong
deterioration of its liquidity as of June 2023, due to lower EBITDA
and the expectation of high capex requirements in the medium term.
Fitch estimates a cash burn of around CLP102 billion since 2021,
and cash reached CLP19 billion as of June 2023, which is
insufficient to service the current level of short-term debt and
interest expenses in the next 12 months.
Support from Shareholders: Fitch views shareholder support as
critical to support the JV and VTR transformation plan. The JV
received a shareholder loan for a total amount of CLP481 billion
since January 2023. This shareholder loan was granted on equal
terms to maintain their 50:50 ownership, without ruling out the
conversion on non-equal terms, affecting the current JV's ownership
structure. The support was used to pay Claro Chile's debt for an
amount of CLP290 billion and to finance capex and working capital
requirements in 2023 and 2024. VTR received an intercompany loan of
CLP39.5 billion from Claro Chile SpA as of June 2023.
Pressured EBITDA: Fitch does not expect a relevant EBITDA recovery
in 2024, and is assuming a limited positive impact from synergies
for the combined operations and VTR. VTR's EBITDA margin has
declined to 17.9% for the LTM June 2023 from 40% in 2019, while its
EBITDA has declined to CLP81 billion from CLP260 billion in 2019,
before the pandemic. As of June 2023, VTR has unable to increase
the RGUs, due to the fierce price competition and lower average
monthly revenue per user (ARPU) since the beginning of the
pandemic. Broadband subscribers declined to less than 1.08 million
from 1.3 million since the start of the pandemic, pressuring
earnings.
Lack of shareholder alignment: The uncertainty around the business
strategy and capital structure that the JV's shareholders will
pursue in the medium term remain a negative credit consideration.
The JV is 50% owned by Liberty Latin America (LLA) and 50% owned by
America Movil S.A.B. de C.V. (AMX; A-). Both are large telecom
operators in Latin America, but have different business model and
capital structures.
LLA has a higher appetite for leverage and independent management
of each affiliate, with movements of cash around the group for
investments and acquisitions. AMX has a strong credit profile due
to its solid business position in most markets in Latin America and
the low level of leverage it has operated with historically.
Limited Transparency: VTR's disclosure of its financial policy,
commercial strategy and future capital structure has been limited
following its combination with Claro Chile in October 2022. The
lack of information surrounding these key credit considerations has
occurred despite high leverage and significant pressure on credit
metrics.
DERIVATION SUMMARY
VTR's ratings are exposed to the competitive pressures in the
Chilean broadband market, which could further pressure its
operating performance and credit metrics. It is uncertain how much
VTR's credit profile can benefit from its combination with Claro
Chile given the lack of transparency. VTR's financial profile is
one of the most levered in the region.
VTR has a similar fixed-line operating profile to Telefonica Chile
(TMCH, BBB-/Stable), and combined business with Claro Chile should
reach a similar scale and diversification as TMCH Chile S.A in a
consolidated basis (BBB). However, TMCH benefits from better
financial metrics, with strong liquidity and leverage metrics
around 3.0x.
Compared with WOM Mobile S.A. (WOM; B+/Negative), VTR/Claro's
combined operation should have higher diversification and scale,
and lower EBITDA margin. WOM's ratings reflect the company's short
but solid track record in Chile, taking on much larger competitors.
Recent WOM's ratings downgrade considers a shift in the company's
financial policy, suggesting a less clear path to deleveraging,
following the investment of USD100 million in WOM Colombia as well
as the material usage of its USD100 million factoring facility with
IDB Invest.
When compared with Millicom International Cellular S.A.'s
(BB+/Stable) subsidiaries, Comcel (CT Trust; BB+/Stable) and
Telefonica Celular del Paraguay (Telecel; BB+/Stable), VTR operates
in a more competitive market, but in a stronger operating
environment. Comcel and Telecel have more dominant market positions
and significantly lower net leverage at around 2x and 3x,
respectively. Comcel's and Telecel's ratings reflect a strong
linkage with their parent Millicom as it heavily relies on these
two wholly owned subsidiaries' dividend upstream to service its
debt.
