/raid1/www/Hosts/bankrupt/TCRLA_Public/231109.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, November 9, 2023, Vol. 24, No. 225
Headlines
A R G E N T I N A
ARGENTINA: Dollarization is a Non-negotiable Policy, Milei Says
ARGENTINA: Foreign Currency Income From Agroindustry Down 50%
GENERACION MEDITERRANEA: Fitch Affirms 'CCC-' LongTerm IDRs
B E R M U D A
IRIS FINANCIAL: Moody's Cuts CFR to B2 & Alters Outlook to Negative
B R A Z I L
BRAZIL: Central Bank Considers Selic Rate Drop to 11.75%
BRAZIL: Sees Lowest Unemployment in Nine Years
UNIGEL PARTICIPACOES: Fitch Lowers Foreign Currency IDR to 'RD'
E L S A L V A D O R
EL SALVADOR: S&P Raises Sovereign Credit Ratings to 'B-/B'
P A N A M A
ENA NORTE: Moody's Cuts Senior Secured Global Scale Rating to Ba1
P U E R T O R I C O
GRUPO HIMA: Gets OK to Sell Assets to Eastern Health for $5.3MM
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A R G E N T I N A
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ARGENTINA: Dollarization is a Non-negotiable Policy, Milei Says
---------------------------------------------------------------
Buenos Aires Times reports that La Libertad Avanza presidential
candidate Javier Milei says he won't back down from two of his key
policy proposals if elected president – no matter what Mauricio
Macri and Patricia Bullrich think.
Milei, 53, said that his plans to dollarise the economy and shutter
the Central Bank would both be introduced should he win the
November 19 run-off against rival Sergio Massa, according to Buenos
Aires Times. He declared he would not negotiate with his new
Juntos por el Cambio allies on the keynote proposals, the report
notes.
"It's a state policy," Milei said on television as he was rushed by
supporters on his way to Congress to formalize his candidacy, the
report says.
Responding to questions, the libertarian dismissed rumours that
Bullrich and Macri had conditioned him by providing public support
and backing his candidacy in the election's second round, the
report discloses.
Quizzed about the PRO leaders' take on the issues, Milei responded:
"We have our differences, that's why our paths had different
structures, it's only natural," the report relays.
He continued: "They provided me with unconditional support,
obviously we don't agree on everything, we coincide by 90 percent,
in some other points we don't. For instance, the elimination of the
Central Bank," the report notes.
Earlier, experts expressed warnings about Milei's plans.
Economist Aldo Abram, the executive director of Libertad y Progreso
think-tank, noted in an interview that "there's a discussion in
Javier Milei's team about how dollarisation is to be carried out
because nobody knows how it will reach the Central Bank," the
report says.
He underlined that "currently, the Central Bank is absolutely broke
and they don't have their own foreign currency – which is what
you need to dollarise overnight," the report relays.
The explicit support of the 'hawk' faction of the PRO has sparked
unrest in libertarian ranks. Outspoken economist Alberto Benegas
Lynch warned: "I'm not saying it will happen, I'm just warning the
usual suspects not to have the absurd intention to 'tame' Javier
Milei into going back on his extraordinary proposals which are
precisely what catapulted him and will put our country back on its
feet."
Ever since the electoral results of October 22, Milei has attempted
to trend to the centre, in order to win over voters who are unsure
of his candidacy, the report discloses.
Guillermo Francos, Milei's likely interior minister should the
candidate win election, acknowledged that there is unrest in La
Libertad Avanza over the deal with Macri and Bullrich, the report
relays.
He said some were fearful that the move is a stitch-up and "an
operation" designed to damage Milei's candidacy, the report notes.
TikTok Appeal
Responding to what Milei describes as rival Massa's "campaign of
fear," the libertarian launched a new TikTok video this week
outlining his policies, the report discloses. Notably, despite his
promises to privatise the education and healthcare systems, the
word "voucher" was nowhere to be found, the report relays.
On education, Milei assured that, in his government, "public
education will continue, but not with [union leader Roberto]
Baradel in the middle getting your children out of class for days,"
the report notes.
On healthcare, Milei promised that "public healthcare will continue
but without [Covid-19] VIP vaccination and waiting for hours" - a
commitment towards a more efficient and equitable management of
healthcare services, the report relays.
As for the economy, he proposed a reduction in the tax burden: "No
more high taxes to put money in your pocket and not [Lomas de
Zamora on-leave mayor Martín] Insaurralde's," the report notes.
On inflation, Milei stated that in his government "inflation will
be over and you'll be able to afford the train and bus without
anyone helping you," the report says.
