/raid1/www/Hosts/bankrupt/TCRLA_Public/240301.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, March 1, 2024, Vol. 25, No. 45
Headlines
A R G E N T I N A
ARGENTINA: Economy Shrank in December by Most Since Pandemic
ARGENTINA: Facing Hardships and Challenges, IMF Director Says
GAUCHO GROUP: 3i LP, 2 Others Report 9.9% Equity Stake
PROVINCE OF NEUQUEN: S&P Affirms 'CCC-' ICR, Outlook Negative
B A H A M A S
FTX GROUP: Reaches $33M Settlement Over Failed European Expansion
B E R M U D A
BORR DRILLING: S&P Assigns 'B+' ICR, Outlook Stable
B R A Z I L
BRAZIL: Aligns Interest Rates with Developed Nations, Chief Says
PETROBRAS: No Plans to Lower Jet Fuel Prices
J A M A I C A
JAMAICA: BOJ Bares Teeth at Inflation
X X X X X X X X
LATAM: IDB Funds Paso Canoas Border for $100 Million in Loan
- - - - -
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A R G E N T I N A
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ARGENTINA: Economy Shrank in December by Most Since Pandemic
------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
Argentina's economy contracted in December by the most since the
peak of the Covid-19 pandemic as newly elected President Javier
Milei put in motion shock austerity measures that slammed the
brakes on consumption.
Economic activity in December fell 3.1% from November, according to
government data published, a drop not seen since April 2020,
according to globalinsolvency.com.
From the same month a year earlier, activity fell 4.5%, more than
the 3.2% decline forecast by economists surveyed by Bloomberg. The
contraction was driven by declines in the financial sector,
manufacturing and commerce, the report notes.
Since taking office Dec. 10, Milei sharply devalued the official
exchange rate, froze public works and cut public sector jobs to
close the yawning deficit at the root of annual inflation running
above 250%, the report relays.
Milei's government achieved the first monthly budget surplus in
over a decade in January by allowing inflation to eat away at
pension payouts and slashing generous energy subsidies, the report
adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
ARGENTINA: Facing Hardships and Challenges, IMF Director Says
-------------------------------------------------------------
International Monetary Fund First Deputy Managing Director, Gita
Gopinath, made the following statement at the end of her visit to
Buenos Aires, Argentina, on February 21-22, 2024:
"I had an excellent first visit to Buenos Aires. Over the past few
days, I have been able to learn more about the progress being made,
but also the hardships the Argentine people are now facing. I heard
first-hand from a wide range of stakeholders who shared their ideas
on how to address the country's challenges and harness its vast
potential.
"In my meetings with President Javier Milei and his economic team
(Chief of Cabinet Nicolas Posse, Economy Minister Luis Caputo, and
BCRA President Santiago Bausili), I recognized the important
initial gains in restoring macroeconomic stability and establishing
a strong fiscal anchor. The path ahead remains challenging, and
consistent and well-communicated monetary and FX policy will be
necessary to continue to bring down inflation, rebuild reserves,
and strengthen credibility.
"Given the near-term stabilization costs, sustained efforts to
support vulnerable segments of the population and preserve the real
value of social assistance and pensions are essential, as well as
to ensure that the burden of the adjustment does not fall
disproportionately on working families. Working pragmatically to
build social and political support is also critical to ensure the
durability and effectiveness of reforms.
"Common messages were echoed in my discussions with academics,
labor, civil society organizations, and private sector firms. There
was broad recognition that Argentina needs market-oriented reforms
to reverse a long-term decline in living standards, but that these
should be designed and sequenced to ensure sustained and inclusive
growth. Importantly, all concurred that Argentina has tremendous
human potential as well as unique opportunities in energy, mining,
and technology.
"My team and I will continue working closely with President Milei
and his team to support their efforts to restore stability and
strengthen growth for the benefit of all Argentines. I am grateful
for the warm hospitality I received during my first visit to this
beautiful country."
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
0its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
GAUCHO GROUP: 3i LP, 2 Others Report 9.9% Equity Stake
------------------------------------------------------
In a Schedule 13G Report filed with the U.S. Securities and
Exchange Commission, the following reporting persons disclosed
beneficial ownership of Gaucho Group Holdings, Inc.'s Common Stock
as of February 6, 2024.