KEY ASSUMPTIONS
- Revenue declines around 13% and 6% of fixed business (VTR
Standalone) in 2023 and 2024, respectively;
- EBITDA margins around 14% in fixed business. Combined business
with 14% of EBITDA margin, increasing gradually to 16% in 2025 due
to synergies;
- Capex in a range of 18% to 19% for the JV, and 19% to 22% in the
case of VTR Finance (standalone).
RECOVERY ANALYSIS
Going Concern Recovery Approach
Fitch's criteria consider a bespoke recovery analysis for issuers
with Issuer Default Ratings (IDR) of 'B-' and below. The bespoke
recovery analysis assumes VTR would be considered a going concern
in bankruptcy and the company would be reorganized rather than
liquidated. VTR's CLP70 billion going concern EBITDA is based on
Fitch's expectation of sustainable, post-reorganization EBITDA,
reflecting the intense competition in the Chilean market. The
enterprise value/EBITDA multiple applied is 4.0x; this figure
reflects VTR's deterioration in its operational performance, and in
its financial profile, despite the strong market position.
Fitch applies a waterfall analysis to the post-default enterprise
value based on the relative claims of the debt in the capital
structure. The agency's debt waterfall assumptions consider the
company's total debt at June 30, 2023. These assumptions result in
a Recovery Rating (RR) for the secured bonds and revolving credit
facility of VTR Comunicaciones (operating company) within the 'RR5'
range, which, per Fitch's criteria, leads to a one-notch depress to
the IDR to 'CC'. For structural subordination, the result of
recovery analysis of VTR's USD483 million senior secured debt is
a'RR6', which is two notches below the IDR, resulting in a 'C'
rating. Fitch applied concession allocation payments to VTR's
debts.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Rapid turnaround of operational performance related to subscriber
base, ARPU, and EBITDA margin, and the ability to capture relevant
synergies related the JV for VTR operation;
- Measures as asset monetization, shareholder support that
strengthens financial flexibility and reduces leverage;
- Improvement in liquidity position;
- Consistent and improved depth of disclosure surrounding strategy
and other credit considerations.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Continuation of deteriorating operational performance;
- Inability to draw on revolving facilities;
- Lack of clarity around of measures from shareholders, and/or
management that would improve VTR's financial flexibility and
capital structure.
LIQUIDITY AND DEBT STRUCTURE
Pressured Liquidity: The company has weak liquidity and Fitch
expects VTR to generate negative FCF in the medium term,
considering the restructuring and integration process between fixed
and mobile business. The company will likely need to add debt to
its capital structure to fund at least part of the shortfall as its
cash was only CLP19 billion as of June 2023, which represents
around 15% of the short- term debt, mainly composed by CLP70
billion of vendor financing debt. This cash level showed a relevant
deterioration compared with 2022 and 2021 cash levels of CLP34
billion and CLP121 billion, respectively.
VTR Finance received shareholder support of CLP39.5 billion as an
intercompany loan from Claro Chile, which was used to finance
interest payments and investments. This debt has no interest rate
and a maturity of less than twelve months. As of May 2024, the
company will need additional debt to replace the vendor financing
program, which maintains an amount of CLP70 billion in short-term
debt.
ISSUER PROFILE
VTR is a telecom operator in Chilean market. The company, combined
with Claro Chile, is the second largest provider of fixed internet
services with 30% market share, and the largest provider of
multi-channel video services with a 38% market share.
SUMMARY OF FINANCIAL ADJUSTMENTS
Hedge Derivatives in Financial Debt.
ESG CONSIDERATIONS
VTR Finance N.V. has an ESG Relevance Score of '5' for Financial
Transparency as a result of the very limited disclosure surrounding
VTR's group structure and its financial strategy in the context of
its combination with Claro Chile. This has a negative impact on the
credit profile and is highly relevant to the rating, resulting in
an implicitly lower rating.