"Decadence is over with me and we'll be a power once again. Long
live liberty, damn it!," was how Javier Milei closed his renewed
TikTok "manifesto," 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: Foreign Currency Income From Agroindustry Down 50%
-------------------------------------------------------------
Buenos Aires Times reports that foreign currency income from cereal
and oil producers in Argentina collapsed by 50 percent over the
first 10 months of the year as a result of a severe drought.
The agroindustrial sector settled US$743.5 million in October,
falling 25 percent compared to the same month the previous year, a
report by the CIARA-CEC crushing and export chamber, according to
Buenos Aires Times.
Compared the first 10 months with last year, the cereal-oil sector
lost sales abroad to the tune of US$17.539 billion (down 50
percent), the report notes. The data points to a US$20-billion
slump in foreign currency this year, the report discloses.
"The income of foreign currency in October results from the
drought, which has caused a loss of available stock of grains, as
well as from an electoral process which always conditions the grain
market," read the report, Buenos Aires Times discloses.
In addition, the remaining grains from the coarse harvest will
limit operations from ports and the soybean grinding industry over
the next few months, the report says.
The monthly income of foreign currency, converted into pesos, is
the mechanism which helps continue buying grains from producers at
the best price possible, the report notes.
The settlement of foreign currency is essentially related to the
purchase of grains to be exported afterwards, whether as is or as
processed products, after an industrial transformation, the report
relays.
The oil-cereal producing complex, including biodiesel and related
products accounted for 48 percent of all exports in Argentina last
year, according to data from the INDEC Statistics Bureau, the
report discloses.
The main export product in this country is soy flour (14.2 percent
of the total), which is an industrialised sub-product made by this
agroindustrial complex, which currently has an idle capacity near
50 percent, the report discloses.
The second most exported product last year, according to INDEC, was
corn (11 percent) and the third was soy oil (6.9 percent), 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.
GENERACION MEDITERRANEA: Fitch Affirms 'CCC-' LongTerm IDRs
-----------------------------------------------------------
Fitch Ratings has affirmed Generacion Mediterranea S.A.'s (GEMSA)
Long-Term Foreign Currency and Local Currency Issuer Default
Ratings (IDRs) at 'CCC-'. Fitch has also affirmed the senior
unsecured notes co-issued by Central Termica Roca S.A. (CTR) and
GEMSA, which are guaranteed by GEMSA at 'CCC'/'RR3'. Both issuers
are jointly and severally liable for any payment obligations under
the notes.
GEMSA's ratings continue to reflect its dependence on the country's
offtaker and electricity market coordinator, Compania
Administradora del Mercado Mayorista Electrico S.A. (CAMMESA).
Fitch believes GEMSA is vulnerable to, and can little afford,
payment delays from CAMMESA, given its expected tight EBITDA
interest coverage for 2023.
KEY RATING DRIVERS
High Leverage, Tight Debt Service Coverage: GEMSA's cash flow is
relatively stable and predictable provided that CAMMESA continues
to pay within its current timeframe of around 70 days (down from a
peak of over 100 days in December 2022). As of 2Q23, 99% of the
company's revenue was denominated in U.S. dollars, and
approximately 89% of EBITDA was derived from long-term take-or-pay
contracts under Resolutions 220/2007 and 21/2016.
On a consolidated basis, Fitch estimates GEMSA's leverage will peak
at around 9.4x in 2023, and then decline thereafter to around 4.1x
over the rating horizon as the company pays off maturing
obligations and the Ezeiza, Maranzana, Talara, and Arroyo Seco
projects are completed (note: excluding limited recourse debt,
Fitch estimates leverage at 7x in 2023). EBITDA interest coverage
is projected to be tight at around 1.4x in 2023, before improving
to 2.0x in 2024.
EBITDA Margins to Improve Post-2023: Fitch expects GEMSA's EBITDA
to increase to around USD167 million in 2024 from USD130 million in
2022. CAMMESA awarded GEMSA power purchase agreements for its
Ezeiza, Maranzana, and Arroyo Seco projects, which are
combined-cycle and co-generation projects under Resolution
287/2017. The imminent completion of the Talara co-generation
project in Peru is estimated to generate about USD15 million in
incremental EBITDA.
Completion of the Ezeiza plant expansion in late 2023 is estimated
to generate about USD38 million; completion of the Maranzana plant
expansion in mid-2024 is anticipated to generate an additional
USD28 million of annual EBITDA, thereafter; and the final (second
stage) completion of the Arroyo Seco co-generation project in
January 2025 is expected to generate total incremental EBITDA of
around USD24 million. GEMSA will have no further contract
expirations until December 2025, when 56MW under Resolution 220 are
scheduled to expire.
