/raid1/www/Hosts/bankrupt/TCRLA_Public/231121.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 21, 2023, Vol. 24, No. 233
Headlines
A R G E N T I N A
ARGENTINA: Biz Leader Says First 6 Mos. of 2024 Will be 'Terrible'
B E R M U D A
HIGHLANDS HOLDINGS: S&P Affirms 'BB+' ICR, On Watch Negative
B R A Z I L
BANCO DE DESENVOLVIMENTO: S&P Affirms 'B' Global Scale Rating
BRAZIL: 2024 Harvest Forecast Shows Decline
C O L O M B I A
FRONTERA ENERGY: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Looks at Alternatives to Protect Nat'l Prod.
J A M A I C A
JAMAICA: Shipping Firms Facing Higher Costs to Bring Goods from US
P E R U
PERU: Economy Slides 1.29% in September, Missing Forecasts
P U E R T O R I C O
ZAGACITY TECH: Case Summary & 16 Unsecured Creditors
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A R G E N T I N A
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ARGENTINA: Biz Leader Says First 6 Mos. of 2024 Will be 'Terrible'
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Buenos Aires Times reports the leader of one of Argentina's top
trade groups is forecasting a "terrible" start to the next year for
both the economy and business more generally.
Speaking ahead of presidential run-off, Entre Rios Province
businessman Natalio Mario Grinman said that "the first six months
of 2024 will be terrible, whoever governs," according to Buenos
Aires Times.
Grinman, the president of the Camara Argentina de Comercio
(Argentine Chamber of Commerce, CAC), said in a radio interview
that the leader of the next government faces an unenviable task,
given the country's economic woes and runaway inflation running at
140 per annum, the report notes.
Argentina's next leader, said the CAC chief, should be "honorable
and predictable," the report relays.
"When people ask me how inflation is going to be, I tell them to
enjoy today, because next year we are going to be worse," Grinman,
68, told Radio Rivadavia, the report discloses.
The business leader forecast that next year would be "very
complex," but he sounded a note of optimism too. "With a good pair
of glasses" it is possible to see "light in the future," he added.
Calling on the nation's leaders to buck up its ideas, Grinman
demanded that politicians "do things properly" and argued that "if
the opposition is going to be opposition for the simple fact of
opposing, Argentina is unviable," the report relays.
"In Argentina there are businessmen who ask for protectionism -
what happens is that the government has to know how to find a
balance," the Concordia-born business leader stressed, the report
relays. "You cannot continue with a protectionist policy while
things are put together with string."
The head of the chamber of commerce said it would not be able to
open up all markets indiscriminately but said that "we have to be
intelligent in order to trade with the whole world," the report
notes.
"Argentina is a country with extraordinary future possibilities,
but it is not a normal country, because a normal country could not
have more than 40 percent poverty and destitution, with all the
potential wealth that we have here," said Grinman, the report
notes. "This situation is for countries who do not have the
resources we have. But in Argentina, the most serious thing of all
is the uncertainty."
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 will be succeeded by Javier Milei who won the
presidential election on November 19, 2023. Milei is scheduled to
be sworn in as President of Argentina on December 10, 2023.
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.
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B E R M U D A
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HIGHLANDS HOLDINGS: S&P Affirms 'BB+' ICR, On Watch Negative
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S&P Global Ratings placed its long-term issuer credit ratings on 15
nonoperating holding companies (NOHCs) of Bermuda-based reinsurers
and insurers (re/insurers) on CreditWatch with negative
implications. S&P also placed its issue ratings on the securities
issued or guaranteed by these NOHCs on CreditWatch negative.
S&P placed its ratings on the following entities on CreditWatch
negative:
-- Arch Capital Group Ltd.;
-- Ascot Group Ltd.;
-- Aspen Insurance Holdings Ltd., Highlands Holdings Bond
Co-Issuer Inc., and Highlands Holdings Bond Issuer Ltd.;
-- AXIS Capital Holdings Ltd.;
-- Enstar Group Ltd.;
-- Everest Group Ltd. and Everest Reinsurance Holdings Inc.;
-- Fidelis Insurance Holdings Ltd.;
-- Hiscox Ltd.;
-- Lancashire Holdings Ltd.;
-- RenaissanceRe Holdings Ltd. and DaVinciRe Holdings Ltd.; and
-- SiriusPoint Ltd.