VTR Finance N.V. has an ESG Relevance Score of '4' for Management
Strategy due to the inability of the management strategy to reverse
deterioration of operational performance and, consequently, in its
financial profile. This has a negative impact on the credit profile
and is relevant to the rating 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 Prior
----------- ------ -------- -----
VTR Comunicaciones SpA
senior secured LT CC Downgrade RR5 CCC
VTR Finance N.V. LT IDR CCC- Affirmed CCC-
LC LT IDR CCC- Affirmed CCC-
senior secured LT C Downgrade RR6 CC
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Border is Open for Commercialization
--------------------------------------------------------
Dominican Today reports that Minister of Industry and Commerce,
Víctor Ito Bisono, has stated that the Dominican side of the
border with Haiti is open for trade, but they are waiting for the
Haitian government to reciprocate.
According to Bisono, the decision of whether Haitian goods come
across the border or not is not within their control, according to
Dominican Today. However, he noted that in recent weeks, some
trade has resumed, the report notes.
The government's goal is to find alternative markets for the
products that were previously sold to Haiti, thereby increasing
exports to other countries in the region, the report discloses.
In response to complaints from businessmen, Bisono mentioned that
they maintain ongoing communication with them to address any
potential issues that may arise, 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.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On August 14, 2023, the TCR-LA reported that Moody's Investors
Service has changed the outlook on the Government of Dominican
Republic's ratings to positive from stable and affirmed the local
and foreign-currency long-term issuer and senior unsecured ratings
at Ba3. Moody's said the key drivers for the outlook change to
positive are: (i) sustained high growth rates have enhanced the
scale and 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.
Fitch Ratings, in December 2022, affirmed the Dominican Republic's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Rating Outlook.
DOMINICAN REPUBLIC: Ex Pres Advocates a New Way of Collecting Taxes
-------------------------------------------------------------------
Dominican Today reports that during the International Seminar
"Labor and Tax Business Perspectives 2024," organized by Tax &
Labor, Bacilio Sanchez, the representative of the tax area for the
Dominican Republic and former president of the Institute of
Accountants of the Dominican Republic, addressed the complexities
of the country's tax system. Sanchez expressed concerns about the
tax collection system, particularly regarding the high arrears
contained in Title 1 of the tax code, which have made some debts
nearly impossible to pay, according to Dominican Today.
Sanchez advocated for the prompt approval of modifications to Title
I of the Tax Code, which is currently under consideration in
Congress, the report notes. These proposed changes aim to
streamline collection processes and establish consistent procedures
in the relationship between the treasury and taxpayers, the report
relays. He also encouraged taxpayers to take advantage of the
payment facilities provided by Law 51-23, which grants prescription
for old debts, and to prepare for the implementation of the
Electronic Invoices Law, set to modernize the tax system starting
in January 2024, the report discloses.
He emphasized the need for tax collection system reform to enhance
efficiency and fairness for all taxpayers, the report relays.
Sanchez believes that the introduction of e-invoicing will promote
transparency and traceability in business transactions, reduce tax
evasion, and enhance government revenue collection, the report
says.
The seminar, titled "Business Perception: Labor and Taxes 2024,"
gathered prominent figures in the legal and tax fields, serving as
a platform for discussing current trends and challenges in tax
management and business affairs in the Dominican Republic, the
report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On August 14, 2023, the TCR-LA reported that Moody's Investors
Service has changed the outlook on the Government of Dominican
Republic's ratings to positive from stable and affirmed the local
and foreign-currency long-term issuer and senior unsecured ratings
at Ba3. Moody's said the key drivers for the outlook change to
positive are: (i) sustained high growth rates have enhanced the
scale and 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.
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.