Reporting Person Amount beneficially Percent of
class:
owned
3i, LP 626,832
9.9%
3i Management LLC 626,832
9.9%
Maier Joshua Tarlow 626,832
9.9%
The ownership percentages reported are based on (i) 5,647,763
shares of Common Stock outstanding as reported in the Issuer's
Current Report on Form 8-K, filed with the U.S. Securities and
Exchange Commission on February 7, 2024, and (ii) 626,832 shares of
Common Stock issuable, in any combination, to 3i upon (x) the full
exercise of Common Stock purchase warrants exercisable for up to an
aggregate of 350,526 shares of Common Stock, which in each case is
subject to a 4.99% beneficial ownership blocker, and (y) the full
conversion of the senior secured convertible note, which is subject
to a 9.99% beneficial ownership blocker.
3i holds the Warrants exercisable for up to an aggregate of 350,526
shares of Common Stock and the Note convertible into a number of
shares of Common Stock pursuant to, and in accordance with, the
conversion price and terms of the Convertible Note, subject to the
Blocker. Due to the interaction between the Blocker and the 4.99%
beneficial ownership limitation in each Warrant, 3i is prohibited
from exercising the Warrants and/or converting the Note into shares
of Common Stock if, as a result of such exercise or conversion,
respectively, 3i, together with its affiliates and any persons
acting as a group together with 3i or any such affiliates, would
beneficially own more than 4.99% or 9.99% of the total number of
shares of Common Stock then issued and outstanding immediately
after giving effect to such exercise or conversion, as applicable.
Consequently, 3i is the beneficial owner of 626,832 shares of
Common Stock. 3i has the power to dispose of and the power to vote
the Shares beneficially owned by it, which power may be exercised
by 3i Management, the manager and general partner of 3i. Mr.
Tarlow, as the manager of 3i Management, has shared power to vote
and/or dispose of the Shares beneficially owned by each of 3i and
3i Management. Mr. Tarlow does not directly own the Shares. By
reason of the provisions of Rule 13d-3 of the Act, Mr. Tarlow may
be deemed to beneficially own the Shares beneficially owned by 3i
and 3i Management, and 3i Management may be deemed to beneficially
own the Shares beneficially owned by 3i.
A full-text copy of the Report is available at:
https://www.sec.gov/Archives/edgar/data/1559998/000175392624000276/g084023_13g.htm
About Gaucho Group
Headquartered in New York, NY, Gaucho Group Holdings, Inc. was
incorporated on April 5, 1999. Effective Oct. 1, 2018, the Company
changed its name from Algodon Wines & Luxury Development, Inc. to
Algodon Group, Inc., and effective March 11, 2019, the Company
changed its name from Algodon Group, Inc. to Gaucho Group Holdings,
Inc. Through its wholly-owned subsidiaries, GGH invests in,
develops and operates real estate projects in Argentina. GGH
operates a hotel, golf and tennis resort, vineyard and producing
winery in addition to developing residential lots located near the
resort. In 2016, GGH formed a new subsidiary, Gaucho Group, Inc.
and in 2018, established an e-commerce platform for the manufacture
and sale of high-end fashion and accessories. In February 2022,
the Company acquired 100% of Hollywood Burger Argentina, S.R.L.,
now Gaucho Development S.R.L ("GD"), through InvestProperty Group,
LLC and Algodon Wine Estates S.R.L., which is an Argentine real
estate holding company. In addition to GD, the activities in
Argentina are conducted through its operating entities:
InvestProperty Group, LLC, Algodon Global Properties, LLC, The
Algodon Recoleta S.R.L, Algodon Properties II S.R.L., and Algodon
Wine Estates S.R.L. Algodon distributes its wines in Europe under
the name Algodon Wines (Europe). On March 20, 2020, the Company
formed a wholly-owned Delaware subsidiary corporation, Bacchus
Collection, Inc., which was dissolved on March 23, 2021. On June
14, 2021, the Company formed a wholly-owned Delaware limited
liability company subsidiary, Gaucho Ventures I Las Vegas, LLC, for
purposes of holding the Company's interest in LVH Holdings LLC.
Gaucho 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 Sept. 30, 2023, the Company had $18.91
million in total assets, $11.02 million in total liabilities, and
$7.89 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.