S&P said, "The CreditWatch placement reflects the potential
reassessment of our base-case assumptions on regulatory
restrictions to payments from Bermuda-based re/insurance operating
entities to NOHCs. We will review the enforcement of regulatory
rules in Bermuda that could limit or restrict cash flow movements
from the operating entity to the NOHC.
"We generally rate NOHCs of insurance groups two notches below
their core operating subsidiaries if potential restrictions to
payments are low and three notches if high.
"If, in our view, the enforcement of regulatory rules results in a
higher likelihood of restrictions on the upstreaming of cash flow,
then we will likely lower the ratings on the NOHCs, and the ratings
on the instruments issued or guaranteed by these NOHCs, by one
notch.
"Alternatively, we may maintain the ratings on these NOHCs at two
notches below the ratings on the core re/insurance operating
entities, and maintain the existing issue ratings, if we conclude
that the potential regulatory restrictions to payments are low."
Furthermore, if S&P determine that the potential restrictions to
payments are high, it could affirm the ratings on these NOHCs, on a
case-by-case basis, if there are potential mitigants such as:
-- The NOHC generates sufficient earnings from operating entities
that are subject to low regulatory restrictions to payments, or
generates significant cash flows from unregulated operating
subsidiaries or own business activities, or
-- The holding company regularly maintains a significant amount of
unencumbered cash or high-quality fixed-income assets to
sustainably meet its ongoing obligations.
If there is any change in ratings on the NOHCs, this will not
affect the ratings on the re/insurance operating entities of these
NOHCs.
S&P said, "At the time of this action, we did not apply our updated
capital model criteria to these Bermuda-based groups. We have not
placed our ratings on these entities under criteria observation
because we do not expect to take rating actions on them as a result
of the updated criteria. Our view of the potential regulatory
restrictions to payments is relevant for our assessment of
debt-funded capital credit for debt issuances under our updated
capital model criteria."
CreditWatch
S&P said, "Over the coming weeks, we will engage with these issuers
and the relevant external third parties. We aim to resolve the
CreditWatch placement as soon as possible based on our analysis of
the above-mentioned regulatory restrictions and mitigants."
Ratings List
AXIS CAPITAL HOLDINGS LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
AXIS CAPITAL HOLDINGS LTD.
Issuer Credit Rating
Local Currency A-/Watch Neg/-- A-/Stable/--
AXIS CAPITAL HOLDINGS LTD.
Preferred Stock BBB/Watch Neg BBB
AXIS SPECIALTY FINANCE LLC
Senior Unsecured A-/Watch Neg A-
Junior Subordinated BBB/Watch Neg BBB
AXIS SPECIALTY FINANCE PLC
Senior Unsecured A-/Watch Neg A-
ARCH CAPITAL GROUP LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
ARCH CAPITAL GROUP LTD.
Issuer Credit Rating A-/Watch Neg/-- A-/Stable/--
ARCH CAPITAL GROUP LTD.
Senior Unsecured A-/Watch Neg A-
Senior Unsecured BBB+/Watch Neg BBB+
Preferred Stock BBB/Watch Neg BBB
ARCH CAPITAL FINANCE LLC
Senior Unsecured A-/Watch Neg A-
ARCH CAPITAL GROUP (U.S) INC.
Senior Unsecured A-/Watch Neg A-
ASCOT GROUP LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
ASCOT GROUP LTD.
Issuer Credit Rating BBB/Watch Neg/-- BBB/Stable/--
ASCOT GROUP LTD.
Senior Unsecured BBB-/Watch Neg BBB-
ASPEN INSURANCE HOLDINGS LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
ASPEN INSURANCE HOLDINGS LTD.
Issuer Credit Rating BBB/Watch Neg/-- BBB/Stable/--
HIGHLANDS HOLDINGS BOND CO-ISSUER INC.
HIGHLANDS HOLDINGS BOND ISSUER LTD.
Issuer Credit Rating BB+/Watch Neg/-- BB+/Stable/--
ASPEN INSURANCE HOLDINGS LTD.
Preferred Stock BB+/Watch Neg BB+
Preference Stock BB+/Watch Neg BB+
HIGHLANDS HOLDINGS BOND ISSUER LTD.
