/raid1/www/Hosts/bankrupt/TCRLA_Public/240326.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, March 26, 2024, Vol. 25, No. 62
Headlines
A R G E N T I N A
ARGENTINA: Battered Middle Class Continues to Shrink Under Milei
ARGENTINA: Bitcoin is Trumping Dollars for Many Locals
B A H A M A S
FTX GROUP: Expects US to Reduce Bankruptcy Claim to $3BB to $5BB
B R A Z I L
ATLAS LITHIUM: Nicholas Rowley Holds 223,685 Indirect Shares
BANCO DO BRASIL: Fitch Puts Final BB Rating to $750M Sr Unsec Notes
BRAZIL: 2024 Interest Rate Outlook Turns Hawkish
JBS SA: Faces International Pushback on U.S. Stock Listing
VAST INFRAESTRUTURA: S&P Affirms 'BB' Debt Rating, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: 8 Risks That Will Impact Business Environment
G U A T E M A L A
INVESTMENT ENERGY: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
J A M A I C A
JAMAICA: Cost of Alcoholic Beverages up 4.6% at February
P U E R T O R I C O
LIBERTY COMMUNICATIONS: Moody's Cuts CFR & Sr. Secured Notes to B2
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Battered Middle Class Continues to Shrink Under Milei
----------------------------------------------------------------
Buenos Aires Times reports Argentina's middle class is vanishing:
with austerity cuts introduced by self-proclaimed
"anarcho-capitalist" President Javier Milei, ever more people
cannot afford schooling or medicine, even those holding down two
jobs.
Inheriting massive levels of inflation and government debt, Milei
has since taking office in December slashed subsidies for
transport, fuel and energy, even as annual inflation soared to over
270 percent and wage-earners lost a fifth of their purchasing
power, according to Buenos Aires Times.
While the poor are, as always, hardest hit by economic turmoil, in
Argentina they're not alone, the report notes.
Today, almost six out of 10 Argentines are poor, according to
figures from the Catholic University of Argentina's Social Debt
Observatory - a significant jump from 49 percent measured when
Milei took office, the report discloses.
Economic 'Tsunami'
"A tsunami came and destroyed the lives that we lived 'normally'
until December. A 180-degree change," said Samanta Gomez, a
39-year-old nurse who has had to transfer her three children from a
private school to a public one, as fees increased and the family
income shrunk, the report discloses.
Public schools are poorly regarded in Argentina, and avoided by
anyone who can afford private fees, the report notes.
But in recent months, "we've seen a very big transfer of
middle-class children from private to public," said Sonia Alesso,
leader of the CTERA teachers' union, the report says.
'Not a Homogenous Class'
The decline of Argentina's middle class, once an example of upward
social mobility that was envied in much of Latin America, predates
Milei, who rode into office on a wave of fury over decades of
economic crisis in the country, the report relays.
Over the past 50 years, a series of neoliberal governments have
overseen deindustrialisation and high public debt, according to
historian Ezequiel Adamovsky, the report says.
There was a more prosperous interval under the interventionist
policies of leftists Nestor and Cristina Fernández de Kirchner,
who successively led the country from 2003 to 2015, only to be
replaced by conservative Mauricio Macri, the report relays.
In 2012, the World Bank said Argentina's middle class had doubled
over a decade to reach 18.6 million people, or 43 percent of the
population, the report recalls.
But the inflationary pressures of recent years, coupled with
libertarian Milei's steps to slash public spending, has been
chipping away at middle-class comforts, the report notes.
At the same time, "there hasn't been such a rapid drop in wage
levels since the military era" of the dictatorship from 1976 to
1983, said Adamovsky, the report recalls.
Under Milei, expensive social benefits such as public healthcare
and education, subsidised research and culture – are now
"demonised and blamed for all past evils," added the historian, as
some Argentines are embracing a "new right-wing identity," the
report says.
Argentina's middle class today, said Adamovsky, "is not a
homogeneous class" but rather "a collection of fragments, like the
remains of a shipwreck," 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 March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings 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: Bitcoin is Trumping Dollars for Many Locals
------------------------------------------------------
Ignacio Olivera Doll at Bloomberg News reports Argentines are
buying Bitcoin to protect themselves from 276 percent inflation
instead of rushing to exchange pesos for dollars, upending a
timeless strategy that's made the crisis-prone country one of the
top places for greenbacks in the world.
Bitcoin purchases in Argentina - one of the nations with the
highest level of cryptocurrency adoption globally - approached
their highest weekly value in 20 months at local cryptocurrency
exchange Lemon, the most popular among retail customers in the
South American country, according to Bloomberg News.
Argentines are looking for ways to survive a recession and one of
the world's highest inflation rates as President Javier Milei
implements his shock therapy policies intended to reset the
economy, Bloomberg News relays. Exchanging pesos for dollars, the
main safe haven for decades, has lost some of its appeal in the
past two months as the commonly-used parallel exchange rate has
strengthened 10 percent against the dollar, while Bitcoin has
rallied almost 60 percent against the greenback over the same
period, Bloomberg News relays.
