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/raid1/www/Hosts/bankrupt/TCRLA_Public/231207.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, December 7, 2023, Vol. 24, No. 245 Headlines A R G E N T I N A GAUCHO GROUP: Gets 180-Day Extension to Regain Nasdaq Compliance GAUCHO GROUP: Welcomes Doug Casey as Lead Business Advisor YPF SA: Argentina Asks for More Time to Pay in Court Case B R A Z I L AMERICANAS SA: Closes Deal With Banks to Restructure Debt BRAZIL: Enhances Oil Market Role with OPEC+ Membership GOL LINHAS: S&P Lowers ICR to 'CCC-' on Restructuring Risk C H I L E INVERSIONES LATIN: Moody's Withdraws 'Ca' Rating on Sr. Sec. Notes C O L O M B I A OLEODUCTO CENTRAL: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable D O M I N I C A N R E P U B L I C AES ESPANA: Fitch Affirms BB- Foreign Currency IDR, Outlook Stable DOMINICAN REPUBLIC: Central Bank Debt Up 1,768.3% Since 2000 P U E R T O R I C O LUCENA DAIRY: Wins Cash Collateral Access Thru Dec 30 X X X X X X X X LATAM: Biggest Economies See Unemployment Tick Down - - - - - ================= A R G E N T I N A ================= GAUCHO GROUP: Gets 180-Day Extension to Regain Nasdaq Compliance ---------------------------------------------------------------- Gaucho Group Holdings, Inc. announced that it has been granted a 180-day extension by NASDAQ to regain compliance with the exchange's listing requirements. This extension provides Gaucho Holdings with crucial time and flexibility to implement strategic initiatives and take corrective measures aimed at ensuring full compliance with NASDAQ standards. The announcement comes at a pivotal time, coinciding with recent elections in Argentina and the potential implications for the country's economy. Gaucho Holdings views this political shift not merely as a change in governance but as a significant opportunity for economic revitalization and investment growth in Argentina. The Company has a longstanding investment presence in the country, dating back to 2007, and is poised to unveil new and exciting initiatives tailored to this evolving landscape. Gaucho Holdings' unique position in the Argentine market, especially in the real estate sector, stems from its early entry into the market and established operational presence. The Company boasts a diversified portfolio, with all its Argentina-based companies fully operational. According to the Company, this advantage is further amplified by established synergies among its assets, allowing for streamlined operations across various platforms. Moreover, Gaucho Holdings benefits from a seasoned management team with deep experience and understanding of the Argentine market. Scott Mathis, CEO and Founder of Gaucho Group Holdings, commented on the development, saying, "This extension from NASDAQ is not just a regulatory respite for us; it's a strategic opportunity. It arrives at a time when Argentina is on the cusp of an economic resurgence. We've been committed to Argentina since 2007, and our deep-rooted presence there, coupled with our diversified business model, positions us uniquely to harness the potential of this new economic era. We are excited to advance our plans and contribute significantly to and benefit from the country's growth trajectory." Gaucho Holdings said its proactive approach in Argentina's changing economic environment highlights its commitment to growth, compliance, and strategic innovation, setting a course for continued success in the region. About Gaucho Group Headquartered in New York, NY, Gaucho Group Holdings, Inc.'s (gauchoholdings.com) mission has been to source and develop opportunities in Argentina's undervalued luxury real estate and consumer marketplace. The Company has positioned itself to take advantage of the continued and fast growth of global e-commerce across multiple market sectors, with the goal of becoming a leader in diversified luxury goods and experiences in sought after lifestyle industries and retail landscapes. Gaucho Group reported a net loss of $21.83 million for the year ended Dec. 31, 2022, compared to a net loss of $2.39 million for the year ended Dec. 31, 2021. As of March 31, 2023, the Company had $21.01 million in total assets, $8.60 million in total liabilities, and $12.40 million in total stockholders' equity. New York, NY-based Marcum LLP, the Company's auditor since 2013, issued a "going concern" qualification in its report dated April 17, 2023, citing that the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. GAUCHO GROUP: Welcomes Doug Casey as Lead Business Advisor ---------------------------------------------------------- Gaucho Group Holdings, Inc. announced the appointment of best-selling author, world-renowned speculator, and libertarian philosopher, Doug Casey, as Gaucho Holdings' Lead Business Advisor - Argentina Investments. The Company believes this appointment can substantially enhance its strategic vision and steer its expansion in Argentina's dynamic luxury real estate market. Doug Casey, bringing his considerable experience and a profound grasp of the Argentine market, is viewed by the Company as a highly suitable advisor for this role. Known for describing Argentina as 'the cheapest civilized place on earth,' Casey brings a unique perspective on the country's economic potential and investment opportunities. The Company said his insights are particularly valuable in light of the recent political changes in Argentina, which Gaucho Holdings views not just as a shift, but as a chance for economic revitalization and investment growth. Casey shared his vision for Argentina's future, stating, "If Milei's reforms stick, within a decade, Argentina could become the most prosperous country in the world. Look at what Pinochet's limited reforms did for Chile. It changed from a backward mining province into the most advanced and prosperous country on the continent. Milei's reforms could transform Argentina into both the freest and the most prosperous country on the planet. Argentina has many advantages . . . It's the perfect