Senior Secured BB+/Watch Neg BB+
ENSTAR GROUP LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
ENSTAR GROUP LTD.
Issuer Credit Rating BBB+/Watch Neg/-- BBB+/Stable/--
ENSTAR GROUP LTD.
Senior Unsecured BBB/Watch Neg BBB
Senior Unsecured BBB+/Watch Neg BBB+
Junior Subordinated BBB-/Watch Neg BBB-
Preferred Stock BBB-/Watch Neg BBB-
ENSTAR FINANCE LLC
Junior Subordinated BBB-/Watch Neg BBB-
EVEREST GROUP LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
EVEREST GROUP LTD.
EVEREST REINSURANCE HOLDINGS INC.
Issuer Credit Rating
Local Currency A-/Watch Neg/-- A-/Stable/--
EVEREST REINSURANCE HOLDINGS INC.
Senior Unsecured A-/Watch Neg A-
Junior Subordinated BBB/Watch Neg BBB
FIDELIS INSURANCE HOLDINGS LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
FIDELIS INSURANCE HOLDINGS LTD.
Issuer Credit Rating
Local Currency BBB/Watch Neg/-- BBB/Stable/--
FIDELIS INSURANCE HOLDINGS LTD.
Senior Unsecured BBB-/Watch Neg BBB-
Junior Subordinated BB+/Watch Neg BB+
HISCOX LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
HISCOX LTD.
Issuer Credit Rating BBB+/Watch Neg/-- BBB+/Stable/--
HISCOX LTD.
Senior Unsecured BBB+/Watch Neg BBB+
Subordinated BBB-/Watch Neg BBB-
LANCASHIRE HOLDINGS LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
LANCASHIRE HOLDINGS LTD.
Issuer Credit Rating
Local Currency BBB/Watch Neg/-- BBB/Stable/--
LANCASHIRE HOLDINGS LTD.
Junior Subordinated BB+/Watch Neg BB+
RENAISSANCERE HOLDINGS LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
DAVINCIRE HOLDINGS LTD.
RENAISSANCERE HOLDINGS LTD.
Issuer Credit Rating A-/Watch Neg/-- A-/Stable/--
DAVINCIRE HOLDINGS LTD.
Senior Unsecured A-/Watch Neg A-
RENAISSANCERE HOLDINGS LTD.
Senior Unsecured A-/Watch Neg A-
Senior Unsecured BBB+/Watch Neg BBB+
Preferred Stock BBB/Watch Neg BBB
RENAISSANCERE FINANCE INC.
Senior Unsecured A-/Watch Neg A-
SIRIUSPOINT LTD.
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
SIRIUSPOINT LTD.
Issuer Credit Rating BBB/Watch Neg/-- BBB/Stable/--
SIRIUSPOINT LTD.
Senior Unsecured BBB/Watch Neg BBB
Subordinated BB+/Watch Neg BB+
Preference Stock BB+/Watch Neg BB+
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B R A Z I L
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BANCO DE DESENVOLVIMENTO: S&P Affirms 'B' Global Scale Rating
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S&P Global Ratings affirmed its 'B' global scale rating on Banco de
Desenvolvimento de Minas Gerais S.A. (BDMG) and raised its
long-term national scale rating to 'brA' from 'brA-'.
S&P said, "The stable outlook on the long-term ratings reflects our
view that we don't expect any changes to the bank's credit factors
in the next 12 months. We expect the bank to maintain a stable
financial performance and continue diversifying its funding
sources, while keeping its prudent liquidity management."
On Nov. 16, 2023, S&P Global Ratings affirmed its 'B' long-term
issuer credit ratings on BDMG. At the same time, S&P raised the
long-term national scale rating on the bank to 'brA' from 'brA-'.
The outlook on both rating scales is stable.
The bank lends mostly in the Brazilian state of Minas Gerais, where
it provides mainly working capital and long-term loans to local
companies and municipalities. S&P also incorporates its stronger
capitalization than those of peers. As of June 2023, the bank's
Basel III ratio was 26.1%, while its risk-adjusted capital (RAC)
ratio was 13.2% as of December 2022.