Lemon recorded almost 35,000 customer transactions to buy Bitcoin
in the week ending March 10, double the weekly average last year,
Bloomberg News notes. The behaviour was similar to that of
customers of other major exchanges in Argentina, such as Ripio and
Belo, Bloomberg News says.
Bloomberg News discloses that a major driver behind the stronger
peso in recent weeks is Milei's tight grip of the amount of money
in circulation, not letting it grow while the Central Bank rebuilds
its stockpile of cash dollars.
Volume in Bitcoin and Ether have increased tenfold so far in 2024
compared to the same period last year at digital wallet Belo, CEO
Manuel Beaudroit said in a phone interview, Bloomberg News notes.
He noted that purchases stablecoins - crypto assets often tied to
currencies like the US dollar - have fallen to 60 percent from 70
percent over that period as Bitcoin’s rally lured in more buyers,
Bloomberg News relays.
"The user decides to buy Bitcoin when they see the news that the
currency is going up, while stablecoin is more pragmatic and many
times used for transactional purposes, as a vehicle to make
payments abroad," Beaudroit said, Bloomberg News discloses.
Argentina is one of the top two countries in the world, along with
Russia, for shipments of US dollar banknotes, according to a 2012
Federal Reserve paper, Bloomberg News relays. The New York Federal
Reserve press office declined to provide more recent data. Savers
in the South American nation hold some US$200 billion in US
currency, a figure only surpassed by the United States and Russia,
according to an analysis by Argentine economist Nicolás Gadano
based on Central Bank data, Bloomberg News relays.
Amid the Bitcoin rally, Argentines are now shedding some of their
dollar savings and initiating investment options that allow them
for the first time in years to save themselves from inflation,
Bloomberg News notes.
Subsequently, there was a fivefold jump in reports of
cryptocurrency scams in February, according to Bitcoin Argentina,
the country’s main non-governmental organization in the sector.
"Argentines' desperation to make it to the end of the month and not
lose their savings leads them to make hasty decisions without
measuring the risks, transforming them into easy prey for
scammers," said Gabriela Battiato, the head of legal at Bitcoin
Argentina,Bloomberg News 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 March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
=============
B A H A M A S
=============
FTX GROUP: Expects US to Reduce Bankruptcy Claim to $3BB to $5BB
----------------------------------------------------------------
Dietrich Knauth at Reuters reports that crypto exchange FTX said it
expects to negotiate U.S. government claims in its bankruptcy down
to $3 billion to $5 billion, leaving no money for shareholders and
contradicting a "reckless and false" claim by founder Sam
Bankman-Fried that FTX's collapse caused no harm.
FTX revealed those estimates in court documents in response to
founder Sam Bankman-Fried's claims that he should receive a light
prison sentence because FTX will be able to repay its customers "in
full," according to Reuters. Bankman-Fried was convicted in
November of stealing $8 billion from FTX customers.
FTX's current CEO John Ray said in court filings in Delaware
bankruptcy court that Bankman-Fried had distorted the company's
recent statements about its ability to repay customers in
bankruptcy to argue that there was "zero" harm to FTX customers,
lenders and investors, the report notes.
"All of these statements are both reckless and false," Ray wrote.
"Even the best conceivable outcome in the Chapter 11 proceeding
will not yield a true, full economic recovery by all creditors and
non-insider equity investors as if the fraud never happened," he
said, the report relays.
The report notes that FTX estimates that it will have $13.7 billion
in assets to pay $31.4 billion in legitimate claims, including $9.2
billion in customer claims and $17 billion in claims asserted by
the U.S. Commodity Futures Trading Commission and the Internal
Revenue Service.
FTX said in January that it expects to pay customers "in full," but
that statement came with a major caveat: It will value customer
claims based on the price of crypto in November 2022, and customers
will receive no benefit from a significant rise in crypto prices
since that date. Many FTX customers are "extremely unhappy" with
FTX's proposed repayment, Ray wrote, the report relays.
FTX proposed bankruptcy repayment still faces significant
obstacles, including ongoing negotiations over the $17 billion in
claims asserted by the U.S. government, the report discloses.
FTX is working towards a settlement that would allow FTX to repay
its customers before the government and reduce the total government
claims to between $3 billion and $5 billion, the report says. The
U.S. government has agreed to prioritize customer repayment in
recent crypto bankruptcies, including the BlockFi and Genesis
Global cases, the report notes.
Reuters relays that if the government does not agree to prioritize
FTX customers, its claims could significantly dilute the amount
available to repay customers, FTX said.
One group that will definitely be harmed by Bankman-Fried's fraud
are FTX investors and shareholders, who have little hope of
recovering any money from the company's bankruptcy, according to
FTX. FTX will not have enough money to pay shareholders, who are
last in line for repayment after the company's customers, its
lenders and the U.S. government, the report notes.