country whose only real problem is its insane government. But that's about to change. If he succeeds, I think there will be a rush of millions of Europeans who will see that Argentina has got everything that Europe does--including the favorable aspects of its culture, but none of the disadvantages." Scott Mathis, CEO and Founder of Gaucho Holdings, commented on the appointment, saying, "Doug Casey's deep understanding of the Argentine market and his perspective on its untapped potential make him an invaluable asset to our team. His guidance will be crucial as we seek to expand and strengthen our presence in Argentina, taking advantage of the unique investment opportunities this country offers. We are excited to have Doug's expertise to guide our initiatives in this new economic landscape." About Gaucho Group Headquartered in New York, NY, Gaucho Group Holdings, Inc.'s (gauchoholdings.com) mission has been to source and develop opportunities in Argentina's undervalued luxury real estate and consumer marketplace. The Company has positioned itself to take advantage of the continued and fast growth of global e-commerce across multiple market sectors, with the goal of becoming a leader in diversified luxury goods and experiences in sought after lifestyle industries and retail landscapes. Gaucho Group reported a net loss of $21.83 million for the year ended Dec. 31, 2022, compared to a net loss of $2.39 million for the year ended Dec. 31, 2021. As of March 31, 2023, the Company had $21.01 million in total assets, $8.60 million in total liabilities, and $12.40 million in total stockholders' equity. New York, NY-based Marcum LLP, the Company's auditor since 2013, issued a "going concern" qualification in its report dated April 17, 2023, citing that the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. YPF SA: Argentina Asks for More Time to Pay in Court Case --------------------------------------------------------- Buenos Aires Times reports that Argentina asked US Judge Loretta Preska, who hearing a case regarding the 2012 nationalization of state energy firm YPF in a New York court, to extend a deadline to cough up cash until after Javier Milei's inauguration. The Argentine state has been ordered to pay US$16.1 billion to two firms who filed suit against the government, according to Buenos Aires Times. Legal representatives for Argentina have now requested Preska push back a deadline for paying a deposit and preventing any seizures until "at least" January 10, 2024, the report notes. On November 21, the judge gave set a deadline of December 5, 2023, for a deposit to be paid for the case regarding the company's nationalisation in 2012, the report relays. Milei is due to take office on December 10, five days later, the report notes. In a document addressed to the judge, the attorney for the Argentine State, Robert J. Giuffra, asks for a new date "no sooner than January 10," the report discloses. The delay would allow Javier Milei's government to "assess the conditions established in the court order dated November 21, 2023," reads the plea, the report relays. The plaintiffs, according to Giuffra, object to any extension unless Argentina "first accepts a fast-track appeal calendar" - one of the conditions in the judge's order, the report notes. Preska sentenced Argentina to pay US$16.099 billion to the two firms, Petersen (US$14.385 billion) and Eton Park (US$1.714 billion), shareholders of YPF which were not compensated after the oil company was nationalized, when it was controlled by Spanish company Repsol, the report says. The government of Alberto Fernandez appealed the demand by plaintiffs that Argentina deposit the amount as security while the appeal is resolved, claiming that said disbursement would cause "irreparable damage" given the difficult economic situation facing the country, the report relays. The judge then gave a deadline until December 5 for "the Argentine Republic to commit to the plaintiffs' shareholdings in YPF" as security to prevent any seizures, the report discloses. Milei has promised to re-privatise 51 percent of YPF stock owned by the Argentine State, the report adds. About YPF SA YPF S.A. is a vertically integrated, majority state-owned Argentine energy company, engaged in oil and gas exploration and production, and the transportation, refining, and marketing of gas and petroleum products. Founded in 1922, YPF was an oil company established as a state enterprise. YPF was later privatized under president Carlos Menem and was bought by the Spanish firm Repsol in 1999, and the resulting merged company was call Repsol YPF. In 2012, about 51% of the firm was renationalized and this was initiated by President Cristina Fernandez se Kirchner. The government of Argentina agreed to pay $5 billion compensation to Repsol. In April 2023, S&P Global Ratings lowered its local and foreign currency ratings on YPF SA to 'CCC-' from 'CCC+'. The outlook on these ratings is now negative. The downgrade follows a similar action on S&P's long-term foreign currency ratings and T&C on Argentina, following announced plans that, if implemented, would oblige some nonfinancial public-sector entities to exchange or sell their holdings of global-and local-law dollar-denominated bonds issued during the 2020 restructuring for other locally issued peso debt, likely dollar-and/or inflation-linked bonds. In S&P's view, the lack of clarity and the apparent motivation for the potential transaction underscore heightened credit vulnerabilities, in particular given the increasing pressures from the severe drought that Argentina is facing, which further constrains the already disrupted FX market. This expected greater pressure on the FX markets also explains S&P's downward revision of the T&C assessment to 'CCC-'. =========== B R A Z I L =========== AMERICANAS SA: Closes Deal With Banks to Restructure Debt --------------------------------------------------------- Bloomberg News reports that Brazilian retailer Americanas SA reached an agreement with bank creditors to overhaul