"The Company's operating needs include the planned costs to operate
its business, including amounts required to fund working capital
and capital expenditures. Based upon projected revenues and
expenses, the Company believes that it may not have sufficient
funds to operate for the next twelve months from the date these
financial statements are made available. Since inception, the
Company's operations have primarily been funded through proceeds
received from equity and debt financings. The Company believes it
has access to capital resources and continues to evaluate
additional financing opportunities. There is no assurance that the
Company will be able to obtain funds on commercially acceptable
terms, if at all. There is also no assurance that the amount of
funds the Company might raise will enable the Company to complete
its development initiatives or attain profitable operations. The
aforementioned factors raise substantial doubt about the Company's
ability to continue as a going concern for a period of one year
from the issuance of these financial statements," according to the
Company's Quarterly Report for the period ended Sept. 30, 2023.
PROVINCE OF NEUQUEN: S&P Affirms 'CCC-' ICR, Outlook Negative
-------------------------------------------------------------
S&P Global Ratings, on Feb. 27, 2024, affirmed its 'CCC-' global
scale issuer credit and issue-level ratings on the province of
Neuquen. The outlook remains negative.
Outlook
The negative outlook reflects the potential deterioration of the
province's overall creditworthiness, given persistent macroeconomic
imbalances in Argentina, and the limited visibility of changes to
the intergovernmental fiscal framework and the provinces' access to
foreign currency, which could pose risks for timely debt service.
Neuquen is somewhat less exposed than other provinces to currency
risk and sovereign interference, because its revenue profile
benefits from the oil and gas extraction activity in Vaca Muerta
and from its low reliance on national government transfers. Still,
the negative outlook also reflects S&P's view that all provinces
are subject to transfer and convertibility (T&C) risks at the
sovereign level.
Downside scenario
S&P could downgrade the province in the next 12 months if a
weaker-than-expected budgetary performance or liquidity position
increases the risk of default, for example, if Neuquen is unable to
contain expenditure growth or if revenue doesn't keep pace with
expectations.
Upside scenario
S&P could upgrade Neuquen as a result of Argentina's improved
creditworthiness and T&C assessment. An upgrade above the 'CCC'
category would require a stronger liquidity position and a
continued track record of pragmatic measures to manage liquidity,
debt, and fiscal sustainability under an unpredictable
macroeconomic scenario and the bulk of revenue coming the volatile
oil and gas sector. Argentina's creditworthiness and S&P's 'CCC-'
T&C assessment of the sovereign continue to cap its ratings on the
province.
Rationale
S&P said, "The 'CCC-' ratings on Neuquen are capped by our T&C
assessment for Argentina, reflecting the ongoing risks to accessing
to foreign currency that could dent Neuquen's ability to service
debt in dollars. Our ratings reflect Neuquen's fragile liquidity
position, a narrow economic base, revenue concentration, and a
history of debt restructurings under distressed conditions." Debt
service will increase substantially in 2024 and 2025 as larger
amortizations approach, prompting the province to tap a shallow and
potentially volatile domestic capital market to roll over debt
payments.
The Argentine local and regional governments' (LRGs') institutional
framework, which we consider as very volatile and underfunded,
limits Neuquen's capacity for fiscal planning and exposes it to a
potential transfer of fiscal stress from higher governmental
tiers.
Strong prospects for the oil and gas sector will partially offset a
broad economic contraction, but the national fiscal adjustment
poses the risk to Neuquen's finances.
S&P said, "Against a backdrop of complex macroeconomic conditions,
with annual inflation running above 200%, the economic contraction,
and structural imbalances in spending, we expect the hydrocarbon
sector will support Neuquen's economy and its fiscal performance in
2024. Notably, according to our base-case scenario, a sharp
currency devaluation in December 2023 will lead to royalty growth
close to 150% in real terms this year, while gross receipts tax
revenue will also increase above nominal GDP growth. Royalties
represented 32% of total revenue in 2023, and gross receipts tax
revenue 22%. We expect both to continue rising through 2025 owing
to increasing production, as we expect oil prices to remain
stable."
Despite its strong revenue profile, which sets it apart from other
provinces, Neuquen is still exposed to Argentina's stressed
macroeconomic conditions, particularly high inflation and limited
access to foreign currency. Argentina's new administration is
implementing measures to reduce the fiscal deficit, deregulate
economy, and normalize monetary policy. Therefore, S&P expects
inflation to accelerate and GDP to contracts by 3.5% in 2024,
following the estimated contraction of 1.6% in 2023. Neuquen's per
capita GDP will reach $14,000 in 2024--a similar level to
2020--mainly because of a steep devaluation of the exchange rate in
December 2023. Higher productivity (as reflected in GDP per capita)
versus other provinces primarily reflects Neuquen's economic
concentration in oil and gas production, which could also become a
source of volatility for its fiscal and budgetary performance.