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 R A Z I L
===========
ATLAS LITHIUM: Nicholas Rowley Holds 223,685 Indirect Shares
------------------------------------------------------------
Nicholas Rowley, Vice President of Business Development at Atlas
Lithium Corp., filed a Form 3 Report with the U.S. Securities and
Exchange Commission, disclosing indirect ownership of 223,685
shares of the company's common stock as of August 20, 2023.
RTEK International DMCC directly owns the reported shares. Nicholas
Rowley is a founder and executive director of RTEK and as such may
be deemed to beneficially own the shares of the Issuer owned by
RTEK. Rowley disclaims any such beneficial ownership, except to the
extent of his pecuniary interest therein.
About Atlas Lithium
Atlas Lithium Corporations formerly Brazil Minerals, Inc. is a
mineral exploration and development company with lithium projects
and exploration properties in other critical and battery minerals,
including nickel, rare earths, graphite, and titanium, to power the
increased demand for electrification. The Company's current focus
is on developing its hard-rock lithium project located in Minas
Gerais State in Brazil at a well-known, premier pegmatitic district
in Brazil. The Company intends to produce and sell lithium
concentrate, a key ingredient for the global battery supply chain.
Atlas Lithium reported a net loss of $5.66 million in 2022, a net
loss of $4.03 million in 2021, a net loss of $1.55 million in 2020,
a net loss of $2.08 million in 2019, a net loss of $1.85 million in
2018, a net loss of $1.89 million in 2017, a net loss of $1.74
million in 2016, and a net loss of $1.88 million in 2015. For the
nine months ended Sept. 30, 2023, the Company reported a net loss
of $25.60 million.
Atlas Lithium stated in its Quarterly Report for the period ended
Sept. 30, 2023, that its future short- and long-term capital
requirements will depend on several factors, including but not
limited to, the rate of the Company's growth, the Company's ability
to identify areas for mineral exploration and the economic
potential of such areas, the exploration and other drilling
campaigns needed to verify and expand the Company's mineral
resources, the types of processing facilities the Company would
need to install to obtain commercial-ready products, and the
ability to attract talent to manage the Company's different
business activities. To the extent that its current resources are
insufficient to satisfy its cash requirements, the Company may need
to seek additional equity or debt financing. If the needed
financing is not available, or if the terms of financing are less
desirable than it expects, it may be forced to scale back its
existing operations and growth plans, which could have an adverse
impact on its business and financial prospects and could raise
substantial doubt about its ability to continue as a going concern.
BANCO DO BRASIL: Fitch Puts Final BB Rating to $750M Sr Unsec Notes
-------------------------------------------------------------------
Fitch Ratings has assigned a 'BB' final Long-Term rating to Banco
do Brasil S.A.'s (BdB) USD750 million senior unsecured notes. The
notes due were issued through its Grand Cayman branch and are due
2031 with a 6.0% annual interest rate.
The net proceeds will be used to finance and/or refinance, in whole
or in part, new or existing eligible green and social projects in
accordance with bank's Sustainability Finance Framework.
The final rating is in line with the expected rating that Fitch
assigned to the proposed debt on March 11, 2024. Please see "Fitch
Expects to Rate Banco do Brasil's Proposed Senior Notes
'BB(EXP)'".
Fitch has also withdrawn the 'BB(EXP)' expected rating on the
proposed notes due 2027, as this tranche has been cancelled and is
no longer expected to proceed.
KEY RATING DRIVERS
The rating on the notes corresponds to BdB's Long-Term Foreign
Currency Issuer Default Rating (IDR; BB/Stable) and ranks equal to
its other senior unsecured debt. BdB's ratings are equalized with
Brazil's IDRs (BB/Stable) and are further underpinned by the bank's
Viability Rating. In Fitch's view, the bank would receive support
from the federal government, if needed. This reflects the majority
of federal government ownership, its key policy role, particularly
in rural lending and systemic importance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
As the notes are rated at the same level as the IDR, their rating
is sensitive to any change in the bank's IDR. The bank's IDR, in
turn, is likely to move in tandem with Brazil's sovereign rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
As the notes are rated at the same level as the IDR, their rating
is sensitive to any change in the bank's IDR. The bank's IDR, in
turn, is likely to move in tandem with Brazil's sovereign rating.
DATE OF RELEVANT COMMITTEE
07 March 2024
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
----------- ------ -----
Banco do Brasil S.A.
senior unsecured LT BB New Rating BB(EXP)
senior unsecured LT WD Withdrawn BB(EXP)
BRAZIL: 2024 Interest Rate Outlook Turns Hawkish
------------------------------------------------
Rio Times Online reports that Central Bank unanimously cut the
Selic rate to 10.75% after price trends prompted a sixth
consecutive reduction, aligning with analysts' expectations.