some of its debt, in a key step toward eventually exiting bankruptcy protection. Some 11 months after sinking into a crisis due to an accounting fraud that more than doubled its debt to 42.5 billion reais ($8.7 billion), a binding agreement was signed with creditors holding more than 35% of company's debt, excluding intercompany credits, Americanas said in a filing, according to the report. Other creditors also showed interest in participating on the same deal in a non-binding way, the company said, the report notes. The agreement, which will allow Americanas to present a new plan in court, is the result of "extensive" negotiations with creditors who hold more than 50% of the company's debt combined, the retailer said, the report relays. It added that the parts committed to backing the plan in an upcoming meeting, scheduled for Dec. 19, the report says. Although Americanas doesn't name creditors in the filing, banks have the majority of the debt, the report discloses. Their buy-in was seen as key to avoid any risk of liquidation for the company, which has seen digital sales sink while losing millions of clients and shuttering dozens of stores in the past year, the report notes. The debt restructuring proposal includes a cash injection and so-called DIP financing of 12 billion reais by the top shareholders, and a debt-to-equity swap from creditors of as much as 12 billion reais, the report relays. That could boost the company's capital by up to 24 billion reais ($4.9 billion.), the report adds. According to the report, all shareholders will be allowed to participate in the capital increase. Americanas will seek approval from the board of directors to grant one subscription bonus to every three shares issued as an additional benefit, it said. The company also secured a 1.5 billion-real bank or judicial insurance guarantee, available for two years from the conclusion of the restructuring stages or until the end of the judicial reorganization, whichever comes first, the report says. The plan also allocated as much as 8.7 billion for the payment of financial creditors, through a reverse auction or early payment of credits at a discount. The company expects to have 1.875 billion reais in gross debt after implementing the measures set out in the plan. The deal comes after the retailer published new earnings reports for 2021 and 2022 that showed it lost nearly 20 billion reais in the period, notes Bloomberg News. The estimated size of the accounting fraud was 25 billion reais, bigger than what it had initially estimated. The crisis at Americanas has been a headache for the billionaire trio Jorge Paulo Lemann, Carlos Sicupira and Marcel Telles, who own about 30% of the company - though the hit to their reputation as the savviest businessmen in the country outweighed the overall financial impact, recounts the report. The blow up also contributed to a credit crunch for Brazilian companies, and put more pressure on retailers already reeling from high interest rates. Americanas, founded in 1929, is one of Brazil's most iconic retailers and is known for its affordable prices for everything from kitchen appliances to clothes, candy and toys. The crisis engulfed the firm on Jan. 11 after a new chief executive officer hired from outside the company took over. Previously, the same CEO had run the management team for decades. The incoming CEO Sergio Rial, who has a long resume at firms like Banco Santander SA, BRF SA and Cargill Inc., resigned just nine days into the job alleging "accounting inconsistencies" estimated at 20 billion reais, the report recalls. The board moved immediately to hire new leaders and sideline the remaining executives from the previous management team, while also fending off creditors and trying to keep operations from collapsing. Blame game Bloomberg News relates that the new team has accused the previous group led by Miguel Gutierrez of hiding debts and inflating profits by falsifying advertising contracts and obscuring supply-chain financing transactions. Gutierrez, who has relocated to Spain where he has nationality, called himself a scapegoat in one of the only comments he's made through lawyers. Americanas, now led by CEO Leonardo Coelho and CFO Camille Loyo Faria, has said it expects to reduce debt to as low as 1 billion reais in 2025 and post positive earnings before interest, taxes, depreciation and amortization of close to 2 billion reais, relays the report. About Americanas SA Americanas was one of the largest diversified retail chains in Brazil, with a wide platform of physical stores, robust e-commerce, fintech, and has just entered into the niche food retail. It is listed on B3, being indirectly controlled by billionaire Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles. The retailer nosedived in January 2023 after becoming mired in an accounting scandal. The firm filed for bankruptcy at a court in Rio de Janeiro on Jan. 19, 2023. Americanas sought protection under Chapter 15 of the Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25, 2023. White & Case LLP, led by John K. Cunningham, is the U.S. counsel. BRAZIL: Enhances Oil Market Role with OPEC+ Membership ------------------------------------------------------ Richard Mann at Rio Times Online reports that as confirmed by an insider, Brazil's upcoming OPEC+ membership in January 2024 signals a significant shift in global oil politics. This move coincides with OPEC+'s plan to reduce oil supply by at least one million barrels per day next year, according to Rio Times Online. OPEC's current members include key oil-producing nations, and its expansion to OPEC+ in 2016 brought in additional countries, Rio Times Online notes. Brazil's entry into OPEC+ acknowledges its status as a major oil exporter, enhancing its impact on global oil market strategies, Rio Times Online 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). GOL LINHAS: S&P Lowers ICR to 'CCC-' on Restructuring Risk ---------------------------------------------------------- S&P Global Ratings lowered its