In addition to broad economic measures, the national government has
reduced discretionary transfers to provinces. While they make up
only about 2% of Neuquen's revenue, S&P believes there is
increasing uncertainty about the intergovernmental fiscal
framework, particularly the future allocation of coparticipation
funds to provinces. Coparticipation transfers will represent about
12% of Neuquen's operating revenue in 2024.
S&P expects continuity in fiscal management following the election
of governor Rolando Figueroa in 2023, under a broad coalition
"comunidad" that includes multiple parties. The administration is
focused on continuing to develop the hydrocarbon sector, mostly by
exploiting those areas with the potential similar to that of Vaca
Muerta, seeking to more than double oil and gas production by 2030.
This strategy, coupled with the province's significant
infrastructure needs, will likely keep capital expenditure (capex)
at historical levels of about 9% of total spending.
Although still modest, the Figueroa administration has taken
concrete steps to contain fiscal imbalances in the short term,
specifically by increasing pension contribution rates for active
workers, along with some cuts to political spending. Although
management acknowledges that structural imbalances in the pension
system remain, this step will allow it to use excess royalties to
pay down debt in 2024, instead of diverting them to fund pension
deficits, as it had decreed in 2023. The province will direct 50%
of royalties generated from exports of oil and gas, previously
dedicated to building an anticyclical fund, to service its
international bonds.
In S&P's view, Argentina has very weak institutional predictability
and a volatile intergovernmental system that has been subject to
modifications to fiscal regulations and inconsistency over the
years. The national government's "shock therapy" economic policies
include cuts to provincial non-automatic transfers, as well as
higher expenditure responsibilities for provinces.
High inflation and principal payments on international bonds will
decrease the province's fiscal space this year. S&P expects
Neuquen's operating surpluse to average 4.7% of operating revenue
and deficit after capex to average 2.3% in 2024-2026.
S&P said, "Our forecasts are based on operating revenue boosted by
non-tax revenue, mainly because of the rise in the royalty and
hydrocarbon production, which also boosted gross receipt tax
collection. We forecast pressures on operating accounts coming from
payroll expenses, which account for 53% of operating spending, and
which we expect will continue to grow above inflation in 2024."
The province's liquidity position remains vulnerable, in S&P's
view, despite a recent rise in cash on hand. The province faces a
significant increase in debt service in 2024-2025 as principal
payments on restructured international bonds rise, exacerbated by
the peso's recent devaluation. Service on foreign-currency
obligations will increase to $200 million in 2024 and $235 million
in 2025 and could escalate further if the province continues to tap
domestic markets to roll over debt in dollars. To meet upcoming
debt service requirements, the administration issued a debt
instrument in October 2023 denominated in dollars in the domestic
market for $99.3 million, below the $150 million amount that the
local legislature authorized.
As of February 2024, $9 million have been used to pay principal and
interest of one of the bonds. The province will be able to build a
liquidity base for the fiscal year through the remaining $90
million, the boost in royalties, and ARP70 billion and $50 million
authorized for domestic market issuances. Still, our base-case
scenario assumes liquidity after expenditures to cover 32% of the
2024 debt service, and that the province will have to resort to
additional borrowings to service its debt in 2025.
S&P said, "We project the province's debt burden will reach 32% of
revenue in 2026, a sharp decline from 74% at the end of 2023.
Almost 90% of the province's debt is denominated in, or linked to,
dollars. To date, Neuquen is the only province that has been able
to tap domestic markets for dollar-denominated debt. We expect that
it will continue to do so in 2024, using its remaining
authorization for $50 million, and if needed, expanding its
authorization to borrow more. Although we consider Neuquen's access
to markets wider than those of other provinces, we still consider
Argentine provinces' liquidity to be subject to limited market
access, particularly in light of their history of defaults and the
sovereign's fragile macroeconomic and external position.
"We expect royalties to continue increasing their share in the
provincial revenue base, as automatic and discretionary transfers
will be cut by the national government." Own-source revenue
accounts for 80% of Neuquen's operating revenue. This revenue
structure, together with the fluctuating oil prices, will make
financial accounts more volatile than those of other provinces.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
NEUQUEN (PROVINCE OF)
Issuer Credit Rating CCC-/Negative/--
NEUQUEN (PROVINCE OF)
Senior Unsecured CCC-
=============
B A H A M A S
=============
FTX GROUP: Reaches $33M Settlement Over Failed European Expansion
-----------------------------------------------------------------
Dietrich Knauth at Reuters reports that bankrupt crypto exchange
FTX has settled a lawsuit that sought to claw back $323 million
that it had spent acquiring a European startup, instead agreeing to
sell the company back to its founders for $32.7 million.
FTX had concluded that no other buyer would agree to purchase its
fledgling European subsidiary, FTX Europe, and that the proposed
settlement is the best outcome for FTX creditors, according to
documents filed in Wilmington, Delaware bankruptcy court, according
to Reuters.
FTX had sued the founders of Zurich, Switzerland-based Digital
Assets DA AG, which FTX acquired and rebranded as FTX Europe in
2021, saying in a July 2023 lawsuit that the purchase price was a
"massive overpayment" that was made using FTX customer funds. FTX
Europe had little more than a business plan and was "not up and
running yet" at the time of the acquisition, according to FTX's
complaint, the report notes.
The defendants in the lawsuit, including DA AG founders Patrick
Gruhn and Robin Matzke, had denied FTX's allegations and filed
their own claims seeking $256.6 million from FTX, the report
relays.
FTX said that litigating those competing claims would be expensive
and time-consuming, even more so because key witnesses like FTX
founder Sam Bankman-Fried have been convicted of fraud and would
not be available to testify, the report discloses.
Matzke said that FTX's European expansion was going well until FTX
failed on an international level in November 2022, adding that the
settlement was a good result, the report says.
"We are happy to support speedy payouts to EU clients," Matzke said
in an email.
FTX has filed similar lawsuits seeking to claw back money from a
former top FTX lawyer, the founders of stock trading platform
Embed, other bankrupt crypto companies, and K5, an investment firm
with political and celebrity connections, the report notes.
The case is FTX Trading Ltd v. Lorem Ipsum UG et al, U.S.
Bankruptcy Court for the District of Delaware, No. 23-ap-50437.
For FTX: Steven Holley, Stephen Ehrenberg, Brian Glueckstein and
Christopher Dunne of Sullivan & Cromwell LLP.
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell
itself to its giant rival Binance, but Binance walked away from the
deal amid reports on FTX regarding mishandled customer funds and
alleged US agency investigations.
At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step
aside, and restructuring vet John J. Ray III was quickly named new
CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
billion in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
According to Reuters, SBF shared a document with investors on Nov.
10, 2022, showing FTX had $13.86 billion in liabilities and $14.6
billion in assets. However, only $900 million of those assets were
liquid, leading to the cash crunch that ended with the company
filing for bankruptcy.
The Hon. John T. Dorsey is the case judge.
The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal
North America, LLC as financial advisor. Kroll is the claims
agent, maintaining the page
https://cases.ra.kroll.com/FTX/Home-Index
The Official Committee of Unsecured Creditors tapped Paul Hastings
as counsel, FTI Consulting, Inc., as financial advisor, and
Jefferies LLC as the investment banker. Young Conaway Stargatt &
Taylor LLP is the Committee's Delaware and conflicts counsel.
Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory
T. Donilon, Edward L. Schnitzer, and David M. Banker, is
representing Sam Bankman-Fried in the Chapter 11 cases.
White-collar crime specialist Mark S. Cohen has reportedly been
hired to represent SBF in litigation. Lawyers at Paul Weiss
previously represented SBF but later renounced representing the
entrepreneur due to a conflict of interest.
=============
B E R M U D A
=============
BORR DRILLING: S&P Assigns 'B+' ICR, Outlook Stable
---------------------------------------------------
S&P Global Ratings assigned its 'B+' issuer credit rating to Borr
Drilling Ltd. and a 'BB-' rating to the senior secured notes.
The stable outlook indicates that S&P anticipates a rapid
deleveraging that will allow Borr Drilling to quickly move FFO to
debt toward 30%, and potentially above 30% from 2024-2025, as well
as a supportive liquidity profile with no maturities in the next
few years.
S&P's analysis considers Borr Drilling's relatively small size.
With a current backlog of $1.75 billion versus $3.9 billion for
Valaris, $2.2 billion for Seadrill, and $2.1 billion for Odfjell,
and despite current revenue visibility of nearly two years with
firm contracts in place, Borr Drilling remains exposed to volatile
and unpredictable end markets where capital expenditure (capex) on
oil and gas is the key driver. Mid- to long-term prospects are
uncertain and volatile. In that context, Borr Drilling's relatively
high indebtedness compared with that of peers, with $1.7 billion
secured debt, is a relative weakness, despite S&P's anticipation of
rapid deleveraging once the two newbuilds are delivered (slated to
happen before year-end 2024). That said, S&P notes the additional
$50 million equity injection, mandatory amortization, and cash flow
sweep are supporting factors. The company also displays certain key
strengths, such as a market-leading age of fleet (average of about
six years) and a 100% contracted fleet, representing operating
efficiency factors that are at least on par or superior to peers'.
In particular, margins above the peer average mitigate the overall
smaller size. The smaller size is also mitigated by sound
geographic diversity and a versatile fleet that can work in most
shallow-water oil and gas producing regions.
Drilling market activity continues to pick up, providing tailwinds
to Borr Drilling's activity levels. S&P said, "We expect that the
current commodity prices, supply and demand fundamentals for crude
oil, and a renewed focus on global energy security will support a
continued gradual increase in offshore drilling spending and
activity. However, over the longer term, we believe the energy
transition will challenge the offshore drilling sector because
customers may become less willing to commit capital to multi-year
greenfield projects, due to the risk of waning oil demand." In that
context, the shallow water segment Borr Drilling focuses on is less
at risk, given a shorter payback time for oil and gas companies.
The company should maintain high utilization and potentially
benefit from upside. S&P's view of the financial risk profile takes
into account the rapid deleveraging the company can achieve on the
back of contracted revenue for 2024 and 2025 and increasing day
rates in most recent contracts signed, a trend that could continue
on the back of relatively high oil and gas prices. Capex will fall
to minimum levels by 2025 because maintenance spending is
relatively low for the company's modern fleet, and volatility risk
will reduce as debt is paid down and leverage attains levels that
are more in line with that of peers.
S&P said, "The stable outlook reflects our expectation that Borr
Drilling will gradually reduce its leverage amid supportive market
conditions and strong contract coverage, thus providing it with the
scope to face potential headwinds at lower points in the cycle. We
believe that Borr Drilling's young and modern fleet of rigs will
continue to achieve above-average utilization and efficiency rates.
We anticipate FFO to debt will rapidly converge toward 30% in 2024
and thereafter, which we view as commensurate with the 'B+'
rating.
"We could lower our rating on Borr Drilling in the next 12 months
if the expected improvement in credit measures after 2024 does not
materialize, such as if FFO to debt remains materially and
sustainably below 30% or if debt to EBITDA remains sustainably
above 3x."
EBITDA interest coverage below 3x could also trigger a downgrade.
This could occur if:
-- Weaker commodity prices impair demand for offshore drilling
services, making it more challenging for the company to re-contract
its rigs at favorable day rates; and
-- Borr Drilling adopts a more aggressive financial policy on
leverage, dividends, and capex, notably increasing its fleet size
speculatively.
S&P views a positive rating action as limited in the next 12 months
considering Borr Drilling's relatively small size and focus on one
asset class (shallow water jack-ups). Any upside scenario is linked
to increased scale and cash flow generation, which would better
protect the company in a downturn. In the longer term, rating
upside could also arise if the company's financial policy targets
were to become much more stringent, for example with a capital
structure that was close to being free of net debt so that debt to
EBITDA stayed below 1.5x and FFO to debt above 60% at all points of
the cycle.
===========
B R A Z I L
===========
BRAZIL: Aligns Interest Rates with Developed Nations, Chief Says
----------------------------------------------------------------
Rio Times Online reports that Roberto Campos Neto, President of
Brazil's Central Bank, announced Brazil's interest rates are
nearing those of the developed world.
He compared them to the neutral rate, which is closer than in other
emerging markets, according to Rio Times Online.
At a Parliamentary Front for the Green Economy event in Brasilia,
Campos Neto stated the difference in rates is almost the same as in
richer countries, the report notes.
This shows Brazil's rates are nearing a balanced level, unlike in
many emerging countries, the report relays.
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).
PETROBRAS: No Plans to Lower Jet Fuel Prices
--------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that Brazil's
state-controlled oil giant Petrobras has no plans to lower jet fuel
prices as part of a wider effort to rescue struggling Brazilian
airlines.
The Rio de Janeiro-based producer can't just lower prices when the
government tells it to, Chief Executive Officer Jean Paul Prates
told Bloomberg News during a recent trip to India, reiterating his
opposition to such a move, according to globalinsolvency.com.
Prates added that "abnormal" airfare costs continued in 2023 even
while jet fuel prices fell, the report notes.
President Luiz Inacio Lula da Silva's administration has been
discussing how to provide financial relief to airlines, and
Petrobras has come under pressure to take on part of the burden,
the report relays.
The plan took on added urgency after Gol Linhas Aereas Inteligentes
SA filed for Chapter 11 bankruptcy protection on Jan. 25, the
report discloses.
Options include cutting fuel taxes and generating more competition
in the distribution industry, the report says.
"This is a sector which is always under crisis. It is not
necessarily connected to jet fuel," Prates said. "We're not going
to lower prices," he added.
About Petrobras
Petroleo Brasileiro S.A. or Petrobras (in English, Brazilian
Petroleum Corporation - Petrobras) is a semi-public Brazilian
multinational corporation in the petroleum industry headquartered
in Rio de Janeiro, Brazil. Petrobras control significant oil and
energy assets in 16 countries in Africa, the Americas, Europe and
Asia. But, Brazil represents majority of its production.
The Brazilian government directly owns 54% of Petrobras' common
shares with voting rights, while the Brazilian Development Bank
and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control
5%, bringing the State's direct and indirect ownership to 64%.
A corruption scandal was uncovered in 2014 that involved
Petrobras.
The scandal related to money laundering that involved Petrobras
executives. The executives were alleged to get received kickbacks
from overpriced contracts, to the tune of about $3 billion in
total. Over a thousand warrants were issued against politicians
and businessmen in relation to the scandal. In 2016, Marcelo
Odebrecht, CEO of Odebrecht, was sentenced to 19 years in prison
after being convicted of paying more than $30 million in bribes to
Petrobras executives.
In January 2018, Petrobras agreed to pay $2.95 billion to settle a
U.S. class action corruption lawsuit. In September 2018, Petrobras
agreed to pay $853.2 million to settle with Brazilian and U.S.
authorities.
In July 2022, Fitch Ratings affirmed Petrobras' BB- Long-Term
Issuer Default Rating. In addition, Fitch has revised the Rating
Outlook to Stable from Negative following a similar revision to
Brazil's Sovereign Rating Outlook. Also in July 2022, Egan-Jones
Ratings Company upgraded the foreign currency and local currency
senior unsecured ratings on debt issued by Petrobras to BB+ from
BB.
In January 2024, S&P Global Ratings assigned a new management &
governance (M&G) assessment of moderately negative to Brazil-based
Petroleo Brasileiro S.A. - Petrobras. At the same time, S&P has
affirmed its issuer credit ratings on Petrobras at 'BB' on the
global scale and 'brAAA' on the Brazilian national scale. S&P has
also affirmed its issue-level ratings on the company, and removed
all its ratings from under criteria observation (UCO).
=============
J A M A I C A
=============
JAMAICA: BOJ Bares Teeth at Inflation
-------------------------------------
Dashan Hendricks at Jamaica Observer reports that HE Bank of
Jamaica (BOJ) is starting to 'bare its teeth' at inflation again,
signalling in its most aggressive language in more than a year that
interest rate increases could resume soon, with inflation expected
to remain elevated over the next few months.
Pointing to January's 7.4 per cent annual inflation rate - the
highest in a year - the central bank said its monetary policy
committee voted unanimously to keep its policy rate at seven per
cent, at least until it meets again in late March, according to
Jamaica Observer. The policy rate has been at seven per cent since
November 2022, the report recalls. Keeping the policy rate
unchanged aside, the BOJ said it is also committed to "stability in
the foreign exchange market" and will "further tighten
Jamaican-dollar liquidity conditions," the report notes.
But it indicates that that job is getting harder, the report says.
For the past four months the central bank has had to be dealing
with annual inflation rates above the six per cent upper limit set
by the Government for price increases, the report notes. And from
what the BOJ is saying, that trajectory should be maintained over
the next year and a half, the report relays.
"Inflation is forecast to remain above the bank's target range over
the March 2024 and June 2025 quarters," the BOJ wrote in notes
accompanying the decisions from its February 16 and 19 monetary
policy committee meeting.
Things like a second-round increase in taxi fares come April, and
higher wages due to the tightening job market were pointed to as
being the culprits for the cloudy forecast for inflation, the
report discloses. So too were the impending supply chain issues
emanating from a slowdown in shipping through the Panama Canal, as
the drought sinks levels in the waterway to historic lows and
heightens attacks on ships in the Red Sea by Yemen-based Houti's.
Already, the BOJ points out that "shipping freight rates have
recently risen", adding that it "could eventually affect other
prices such as grains and finished goods," the report relays. Even
considering those things, it said if the taxi fare increases were
taken out of the picture, inflation would be within its target
range of four per cent to six per cent by December, the report
notes.
That would set the stage for expectations that the policy rate
could start easing, signalling to entities in the financial sector
that interest rates on consumer loans and those charged in the
money and capital markets should start coming down, the report
relays.
But instead BOJ, while noting as normal that its future decisions
will continue to be dependent on incoming data, added language
speaking about "further interest rate increases" if inflation
materialises as forecast, which marks a change in language. It is
the first time such strong discourse has been used in BOJ releases
in more than a year, the report says. The central bank has often
deferred to using subtle and vague language when it comes to
talking about interest rate increases in particular, the report
notes.
Of course, things could go the other way. Global growth could slow,
which could have a knock-on effect on growth locally, and slow
demand and price increases, the report discloses. It could also
result in Jamaicans importing less and therefore importing
less-inflated prices, the report relays.
On a brighter note, BOJ said its estimate is that growth continued
in the one to three per cent range in the December quarter, the
report notes. And it said that "there are signs that the economy
continued to expand in the [current] March 2024 quarter," the
report relays.
The expectation is that the growth will continue in line with
forecasts for the net two years - that is, hovering just between 1
and 2 per cent, 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.
===============
X X X X X X X X
===============
LATAM: IDB Funds Paso Canoas Border for $100 Million in Loan
------------------------------------------------------------
The presidents of Costa Rica, Rodrigo Chaves, and of Panama,
Laurentino Cortizo, inaugurated the Integrated Control Center in
Paso Canoas, Costa Rica, which will process the crossing of goods
and people entering the country from Panama.
The Inter-American Development Bank (IDB) provided technical and
financial support for the design and construction of this modern
and innovate facility, setting the standard for other countries in
Latin America.
This border crossing benefits carriers, trade operators, and
exporters and importers from both countries and other parts of
Central America. It also benefits the over 15,000 people who live
in the provinces on either side of the border, persons crossing
from one country to the other for tourism or other activities, and
the border control authorities of both countries.
IDB Integration and Trade Sector Manager Fabrizio Opertti said this
type of border crossings "bring down logistical costs, one of the
bottlenecks for trade and integration, and reduce wait times and
costs for foreign trade operators, all of which makes Costa Rica,
Panama and Central America more competitive."
The IDB's general manager for Central America, Panama, Mexico,
Haiti and the Dominican Republic, Tomas Bermudez, said "we are
excited to support such a strategic project, which both improves
infrastructure and optimizes the border post's processes and
processing capacity, boosting the productivity of both countries
and of Central America as a whole."
Building and launching Paso Canoas required a $33 million
investment, and it is the first border crossing to be opened under
Costa Rica's Border Integration Program, funded by a $100 million
loan from the IDB. On the Panamanian side, a parallel program is
underway to handle Costa Rican exports and Panamanian imports at a
single control center.
Paso Canoas consists of an integrated control center, with
digitized and optimized processes, and a dual-facility system where
the two countries carry out joint and simultaneous control at a
single point. This arrangement slashes average cargo transit times
from hours to minutes, reduces passenger transit times by 50%,
lowers transportation costs, and promotes integration.
The project is also an important model of how to deepen regional
integration, which is one of the pillars of the IDB's new "America
at the Center" program for bolstering integration, resilience, and
social development in Central America and the Dominican Republic.
The new facility is unique in that its migration and border control
work is located 4.3 kilometers from the border line to respect the
space of the binational city of Paso Canoas. It has a 150,700
square foot roofed area where customs, immigration, agricultural,
sanitary, police, transportation and logistical support authorities
from both countries carry out their tasks.
The border crossing facility has an EDGE sustainability
certification, meaning it uses the most effective ways to reduce
energy, water and resources in building materials.
*********
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 2024. 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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of the same firm for the term of the initial subscription or
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contact Peter A. Chapman at 215-945-7000.
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