The loan portfolio remained stable at about R$5.6 billion as of
June 2023 versus the same period last year. S&P said, "In our view,
this indicates a manageable credit portfolio. BDGM also reported
stable nonperforming loans (NPLs), despite an overall worsening in
the financial system's NPLs due to the retail loan segment. As a
result, we believe BDMG has improved its relative credit quality
compared to peers with similar ratings."
Given BDMG's role as a development bank, it renegotiated existing
loans due to the pandemic's economic fallout. As of June 2023,
restructured loans accounted for 21.1% of total loans, down from
24.7% at year-end 2022.
S&P said, "In our view, the still high level of renegotiated loans
keeps asset risk high mostly because of the challenging economic
conditions for midsize companies. These companies are struggling to
maintain their credit quality due to persistently high interest
rates that increase debt burden. We think BDMG's oversight of this
portfolio and guarantee structure partially mitigates the risk of
material losses.
"The state of Minas Gerais (CCC+/Stable/--), BDMG's controlling
shareholder, has been improving its finances. In addition, we
believe that Brazil's Fiscal Responsibility Law and banking
regulations have protected the bank from potential intervention
from the state."
Moreover, BDMG continues to strengthen its relationship with
foreign multilateral lending agencies, which is diversifying its
funding sources and gradually decreasing the share of funding from
the Brazilian Development Bank (BNDES).
BRAZIL: 2024 Harvest Forecast Shows Decline
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Rio Times Online reports that Brazil projects a modest dip in its
2024 harvest, with grain totals expected at 308.5 million tons,
2.8% less than this year.
The IBGE links this decline mainly to weather challenges affecting
key crops like soybeans and corn, according to Rio Times Online.
Soybean production is set to decrease by 1.3% and corn by 5.6%,
despite robust yields expected from the previous year, the report
notes.
The agency reports delays in planting due to varied regional
climates, potentially impacting harvest and second-season crop
timelines, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-',
with a Stable Outlook. The upgrade reflects better-than-expected
macroeconomic and fiscal performance amid successive shocks in
recent years, proactive policies and reforms that have supported
this, and Fitch's expectation that the new government will work
toward further improvements.
In mid-June 2023, S&P Global Ratings, revised the outlook on its
long-term global scale ratings on Brazil to positive from stable.
S&P affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. S&P also affirmed its
'brAAA' national scale rating, and the outlook remains stable. The
transfer and convertibility assessment remains 'BB+'. The positive
outlook reflects signs of greater certainty about stable fiscal and
monetary policy that could benefit Brazil's still-low GDP growth
prospects. Continued GDP growth plus the emerging framework for
fiscal policy could result in a smaller government debt burden than
expected, which could support monetary flexibility and sustain the
country's net external position.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-Term
Foreign and Local Currency - Issuer Ratings to BB from BB (low).
At the same time, DBRS Morningstar confirmed Brazil's
Short-term Foreign and Local Currency - Issuer Ratings at R-4.
The trend on all ratings is Stable (March 2018).
===============
C O L O M B I A
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FRONTERA ENERGY: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
---------------------------------------------------------------
Fitch Ratings has affirmed Frontera Energy Corporation's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B'. In
addition, Fitch has affirmed Frontera's senior unsecured notes at
'B'/'RR4'. The Rating Outlook is Stable.
Frontera's ratings and Outlook reflect its small and concentrated
production profile and weak Proved Developed Producing (PDP)
reserve life of 2.6 years as of YE 2022, below the peer average of
3.8 years. Fitch forecasts gross leverage, defined as total debt to
EBITDA, will be close to 1.0x by YE 2023, while having total debt
to 1P of USD4.6 per boe and total debt to PDP of USD13.0 per boe.
KEY RATING DRIVERS
Small Production Profile and Reserve Life: Frontera's ratings are
constrained by its production size. Fitch's base case assumes
Frontera's production to be close to 42,000 boed in 2023, and
remain at that level between 2024-2026. The ratings incorporate
Frontera's low PDP reserve life of 2.6 years as of YE 2022,
although improved from 1.6 years in 2020 is still the lowest among
peers. Production is concentrated in Quifa and represents nearly
43% of daily production, followed by Guatiquia at almost 17% and
CPE-6 13%.
Fixed Cost Production Profile: The company has a fixed production
profile that limits its financial flexibility. The company's
half-cycle cost, as calculated by Fitch, was USD29 per boe in 2022,
flat compared to 2021. The high production cost is mostly due to
its transportation cost, that reflects the fact that Frontera
delivers its production at the Colombian coast instead of
delivering at wellhead as other peers do. Fitch expects the company
to hedge a minimum 40% and peso-denominated costs to protect it
from price volatility and offset the higher costs, respectively.
CFO Supports Capex: Frontera is expected to be FCF negative in 2023
as the company deploys its ambitious capex program, estimated at
$32 per boe, of which $24 per boe correspond to capex at Wei-1 in
Guyana. Going forward, Fitch assumes Frontera will finance its
capex with internally generated cash flows, averaging $15 per boe
and FCF will be mostly neutral, absent of dividends distributions,
were CFO is forecasted to average USD255 million per year between
2024-2026. Regarding Guyana discovery, Frontera is evaluating
strategic options with an investment bank, including a potential
farm-down.
Leverage Profile: Fitch estimates gross leverage will be 1.1x by YE
2023, strong for its rating category, assuming an EBITDA, including
dividends from affiliates, of USD481 million and total debt of
USD508 million. Fitch expects total debt to PDP to be USD13.0 per
boe by YE 2023, which is high for its rating category, and total
debt/1P to be USD4.6 in 2022. Fitch estimates EBITDA to interest
paid to be above 5.0x over the rated horizon.
DERIVATION SUMMARY
Frontera Energy's credit and business profile are comparable to
other small independent oil producers in Colombia. The ratings of
Geopark Limited (B+/Negative), SierraCol Energy Limited
(B+/Stable), and Gran Tierra Energy International Holdings Ltd.
(B/Stable) are all constrained to the 'B' category or below, given
the inherent operational risk associated with small scale and low
diversification of oil and gas production.
Frontera's production profile compares favorably with other 'B'
rated Colombian oil exploration and production companies. Over the
rated horizon, Fitch expects Frontera's production will average
42,000boed in line with that of SierraCol but higher than Geopark's
of 40,000boed. Frontera's PDP reserve life of 2.6 years in 2022 is
the lowest compared to Geopark's at 4.0 years, SierraCol's 3.3
years and Gran Tierra's 4.2 years.
As per Fitch's calculation, Frontera's half-cycle production cost
was $29.0/boe in 2022 and full-cycle cost was USD58.6/boe, which
incorporate transportation costs of $10.5/boe that reflects the
fact that Frontera delivers its production at the Colombian coast
instead of delivering at wellhead as other peers do. Geopark's
costs, which is the lowest cost producer in the region, are
$12.7/boe and $24.4/boe, SierraCol at $22.4/boe and $34.2/boe, and
Gran Tierra at $22.1/boe and USD38.3/boe.
Fitch expects Frontera's gross leverage will be at or below 2.0x
over the rated horizon and that total debt/PDP at or below $13/boe
and total debt/1P at or below $5/boe.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
Include
- Fitch's price deck for Brent oil prices of $80 in 2023, $75 in
2024, $70 in 2025 and $65 in 2026;
- Vasconia discount of $6 per barrel of crude oil (bbl) over the
rated horizon;
- Gross production of 41,500boed in 2023; average of 42,000boed
between 2024-2026;
- Gross production costs averaging USD12.8/barrel;
- Gross transportation costs averaging USD10.3/barrel;
- Gross SG&A cost averaging USD3.0/barrel;
- Capex of USD480 million on 2023 reflecting investments in Guyana;
average of USD230 million between 2024-2026;
- No dividends payments over the rated horizon;
- Annual dividends received from Oleoducto de los Llanos Orientales
S.A (ODL) of USD35 million per year through 2026.
RECOVERY ANALYSIS
The recovery analysis assumes that Frontera would be a going
concern (GC) in bankruptcy and that it would be reorganized rather
than liquidated.
GC Approach:
- A 10% administrative claim.
- The GC EBITDA is estimated at USD350 million. The GC EBITDA
estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
valuation of Frontera.
- EV multiple of 3.0x.
With these assumptions, its waterfall generated recovery
computation (WGRC) for the senior unsecured notes is in the 'RR1'
band. However, according to Fitch's Country-Specific Treatment of
Recovery Ratings Criteria, the Recovery Rating for corporate
issuers in Colombia is capped at 'RR4'. The Recovery Rating for the
senior secured notes is therefore 'RR4' with a WGRC output
percentage at 50%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Net production maintained at 45,000boed or more, while
maintaining a 1P reserve life of seven years or greater and PDP
reserve life of at least four years;
- Maintain a conservative financial profile with gross leverage of
2.5x or below and total debt/1P reserves of USD8/boe or below.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sustainable production size declines to below 30,000boed;
- 1P reserve life declines to below seven years on a sustained
basis;
- A significant deterioration of credit metrics to total
debt/EBITDA of 3.0x or more;
- A persistently weak oil and gas pricing environment that impairs
the longer-term value of its reserve base;
- Sustained deterioration in liquidity and operating profile,
particularly in conjunction with more aggressive dividend
distributions than previously anticipated.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Frontera's cash and cash equivalents balance as
of September 2023 was USD189 million, excluding USD32 million in
restricted cash, which cover interest expense of the next three
years by 1.1x. Fitch projects that capex will be funded with
internal cash flows. Frontera benefits from a manageable debt
amortization profile with USD142 million in amortizing loans
maturing between 2024 and 2027, of which USD64 million are due
within the next 24 months; while USD400 million in unsecured notes
are due in June 2028. The outstanding debt at the midstream level
is non-recourse to Frontera.
ISSUER PROFILE
Frontera Energy Corporation (FEC/ Frontera) is an oil and gas
company incorporated in Canada with operations in Latin America,
including upstream, pipeline and port facilities assets in
Colombia, Ecuador and off-shore Guyana.
ESG CONSIDERATIONS
Fitch has revised Frontera Energy Corporation's ESG Relevance Score
for GHG Emissions & Air Quality to '4' from '3' due to the growing
importance of the continued development and execution of the
company's energy-transition strategy. 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
----------- ------ -------- -----
Frontera Energy
Corporation LT IDR B Affirmed B
LC LT IDR B Affirmed B
senior
unsecured LT B Affirmed RR4 B
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Looks at Alternatives to Protect Nat'l Prod.
----------------------------------------------------------------
Dominican Today reports that the Dominican Republic-Central
America-United States Free Trade Agreement (DR-CAFTA) continues to
be a subject of debate in the country, especially concerning its
potential impact on Dominican agricultural producers, including
those in the rice and livestock sectors.
The Minister of Industry, Commerce, and MSMEs (MICM), Victor "Ito"
Bisono, stated that the government has been collaborating with
stakeholders in the rice sector to ensure they are aligned in
protecting national production. He emphasized the importance of
addressing legal aspects and seeking expert advice to navigate this
complex issue, according to Dominican Today.
Vilma Arbaje, Vice Minister of Foreign Trade at MICM, discussed
internal measures taken to support producers when North American
products can enter the Dominican Republic without tariffs, the
report notes. These measures include improving the efficiency of
productive processes, such as planting, harvesting, and more,
particularly in the case of rice production, the report notes. She
highlighted the significance of rice as a staple food in the
country and the large number of provinces and producers involved in
its production, the report relays.
Arbaje clarified that DR-CAFTA does not impose limitations on the
entry of products into the country. Instead, they are exploring
legally accepted figures to address the challenges posed by the
agreement, the report discloses. The Dominican Republic remains
committed to fulfilling its DR-CAFTA commitments, and its laws
align with these commitments, the report says.
While the agreement's calendar ends in January 2025, the rules
outlined in the agreement will continue to apply as long as the
Dominican Republic remains a member of DR-CAFTA, the report relays.
Non-tariff measures, trade defense, public procurement, and
dispute resolution mechanisms will remain in force, the report
notes.
Arbaje stressed that only products originating from DR-CAFTA
countries can enter the Dominican Republic tariff-free, and
importers must request preferential terms under the agreement, the
report discloses.
The impact of the rice sector on the Dominican Republic is
substantial, generating thousands of jobs and contributing
significantly to the country's economy, the report says. The
sector's self-sufficiency and surplus rice production have made the
Dominican Republic an exporter of rice products, the report
relays.
In summary, the Dominican government is actively working with
stakeholders to address concerns related to DR-CAFTA and ensure the
protection and competitiveness of national agricultural production,
particularly in the rice sector, 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.