However, its Monetary Policy Committee (Copom) hinted at a likely
rise in the Selic rate for 2024, indicating a hawkish turn in
monetary policy, according to Rio Times Online.
This revelation led to widespread discussions, with market analysts
suggesting that interest rates could breach the 9% mark by the
year's end, a figure that aligns with the upper limits projected by
the Focus Bulletin, the report notes.
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.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain
a
strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. Fitch said Brazil's ratings are supported by its large and
diverse economy, high per-capita income, and deep domestic markets
and a large cash cushion that support the sovereign's financing
flexibility and its high local-currency debt share. Strong external
finances support resilience to shocks, underpinned by a flexible
exchange rate, robust international reserves and a sovereign net
external creditor position. The ratings are constrained by weak
economic growth potential, relatively low governance scores, high
and rising government debt/GDP, and budgetary rigidities. A new
fiscal framework introduced this year aims to anchor a gradual
consolidation process and address these fiscal weaknesses, but its
effectiveness is increasingly unclear.
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).
JBS SA: Faces International Pushback on U.S. Stock Listing
----------------------------------------------------------
Richard Mann at Rio Times Online reports that JBS SA, the global
leader in animal protein production, is striving for a New York
Stock Exchange listing, a move hampered by past scandals and
economic challenges.
The company, led by the Batista brothers, now confronts global
criticism over its environmental and ethical practices, compounded
by a greenwashing lawsuit in New York, according to Rio Times
Online.
About JBS SA
As reported in the Troubled Company Reporter-Latin America in
August 2021, S&P Global Ratings revised the global scale outlook on
JBS S.A. (JBS) and its fully owned subsidiary JBS USA Lux S.A. (JBS
USA) to positive from stable and affirmed its 'BB+' issuer credit
rating. The recovery expectations remain unchanged, and S&P
affirmed the 'BB+' ratings on the senior unsecured notes and the
'BBB' ratings on the secured term loans.
VAST INFRAESTRUTURA: S&P Affirms 'BB' Debt Rating, Outlook Stable
-----------------------------------------------------------------
On March 19, 2024, S&P Global Ratings affirmed its 'BB' issue-level
rating on Vast Infraestrutura S.A.'s (formerly Acu Petroleo S.A.)
debt. The recovery rating of '2' on the notes remains unchanged,
indicating a substantial recovery in the event of a default.
The stable outlook reflects its expectations for growing volume in
next two years that will translate to a debt service coverage ratio
of around 2.4x.
Vast Infraestrutura owns and operates the largest private crude oil
transshipment terminal in Brazil (BB/Stable/B), with a current
licensed capacity of 1.2 million boed.
It started operating in 2016 and is strategically located in the
state of Rio de Janeiro in the pre-salt area--one of the major
ultra-deepwater oil drilling regions in the world. It is a key
infrastructure provider of oil transshipment services. Vast's
owners are Brazil-based logistics company Prumo Logistica (not
rated; majority owned by the U.S.-based fund EIG Global Energy
Partners and minority owned by the investment fund Mubadala
Investment Co.).
Vast Infraestrutura has demonstrated an ability to secure and renew
contracts over the past few quarters.
In 2023, it handled an average daily volume of 562,000 barrels of
oil equivalent per day (boed), leading to excess cash flow that
allowed the project to make the first three target amortization
payments on its debt, for a total of $18 million. S&P expects this
trend to continue and forecast the early repayment of the bonds by
2032.
Key strengths
-- Relative ease to operate an oil transshipment terminal, and the
absence of oil leaks or fires. Over four years of no recordable
incidents.
-- Favorable competitive position, thanks to the project's ability
to secure new contracts, and no direct competition for very large
crude carrier double banking operations.
Key risks
-- High market exposure, because less than 20% of the project's
capacity is contracted until the notes mature.
-- Exposure to oil export volume, which depends on the pace of
additional oilfield developments and commodities prices.
Over the past quarters, Vast has demonstrated its ability to engage
new clients and renew existing contracts. Vast increased its client
base to nine counterparties, including new contracts with Petroliam
Nasional Bhd. (Petronas) subsidiary Petronas Petroleo do Brasil
Ltda. and Prio S.A. It also extended its contracts with Petroleo
Brasileiro S.A. (Petrobras) until July 2026.
The cash flow generated by these contracts allowed the project to
make the first targeted amortization payments of $3.67 million in
January 2023, $7.36 million in July 2023, and $7.15 million in
January 2024. S&P said, "We expect it to make the next targeted
amortization payments as originally planned, resulting in the early
repayment of the notes by 2032. Under our updated base-case
scenario, we project a minimum debt service coverage ratio (DSCR)
of 2.13x in 2026."
On the flip side, S&P believes the project remains exposed to
market risk, because more than 50% of its operating capacity will
be uncontracted starting in 2025. Hence, the company's financial
metrics will depend on oil export growth and Vast's continued
ability to renew contracts and engage new clients.
S&P said, "As a result, in case of a market downside such as lower
oil production, we expect demand for Vast's services and rates
accrued to plummet. Under this scenario, we expect that the cash
flow available for debt service (CFADS) would plunge about 45% in
2024-2035, with a deeper drop of more than 50% in certain years.
Absent any upside from these contracts, the project would not make
the target amortization payments, and the minimum DSCR would fall
to 1.75x, which we view as a negative."
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: 8 Risks That Will Impact Business Environment
-----------------------------------------------------------------
Dominican Today reports that LLYC, a global corporate affairs and
marketing firm, presented the report "Dominican Context: Challenges
for the business environment," revealing the country's main
reputational risks for the current year. This comprehensive
analysis evaluated over 3 million digital mentions, identifying the
most critical challenges facing the Dominican Republic in public
and private spheres.
The report highlights that instability and forced migration from
Haiti, the effects of El Nino and Hurricanes, the impact on tourism
from multi-regional conflicts, and misinformation are among the
main risks, underscoring the need for informed and strategic
decision-making to address these issues, according to Dominican
Today. This analysis was based on the work of specialized Public
Affairs, Risk, and Deep Learning teams, which employed advanced
artificial intelligence and machine learning tools, Dominican Today
notes.
"Dominican Context: challenges for the business environment" offers
essential strategic insight at a crucial time for the country:
presidential elections combined with a convulsive and volatile
international environment. The report provides a vital
decision-making tool for corporate entities and the subsequent
political leaders, highlighting the importance of proactively and
effectively addressing these reputational risks, Dominican Today
relays.
Dominican Today discloses that the construction of the Dominican
Republic Reputational Risk Prioritization Map was carried out by
LLYC's team of international experts, employing data intelligence
supported by advanced artificial intelligence and machine learning
tools and the team's analysis of country indicators and reports,
which resulted in the identification and prioritization of the
challenges for the country:
Risk 1. Impact on tourism due to multi-region hostilities: in the
face of fear due to multiple war conflicts, we analyzed what
actions can be implemented as a country to protect one of the main
economic activities.
Risk 2. El Nino phenomenon and hurricanes: as an island nation,
extreme weather events have a cross-cutting impact on the country's
economic activities, so implementing resilient infrastructure and
establishing early warning systems to protect the population and
minimize financial losses are vital actions to address them.
Risk 3. Instability and forced migration from Haiti: The
international community's and companies' perceptions of the impact
of the prolonged crisis in the neighboring country pose a
significant long-term threat to the Dominican Republic.
Risk 4. Inflation and its economic impact: the economic challenge
would require resilience measures for the country to adapt to a
volatile global environment. Likewise, public-private collaboration
that guarantees investment conditions will be vital this year.
Risk 5. Elections, new government, or ratification? This topic
concentrates the greatest volume of conversation analyzed, as well
as the diversity of communities and scope. Uncertainty,
polarization, and confrontations between the different political
forces are evident.
Risk 6. Cybersecurity and the role of AI: This is an accelerating
territory with very limited communities. The media mainly exposes
capabilities, applications, and associated risks.
Risk 7. Citizen security: Given this risk, it is essential to
design strategies to mitigate the problem and strengthen a more
favorable environment for its citizens and, therefore, for
businesses. According to the Reputational Risk Prioritization Map,
this risk has a high impact and moderate probability. Building
solutions that foster social peace will allow for a better
development of the country.
Risk 8. Disinformation: In the Dominican context, disinformation is
presented as a crucial risk for public opinion, as some political
organizations and influential figures may contribute to the spread
of unverified information.
Dominican Today says that according to Iban Campo, General Director
of LLYC Santo Domingo, "Managing the context and not only reacting
to it will allow organizations to design mitigation strategies to
face the detected impact, or take an anti-fragility perspective
that allows companies to achieve their business objectives and
protect their reputation."
According to Renata Sanchez, Director of Corporate Affairs at LLYC
Santo Domingo, "In an environment of permacrisis and constant
uncertainty, in which risks are much more complex, having the
information supported by insights from Big Data allows designing
more powerful strategies in the volatile environment that
characterizes the global and Dominican environment," Dominican
Today notes.
This Reputational Risk Prioritization Map aims to provide the
country with an essential tool for making informed and strategic
decisions, both for corporate entities and for upcoming leaders,
Dominican Today 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.
=================
G U A T E M A L A
=================
INVESTMENT ENERGY: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Investment Energy Resources Limited's
(IERL) Long-Term Issuer Default Rating (IDR), Local Currency IDR
and senior secured notes at 'BB'. The Rating Outlook for the IDRs
is Stable.