=============
E C U A D O R
=============
GUAYAQUIL DPR: Fitch Assigns Final 'BB-' Rating on 2023-1 Notes
---------------------------------------------------------------
Fitch Ratings has assigned final ratings of 'BB-' to the Series
2023-1 and 2023-2 delayed funding notes issued by Guayaquil DPR
Limited. The Rating Outlook is Stable. The Series 2023 notes have
an aggregate issuance amount of $125 million.
Entity/Debt Rating
----------- ------
Guayaquil DPR
Limited
2023-1 LT BB- New Rating
2023-2 LT BB- New Rating
TRANSACTION SUMMARY
The future flow program is backed by existing and future U.S.
dollar-denominated diversified payment rights (DPRs) originated by
Banco Guayaquil S.A. (BG). The majority of DPRs are processed by
designated depository banks (DDBs) that have executed account
agreements (AAs), irrevocably obligating them to make payments to
an account controlled by the program agent. Fitch's ratings address
the timely payment of interest and principal on a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: The
rating of this future flow (FF) transaction is driven by the
Long-Term Issuer Default Rating (IDR) of the originator, BG. On
Aug. 24, 2023, Fitch downgraded BG's LT IDR to 'CCC+' from 'B-' and
its Viability Rating (VR) to 'ccc+' from 'b-'. This followed the
downgrade of Ecuador's LT IDR to 'CCC+' from 'B-'. In Fitch's view,
BG's rating is driven by its intrinsic profile and constrained by
the sovereign's rating of 'CCC+'.
Going Concern Assessment Supports Notching Differential: Fitch uses
a going concern assessment (GCA) score to gauge the likelihood that
the originator of an FF transaction will stay in operation
throughout the transaction's life. Fitch assigned a GCA score of
'GC2' to BG based on the bank's systemic importance. The score
allows for a maximum uplift of four notches above the IDR of the
originator.
Notching Uplift from IDR: The 'GC2' allows for a maximum four-notch
rating uplift from the bank's Long-Term IDR pursuant to Fitch's FF
methodology. Considering the bank's current LT IDR, the assigned
rating is at the maximum notching differential allowed by Fitch's
FF methodology for an originator with a score of 'GC2'. The
four-notch rating uplift is supported by the transaction's strong
projected coverage levels; FF debt relative to the bank's funding
ratios being within the thresholds outlined in Fitch's Future Flow
Securitization Rating Criteria; and Fitch reserving the maximum
notching uplift for transactions with originators rated at the
lower end of the rating scale, such as BG.
Moderately High Future Flow Debt Relative to Balance Sheet: Fitch
estimates BG's FF debt will represent 3.8% of its total funding and
27.8% of non-deposit funding when considering the $125 million DPR
transaction and the $112 million outstanding balance on the bank's
merchant voucher program (MV). Fitch views the ratio of FF debt to
overall liabilities as small enough to allow the financial FF
ratings the maximum uplift indicated by the GCA score.
Coverage Levels Commensurate with Rating: Fitch views the
transaction's debt service coverage ratio (DSCR) as more than
sufficient for the assigned rating. The minimum projected DSCR is
approximately 100.3x when considering the maximum periodic debt
service over the life of the program and DDB flows over the past
five years (removing transactions greater than $25 million).
Sovereign/Diversion Risks Reduced: The structure mitigates certain
sovereign risks by collecting cash flows offshore until the
collection of periodic debt service amounts. Fitch believes
diversion risk is partially mitigated by the AAs that have been
executed by the DDBs.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The transaction rating is sensitive to changes in BG's credit
quality. Currently, the transaction is receiving the maximum
notching uplift from BG's LT IDR. Therefore, a deterioration in
BG's credit quality by one notch would trigger a downgrade of the
transaction rating from its current level.
- The transaction rating is sensitive to increases in the FF debt
relative to the bank's funding ratios. If either ratio were to
increase beyond the thresholds outlined in Fitch's Future Flow
Securitization Rating Criteria, it could result in a downgrade of
the transaction rating from its current level.