=============
J A M A I C A
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JAMAICA: Shipping Firms Facing Higher Costs to Bring Goods from US
------------------------------------------------------------------
Javaughn Keyes at RJR News reports that shipping companies taking
goods to Jamaica from the United States say they are facing higher
costs.
President and CEO of Dennis Shipping, Dennis Hawthorne, says this
is primarily linked to increased commodity costs and wage
adjustments in North America, according to RJR News.
"The price of trucking, the steam ship line has incurred a fuel
charge based on the fuel charge and how the fuel goes up and it
impacts us a lot also because we have to charge a little bit more
but we cannot pass that on to our customers. So most of the time
we have to absorb it," Hawthorne says, notes the report. "And for
example . . . New York minimum wage was like $8.50 per hour.
Recently they have increased it twice. It's like $15 an hour that
we have to pay, and we can't pay our staff $15 an hour, so we have
to increase it," he admitted.
Fuel prices have faced uncertainty, especially in the last year, as
the Isreal-Hamas war in the Middle East and the Ukraine-Russia war,
which started last February, pose threats to the production and
supply of fuel, the report relays.
Mr. Hawthorne said the issue is compounded by inflation, but he
hopes the prices will come down so this can be passed on to
consumers, 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 E R U
=======
PERU: Economy Slides 1.29% in September, Missing Forecasts
----------------------------------------------------------
Reuters reports that Peru's gross domestic product (GDP) shrank
1.29% in September from the same month last year, the government's
INEI statistics agency said, marking a fifth consecutive month of
decline and landing well below analysts' expectations.
Analysts polled by Reuters had forecast a contraction of 0.65%,
notes the report. Meanwhile, INEI reported that the economy shrunk
0.63% year-on-year over the first nine months of 2023.
"The country's productive activity was affected by the state of
alert over the coastal El Nino phenomenon, which interrupted the
normal development of economic sectors such as agriculture,
manufacturing and construction," INEI said in a statement, reports
Reuters. "At the same time, there was a recurrence of
socio-environmental conflicts and technical and climate change
factors, which caused temporary suspensions in productive
activities," it added.
The contraction was led by year-on-year declines in Peru's
agriculture, manufacturing, construction and finance sectors, even
as the fishing and mining and energy sectors improved, the report
relates.
Reuters notes that the figure comes after Adrian Armas, the chief
economist of Peru's central bank warned in early November that July
to September could mark a third straight quarter of economic
contraction in the Andean country, the world's second-largest
copper producer.
Peru had slid into a technical recession earlier this year after
two quarters of negative growth due to the adverse impacts of the
El Nino weather phenomenon, lower private investment and lingering
effects from earlier social conflicts, the report notes.
Armas told a conference early this month that the central bank's
current forecast of 0.9% economic growth over 2023 - down from a
prior forecast of 2.2% growth - faces "downward pressure," the
report adds.
Peru's economy ministry had meanwhile flagged a possible turnaround
in the fourth quarter as a package of stimulus measures aimed at
boosting investments, particularly in the critical mining sector,
take effect, notes the report.
=====================
P U E R T O R I C O
=====================
ZAGACITY TECH: Case Summary & 16 Unsecured Creditors
----------------------------------------------------
Debtor: Zagacity Tech LLC
AKA Era Zagacity Tech LLC
Palmas Industrial Park
St 869, Lot A,
Catano, PR 00962
Business Description: The Debtor distributes and sells
technological products, home appliances,
audio and TV, in the home and commercial
lines.
Chapter 11 Petition Date: November 17, 2023
Court: United States Bankruptcy Court
District of Puerto Rico
Case No.: 23-03787
Debtor's Counsel: Javier Vilarino, Esq.
VILARINO AND ASSOCIATES LLC
PO Box 9022515
San Juan, PR 00902
Tel: (787) 565-9894
Email: jvilarino@vilarinolaw.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Nestor G. Cardona as president.
A full-text copy of the petition containing, among other items, a
list of the Debtor's 16 unsecured creditors is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/R7ZSMUQ/ZAGACITY_TECH_LLC__prbke-23-03787__0001.0.pdf?mcid=tGE4TAMA
*********
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
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Information contained herein is obtained from sources believed to
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contact Peter A. Chapman at 215-945-7000.
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* * * End of Transmission * * *