IERL's ratings reflect a diversified portfolio of generation assets
spanning across Central America. Energy sales are contracted
through long-term U.S. dollar-denominated contracts, and off-taker
risk has steadily improved in recent years. Nearly 70% of EBITDA is
derived from distribution companies with 'BB-' or above ratings or
operating environments. These include Energuate (BB/Stable
Outlook), Instituto Costarricense de Electricidad (ICE, BB/Stable),
and off-takers in the Dominican Republic (sovereign rating
BB-/Positive Outlook). This concentration moderately offsets the
company's otherwise high off-taker risk tied to governments in
lower-rated operating environments.
KEY RATING DRIVERS
Off-Taker Profiles Drive Ratings: IERL's ratings reflect a weighted
average combination of off-taker risk from the six operating
environments in which it maintains assets. Off-taker sovereign
ratings include Guatemala (BB/Stable), Costa Rica (BB/Stable), the
Dominican Republic (BB-/Positive), Nicaragua (B-/Positive),
Honduras (not rated) and through joint ventures, such as El
Salvador (CCC+).
The company's largest source of off-taker risk stems from frequent
accumulation of accounts receivable by Honduras's Empresa Nacional
de Energia Electrica (ENEE), which accounts for an average 33% of
EBITDA. IERL mitigates this risk through the maintenance of a
robust and flexible annual cash balance. Risk is further mitigated
through EBITDA from the Guatemalan off-takers, which alone, are
sufficient to cover hard currency interest payments through the
rating cycle. Accordingly, IERL's ratings' applicable Country
Ceiling is Guatemala ('BBB-').
Predictable Cash Flows: IERL's predictable cash flows are supported
by long-term U.S. dollar-denominated contracts and a low fixed
marginal cost of production from renewable assets. As of estimated
YE 2023, 83% of the company's hydroelectricity generation capacity
and 100% of solar and wind capacity was contracted under power
purchase agreements (PPAs) with a weighted average remaining life
of approximately 12 years. Off-takers for the solar and wind
take-or-pay contracts are obligated to purchase 100% of
generation.
Steady Deleveraging: Fiscal 2023 leverage (gross debt/EBITDA)
declined to 4.3x from 4.6x the prior year on account of solid
EBITDA generation and a material reduction of debt through a
voluntary repayment of USD110 million. Ongoing debt amortization
coupled with yoy EBITDA growth and reduced interest costs should
sustain a steadily improving leverage profile to below 4.0x by
2025.
Fitch's base case reflects that energy production will be 2.9
gigawatt hours in 2023, assuming a blend of P50 and P90 scenarios
for the solar and wind projects and capacity factors that reflect
weaker hydrology conditions at the Renace S.A. and Santa Teresa
plants due to drier conditions in Guatemala that year. Revenue
under these assumptions should approximate USD350 million, and
EBITDA of USD185 million. EBITDA interest coverage should average a
solid 4.2x going forward.
Diversified Business Portfolio: IERL operates a diversified
portfolio of 846MW in utility-scale renewable generation assets
across Central America. The capacity mix includes 38%
hydroelectricity, 24% solar, and 38% wind. Solar capacity includes
50% stakes in the solar farms Bosforo (100MW) and Cuscatlan Solar
(10MW) through joint ventures with AES El Salvador, as well as a
49% stake in the solar farm El Soco (50MW) in the Dominican
Republic, through a joint venture with BAS Dominion. This
diversified balance helps offset the idiosyncratic risk tied to
government-supported off-takers in lower-rated environments and to
stabilize cash flows across complementary technologies.
Strong Shareholder Group: IERL benefits from the strength of the
Corporacion Multi Inversiones (CMI) group of companies. CMI is a
family-owned multinational conglomerate and one of the largest in
Central America, with operations in 16 countries, including the
Caribbean and the U.S. Its operations span agribusiness;
restaurants, including the global chain Pollo Campero; real estate;
electricity generation; and finance. CMI has shown commitment to
developing its energy business unit and has made significant
investments in this industry, while providing back-office support
and access to credit to CMI Energia.
DERIVATION SUMMARY
IERL's 'BB' rating reflects the company's diversified and
complementary asset portfolio, supported by exceptionally long-term
U.S. dollar-denominated contracts, which mitigates its exposure to
weak off-takers in challenging operating environments. Compared
with AES Panama Generation Holdings, S.R.L. (AESPGH; BBB-/Stable),
IERL has a lower scale of operations but better geographic
diversification, for which AESPGH compensates with a better
off-taker risk profile limited to Panama. Both companies have
similar leverage expectations.
Compared with Orazul Energy Peru S.A. (BB/Stable), a single-asset
hydroelectric facility in Peru, IERL has declining leverage and a
more variable combined operating environment composition. Compared
with Nautilus Inkia Holdings SCS (BB/Stable), a multinational
holding company with renewable and non-renewable generation assets
concentrated primarily in Peru, IERL demonstrates a declining
leverage profile and only modest capex investments, with a more
flexible shareholder strategy but a weaker blended operating
environment.
KEY ASSUMPTIONS
- Average capacity factors of 47% for wind assets and 25% for solar
in 2024-2027;
- Capacity factors that reflect historical average hydrology
conditions, of 46% in the case of Renace and 42% for Santa Teresa
in 2024-2027;
- Around 82% contracted generation for the hydroelectric assets and
100% contracted for solar and wind assets through the cycle;
- Average monomic price of around USD110/MWh over 2024-2027;
- Amortization of USD23.1 million in 2023 as well as a USD110
million one-time voluntary pre-payment (total USD133.1 million paid
down), with ongoing annual USD16.3million in 2024 through 2027 and
a balloon repayment in 2028;
- A material increase in annual year-end cash balances after
dividends, barring no large investments;
- Total maintenance capex at USD42 million for 2024-2027.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action:
- A material improvement in the company's operating environment;
- Sustained gross leverage below 4.0x through the rating cycle.
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action:
- A material deterioration in the company's operating environment
and/or applicable Country Ceiling;
- Total debt/EBITDA of 5.0x on a sustained basis;
- Significant lag in collections that weakens the company's
liquidity position;
- Sustained disruptions in generation capacity due to either
technical or climatological issues.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Fitch-calculated readily available, consolidated
cash and cash equivalents totalled USD82 million as of Dec. 31,
2023. During 2023, IERL amortized USD23.1 million, as well as
voluntarily prepaid an additional USD110.1 million of outstanding
bank debt with proceeds from a USD70 million capital injection from
its parent company and the receipt of USD72.8 million in arrears
paid by Honduran electricity company and IERL customer ENEE. This
reduced ongoing debt amortization payments to USD16.3 million from
USD30 million as well as annual interest expense.
Fitch expects year-end cash balances to materially grow barring
further investments into new projects, and for the company to be
FCF positive through the rating cycle, sustaining this strong
overall liquidity position.
ISSUER PROFILE
Investment Energy Resources Limited (IERL) is the entity through
which the Corporacion Multi Inversiones corporate group (the CMI
Group) owns the largest and most diversified private renewable
energy portfolio in Central America and the Caribbean.
ESG CONSIDERATIONS
IERL has an ESG Relevance Score of '4[+]' for Greenhouse Gas
Emissions & Air Quality, due to the company's advantage as a
renewable generation company in Central America, which has a
positive impact on the credit profile and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Investment Energy
Resources Limited LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
senior secured LT BB Affirmed BB
=============
J A M A I C A
=============
JAMAICA: Cost of Alcoholic Beverages up 4.6% at February
--------------------------------------------------------
RJR News reports that the cost of alcoholic beverages increased by
4.6 per cent for the 12 months to February.
Looking at the month of February alone, the Statistical Institute
of Jamaica says there was an increase of 0.3 per cent in the index
for this division, according to RJR News.
This was impacted by a 0.4 per cent increase in the cost of spirits
and liquors, the report notes.
The cost of beers increased by 0.4 per cent, while the cost of
wines increased by 0.1 per cent over January, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
=====================
P U E R T O R I C O
=====================
LIBERTY COMMUNICATIONS: Moody's Cuts CFR & Sr. Secured Notes to B2
------------------------------------------------------------------
Moody's Ratings downgraded Liberty Communications PR Holding LP
("Liberty PR")'s ratings, including its corporate family rating and
probability of default rating to B2 from B1 and to B2-PD from
B1-PD, respectively. At the same time, Moody's also downgraded LCPR
Senior Secured Financing DAC backed senior secured and senior
secured notes to B2 from B1 and LCPR Loan Financing LLC backed
senior secured bank credit facility to B2 from B1. The outlook
remains stable.
RATINGS RATIONALE
The rating action reflects higher than expected leverage (adjusted
debt/EBITDA, including Moody's adjustments) that has remained above
5x since December 2022 and that Moody's estimates will peak at 5.7x
as of December 2023. Moody's expects the company to improve
profitability only in the second half of 2024 after the company
completes the integration of AT&T Inc.'s (AT&T, Baa2 stable)
operations in Puerto Rico and the US Virgin Islands. The completion
of this integration will bring significant cost reductions;
nonetheless, leverage will remain above 5x through 2025, which
Moody's considers as more appropriately reflected in a B2 rating.
The outlook reflects Moody's expectations that Liberty PR's credit
metrics will remain weak during 2024, improving in 2025 following
the successful implementation of its strategic plan. It also
assumes that Liberty PR will prudently manage its liquidity during
this period.
Liberty PR expects to complete the integration during the first
half of 2024, which will translate in around $60 million in savings
on duplicated services. In 2024, once the integration is completed,
margins will benefit from the removal of AT&T's transitional
service agreement cost and integration costs no longer needed, and
from the integration of systems and IT, and operating expenses.
According to the company, there is little execution risk in
executing these savings as expected, since more than 85% of the
mobile customer base has already migrated to Liberty PR's mobile
core and the company expects to migrate the business to business
(B2B) customers by April. Going forward, there is some upside
revenue potential from cross-selling initiatives; however, Moody's
believes that competitive pressures could challenge the execution
of its commercial strategy delaying improvements in the company's
credit and operating metrics.