Refinancing Risk: GEMSA has been able to successfully repay its
sizable short-term maturities in 2023 with funds from local debt
issuances. But for 4Q23 and 2024, the company still faces roughly
USD265 million in short-term debt and an average of USD168 million
of debt will mature each year over the rated horizon. This high
concentration in short-term debt coupled with elevated financing
costs, deteriorating macroeconomic conditions in Argentina and
capital control rules that may be extended through 2024 exposes the
company and its Argentine peers to some refinancing risk.
DERIVATION SUMMARY
GEMSA's rated Argentine utility peers are Pampa Energia S.A.
(B-/Stable), Genneia S.A. (CCC-), AES Argentina Generacion S.A.
(CCC-) and MSU Energy (CCC-). GEMSA's ratings and those of its
pure-play generation peers reflect Argentina's sovereign rating,
because they receive payments from the market coordinator, CAMMESA,
which depends on the government. Fitch estimates median gross
leverage for GEMSA's Argentine utility peers at 4.2x in 2022.
GEMSA's expected 2023 gross leverage, measured as total
debt/EBITDA, is 9.4x, weaker than Pampa Energia's 1.4x, AES
Argentina's 1.9x, Genneia's 4.0x and MSU Energy's 4.0x. GEMSA is
undertaking a combined-cycle expansion at its Ezeiza and Maranzana
plants, similar to ones MSU Energy completed in 2020, for which
GEMSA incurred an additional USD130 million in debt in 2021.
Genneia recently completed renewable energy expansions under the
renewable energy RenovAr program and is in a deleveraging phase.
GEMSA's working capital levels are vulnerable to delays in payments
from CAMMESA as it increases leverage to begin its combined-cycle
expansions.
KEY ASSUMPTIONS
- Refinancing/financing assumptions based on maintenance of roughly
USD100 million in readily available cash annually from 2024 through
the rating horizon, and refinancing of upcoming maturities at
current market rates;
- COD of projects as expected: Talara YE23, Ezeiza YE23, Maranzana
mid-2024, and Arroyo Seco Jan. 2025;
- Capex of USD15 million annually;
- Tax deferment through the rating horizon;
- Aggregated contracted capacity payments of USD168.6 million
annually over the rating horizon;
- Average capacity factor of 55%, and average price of electricity
of USD14 over the rating horizon.
RECOVERY ANALYSIS
Key Recovery Rating Assumptions EBITDA declines 30% in bankruptcy;
A 5.0x EBITDA multiple; Administrative claims of 0%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- An upgrade of the Argentine sovereign rating;
- Given the issuer's high dependence on CAMMESA subsidies from the
national treasury, any further regulatory developments leading to a
market less reliant on support from the Argentine government or a
sovereign upgrade could positively affect the company's
collections/cash flow;
- Cumulative cash flow from Peru covering hard-currency debt
service by 1.0x on a consistent basis.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- A downgrade of GEMSA below 'CCC-' could occur if Fitch believes
that a default of some kind is probable or a default-like process
has begun. This would be represented by a 'CC' or 'C' rating, given
that GEMSA's ratings are linked to those of the Argentine sovereign
at 'CC', due to the high reliance on government subsidies to the
electricity sector.
LIQUIDITY AND DEBT STRUCTURE
Pressured but Improved Liquidity: Fitch expects the company to
exhibit tight EBITDA interest coverage of 1.4x in 2023, increasing
to 2.0x in 2024. As of June 30, 2023, the company had a cash
balance of USD225.8 million, roughly 90% of which was held in U.S.
dollars.
ISSUER PROFILE
Generacion Mediterranea S.A. (GEMSA) is a holding company for most
of Grupo Albanesi's electricity generation assets. Albanesi has
been operating in the sector since 2004, and currently owns or
participates in five generation companies: Generacion Mediterranea
S.A., Central Termica Roca S.A., GM Operaciones S.A., Generacion
Litoral S.A. and Solalban Energia S.A.
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 Prior
----------- ------ -------- -----
Generacion
Mediterranea S.A. LT IDR CCC- Affirmed CCC-
LC LT IDR CCC- Affirmed CCC-
senior
unsecured LT CCC Affirmed RR3 CCC
Central Termica
Roca S.A.
senior
unsecured LT CCC Affirmed RR3 CCC
=============
B E R M U D A
=============
IRIS FINANCIAL: Moody's Cuts CFR to B2 & Alters Outlook to Negative
-------------------------------------------------------------------
Moody's Investors Service has downgraded Iris Financial Services
Limited's Corporate Family Fating to B2 from B1. The outlook was
changed to negative from stable.