- The transaction rating is sensitive to the DPR business line's
performance and its ability to continue operating, as reflected by
the GCA score. Changes in Fitch's view of the bank's GCA score can
lead to a change in the transaction's rating. The minimum expected
quarterly DSCR when considering DDB flows for the past five years
is approximately 100.3x and should therefore be able to withstand a
significant decline in cash flows absent other issues. However,
significant declines in flows could lead to a negative rating
action. A rating committee will analyze any change to these
variables to assess the potential impact on the transaction
rating.
- No company is immune to the economic and political conditions of
its home country. Political risks and the potential for sovereign
interference may increase as a sovereign's rating is downgraded.
However, the underlying structure and transaction enhancements
mitigate these risks to a level consistent with the assigned
rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The main constraint to the transaction rating is the originator's
rating and BG's operating environment. If the bank's LT IDR is
upgraded by more than one notch from its current rating, Fitch
would consider if the same uplift could be maintained or should be
further tempered in accordance with criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The FF ratings are driven by the credit risk of Banco Guayaquil,
S.A. as measured by its Long-Term IDR.
=============
J A M A I C A
=============
JAMAICA: Egg Glut Worries Farmers
---------------------------------
RJR News reports that egg farmers are concerned about the low
consumption of table eggs which has resulted in a glut in the
market.
The revelation came at a Jamaica Egg Farmers Association meeting in
St. Ann, according to RJR News.
President of the association, Mark Campbell, says the only hope
lies in the removal of the 15 per cent GCT on the product, the
report notes.
It's a move the association has been lobbying for, for years, the
report relays.
"We want the consumption of eggs in Jamaica to go up because it is
just too low. It is at the very same level as Haiti, and our other
Caribbean countries are eating two times, two and a half times
weekly what we are eating in Jamaica," Mr. Campbell outlined, the
report says.
According to data from the Agriculture Ministry, since 2019, egg
production has increased by 39.4 per cent, the report discloses.
Jamaica has not imported table eggs since 2007.
Agriculture Minister Floyd Green believes to increase consumption,
an effective local marketing campaign is needed, the report notes.
He also responded to calls for the removal of the GCT on eggs.
"We will seek to engage the Minister of Finance to see the
possibilities of looking at the removal of GCT or a reduction of
GCT. But we know if we were able to get that, then that would help
drive the consumption of eggs," he admitted.
In the meantime, the Jamaica Egg Farmers Association said its
members are exploring export options, the report says.
"We have enquires about eggs from a number of Caribbean countries.
We have from Cuba. We are involved right now in negotiation to see
how that is going to go. We have from Barbados and we have from
Trinidad. And I think there may be another interest being
expressed," said Mr. Campbell, 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.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
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.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===============
P A R A G U A Y
===============
PARAGUAY: Fitch Affirms 'BB+' Foreign Currrency IDR, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Paraguay's Long-Term (LT) Foreign
Currency (FC) Issuer Default Rating (IDR) at 'BB+' with a Stable
Outlook.
KEY RATING DRIVERS
Ratings Affirmed, Stable Outlook: Paraguay's ratings reflect its
track record of broadly prudent and consistent macroeconomic
policies, low government debt relative to rating peers despite an
increase in recent years, and robust external liquidity. Its
ratings are mainly constrained by weak governance indicators, a
shallow local capital market that narrows fiscal financing
flexibility, and vulnerability to adverse climactic shocks
reflected in high GDP volatility.
New Administration Faces Policy Challenges: The administration of
President Santiago Peña took office in August, signaling broad
economic policy continuity under the Colorado Party, which also won
majorities in both houses of congress. The administration has
touted a business-friendly, green agenda aiming to increase the
role of the private sector in the economy and boost formal
employment, and has already made progress with some initiatives
(e.g. a carbon credits law). It also plans to continue with reforms
in the Policy Coordination Instrument (PCI) agreed with the IMF,
including creation of a pension regulatory body and reform of the
public sector pension system (Caja Fiscal), however, these have
faced resistance and could be difficult to advance despite Peña's
strong support in the legislature. The incoming government also
faces the challenge of implementing a credible fiscal
consolidation, which would be needed to stabilize debt/GDP and
bolster fiscal policy credibility after deterioration over the past
five years.