Liberty PR still expects negative trend in postpaid mobile to
continue in early 2024 with the withdrawal of government funding
for schools in Puerto Rico coupled with the reduced commercial
activity due to the customer migration works. However, once the
integration is completed, Liberty PR will focus on strengthening
its 5G offering leveraging on it solid market position. Moody's
estimates Liberty PR mobile market share at around 26%.
Furthermore, the company's proposed acquisition of DISH Network's
spectrum holdings in Puerto Rico and the United States Virgin
Islands and 120 thousand prepaid subscribers (equivalent to 12% of
Liberty PR's total mobile base or the bulk of its prepaid
subscribers base) will improve the company's mobile network and
will support the company's solid competitive position. Moody's
believes that the company's own cash generation will be sufficient
to cover for the $256 million purchasing prices, as it will be paid
in 4 annual installments.
While Liberty PR is one of the leading wireless and fixed telecom
operators in the Puerto Rican telecom market, competitive landscape
remains intense with other large companies operating in the market
including T-Mobile USA, Inc. (T-Mobile, Baa2 stable) and America
Movil, S.A.B. de C.V. (America Movil, Baa1 stable). Liberty PR is
the largest provider of fixed-line video services in Puerto Rico
with around 50% of the market share. T-Mobile has a leading
position, with around half of the market share in the mobile
market. Liberty PR benefits from a portfolio of wireless
subscribers who are mostly postpaid, accounting for 88% of the
current customer base as of December 2023. In paid TV and
broadband, the two largest operators are Liberty PR and America
Movil.
Liberty PR B2 CFR factors the company's operating scale and
business model with leading wireless and fixed market positions in
Puerto Rico, its offering of a full suite of services, the quality
of its networks and mobile spectrum holdings, and its adequate
liquidity, supported by positive free cash flow (FCF) generation.
The B2 CFR also reflects the group's concentration in two small
markets, Puerto Rico and the US Virgin Islands, which have
relatively weak economies and are exposed to adverse weather
events, the company's high leverage and a highly competitive
telecom market in Puerto Rico.
Moody's expects positive FCF generation which will support Liberty
PR credit profile, with expected 16% of revenue in capital
investments. Liberty Latin America Ltd. (LLA)'s policy to upstream
cash from its subsidiaries through parent distributions is
considered in the rating. LLA's liquidity management is
nevertheless conservative. While LLA has a medium-term net leverage
guidance of 3.5x for the consolidated group (4.8x gross and 4.2x
net leverage ratios as reported in December 2023), given the
long-term non-amortizing nature of debt, Moody's believes that
gross debt is unlikely to decrease significantly in the coming
years; therefore, leverage reduction will be gradual and primarily
stem from an increase in EBITDA. Moody's expects EBITDA
improvements in the second half of 2024, which should lead Moody's
adjusted leverage below 5x in 2025.
Liberty PR has good liquidity, generating positive free cash flow
before dividend distributions and having access to a $172.5 million
senior secured revolving credit facility maturing in 2027 at the
level of Liberty PR, which shares the same guarantors and
collateral as the term loan and notes. The next material debt
maturity will be in 2027 in connection with the company's $1.2
billion in secured notes.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade Liberty PR's ratings if its leverage (as
adjusted by Moody's) is sustained below 4.75x and its ratio of
(EBITDA-capex)/interest expense (including Moody's adjustments) is
at or above 1.5x on a sustainable basis. An upgrade would also
require the maintenance of positive free cash flow and at least an
adequate liquidity profile.
Moody's could downgrade Liberty PR's ratings if its leverage
remains above 5.5x without a clear path of deleveraging and its
ratio of (EBITDA-capex)/interest expense falls below 1.5x for a
prolonged period. A downgrade would also occur if liquidity weakens
or if the company's revenue base declines, resulting from a decline
in Puerto Rico's population or from additional economic or
competitive pressures.
The principal methodology used in these ratings was
Telecommunications Service Providers published in November 2023.
Liberty Communications PR Holding LP (Liberty PR) is a holding
company indirectly owned by Liberty Latin America Ltd. (LLA). In
October 2020, Liberty PR consolidated the combined operations of
Liberty Communications of Puerto Rico LLC (LCPR) and AT&T in Puerto
Rico and the US Virgin Islands. The combined operations offer a
full suite of wireless and fixed services, and have leading market
positions in wireless, fixed broadband and pay-TV in Puerto Rico,
as well as in fixed and wireless in the US Virgin Islands.
As of December 31, 2023, Liberty PR's fixed network passed
1,178,700 homes (accounting for around 95% of all households in
Puerto Rico) and had 1,053,000 revenue-generating units (RGUs). The
combined group reported revenue for fiscal year 2023 is of about
$1.4 billion and EBITDA margin of 34%.
*********
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
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 * * *