global scale issuer credit rating on Gol Linhas Aereas Inteligentes S.A. to 'CCC-' from 'CCC+', and its national scale issuer credit rating to 'brCCC-' from 'brBB+'. S&P said, "At the same time, we lowered our issue-level rating to 'CC' from 'CCC' on the company's senior unsecured notes and kept unchanged the '5' recovery rating, reflecting expectation of average (20%; rounded estimate) recovery prospects in the event of a payment default. "The negative outlook reflects a potential further downgrade if the company announces a debt restructuring that we would view as distressed and tantamount to default. "We understand that the advisor's initial focus would be on the negotiation of lease obligations that have become very burdensome following pandemic deferrals and stressed cash flows in coming years." The hiring of a financial advisor may also prompt a broader discussion of the company's capital structure, given weak prospects for cash flow generation and the dependence on refinancing in the next two years. Gol completed a debt restructuring on its 2024, 2025, 2026, and perpetual notes earlier this year. Additionally, it has refinanced its local debentures. As a result, Gol doesn't face material debt amortization in the next 12 months. S&P said, "Additionally, we expect the company to maintain good operating performance amid healthy demand and a very rational supply in the Brazilian airline market. We estimate Gol will report EBITDA of about R$4.7 billion in 2023 and $R5.2 billion in 2025, up from $R2.1 billion in 2022. This will result in a drop in S&P-adjusted leverage to 5.2x-5.5x in 2023 and 2024 from 10.3x in 2022. However, substantial lease payments of about $R2.5 billion, high capital expenditures (capex) of about R$2.0 billion annually, and some working capital outflows would deplete operating cash flow and expose the company to persistent refinancing needs in next two years." ========= C H I L E ========= INVERSIONES LATIN: Moody's Withdraws 'Ca' Rating on Sr. Sec. Notes ------------------------------------------------------------------ Moody's Investors Service has withdrawn the Ca Senior Secured Rating assigned to the $404 million Senior Secured Notes issued by Inversiones Latin America Power Limitada ("ILAP"). The outlook prior to withdrawal was negative. The action follows the commencement of Chapter 11 bankruptcy proceedings. RATINGS RATIONALE The ratings withdrawal follows the company's filing a petition for reorganization under Chapter 11 of the US Bankruptcy Code on November 30, 2023 at the US District Court for the Southern District of New York. Moody's last rating action for ILAP occurred on October 11, 2023 when the rating was downgraded to Ca with a negative outlook, reflecting Moody's assessment of the expected loss to bondholders following the publication of the draft restructuring plan on the company's website. LIST OF AFFECTED RATINGS Issuer: Inversiones Latin America Power Limitada Withdrawals: Senior Secured Regular Bond/Debenture, Withdrawn , previously rated Ca Outlook Actions: Outlook, Changed To Rating Withdrawn From Negative ILAP is a subsidiary of Latin America Power S.A., owned by BTG Pactual Brazil Infrastructure Fund II (45.85%), Patria Infrastructure FIP (45.85%), and GMR Holding B.V. (8.30%). ILAP owns 100% of the ownership interest in two wind power generation assets in Chile, "San Juan" and "Totoral", which have achieved full commercial operating date on March 2017 and January 2010, respectively, and have a combined installed capacity of 239.2 megawatt ("MW") North of Santiago. =============== C O L O M B I A =============== OLEODUCTO CENTRAL: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Oleoducto Central S.A. (OCENSA) at 'BB+'. The Rating Outlook is Stable. OCENSA's ratings reflect the linkage with the credit profile of Ecopetrol S.A. (BB+/Stable), which indirectly owns 72.648% of OCENSA. Fitch believes operational synergies and strategic ties between both entities are important enough to create economic incentives for Ecopetrol to effectively support OCENSA, if needed. The ratings incorporate the company's strong competitive position as the largest and most reliable crude oil transportation company in Colombia, which gives it cost advantages over its main competitors. OCENSA's moderate exposure to volume risk and the regulated nature of the business provide cash flow stability and minimize margin volatility. KEY RATING DRIVERS Linkage to Ecopetrol: OCENSA's ratings reflect its linkage to the credit profile of Ecopetrol, the largest crude oil producer in Colombia and OCENSA's main off-taker. In terms of operational synergies, OCENSA's operations are an integral part of Ecopetrol's core business, and conversely, Ecopetrol relies heavily on OCENSA's infrastructure to transport crude oil from production fields to its refineries and export terminal. Fitch considers OCENSA strategically important for Ecopetrol, transporting 82% of Ecopetrol's crude oil production during 2Q23. Strong Competitive Position: OCENSA is the largest crude oil transportation company in Colombia, connecting the most important oil basins with the country's main crude oil export terminal, also acting as a gateway to the country's largest refineries. The company represents the most important and reliable crude oil transportation system for Ecopetrol and Colombia, transporting 76% of the country's oil production and 57% of oil exports during 2Q23. The geographic location of the assets makes it less vulnerable to attacks and increases the reliability of the system. Consistently high utilization rates of 80% or more give OCENSA cost advantages over its main competitors and positively affects the stability of cash flow. Conservative Capital Structure: Fitch forecasts OCENSA's leverage will remain at or below 0.5x and does not anticipate pressure on its credit metrics. The company's demonstrated ability to generate strong and consistent operating cash flow allows it to fund capex without resorting to significant use of debt. In fact, the