Growth Rebounds: Fitch expects the economy to rebound by 5.2% in
2023, driven primarily by the recovery of the agriculture and
hydroelectricity sectors, after a severe drought in 2022 reduced
growth to just 0.1%. Fitch forecasts growth to remain robust at
4.5% in 2024 and 2025, supported by a pipeline of large investment
projects in pulp (i.e. Paracel), green hydrogen, and biofuels.
These investments, coupled with gradual growth in the maquila
sector, are supportive of Paraguay's economic diversification
efforts, which could help mitigate vulnerability to climatic shocks
that have become more frequent and severe in recent years.
Arrears Delay Fiscal Consolidation: A significant amount of arrears
(USD600 million, 1.1% of GDP) were reported this year, reflecting
unrecorded expenditure commitments related to health and public
works that have accumulated over the past few years. The new
administration intends to include the arrears in a revised 2023
budget, which foresees a deficit of 4.1% of GDP, compared to an
original target of 2.3% of GDP. This revision reflects a full
recognition of the arrears (1.1% of GDP) but also a weaker
underlying deficit position (about 3% of GDP).
Fiscal Risks, Credibility Erosion: The 2024 budget will target a
fiscal deficit of 2.6%, and the revised fiscal consolidation path
envisions a deficit of 1.9% in 2025 and a return to the fiscal
responsibility law (FRL) limit of 1.5% in 2026. The new government
has eschewed any tax increases, aiming instead to rely primarily on
greater spending efficiency, improved tax administration, and
higher growth. The authorities have yet to clearly outline the
measures to support fiscal consolidation, however. In addition to
the impact of payment arrears, Fitch notes that the higher deficit
and longer fiscal consolidation path follows several relaxations in
the FRL in recent years, which have weakened Paraguay's fiscal
anchor. In Fitch's view, the government's capacity to outline and
implement a realistic fiscal consolidation strategy will be key to
restore fiscal policy credibility and avoid downward pressure on
the sovereign rating.
Public Sector Pension Pressures: Achieving these fiscal goals will
also require an additional effort to offset the erosion in the
public-sector pension system (Caja Fiscal). The overall balance is
in deficit (0.5% of GDP in 2022) and deteriorating by 0.1% of GDP
per year, which will deplete the system's reserves in about three
years, after which period government transfers will be required. A
law to create a high-level commission of experts was submitted in
July, tasked with formulating reform proposals, which would only
yield savings in the medium term. Passage of reform could face
political resistance despite the government's strong support in
congress.
Consolidation to Stabilize Debt: Fitch forecasts government debt to
rise to 35.5% of GDP in 2024, from 33.8% in 2022. Achievement of
fiscal consolidation targets should stabilize debt/GDP around this
level, absent any unexpected shocks to growth or the exchange rate.
Debt remains lower than the 'BB' median of 52.8% but has risen
sharply since Paraguay's upgrade in 2018 (17.8%). The interest
burden is expected to increase to 1.6% of GDP in 2023 from 1.1% in
2021, and from 6.4% of revenues to 9.6%, thus exceeding the 'BB'
median (9.2%) for the first time.
Efforts to Deepen Domestic Debt Market: The government is trying to
deepen the local currency securities market, which is shallow and a
key constraint on financing flexibility and creditworthiness. In
June, a non-resident investor became the first to purchase
local-currency bonds. The government intends to increase the amount
of local market issuance to finance the 2024 budget, targeting up
to USD350 million equivalent (versus an average of about 140
million in recent years), of which about 30% of demand is expected
from non-resident participants. Greater local borrowing could
gradually reduce the foreign currency share of debt, although this
is set to remain among the highest in the 'BB' category (91% in
2022 versus a BB median of 52%).
Pension Oversight: As part of reform efforts agreed under the PCI,
a draft law to establish a pension superintendency has been
submitted to congress, with approval targeted in 1H24. The reform
seeks to set up a regulatory body for the currently unsupervised
pension system. The new body would also have the authority to
change regulations that currently prevent pensions from investing
in local government securities, a significant constraint on
Paraguay's local capital market development. Chances of approval
are bolstered by the new administration's political capital early
in the term, although it has already faced some opposition.
Current Account Recovers: Fitch forecasts the current account to
move into surplus (0.6% of GDP) in 2023 from a large deficit (6.7%)
in 2022, due to the improvement in agricultural exports after last
year's severe drought. Fitch forecasts the current account to
return to a slight deficit in the coming years as imports increase
to support the pipeline of capital-intensive investment projects.
International reserves are forecast to remain above six months of
coverage of current external payments (CXP), well above the 'BB'
median of 4.4.
Inflation Anchored: Inflation has fallen sharply this year (3.5% as
of September), driven primarily by lower fuel and food prices.
Fitch forecasts average inflation of 4.8% in 2023, down from 9.8%
in 2022. The central bank gradually cut policy rates, from a peak
of 8.5% to 7.75% in October. Inflation expectations are well
anchored (4% at 12 and 24-month horizons), reflecting the central
bank's prudent management and well-entrenched credibility.
Country Ceiling Upgrade: Fitch has upgraded Paraguay's Country
Ceiling to 'BBB-' from 'BB+'. Paraguay's +1 notch uplift from the
IDR reflects its view that risks of FX controls are mitigated by
robust external liquidity, a floating exchange rate, sound
macroeconomic policies and institutions, and efforts to diversify
the economy and attract FDI. The upgrade places Paraguay more in
line with similarly rated 'BB' peers in the region.
ESG - Governance: Paraguay's scores for both Political Stability
and Rights and for the Rule of Law, Institutional and Regulatory
Quality and Control of Corruption reflect the high weight that the
World Bank Governance Indicators (WBGI) have in its proprietary
Sovereign Rating Model. Paraguay has a medium WBGI ranking at the
36th percentile, reflecting a recent track record of peaceful
political transitions, a moderate level of rights for participation
in the political process, weak institutional capacity, weak rule of
law and a high level of corruption.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Public Finances: Failure to implement a credible fiscal
consolidation plan sufficient to stabilize debt to GDP.
Macro: Deterioration in the credibility of macroeconomic
policymaking, which could lead to the removal of one +1 notch on
Macro.
Macro: Materialization of a shock, such as an adverse weather
event, that negatively impacts growth, fiscal and external
metrics.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Public Finances: Strengthening of fiscal flexibility through
expansion of the revenue base and lower debt/GDP ratio, and
development of the local capital market and/or buildup of fiscal
saving buffers that improve financial flexibility.
Macro: Higher economic growth (in the context of macro stability)
that increases prospects for GDP per capita convergence with
higher-rated sovereigns, and/or evidence of economic
diversification that reduces Paraguay's exposure to extreme weather
events.
Structural: Sustained improvement in governance indicators, via
efforts to combat corruption and strengthen public institutions.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Paraguay a score equivalent to a
rating of 'BB-' on the LT FC IDR scale.
Fitch's sovereign rating committee adjusted the output by +2
notches from the SRM score to arrive at the final LT FC IDR of
'BB+' by applying its QO, relative to SRM data and output, as
follows:
- Macro: +2 notches. One notch to reflect Paraguay's track record
of prudent and consistent macroeconomic policies that include a
floating FX regime and inflation targeting. Fitch has added an
additional +1 notch which it views as temporary to offset the
deterioration in the SRM output driven by volatility from shocks,
including on GDP growth and inflation.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within its
criteria that are not fully quantifiable and/or not fully reflected
in the SRM.