RATINGS RATIONALE
The downgrade of Bermuda-based Iris' CFR to B2, from B1, reflects
the deterioration in the company's credit profile over the past
year amid challenging operating conditions in Colombia, where most
of its operations take place, that have particularly affected
consumer-oriented finance companies' business models in the
country.
In particular, the continued high interest rates and persistent
inflationary pressures in Colombia, combined with a sharp
deceleration in economic activity has strained on the company's
cost of funding, with significant impact to its interest margins
and overall profitability. The overall negative scenario also led
to a deterioration of its asset quality metrics in the first half
of 2023, while adding further pressure to Iris' already weak
liquidity structure and high refinancing risk. On the other hand,
the company continues to benefit from its focus on secured payroll
lending in Colombia, which benefits from the deductibility of
consumers' payroll, a strong mitigating factor to rising asset
risks. Iris also has a long track record of adequate
capitalization, a positive rating driver for the company that
supports its loss absorption capacity.
Iris' net interest margins fell to close to 2.7% annualized in June
2023, down from 3.8% and 6.1% in 2021 and 2022, respectively, while
consolidated net income remained adequate at 2.8% of average
managed assets in June 2023, though still below the strong 5.3%
average reported between 2019 and 2022. The relatively low credit
costs reported by Iris, when compared with other consumer lenders,
with loan loss provisions at just 1.8% of gross loans in June 2023,
helped bottom line results. In addition, Iris maintained adequate
capital levels, considering an estimated tangible common equity to
tangible managed assets (TCE/TMA) ratio of 24% as of June 2023.
The negative outlook on the B2 CFR captures the expectation that if
the current negative cycle did not reverse in the next two
quarters, Iris' financial fundamentals will remain under pressure,
especially to its earning generation capacity and funding profile.
As a holding company, Iris' consumer lending franchise and
insurance businesses are conducted through its subsidiaries
ExcelCredit S.A.S (ExcelCredit, domiciled in Colombia) and Golden
Tree Reinsurance Limited (Golden Tree, domiciled in Bermuda),
respectively.
Iris' consolidated funding structure is predominantly made of
wholesale resources that are inherently more sensitive to
investors' confidence and tight global market conditions than
granular core deposits. The short-term nature of funds and high
level of secured funding facilities also increases its price
sensitivity in a high interest rate cycle, negative drivers to its
earnings and liquidity factors. Over the past 12 months, the
company has been able to maintain and even extend credit facilities
with local banks in Colombia, which is also acknowledged in the B2
rating. In June 2023, the company's consolidated debt maturity
coverage remained at a modest 19%, below the 26% of 2022 year-end
and 42% in 2021. Secured funding sources accounted for roughly 37%
of tangible assets in June 2023, a constrain to its financial
flexibility, although slightly down from 42% at the end of 2022. In
addition, Iris corporate structure and related party transactions,
including funding and portfolio sales to the group's affiliates,
weigh negatively on its credit profile as it creates opacity and
complexity.
While the company currently does not have outstanding rated debt
instruments, in Moody's view, a rating on senior unsecured debt
would incorporate the B2 CFR and Iris' capital structure, where
high levels of secured financing would likely lead senior unsecured
ratings to be below the CFR.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Iris' B2 CFR could be downgraded if its currently weaker liquidity
position fail to recover, leading to continuously low coverage of
short-term obligations and an overall weaker funding profile. Iris'
rating would also face negative pressure if its margins and overall
profits deteriorated further, or if its capitalization fell from
current levels.
Although unlikely at this point given the negative outlook, Iris'
rating outlook could be stabilized if the company improves its
funding structure and liquidity profile through access to unsecured
resources, that could enhance its financial flexibility. Positive
rating pressure would also arise if Iris were able to successfully
implement its current growth strategy while maintaining strong
earnings, asset quality and capital adequacy.
The principal methodology used in this rating was Finance Companies
Methodology published in November 2019.
===========
B R A Z I L
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BRAZIL: Central Bank Considers Selic Rate Drop to 11.75%
--------------------------------------------------------
Richard Mann at Rio Times Online reports that the Monetary Policy
Committee (Copom) hinted at a potential change in the Selic rate in
Brazil, which currently stands at 12.25%.
By December 12-13, 2023, they might reduce it to 11.75%, according
to Rio Times Online. This decision follows a recent reduction of
0.5 percentage points, the report notes.
That drop brought the Selic to 12.25%, its lowest since May 2022,
the report relays.
This reduction is not new, the report relays. The Central Bank
decreased the Selic rate in three consecutive meetings, the report
adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-',
with a Stable Outlook. The upgrade reflects better-than-expected
macroeconomic and fiscal performance amid successive shocks in
recent years, proactive policies and reforms that have supported
this, and Fitch's expectation that the new government will work
toward further improvements.
In mid-June 2023, S&P Global Ratings, revised the outlook on its
long-term global scale ratings on Brazil to positive from stable.
S&P affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. S&P also affirmed its
'brAAA' national scale rating, and the outlook remains stable. The
transfer and convertibility assessment remains 'BB+'. The positive
outlook reflects signs of greater certainty about stable fiscal and
monetary policy that could benefit Brazil's still-low GDP growth
prospects. Continued GDP growth plus the emerging framework for
fiscal policy could result in a smaller government debt burden than
expected, which could support monetary flexibility and sustain the
country's net external position.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and senior
unsecured bond ratings in April 2022.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term
Foreign and Local Currency - Issuer Ratings to BB from BB (low).
At the same time, DBRS Morningstar confirmed Brazil's
Short-term Foreign and Local Currency - Issuer Ratings at R-4.
The trend on all ratings is Stable (March 2018).
BRAZIL: Sees Lowest Unemployment in Nine Years
----------------------------------------------
Iolanda Fonseca at Rio Times Online reports that the Brazilian
Institute of Geography and Statistics (IBGE) reports that Brazil's
jobless rate has dropped to 7.7%, marking its lowest since 2015.
In this quarter, 331,000 fewer people were unemployed. That's a
3.8% drop, according to Rio Times Online. Compared to last year,
1.1 million fewer people are jobless, a 12.1% decline, the report
notes.
Meanwhile, employment is up. Now, 99.8 million people have jobs,
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).
UNIGEL PARTICIPACOES: Fitch Lowers Foreign Currency IDR to 'RD'
---------------------------------------------------------------
Fitch Ratings has downgraded Unigel Participacoes S.A.'s (Unigel)
Long-Term Foreign Currency Issuer Default Rating (IDR) to 'RD' from
'C' and its long-term National Scale Rating to 'RD(bra)' from
'C(bra)'. Fitch has also affirmed Unigel Luxembourg's S.A. USD530
million senior unsecured notes due 2026 at 'C'/'RR4'.The rating
actions follow the company's failure to cure the missed interest
payment due on Oct. 2, 2023 on its senior unsecured notes as part
of the company's ongoing negotiations with creditors.
KEY RATING DRIVERS
Uncured Missed Interest Payment: Unigel skipped an interest payment
due on Oct. 2, 2023 on its USD530 million senior unsecured notes.
Fitch views the failure to cure the missed interest payment within
the 30-day original grace period as a restricted default as per its
ratings definitions.
Bond Repayment Uncertain: Unigel is still considering a potential
debt restructuring in the midst of challenging market conditions.
Without additional funds, the company will need some combination of
asset sales, an equity injection from its shareholder or a
renegotiation of its natural gas supply contracts.
Fitch believes that the engagement of Moelis, which has been an
advisor for several companies that have restructured debt in
Brazil, materially reduces the creditors' willingness to provide
new financings to the group to cover its 2023 and 2024 funding
needs.
Elevated Leverage; Covenant Breach: Fitch understands that Unigel
violated its maintenance covenant on its debentures of 3.5x net
leverage in the 2Q23 and has reached an agreement with debenture
holders such that its debt is not accelerated. Unigel's financial
performance is the result of deteriorating market conditions in
both the chemical and agro segments. EBITDA in these segments
decreased to BRL104 million (~USD21 million USD) in 1Q23 from
BRL568 million in 1Q22 and BRL226 million in 4Q22 due to weak
prices and higher feedstock prices.
DERIVATION SUMMARY
Unigel's ratings reflect the non-payment of bond interests after
the original 30-day grace period.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A liquidity injection sufficient to cover financing liabilities
without material reduction in terms compared with the original
contractual ones, that would otherwise be classified as Distressed
Debt Exchange;
- Fitch will reassess the IDRs upon the completion of a debt
restructuring process; the updated IDRs would reflect the new
capital structure and credit profile of the issuer.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Filing for bankruptcy protection would result in a downgrade to
'D'.
ISSUER PROFILE
Unigel is a medium-size chemical producer operating in the
midstream of the petrochemical industry value chain (acrylics and
styrenics), with facilities in Brazil and Mexico.