company's strong ending cash position in 2022 enabled it to repurchase 20% (USD100 million) of its outstanding bonds expiring in 2027, further serving to keep leverage metrics low. OCENSA's only financial debt is its outstanding seven-year senior unsecured notes due 2027, now carrying a principal balance of USD400 million as of June 30, 2023. Consistent and Predictable CFO: Most of OCENSA's revenues are tied to fee-based and fixed-price arrangements through ship-and-pay contracts with no direct exposure to commodity prices. Roughly 25% of the company's revenues comes from ship-or-pay contracts linked to additional capacity of 135 thousand barrels per day (kbpd). CFO is also positively affected by the exposure of OCENSA to Ecopetrol, which makes up more than 80% of the company's total revenues. The company's revenue profile provides stability to cash flow measures and helps minimize profit margin volatility. CFO benefits from the regulated nature of the crude oil transportation tariffs in Colombia, which is fixed in U.S. dollars, adjusted by inflation and reviewed every four years. Manageable Volume Risk: OCENSA is exposed to volume risk, but Fitch believes this risk is manageable, based on the demonstrated resilience to different oil price cycles. The low availability of alternative transportation systems and the non-programmed interruptions of Cano Limon-Covenas pipeline system (CLC) has historically favored OCENSA's volumes. Transported volumes increased to 589 kbpd during 2Q23 from 554 kbpd during 1Q23 as crude oil production recovered to 778 kbpd from 769 kbpd during the same periods. DERIVATION SUMMARY OCENSA's ratings compare well relative to tolling-based natural gas peers in the region, such as Transportadora de Gas Internacional S.A. ESP (TGI; BBB/Stable) and Transportadora de gas del Peru, S.A. (TGP; BBB+/Negative) due to their stable and predictable cash flow generation. OCENSA has a stronger financial profile, with leverage of 0.5x over the rating horizon, which offsets higher exposure to volume risk given its greater reliance on take-and-pay contracts relative to peers. Fitch considers TGI and TGP to have lower business risk resulting from a solid long-term contractual structure and low to no exposure to commodity price or volume risk. OCENSA's ratings remain three notches below TGP and two notches below TGI, even though TGP and TGI have less conservative capital structures. TGP has a stronger business profile with revenue derived from long-term ship-or-pay contracts with an average remaining life of around nine years. TGI's average contract length is four years, which reduces revenue visibility compared with TGP. TGI is rated in line with its parent, Grupo Energia Bogota S.A. E.S.P. (GEB; BBB/Stable), and maintains a strong linkage to GEB. OCENSA's ratings reflect strong operational and strategic ties to Ecopetrol. Therefore, Fitch considers it unlikely that both companies will have different credit profiles. KEY ASSUMPTIONS - Volumes for ship-and-pay contracts grow by 1% annually over the rating horizon; - Volumes for ship-or-pay contracts according to negotiated terms with off-takers; - Current tariffs remain valid through 2023, and then increase by 1% annually thereafter; - Capex estimated at USD35 million in 2023, and increasing each year at that level including forecast inflation; - Dividend pay-out of 100%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade of Ecopetrol's credit ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A downgrade of Ecopetrol's credit ratings; - A weakening of the company's linkage with Ecopetrol and material deterioration of OCENSA's capital structure. LIQUIDITY AND DEBT STRUCTURE Liquidity Not a Concern: The company's strong liquidity position is supported by cash on hand, strong internal cash flow generation and favorable debt maturities. As of June 30, 2023, OCENSA had COP292 billion of cash on hand. Fitch expects CFO to average COP3.7 trillion through the medium term, although a significant proportion of this cash flow will likely be up-streamed to shareholders through dividend distributions. Fitch expects OCENSA to generate positive FCF in the short to medium term given the absence of sizable capex. ISSUER PROFILE OCENSA is Colombia's largest crude oil transportation company, with pipelines covering 836 km underground and 12 km offshore. It connects Colombia's most prolific oil basins with its main crude oil export terminal and is a gateway to the country's largest refineries. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS OCENSA's ratings are linked to the credit profile of Ecopetrol. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Oleoducto Central S.A. (OCENSA) LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ =================================== D O M I N I C A N R E P U B L I C =================================== AES ESPANA: Fitch Affirms BB- Foreign Currency IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed AES Espana B.V.'s Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'/Stable Outlook. Fitch has also affirmed AES Espana' USD300 million notes due 2028 at 'BB-' and National Scale Long-Term rating at 'AA(dom)'/Stable Outlook. The ratings consider the combined operating assets of AES Espana and Dominican Power Partners (DPP; jointly referred to as AES Dominicana), which are joint obligors of the USD300 million notes due 2028. AES Espana's ratings reflect a strong linkage to the Dominican Republic's (BB-/Positive) credit quality, due to its dependence on government transfers, as well as historically strong balance sheet and diversified asset portfolio. Leverage will increase temporarily yoy to 5.0x through 2025 as the company increases its debt to finance a renewables expansion plan and remains partially contracted through its power purchase agreements (PPAs) with the state-owned distribution companies (discos). Fitch expects the company to reduce leverage to the 3.0x range in 2026, assuming a return to a higher contracted structure inclusive of the additional