COUNTRY CEILING
The Country Ceiling for Paraguay is 'BBB-', 1 notch above the LT FC
IDR. This reflects strong constraints and incentives, relative to
the IDR, against capital or exchange controls being imposed that
would prevent or significantly impede the private sector from
converting local currency into foreign currency and transferring
the proceeds to non-resident creditors to service debt payments.
Fitch's Country Ceiling Model produced a starting point uplift of
+1 notch above the IDR. Fitch's rating committee did not apply a
qualitative adjustment to the model result.
ESG CONSIDERATIONS
Paraguay has an ESG Relevance Score of '5' for Political Stability
and Rights as World Bank Governance Indicators have the highest
weight in Fitch's SRM and are therefore highly relevant to the
rating and a key rating driver with a high weight. As Paraguay has
a percentile rank below 50 for the respective Governance Indicator,
this has a negative impact on the credit profile.
Paraguay has an ESG Relevance Score of '5' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
World Bank Governance Indicators have the highest weight in Fitch's
SRM and are therefore highly relevant to the rating and are a key
rating driver with a high weight. As Paraguay has a percentile rank
below 50 for the respective Governance Indicator, this has a
negative impact on the credit profile.
Paraguay has an ESG Relevance Score of '4' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
World Bank Governance Indicators is relevant to the rating and a
rating driver. As Paraguay has a percentile rank below 50 for the
respective Governance Indicator, this has a negative impact on the
credit profile.
Paraguay has an ESG Relevance Score of '4' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Paraguay, as for all sovereigns. As Paraguay
has a fairly recent restructuring of public debt in 2004, this has
a negative impact on the credit profile.
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
----------- ------ -----
Paraguay LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Country Ceiling BBB- Upgrade BB+
senior
unsecured LT BB+ Affirmed BB+
=====================
P U E R T O R I C O
=====================
PUERTO RICO: CVI Holders Receive $388 Million Payment
-----------------------------------------------------
Michelle Kaske of Bloomberg News reports that Puerto Rico directed
$388.8 million to holders of its so-called contingent value
instruments, a type of debt which only repay if sales-tax revenue
collections surpass budgeted estimates.
Holders of the general obligation CVIs received the payment on
November 1, 2023 because the commonwealth's sales and use tax
receipts in the fiscal year that ended June 30, 2023 1012 exceeded
a baseline of $1.28 billion, according to a filing on the Municipal
Securities Rulemaking Board's website.
The CVIs are taxable and do not carry interest. Last 2022,
investors received a similar payment of $361.8 million.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States. The chief of state is the President of the
United States of America. The head of government is an elected
Governor. There are two legislative chambers: the House of
Representatives, 51 seats, and the Senate, 27 seats. The
governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the son
of former governor Pedro Rossello.
In 2016, the U.S. Congress passed PROMESA, which, among other
things, created the Financial Oversight and Management Board and
imposed an automatic stay on creditor lawsuits against the
government, which expired May 1, 2017.
The members of the oversight board are: (i) Andrew G. Biggs, (ii)
Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J.
Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii)
David A. Skeel Jr.
On May 3, 2017, the Commonwealth of Puerto Rico filed a petition
for relief under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The case is
pending in the United States District Court for the District of
Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's
PROMESA petition is available at
http://bankrupt.com/misc/17-01578-00001.pdf
On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation
(COFINA) commenced a case under Title III of PROMESA (D.P.R. Case
No. 17-01599). Joint administration has been sought for the Title
III cases.
On May 21, 2017, two more agencies -- Employees Retirement System
of the Government of the Commonwealth of Puerto Rico and Puerto
Rico Highways and Transportation Authority (Case Nos. 17-01685 and
17-01686) -- commenced Title III cases.
U.S. Chief Justice John Roberts named U.S. District Judge Laura
Taylor Swain to preside over the Title III cases.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq.,
at O'Neill & Borges LLC are onboard as attorneys.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains the case web site
https://cases.primeclerk.com/puertorico
Jones Day is serving as counsel to certain ERS bondholders.
Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General
Obligation Bondholders.
*********
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 * * *