ESG CONSIDERATIONS
Unigel Participacoes S.A. has an ESG Relevance Score of '4' for
Governance Structure due to ownership concentration and key person
risk, which has a negative impact on the credit profile, and is
relevant to the rating[s] in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Unigel
Luxembourg S.A.
senior
unsecured LT C Affirmed RR4 C
Unigel
Participacoes S.A. LT IDR RD Downgrade C
LC LT IDR RD Downgrade C
Natl LT RD(bra)Downgrade C(bra)
=====================
E L S A L V A D O R
=====================
EL SALVADOR: S&P Raises Sovereign Credit Ratings to 'B-/B'
----------------------------------------------------------
S&P Global Ratings, on Nov. 7, 2023, raised its long- and
short-term sovereign credit ratings on El Salvador to 'B-/B' from
'CCC+/C'. The outlook on the long-term ratings is stable. S&P also
raised its long-term issue ratings to 'B-'. The transfer and
convertibility assessment remains 'AAA'.
Outlook
The stable outlook indicates S&P's view of balanced risks between
El Salvador's recently reduced rollover needs and its still-high
debt service payments in the coming years, along with its fragile
economic profile.
Downside scenario
S&P could lower the ratings over the next six to 12 months if it
sees a weakening of the government's ability to secure adequate
funding for its fiscal deficits and rollover needs, or of its
capacity to undertake the fiscal adjustment needed to stabilize its
very high debt burden. Furthermore, higher refinancing risks or
potential indications that the government is less willing to
service its debt could also lead to a downgrade.
Upside scenario
S&P could raise the ratings in the next six to 12 months if
comprehensive reforms lead to improved debt management, continued
economic recovery, and greater clarity about fiscal policy, in turn
reducing the financing gap and bolstering the country's debt
payment culture.
Rationale
S&P said, "We raised our sovereign credit ratings on El Salvador to
'B-/B' because we consider that the government's recent program to
gradually refinance its short-term debt with local banks will
reduce rollover needs and mitigate the risk of a default over the
next two years. This strategy is another step in the broad debt
reprofiling process that began around a year ago, with two external
debt repurchases and a pension debt exchange. (We deemed the
pension debt exchange to be a distressed exchange.)"
Although the debt reprofiling brings some fiscal relief to the
government, it still faces considerable fiscal and debt risks as
debt service payments remain high and financing alternatives are
somewhat limited.
The short-term debt refinancing strategy targets around $1.4
billion of the $2.8 billion (around 8% of GDP) in short-term bills
(LETES and CETES, for its Spanish acronyms). Under the reprofiling,
the government repays in full every outstanding short-term bill at
its current maturity date. The following day, it issues a new debt
obligation--at longer maturities of two, three, five, or seven
years--that could be taken by the same bank. To compensate for the
longer maturities, the government will pay higher interest rates
that range from 8.25% for the current one-year bills to 9.75% for
the seven-year issuance.
Banks have already agreed how much of each bond will be held in
their portfolios. Longer maturity bonds are being issued first. The
program started in October this year, and given that the current
short-term bills are being paid at maturity, it will take around
one year for the government to complete the refinancing process,
concluding in September 2024.
Once it's finished, rollover needs on the short-term debt will ease
to around $1.7 billion-$2 billion annually, from the current $2.8
billion. Furthermore, the program contemplates a strategy to
gradually reduce the stock of short-term debt--since both five-year
and seven-year bonds will be amortizing (instead of the current
bullet issuances of LETES and CETES)--to around $300 million in
seven years. The government has also lowered the short-term debt
ceiling approved in its 2024 budget to 20% of its revenues (from
25%) as a commitment to mitigate this exposure.
This gradual refinancing follows:
-- Two long-term debt repurchases in late 2022, which reduced the
bullet bond amortizations due in 2023 and 2025, and
-- A pension debt restructuring in the first half of the year,
which granted relief of around four years of no interest and
capital payments on its pension debt certificates.
Despite the fiscal relief coming from these measures, the country's
public finances remain fragile, reflecting long-term structural
vulnerabilities.
The rating on El Salvador incorporates the country's institutional
weaknesses, as indicated by long-standing difficulties in
predicting policy responses amid poor checks and balances, modest
per capita GDP at $5,200, and only moderate GDP growth prospects
due to persistently low investment and productivity. In addition,
the sovereign has a very high debt burden, around 70% of GDP, and
hefty debt service payments over the next three to five years. It
also lacks monetary flexibility because of full dollarization.
The government has been in talks with the IMF and could enter into
a program in the coming year. Although, most likely this would
happen after the presidential election in February 2024.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
EL SALVADOR
Transfer & Convertibility Assessment
Local Currency AAA
UPGRADED
TO FROM
EL SALVADOR
Sovereign Credit Rating B-/Stable/B CCC+/Stable/C
EL SALVADOR
Senior Unsecured B- CCC+
===========
P A N A M A
===========
ENA NORTE: Moody's Cuts Senior Secured Global Scale Rating to Ba1
-----------------------------------------------------------------
Moody's Investors Service downgraded ENA Norte Trust's (ENA Norte)
senior secured Global Scale rating to Ba1 from Baa3 and Baseline
Credit Assessment (BCA) to ba2 from ba1. Moody's also downgraded
ENA Master Trust's (ENA Master) senior secured Global Scale rating
to Baa3 from Baa2 and BCA to baa3 from baa2. The outlook on the
ratings for ENA Norte and ENA Master changed to stable from
negative.
This rating action follows the Government of Panama rating
downgrade to Baa3 stable from Baa2 and outlook change to stable
from negative.
RATINGS RATIONALE
The downgrade in ENA Norte and ENA Master's ratings reflects the
rating downgrade of the Government of Panama ratings, the support
provider for these entities under Moody's analytical framework for
Government-Related Issuers Methodology (GRIs).
ENA Norte's rating downgrade also incorporates the adjustment of
its BCA to ba2 from ba1, recognizing its weaker standalone credit
profile. This action reflects the diminished cash generation
capacity of the toll road due to the longer than expected traffic
recovery to pre pandemic levels, as well as the lack of annual
tariff increases for several years. ENA Norte's debt amortizes
through a cash sweep mechanism in which any excess cash after O&M
costs, taxes and interest payments is used to repay debt. Given the
performance of the asset and the cash sweep mechanism, under
Moody's Base Case, Moody's estimate that at maturity in April 2028,
$16 million of the notes will remain outstanding ($600 original
issuance amount). Thus, ENA Norte will need to repay the
outstanding amount with cash from the sponsor or refinance the
outstanding balance to be fully repaid before the end of the
concession in 2028. Moody's Base Case assumes that traffic recovery
to pre-pandemic levels will only occur in 2027 or 2028.
The Ba1 rating of ENA Norte reflects the application of Moody's
joint default analysis (JDA) framework for GRIs, which takes into
account: i) a BCA of ba2 as a measure of ENA Norte's standalone
creditworthiness, ii) the Baa3 rating of the Government of Panama
as support provider, as well as iii) Moody's estimates of a
moderate implied government support in the case of financial
distress and iv) a very high default dependence between ENA Norte
and the Government of Panama.
ENA Master's rating downgrade also incorporates the adjustment of
its Baseline Credit Assessment (BCA) to baa3 from baa2, in line
with the rating downgrade of the Government of Panama. The Baa3
rating of ENA Master also reflects the application of Moody's joint
default analysis (JDA) framework for GRIs, which takes into
account: i) a BCA of baa3 as a measure of ENA Master's standalone
creditworthiness, ii) the Baa3 rating of the Government of Panama
as support provider, as well as iii) Moody's estimates of a
moderate implied government support in the case of financial
distress and iv) a very high default dependence between ENA Master
and the Government of Panama.
Moody's believes that there is a moderate likelihood of
governmental support given the toll roads' strategic importance to
the country's transportation system and their status as wholly
owned entities of the Republic of Panama. The estimate of very high
default dependence reflects Moody's view that ENA Norte and ENA
Master share common risk factors with the government, because their
revenue base is derived from the same population base and are
exposed to similar economic and social challenges.
RATING OUTLOOK
ENA Norte
The stable rating outlook in ENA Norte's rating considers Moody's
expectation that the debt outstanding balance at maturity will not
be material and will be refinanced. Evidence from this type of
situation was when the ENA Master trust was established to
refinance the ENA Sur and ENA Este debt.
ENA Master
The stable rating outlook reflects the outlook on the Government of
Panama as a result of the strong links of the government with the
toll roads. It also incorporates Moody's expectation that the debt
service coverage ratio (DSCR) will remain above 3.0x over the next
12-18 months.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
ENA Norte
ENA Norte's rating will have upward pressure if DSCR is above 1.2x
in a projected and sustained basis due to stronger traffic
performance, tariff increases or cost control.
Downward pressure on ENA Norte's rating could generate from an
increase in refinancing risk driven by the delay in the concession
extension or material increase in the expected outstanding debt
balance at maturity.
ENA Master
ENA Master's rating could be upgraded if Panama's rating is
upgraded, and the company reports stronger DSCRs of more than 2.0x
on a projected and sustained basis.
ENA Master's rating could be downgraded if Panama's rating is
downgraded. The lack of tariff increases to satisfy debt service
requirements when needed or a reduction in cash flow resulting in
DSCRs of less than 1.6x would also exert downward pressure on the
rating.
ABOUT ENA NORTE
ENA Norte Trust is the special purpose vehicle created for this
transaction to which rights under a concession and cash flows
related to Corredor Norte toll road have been assigned. Corredor
Norte is a highway system in Panama City, the capital of the
Republic of Panama. It spans the northern part of the city
complementing the Corredor Sur highway that runs along the shore in
the south. Corredor Norte currently consists of three 2-lane
segments totaling 33 kilometers, and one additional segment (Phase
IIB), which is not a part of this transaction.
ABOUT ENA MASTER
ENA Master is a special-purpose financing vehicle created to incur
indebtedness and hold assets after the redemption of the ENA Sur
notes and the 2014 ENA Este notes. ENA Master issued $400 million
of senior secured debt that is supported by the consolidated toll
road cash flow of the ENA Sur and ENA Este corridors (Corridor Sur
and Corridor Este). The notes are guaranteed by ENA Sur and ENA
Este on a joint and several basis. Corridor Sur runs in a
northeast/southwest direction along the coast, connecting the
western sector of Panama City (Paitilla), which includes the main
business and financial district of Panama City and the new
development of Punta Pacifica, and the eastern sector (Tocumen),
which includes various suburban areas, the Tocumen International
Airport and the Pan American Highway. Corridor Este is a highway
that connects the township of Las Mananitas and the Panamerican
Highway with the Corredor Norte Toll Road. Corridor Este brings
traffic directly from the east of the Panama Canal and from the
ports in Colon in the Atlantic Ocean directly to the Tocumen
International Airport without having to go through Panama City.
The methodologies used in these ratings were Publicly Managed Toll
Roads and Parking Facilities published in May 2023.
=====================
P U E R T O R I C O
=====================
GRUPO HIMA: Gets OK to Sell Assets to Eastern Health for $5.3MM
---------------------------------------------------------------
Grupo Hima San Pablo, Inc. and its affiliates received court
approval to sell assets to Eastern Health, LLC.
In his order, Judge Enrique Lamoutte Inclan of the U.S. Bankruptcy
Court for the District of Puerto Rico held that Eastern Health is a
"good faith purchaser."
"The approval of the sale to Eastern Health through the asset
purchase agreement is considered to be deemed fair and reasonable
and in the best interests of [the companies'] estates," the
bankruptcy judge said.
Eastern Health made a $5.3 million offer for the assets, which
consist of real and personal properties associated with the
operation of the businesses of Grupo Hima San Pablo's affiliates
Centro Medico del Turabo, Inc. and Hima San Pablo Properties, Inc.
The assets include the Hima San Pablo Humacao Hospital, an acute
care general hospital in Humacao, P.R. They were sold to Eastern
Health "free and clear" of liens, claims and encumbrances.
The companies previously put the assets up for bidding and held an
auction on Oct. 2 where Eastern Health emerged as the winning
bidder. The next highest bidder is Caribbean Med, which offered
$5.2 million for the assets.
About Grupo Hima San Pablo
Grupo HIMA San Pablo, Inc. serves as a diversified healthcare
services holding company pursuant to a corporate reorganization of
several businesses related by common ownership. Through its
subsidiaries and affiliates, Grupo HIMA San Pablo primarily owns
and operates hospital facilities and other healthcare related
businesses. As of August 2023, the HIMA GROUP operates four
hospitals, with over 1,200 licensed beds, including an Oncological
Hospital, a multi-specialty physician practice management company,
Home Care Service (including infusion therapies and wound care), a
free-standing ambulatory center and a 16-ambulance service
company.
Grupo HIMA San Pablo and its affiliates filed Chapter 11 petitions
(Bankr. D. P.R. Lead Case No. 23-02510) on Aug. 15, 2023. In the
petition signed by its chief executive officer, Armando J.
Rodriguez-Benitez, Grupo HIMA San Pablo disclosed $500 million to
$1 billion in assets and $100 million to $500 million in
liabilities.
Judge Enrique S. Lamoutte Inclan oversees the cases.
Wigberto Lugo Mender, Esq., at Lugo Mender Group, LLC and
Pietrantoni Mendez & Alvarez, LLC serve as the Debtors' bankruptcy
counsel and special counsel, respectively.
The U.S. Trustee for Region 21 appointed an official committee of
unsecured creditors on Sept. 7, 2023. Porzio, Bromberg & Newman,
P.C. is the committee's legal counsel.
Edna Diaz De Jesus is the patient care ombudsman appointed in the
Debtors' Chapter 11 cases.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
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