renewables capacity. A parent and subsidiary relationship exists between AES Espana and AES Corporation (BBB-/Stable) due to the latter's pledge of shares in the operating companies, but Fitch rates AES Espana on a standalone basis, not assuming implicit parental support. KEY RATING DRIVERS Increased Leverage Manageable, Temporary: Fitch views AES Espana's multi-year increase in gross leverage from 2.8x at YE 2023 to about 5.0x yoy through 2025 as a manageable, cyclical event, despite being above prior expectations and exceeding Fitch's downward rating sensitivity. The increase will be temporary, and attributable to an increased capex program to expand renewable energy capacity, partially funded by new debt. In addition, higher leverage is due to continued weaker EBITDA generation, as the company remains only partially contracted with the state-owned discos until its TTF-linked natural gas supply contract converts to a more economical index beginning in 2026. However, in 2023 the company generated some additional margin as demand increased with hot weather and supply prices steadily declined. In 2026 and beyond, Fitch expects the company to deleverage to the 3x range, as capex rates subside and EBITDA grows with the higher contracted renewable assets, as well as a re-contracting with the discos as a baseload provider under a more economical gas supply contract. Expansion Plan Impacts Cash Flow: Fitch expects that AES Espana will produce a negative annual average FCF of USD85 million during its higher capex program in 2023-2025 and an extraordinary dividend. Cash flow from operations (CFO) should also normalize to historical levels following the temporary lower contracted position, and the rate of dividend payments should moderate in 2024. The renewable expansion program is managed by unrestricted subsidiary ADRE (99.9% owned by AES Espana) and will amount to around USD452 million through 2025, funded by around USD350 million in new debt. In 2026 and beyond, Fitch expects capex to focus primarily on maintenance work and be funded through free cash flow and for CFO to rebound to historic levels as the company reverts to baseload status. Stable LNG Business; Opportunistic Transactions: AES Espana's natural gas supply, storage and transportation business accounts for an average 42% of annual revenues and approximately 25% of annual variable margin (subject to volumes sold and prices). The company provides the country's sole LNG import terminal, offering regasification, storage, and transportation infrastructure. EBITDA declined in 2023 yoy as the company executed fewer extraordinary LNG transactions compared to 2022. In 2024, Fitch expects gas transactions to increase for several clients, and going forward to remain a dynamic and opportunistic component of the company's business profile. Dependence on Government Transfers: High energy distribution losses have averaged a chronic 33% due to low collection rates and important subsidies for end-users. This has created a strong dependence on government transfers for the country's generation companies, and has been exacerbated by the country's exposure to fluctuations in fossil-fuel prices and strong energy demand growth from discos. The regular delays in government transfers can pressure generators' working capital needs and add volatility to cash flows. High-Quality Asset Base: Historically, AES Espana has ranked among the lowest-cost electricity generators in the country. AES Espana's combined-cycle plant with dual natural gas, as well as fuel oil No. 2 (diesel), is generally expected to be fully dispatched as a base-load unit as long as the LNG price is not more than 15% higher than the price of imported diesel (as is the situation in 2022-2026). The company continues to invest in renewable assets as well, adding new solar and wind assets to the portfolio at zero variable cost. DERIVATION SUMMARY AES Espana's ratings are linked to and constrained by the Dominican Republic's ratings, from which it indirectly receives its revenues. Empresa Generadora de Electricidad Haina, S.A. (EGE Haina; BB-/Stable) is Espana's closest peer competitor, as both company's' ratings are linked to and constrained by the Dominican Republic's ratings, from which they indirectly receive material parts of their revenues. Each company is exposed to working capital volatility due to operating difficulties tied to state-owned discos, which are characterized by high dependency on government transfers due to their and high energy loss and lower collection rates. EGE Haina benefits from a diversified energy matrix, which includes thermal and nonconventional renewable energy assets, with more installed capacity than AES Espana and DPP combined. However, AES Espana operates the country's sole natural gas port, regasification, storage and gas pipeline facilities. Both companies are in a period of asset expansion, in which they can each expect leverage to increase to around 5x through 2025. AES Espana's capital structure is strong relative to similarly rated, unconstrained peers. Orazul Energy Peru S.A.'s (BB/Stable) ratings reflect the company's predictable cash flows supported by an adequate contractual position, historically efficient and reliable hydroelectric generation assets, and cost structure flexibility. Contrary to AES Espana, Orazul's historically elevated leverage levels have tempered in recent years due to asset sales and debt reduction, and could improve compared to the rating category over the medium term. KEY ASSUMPTIONS - Both AES Espana and DPP increase generation volumes through partial disco PPAs (last updated in February 2023), albeit at lower levels than historical base load volumes; - By 2026 both generators resume fully-contracted financial PPAs with discos and margins revert to generation; - Additional approximately USD350 million in new debt (issued by unrestricted renewable development subsidiary ADRE) to support ongoing capex and dividend payments equivalent to 100% of prior year's net income; - Dividends of USD124 million in 2023, declining to an average USD46million through 2026, with year-end cash estimated at around than USD70 million; - Solar assets Mirasol I and II (each 50 MW capacity) operationalize in 2023 and 2024 respectively, and solar assets Peravia I and II (total 140 MW) to operationalize in early 2025; - Fuel prices (TTF and NYMEX Natural Gas/Henry Hub) track Fitch price deck. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade in the Dominican Republic's sovereign ratings, inclusive of the electricity sector achieving financial sustainability through proper policy implementation. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A downgrade in the Dominican Republic's sovereign ratings; - Sustained deterioration in the reliability of government transfers; - Continued exposure to spot sales and gas sales that collectively represent more than 60% of EBITDA, coupled with a financial performance deterioration resulting in the combined AES Espana/DPP ratio of debt-to-EBITDA to above 4.5x for a sustained period. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: AES Espana and DPP have historically reported very strong combined credit metrics for the rating category. Both companies have financial profiles characterized by low to moderate leverage and strong liquidity, on a sustained basis. Cash on hand at YE 2022 was USD77 million, and the company maintains around USD70 million by policy each year. The companies' strong liquidity position is further supported by the future refinancing of their 2026 international bond to a bond due in 2028. Andres also has local, amortizing bonds due in 2027. ISSUER PROFILE AES Espana is a 319 MW combined cycle power station and has a 160,000 m3 LNG storage facility, regasification terminal and a 34km pipeline to DPP. The company also operates 100 MW of solar and 50 MW of wind assets, with more in the pipeline. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- AES Espana B.V. LT IDR BB- Affirmed BB- Natl LT AA(dom) Affirmed AA(dom) senior unsecured LT BB- Affirmed BB- DOMINICAN REPUBLIC: Central Bank Debt Up 1,768.3% Since 2000 ------------------------------------------------------------ Dominican Today reports that the debt of the Central Bank of the Dominican Republic (BCRD) has seen a significant expansion since the beginning of the century, reaching $20.442 billion USD by the end of the third quarter of this year. According to the General Directorate of Public Credit, this figure represents 17% of the gross domestic product (GDP), the report notes. This is a dramatic increase from the year 2000, when the debt stood at $1.156 billion USD, marking a rise of 1,768.3% over the period, according to Dominican Today. From 2000 to 2019, the average annual debt of the BCRD was $6.622 billion USD, peaking at $11.488 billion in 2019 USD, which accounted for 12.9% of the GDP, the report relays. However, by September of this year, the debt surged by an additional $8.955 billion USD, a 43.8% increase in just 45 months, the report notes. Over these three years and nine months, the average annual debt was around $15.961 billion USD, the report discloses. The most notable increase was between 2021 and 2022, when the debt jumped by $3.371 billion USD, rising from $13.901 billion USD to $17.272 billion USD, the report says. As of September this year, the total debt represents a 15.5% expansion compared to December 2022, the report relays. In terms of composition, the Central Bank's debt in 2000 comprised 77.1% external debt and 22.9% internal debt, the report notes. This changed significantly after the 2003 financial crisis, with internal debt increasing from $393.2 million USD to $1.703 billion USD, a 76.9% rise within a year, the report discloses. Since then, the internal debt has been on an upward trend, averaging $5.792 billion USD annually between 2000 and 2019, the report relays. As of September 2023, the internal debt stands at $19.362 billion USD, making up 94.7% of the total debt, the report notes. The external debt, currently at $1.081 billion, accounts for 5.3% of the total, surpassing the peak of $1.016 billion USD in 2012 and greatly exceeding the 2020 figure of $305.3 million, the report relates. Dominican Today says that the recent surge in the Central Bank's debt is attributed to the issuance of more financial certificates to cover the debt. Antonio Ciriaco Cruz, an economist and dean of the Faculty of Economic and Social Sciences at the Autonomous University of Santo Domingo (UASD), noted that the issuance of certificates to cover the quasi-fiscal deficit reached 870.299 billion pesos in December 2022 and has since increased to 1.049 trillion pesos, the report notes. This trend results from the government's difficulty in fulfilling its financial obligations under Law 167-07 for the Recapitalization of the Central Bank, the report relays. The law's reformulation, extending the compliance period and increasing contributions to the debt, is suggested, the report discloses. Additionally, Cruz recommends transferring the Central Bank's debt to the Ministry of Finance, followed by issuing long-term bonds to resolve it, the report notes. The International Monetary Fund (IMF) also advises recapitalizing the Central Bank as a key economic policy for the medium term, the report relays. This step, according to the IMF, will boost the bank's autonomy and support the inflation targeting framework by deepening the exchange market and increasing the use of hedging mechanisms, 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 December 4, 2023, the TCR-LA reported that Fitch Ratings has affirmed Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the Outlook to Positive from Stable. Fitch says the Positive Outlook reflects a trend improvement in governance, and robust growth prospects that should lead to continued gains in per capita income. According to Fitch, growth has decelerated in 2023, but it expects Dominican Republic to recover to high levels during 2024-2025. External liquidity metrics have improved in recent years, and foreign currency share of government debt is on a downward path. In August 2023, Moody's Investors Service 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. ===================== P U E R T O R I C O ===================== LUCENA DAIRY: Wins Cash Collateral Access Thru Dec 30 ----------------------------------------------------- The U.S. Bankruptcy Court for the District of Puerto Rico authorized Lucena Dairy Inc. to continue using cash collateral on an interim basis in accordance with the budget, through December 30, 2023 as agreed by the Debtor and Condado 4 LLC. The court said the hearing set for for November 30, 2023 is rescheduled to December 29, 2023 at 2 p.m., via Microsoft Teams Video & Audio Conferencing and/or Telephonic Hearings. As previously reported by the Troubled Company Reporter, Condado 4 LLC holds a pre-petition security interest over the cash collateral. As of the Petition Date, Debtor has estimated Condado's claims in the approximate amount of $11 million. Condado's collateral from the Debtor is valued at approximately $1.2 million. Condado also has liens over the real property that the Debtor leases from Debtor's shareholders. To the extent of any diminution in the value of the Prepetition Secured Party's respective interests in their collateral (including cash collateral) from the Petition Date arising from the use, sale, or lease of such collateral or the imposition of the automatic: stay, such Prepetition Secured Party was granted (i) replacement liens of the same priority on the same assets that serve as preparation collateral of the Debtors and (ii) direct the Debtor to make a payment as additional adequate protection to the Prepetition Secured Creditor in the amount of $10,000, per month, upon entry of the Final Order. A copy of the court's order is available at https://urlcurt.com/u?l=2Icyht from PacerMonitor.com. About Lucena Dairy Inc. Lucena Dairy Inc. is engaged in the production of cows' milk and other dairy products and in raising dairy heifer replacements. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. P.R. Case No. 23-02835) on September 8, 2023. In the petition signed by Jorge Lucena Betancourt, president, the Debtor disclosed $1,905,560 in assets and $11,464,130 in liabilities. Judge Edward A. Godoy oversees the case. Carmen D. Conde Torres, Esq., at C. Conde & Associates, represents the Debtor as legal counsel. =============== X X X X X X X X =============== LATAM: Biggest Economies See Unemployment Tick Down --------------------------------------------------- Andrew Rosati and Matthew Malinowski at Bloomberg News reports that unemployment rates in Brazil and Mexico fell in October, as strong labour markets underpin the outperformance of Latin America's largest economies in the face of high interest rates.' Official data released on November 30 showed Brazil's unemployment rate declined to 7.6 percent from a month earlier, with the number of out-of-work people falling to 8.3 million - both figures the lowest since 2015, according to Bloomberg News. In Mexico, the jobless rate dropped to 2.75 percent in the same period, Bloomberg News relays. Robust job markets are helping to propel growth well above estimates from the start of the year, Bloomberg News notes. In Brazil, bumper harvests led to gains and have helped drive the unemployment rate lower for seven straight months, Bloomberg News discloses. Meanwhile, the region's second-largest economy has benefited from a flood of foreign capital for investments serving North American markets and also strong domestic demand, Bloomberg News says. In Brazil, the total number of employed people breached 100 million for the first time on record. Still, some 20 million workers remain underutilized, according to the national statistics agency, Bloomberg News relays. Mexico's number of employed people hit 59.4 million, representing a rise of one million from the same month a year prior, according to the government report, Bloomberg News notes. Formal employment rose 0.1 percent on the month in seasonally-adjusted terms and a "solid" 3.2 percent year-on-year, according to Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc, Bloomberg News discloses. "A tight labour market is one of the factors supporting a conservative calibration of monetary policy," he wrote in a report, Bloomberg News relates. Outshine More disposable income and rising wages have buttressed consumer confidence in both nations, Bloomberg News notes. In turn, improved sentiment has driven stronger demand of goods and services, allowing Mexico and Brazil to outshine other important regional economies including Chile, Colombia and Argentina, Bloomberg News relays. Mexico's Central Bank, known as Banxico, raised its 2023 and 2024 economic growth forecasts to 3.3 percent and 3 percent, respectively, Bloomberg News says. The economy is benefiting from "a resilient external demand and domestic spending dynamism," Banxico Governor Victoria Rodriguez Ceja told reporters, Bloomberg News discloses. She added that lowering the interest rate from the current level of 11.25 percent in early 2024 was a possibility to be discussed with other board members, Bloomberg News relays. Bloomberg News notes that Felipe Garcia Ascencio, chief executive officer of Banco Santander SA's Mexico unit, said in an interview that greater investments in the local economy mean domestic employment is going to remain healthy. Brazilian policy-makers led by Roberto Campos Neto see the domestic job market as "rather dynamic" with a high level of hiring, according to the minutes of their November monetary policy meeting, Bloomberg News relates. At the same time, they have reiterated that the economy will slow during coming quarters, Bloomberg News says. Brazil has room to continue lowering borrowing costs from the current level of 12.25 percent, Campos Neto said in an interview. Policymakers have already delivered three straight half-point reductions, Bloomberg News adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *