/raid1/www/Hosts/bankrupt/TCRLA_Public/240404.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, April 4, 2024, Vol. 25, No. 69
Headlines
B A H A M A S
FTX GROUP: Customers Disappointed Over CEO's 25-Yr. Sentence
FTX GROUP: Reaches Bankruptcy Deal w/ BlockFi for Up to $875-Mil.
B E R M U D A
VANTAGE DRILLING: Incurs $15.4 Million Loss in 2023
B R A Z I L
AMERICANAS SA: Launches 2030 Notes Cash Tender Offer
BANCO BTG PACTUAL: Moody's Rates New Senior Unsecured Notes 'Ba2'
GOL LINHAS: Committee Taps Alvarez & Marsal as Financial Advisor
GOL LINHAS: Dechert LLP Updates List of Abra Noteholders
MOVIDA PARTICIPACOES: Moody's Assigns 'Ba3' CFR, Outlook Stable
SYLVAMO CORP: Moody's Affirms 'Ba2' CFR, Alters Outlook to Stable
C O L O M B I A
CANACOL ENERGY: Fitch Lowers LongTerm IDR to 'B', Outlook Negative
SOCIEDAD CONCESIONARIA: Fitch's Outlook on BB+ Rated Sr. Notes Pos.
E C U A D O R
FIDEICOMISO MERCANTIL 5: Fitch Affirms CCC+sf Rating on 2 Tranches
J A M A I C A
[*] JAMAICA: Economy Grew 1.7% in Fourth Quarter of 2023
M E X I C O
BANCO AZTECA: Fitch Lowers LongTerm IDR to 'BB-', Outlook Stable
NEMAK S.A.B.: S&P Alters Outlook to Negative, Affirms 'BB+' ICR
T R I N I D A D A N D T O B A G O
ARCELORMITTAL: Sale of Point Lisas Mill Close to Finish Line
- - - - -
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B A H A M A S
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FTX GROUP: Customers Disappointed Over CEO's 25-Yr. Sentence
-------------------------------------------------------------
Reuters reports that some former FTX customers expressed anger and
disappointment after Sam Bankman-Fried, the crypto exchange's
former billionaire boss, was sentenced to 25 years in prison for
stealing $8 billion from customers.
"25 years is a joke," a member of an FTX creditors group with the
username Bruno Dixon wrote on messaging app Telegram minutes after
the sentence was handed down by a New York judge, according to
Reuters.
Another member of the same Telegram group, going by Steven, said
the sentence was "laughable for such a serious crime," the report
notes.
More than an estimated 1 million customers face potential losses as
a result of FTX's sudden November 2022 collapse, the report relays.
Victims say they are still owed more than $19 billion based on
current crypto prices, the report discloses.
A New York jury last year found Bankman-Fried guilty of stealing
from unsuspecting customers to prop up his hedge fund Alameda
Research, buy luxury properties and fund political donations, the
report says.
Prosecutors sought a sentence of 40 to 50 years for what they say
was one of the biggest financial frauds in U.S. history, the report
notes. Bankman-Fried's defense has argued that around five years
would be appropriate since customers would likely be made whole,
the report relays.
Some victims said the sentence was as expected for a corporate
fraud crime, the report discloses.
"White collar guys get treated differently so 25 is probably as
good as it was going to get," wrote one of the Telegram group's
administrators, adding members should focus on recovering their
assets, the report relays.
But other victims compared it unfavorably to the 150 years handed
down to notorious fraudster Bernie Madoff, the report notes.
"I found 30-40 to be somewhat fair," wrote Tristan, another user of
the same Telegram group, which has more than 3,000 members who say
they have a combined nearly $700 million in claims, the report
relates.
Bankman-Fried's attorneys said the former FTX boss had overlooked
risk management but did not steal customer money, the report notes.
Bankman-Fried has vowed to appeal his conviction and sentence.
Some customers said they thought 25 years was not enough to justify
plea deals prosecutors inked with other top FTX executives, which
allowed them to avoid stringent punishments in return for acting as
witnesses. Many speculated Bankman-Fried would serve significantly
less following his promised appeal, the report discloses.
Mark Bini, a former federal prosecutor, said the judge's sentence
took into account the magnitude of the crime and the finding that
Bankman-Fried lied on the stand, the report relays.
"While less than the prosecutors' request for 40-50 years, it is a
very significant sentence and sends a message that people convicted
of crimes in the crypto space will face serious consequences," said
Bini, now a partner at law firm Reed Smith, the report says.
During the trial, prosecutors called FTX customers to testify and
submitted dozens of victim impact statements to the court ahead of
the sentencing. Many said they had lost years worth of savings and
that their lives had been destroyed, the report notes.
"I lost my happiness, my ability to get out of bed, my desire to
continue living," wrote one FTX customer who said they had a $4
million claim, the report says. Names were redacted.
Reuters reported last year that FTX customers have created support
groups to help each another navigate the complex bankruptcy claims
process.
Administrators now running FTX are still recovering assets. They
said in January that they expect to have $13.7 billion to pay $31.4
billion in legitimate claims, including $9.2 billion from
customers, the report relays.
Customers will be paid "in full" but at November 2022 crypto
prices, the administrators said, meaning customers will not benefit
from a rally in bitcoin and other tokens in recent months. Many FTX
customers are fighting that decision, the report discloses.
FTX was one of a string of crypto company bankruptcies in 2022
sparked by a collapse in crypto prices, the report adds.
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.
FTX GROUP: Reaches Bankruptcy Deal w/ BlockFi for Up to $875-Mil.
-----------------------------------------------------------------
Alex Wolf of Bloomberg Law reports that FTX Trading Ltd. will
recognize $874.5 million in creditor claims asserted by BlockFi
Inc., resolving a thorny dispute that emerged between the two
cryptocurrency platforms when they each collapsed into bankruptcy.
The deal, announced Wednesday, March 6, 2024, in court filings,
provides BlockFi with a claim for about $689 million in loans owed
by FTX affiliate Alameda Research Ltd., of which $250 million will
be given priority repayment treatment. Additionally, FTX will
recognize about $185 million owed in BlockFi customer claims.
BlockFi will be able to collect on those claims following approval
of a Chapter 11 plan for FTX and Alameda.
About FTX Group
FTX was the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offered
various 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.
About BlockFi Inc.
BlockFi Inc. says it's building a bridge between digital assets and
traditional financial and wealth management products to advance the
overall digital asset ecosystem for individual and institutional
investors.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in
its early days had backing from influential Wall Street investors
like Mike Novogratz and, later on, Valar Ventures, a Peter
Thiel-backed venture fund as well as Winklevoss Capital, among
others. BlockFi made waves in 2019 when it began providing
interest-bearing accounts with returns paid in Bitcoin and Ether,
with its program attracting millions of dollars in deposits right
away.
BlockFi grew during the pandemic years and had offices in New York,
New Jersey, Singapore, Poland and Argentina.
BlockFi worked with FTX US after it took an $80 million hit from
the bad debt of crypto hedge fund Three Arrows Capital, which
imploded after the TerraUSD stablecoin wipeout in May 2022.
BlockFi had significant exposure to the companies founded by former
FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a
$400 million credit line from FTX US in an agreement that also gave
FTX the option to acquire BlockFi through a bailout orchestrated by
Bankman-Fried over the summer. BlockFi also had collateralized
loans to Alameda Research, the trading firm co-founded by
Bankman-Fried.
BlockFi is the latest crypto firm to seek bankruptcy amid a
prolonged slump in digital asset prices. Lenders Celsius Network
LLC and Voyager Digital Holdings Inc. also filed for court
protection this year. Kirkland & Ellis is also advising Celsius and
Voyager in their separate Chapter 11 cases.
BlockFi Inc. and eight affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on
Nov. 28, 2022. In the petitions signed by their chief executive
officer, Zachary Prince, the Debtors reported $1 billion to $10
billion in both assets and liabilities.
Judge Michael B. Kaplan oversees the cases.
The Debtors tapped Kirkland & Ellis and Haynes and Boone, LLP, as
general bankruptcy counsels; Walkers (Bermuda) Limited as special
Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley
Research Group, LLC as financial advisor; Moelis & Company as
investment banker; and Street Advisory Group, LLC, as strategic and
communications advisor. Kroll Restructuring Administration, LLC, is
the notice and claims agent.
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B E R M U D A
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VANTAGE DRILLING: Incurs $15.4 Million Loss in 2023
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The Royal Gazette reports that Vantage Drilling International Ltd,
the Bermudian-registered exempted company, has reported a net loss
attributable to controlling interest of approximately $15.4 million
in the 2023 fiscal year.
That compares with a loss of $3.4 million for the prior year,
according to The Royal Gazette.
The offshore drilling contractor reported a net loss attributable
to controlling interest of approximately $14.6 million in the
fourth quarter of 2023, compared with a loss of $16.4 million for
the prior year period, the report notes.
At year-end 2023, Vantage had approximately $84 million in cash,
including $10.8 million of restricted cash, compared with $93.3
million in cash, including $19.2 million of restricted cash, at
year-end 2022, the report discloses.
At December 31, Vantage maintained $11.6 million of cash pre-funded
by its managed services customers to address near-term obligations
during the fourth quarter, The Royal Gazette relays.
Excluding cash used in connection with managed services customers,
the company generated $13.6 million of cash from operating
activities during the fourth quarter, the report relays.
Ihab Toma, chief executive officer, said: "I am pleased with the
company's financial performance for 2023. The company generated
cash of $2.2 million for the year, reaching approximately $71
million of earnings before interest, tax, depreciation and
amortization, a level not seen since prior to the company's
reorganization in 2016.
"Vantage continued to serve its clients well across our managed
services and owned rigs segments.
"It is our operational strength, customer focus and creative
business models that led to the ground-breaking announcement with
our client, TotalEnergies, regarding our joint venture to own the
Tungsten Explorer along with a 10-year management contract to
manage the rig," he said, the report relays.
He added: "As for 2024, while in many ways, it is a year of
transition for some of our rigs with shipyard stays and preparation
time between contracts, I am excited about what the future holds
for Vantage.
"Fundamentally, the market continues to be in a healthy place, and
we are in a good position to take advantage of this."
Vantage has a fleet of two ultra-deep-water drill ships, and two
premium jack-up drilling rigs, the report notes.
The company's primary business is to contract drilling units,
related equipment and work crews primarily on a day rate basis to
drill oil and natural gas wells globally for major, national and
independent oil and gas companies, the report discloses.
Vantage also markets, operates and provides management services in
respect of, third party-owned drilling units, the report adds.
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B R A Z I L
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AMERICANAS SA: Launches 2030 Notes Cash Tender Offer
----------------------------------------------------
Alex Vasquez of Bloomberg News reports that Americanas announced
it started an offer to purchase 4.750% Senior Notes due 2030 and
4.375% Senior Notes due 2030, according to a company filing late
Monday, April 1, 2024.
Notes Americanas offered to purchase:
* 4.750% Senior Notes due 2030; outstanding principal amount of
$38.88 million
* 4.750% Senior Notes due 2030; outstanding principal amount of
$16.23 million
* 4.750% Senior Notes due 2030; outstanding principal amount of
$342.77 million
* 4.375% Senior Notes due 2030; outstanding principal amount of
$38.75 million
* 4.375% Senior Notes due 2030; outstanding principal amount of
$20.47 million
* 4.375% Senior Notes due 2030; outstanding principal amount of
$289.79 million
A full-text copy of the announcement is available at
https://api.mziq.com/mzfilemanager/v2/d/347dba24-05d2-479e-a775-2ea8677c50f2/95c9296f-1ea7-be7d-48e3-1e4a4560bac5?origin=1
About Americanas SA
Americanas was one of the largest diversified retail chains in
Brazil, with a wide platform of physical stores, robust e-commerce,
fintech, and has just entered into the niche food retail. It is
listed on B3, being indirectly controlled by billionaire Jorge
Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles.
The retailer nosedived in January 2023 after becoming mired in an
accounting scandal. The firm filed for bankruptcy at a court in
Rio de Janeiro on Jan. 19, 2023.
Americanas sought protection under Chapter 15 of the Bankruptcy
Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25, 2023. White &
Case LLP, led by John K. Cunningham, is the U.S. counsel.
BANCO BTG PACTUAL: Moody's Rates New Senior Unsecured Notes 'Ba2'
-----------------------------------------------------------------
Moody's Ratings has assigned a Ba2 long-term foreign currency
senior unsecured debt rating to the proposed senior unsecured notes
to be issued by Banco BTG Pactual S.A. (BTG), acting through its
Grand Cayman Branch (BTG Cayman). The proposed notes will be issued
under the existing $5 billion Medium Term Note Program that rated
(P)Ba2, and will be due in 2029. The outlook on the debt rating is
stable.
RATINGS RATIONALE
The Ba2 rating on the notes reflects BTG's well-established
investment banking franchise, strong profitability supported by a
diversified earning mix with 46.7% of revenues provided by
recurring asset management and wealth management activities as well
as of a consistent expansion of corporate banking operation over
the past five years. This strategy is supported by strong
capitalization and disciplined risk management.
In December 2023, the bank reported 2.0% net income to tangible
assets ratio that continued to benefit from steady growth of its
wealth and asset management platforms, that accounted for 22.8% of
total revenues and higher earnings generation from credit (23.9%).
Gains on sales and trading accounted for 28.9% of total revenues in
2023, remaining a key source of earnings for the bank. While BTG's
expanded loan portfolio grew 20.1% in 2023, the bank continues to
focus on increasing the number of customers and sectors and its
footprint into servicing medium size companies (SME) with
relatively higher spreads, beyond its core operations with large
corporates. This high-growth strategy into SME is mitigated by
conservative collateralization structures and high loan loss
reserve buffer maintained by the bank at 144% of problem loans in
December 2023. The problem loan ratio reached 2.7% in December
2023, above 1.8% one year prior, mainly because of a single
borrower occurrence in the first quarter of 2023. At the same time,
the bank continues to expand lending above the market levels (8.1%
in the 12 months ended in December 2023).
BTG's balances sheet growth has been supported by robust
capitalization maintained over the past five years. As per Moody's
tangible common equity to risk-weighted assets (TCE/RWA), at the
end of 2023, capital ratio remained stable at 9.8% supported by
strong internal earnings generation. BTG has also maintained
adequate liquidity profile, with LCR of 196% in September 2023, and
improving funding structure through retail deposits mix that
accounted for 31% of total resources at the end of 2023.
BTG's long-term local and foreign currency deposit and foreign
currency senior unsecured debt ratings of Ba2 at BTG Cayman are at
the same level as the Government of Brazil's (Brazil) Ba2 sovereign
rating. The ratings have a stable outlook in line with the outlook
on the sovereign rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
BTG Cayman's senior unsecured debt rating could be upgraded
following an upgrade of BTG's BCA. However, an upgrade of BTG's BCA
of ba2 is unlikely as long as the Brazilian government bond rating
remains at Ba2, which currently has a stable outlook.
The Ba2 rating assigned to the proposed notes could, however, be
downgraded following a downgrade of its BCA, which could be related
to the downgrade of Brazil's sovereign rating, or in case of
pressures developed at this standalone credit profile as a result
of: (1) rapid loan growth that could lead to a greater than
expected increase in asset risks, and (2) if the bank's
capitalization ratio drops sharply. Downward rating pressure could
also be triggered by weakening liquidity, which could increase the
bank's intrinsic vulnerability to its institutional-based funding
structure.
The principal methodology used in this rating was Banks Methodology
published in March 2024.
GOL LINHAS: Committee Taps Alvarez & Marsal as Financial Advisor
----------------------------------------------------------------
The official committee of unsecured creditors of Gol Linhas Aereas
Inteligentes S.A., seeks approval from the U.S. Bankruptcy Court
for the Southern District of New York to employ Alvarez & Marsal
North America, LLC as its financial advisor.
The firm will render these services:
(a) assist in the review of the Debtors' Schedules of Assets
and Liabilities and Statements of Financial Affairs;
(b) assist in the review of certain "first day" motions and
proposed orders;
(c) assist in the review of the Debtors' proposed key
employee
retention plan and key employee incentive plan, to the extent
applicable;
(d) attend meetings with the Debtors, the Debtors' lenders
and
creditors, potential investors, the Committee and any other
official committees organized in these chapter 11 cases, the U.S.
Trustee, other parties in interest, and professionals hired by the
same, as requested;
(e) assist in the review of any tax-related issues;
(f) assist the Committee and its advisors in its
investigation
and pursuit of certain potential causes of actions;
(g) assist the Committee and its advisors in potential
settlement negotiations by analyzing potential recoveries to
general unsecured creditors under any proposed chapter 11 plan,
including by, but not limited to, analyzing potential plan
structures, analyzing intercompany claims, and developing a
distribution analysis;
(h) assist the Committee with analyzing and valuing the
Debtors' trademarks, registrations, registration applications, and
other associated intellectual property including, but not limited
to, brand names, licensing rights or naming rights;
(i) assist the Committee in cooperation with its advisors
with
local Brazilian issues; and
(j) render such other general business consulting or such
other assistance as the Committee or its counsel may deem
necessary, consistent with the role of a financial advisor and not
duplicative of services provided by other professionals in these
chapter 11 cases.
The firm will be paid as follow:
(a) Hourly Rates: A&M will be paid by the Debtors for the
services of A&M professionals at the following hourly rates,
subject to periodic adjustments:
Managing Directors $1,075 to $1,525
Directors $825 to $1,075
Associates $625 to $825
Analysts $425 to $625
(b) Expense Reimbursement: A&M will be reimbursed for
reasonable expenses incurred in connection with this engagement
such as travel, lodging, third party duplication, messenger and
telephone charges; reasonable expenses include any reasonable
legal
fees incurred for A&M's defense of its retention application and
fee applications submitted in these chapter 11 cases, subject to
Court approval.
The firm can be reached through:
Mark Greenberg
Alvarez & Marsal North America, LLC
600 Madison Avenue,8th Floor
New York, NY 10022
Tel: (917) 841-8334
Email: mgreenberg@alvarezandmarsal.com
About Gol Linhas
GOL Linhas Aereas Inteligentes S.A. provides scheduled and
non-scheduled air transportation services for passengers and
cargo;
and maintenance services for aircraft and components in Brazil and
internationally. The company offers Smiles, a frequent-flyer
program to approximately 20.5 million members, allowing clients to
accumulate and redeem miles. It operates a fleet of 146 Boeing 737
aircraft with 674 daily flights. The company was founded in 2000
and is headquartered in Sao Paulo, Brazil.
GOL Linhas Aereas Inteligentes and its affiliates and subsidiaries
voluntarily filed for Chapter 11 protection (Bankr. S.D.N.Y. Lead
Case No. 24-10118) on Jan. 25, 2024. As of the bankruptcy filing,
the Debtors estimated $1 billion to $10 billion in both assets and
liabilities.
Judge Martin Glenn oversees the cases.
The Debtors tapped Milbank, LLP as bankruptcy counsel; Seabury
Securities, LLC as restructuring advisor, financial advisor and
investment banker; Alixpartners, LLP as financial advisor; and
Hughes Hubbard & Reed, LLP as aviation counsel. Kroll
Restructuring
Administration, LLC is the claims agent.
The U.S. Trustee for Region 2 appointed an official committee to
represent unsecured creditors in the Debtors' Chapter 11 cases.
GOL LINHAS: Dechert LLP Updates List of Abra Noteholders
--------------------------------------------------------
In the Chapter 11 cases of GOL Linhas Aereas Inteligentes S.A., et
al., the Ad Hoc Group of Abra Noteholders filed a third verified
statement pursuant to Rule 2019 of the Federal Rules of Bankruptcy
Procedure.
Starting in December 2023, members of the Ad Hoc Group retained
attorneys with the firm of Dechert LLP to represent them as
counsel
in connection with their Abra Notes which benefit from security
interests in certain of the assets of the Debtors.
The Ad Hoc Group submits this Third Verified Statement to update
the Ad Hoc Group's holdings of disclosable economic interest
currently held by its members, as of March 19, 2024, including
that
of certain new members who have joined the Ad Hoc Group since the
filing of the Second Verified Statement.
As of March 19, 2024, the members of the Ad Hoc Group beneficially
own or manage (or are the investment advisors or managers for
funds
or accounts that beneficially own or manage) approximately $1
billion in principal amount of Abra Notes, including $722 million
in principal amount of SSNs and $282.8 million in principal amount
of SSENs.
Dechert does not undertake to represent the interests of any
creditor, party in interest, or other entity other than the Ad Hoc
Group. No member of the Ad Hoc Group represents or purports to
represent any other member in connection with the Debtors' chapter
11 cases. In addition, each member of the Ad Hoc Group (a) does
not
assume any fiduciary or other duties to any other member of the Ad
Hoc Group and (b) does not purport to act or speak on behalf of
any
other member of the Ad Hoc Group in connection with these chapter
11 cases.
The names and addresses of each of the members of the Ad Hoc Group
of Abra Noteholders, together with the nature and amount of the
disclosable economic interests held by each of them in relation to
the Debtors, are as follows:
1. Certain funds and accounts managed or advised by
AMUNDI ASSET MANAGEMENT US, INC.
60 State Street
Boston, MA 02109
* Senior Secured Notes due 2028 ($73,385,949)
* Senior Secured Exchangeable Notes due 2028 ($898,385)
2. AMUNDI IRELAND LIMITED, acting solely in its capacity
as investment manager for and on behalf of the funds it
manages that hold the Abra Notes
c/o Amundi (UK) Limited
77 Coleman Street
London, EC2R 5BJ United Kingdom
* Senior Secured Notes due 2028 ($2,389,870)
3. AMUNDI (UK) LIMITED, acting solely in its capacity as
investment manager for and on behalf of certain funds
it manages that hold Abra Notes
77 Coleman Street
London, EC2R 5BJ United Kingdom
* Senior Secured Notes due 2028 ($5,849,429)
4. Certain funds and accounts managed or advised by
BLACKROCK FINANCIAL MANAGEMENT, INC.-FIXED INCOME
GROUP
50 Hudson Yards
New York, NY 10001
* Senior Secured Notes due 2028 ($14,156,471)
5. Certain funds and accounts managed or advised by
CARRONADE CAPITAL MANAGEMENT, LP
17 Old Kings Highway South, Suite 140
Darien, CT 06820
* Senior Secured Notes due 2028 ($9,858,131)
* Senior Secured Exchange Notes due 2028 ($42,105,764)
* Abra Common Shares (13,547,889 shares)
6. Certain funds and accounts managed by CORBIN CAPITAL
PARTNERS, L.P.
575 Madison Avenue, 21st Floor
New York, NY 10022
* Senior Secured Notes due 2028 ($18,116,412)
7. Certain funds and accounts managed or advised by DSC
MERIDIAN CAPITAL LP
888 Seventh Ave, 16th Floor
New York, NY 10106
* Abra Senior Secured Notes due 2028 ($38,353,604)
8. Certain funds and accounts managed or advised by
FORTRESS INVESTMENT GROUP LLC
1345 Avenue of the Americas 26th Floor
New York, NY 10105
* Senior Secured Exchangeable Notes due 2028
($46,303,017)
* Abra Common Shares (24,750,013 shares)
9. Certain funds and accounts managed by GLENDON CAPITAL
MANAGEMENT L.P.
2425 Olympic Blvd.
Suite 500E
Santa Monica, CA 90404
* Senior Secured Notes due 2028 ($99,436,639)
* Senior Secured Exchangeable Notes due 2028
($6,871,042)
* GOL Notes due 2026 ($5,000,000)
10. Certain funds and accounts managed or advised by GLG
PARTNERS LIMITED, in its capacity as investment manager
or sub-investment manager (as applicable), on behalf of
certain funds
Riverbank House, 2 Swan Lane
London EC4R 3AD, United Kingdom
* Senior Secured Notes due 2028 ($1,437,396)
* Senior Secured Exchangeable Notes due 2028
($73,523,020)
11. Certain funds and accounts managed or advised by
GROSVENOR CAPITAL MANAGEMENT, L.P.
900 North Michigan Avenue Suite 1110
Chicago, Illinois, 60611
* Senior Secured Notes due 2028 ($11,500,000)
12. Certain funds and accounts managed or advised by KING
STREET CAPITAL MANAGEMENT
299 Park Avenue, 40th Floor
New York, NY 10171
* Senior Secured Notes due 2028 ($67,161,194)
13. MOORE GLOBAL INVESTMENTS, LLC
11 Times Square
New York, NY 10036
* Abra Senior Secured Notes due 2028 ($9,931,143)
* Senior Secured Exchangeable Notes due 2028
($5,785,897)
* Short-GOL Shares (ADS) (484,165 shares)
14. Certain funds and accounts managed or advised by NUT
TREE CAPITAL MANAGEMENT, LP
55 Hudson Yards
New York, NY 10001
* Abra Senior Secured Notes due 2028 ($85,064,098)
15. Certain funds and accounts managed or advised by
OAKTREE CAPITAL MANAGEMENT, L.P.
333 S. Grand Ave., 28th Floor
Los Angeles, CA 90071
* Senior Secured Notes due 2028 ($20,504,000)
16. Certain funds and accounts managed or advised by
OLYMPUS PEAK ASSET MANAGEMENT LP
177 West Putnam Ave Suite 2622-S1
Greenwich, CT 06831
* Abra Senior Secured Notes due 2028 ($9,016,861)
* Senior Secured Exchangeable Notes due 2028
($17,667,732)
* Abra Common Shares (ADS) (2,722,276 shares)
17. Certain funds and accounts of SUNRISE PARTNERS LIMITED
PARNERSHIP managed or advised by PALOMA PARTNERS
MANAGEMENT COMPANY
Two American Lane
Greenwich, CT 06831
* Senior Secured Notes due 2028 ($31,315,229)
18. Certain funds and accounts managed or advised by
READYSTATE ASSET MANAGEMENT, LP
936 West Fulton Market Suite 200
Chicago, IL 60607
* Abra Senior Secured Notes due 2028 ($35,707,655)
19. Certain funds and accounts managed or advised by
REDWOOD CAPITAL MANAGEMENT, LLC
250 West 55th Street, Floor 26
New York, NY 10019
* Abra Senior Secured Notes due 2028 ($82,842,737)
20. Certain funds and accounts managed or advised by
CAPITAL VENTURES INTERNATIONAL C/O SUSQUEHANNA ADVISORS
GROUP, INC.
401 City Avenue, Suite 220
Bala Cynwyd, PA 19004
* Senior Secured Exchangeable Notes due 2028
($62,971,097)
21. VR GLOBAL PARTNERS, L.P.
One Nexus Way, Camana Bay
Grand Cayman, KY1-9005, Cayman Islands
c/o VR Advisory Services (USA) LLC,
601 Lexington Avenue 59th Floor
New York, NY 10022
* Abra Senior Secured Notes due 2028 ($77,279,972)
* Senior Secured Exchangeable Notes due 2028
($26,651,961)
* Abra Common Shares (1,272,329 shares)
* GOL Notes due 2026 ($28,588,000)
22. Certain funds and accounts managed or advised by
WHITEBOX ADVISORS LLC
3033 Excelsior Boulevard, Suite 500
Minneapolis, MN 55416
* Senior Secured Notes due 2028 ($28,709,013)
* GOL Bonds due 2024 ($25,077,000)
* Short - GOL Shares (ADS) (23,638 shares)
Counsel to the Ad Hoc Group of Abra Noteholders:
Allan S. Brilliant, Esq.
DECHERT LLP
1095 Avenue of the Americas
New York, NY 10036-6797
Email: allan.brilliant@dechert.com
Tel: (212) 698-3500
Fax: (212) 698-3599
About Gol GOLL4.SA
GOL Linhas Aereas Inteligentes S.A. provides scheduled and
non-scheduled air transportation services for passengers and
cargo;
and maintenance services for aircrafts and components in Brazil
and
internationally. The company offers Smiles, a frequent-flyer
programs to approximately 20.5 million members, allowing clients
to
accumulate and redeem miles. It operates a fleet of 146 Boeing
737
aircraft with 674 daily flights. The company was founded in 2000
and is headquartered in Sao Paulo, Brazil.
GOL Linhas Aereas Inteligentes S.A. and its affiliates and its
subsidiaries voluntarily filed for Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 24-10118) on Jan. 25, 2024.
GOL Linhas estimated $1 billion to $10 billion in assets as of the
bankruptcy filing.
The Debtors tapped MILBANK LLP as counsel, SEABURY SECURITIES LLC
as restructuring advisor, financial advisor and investment banker,
ALIXPARTNERS, LLP, as financial advisor, and HUGHES HUBBARD & REED
LLP as aviation related counsel. KROLL RESTRUCTURING
ADMINISTRATION LLC is the claims agent.
MOVIDA PARTICIPACOES: Moody's Assigns 'Ba3' CFR, Outlook Stable
---------------------------------------------------------------
Moody's Ratings has assigned a Ba3 corporate family rating to
Movida Participacoes S.A. (Movida) and a Ba3 backed senior
unsecured rating to the proposed notes to be issued by Movida
Europe S.A., unconditionally and irrevocably guaranteed by Movida
Participacoes S.A. and Movida Locacao de Veiculos S.A. The outlook
is stable for both entities.
Moody's expects the majority of the proceeds to be used in the
refinancing of certain existing indebtedness, extending the
company's maturity profile and reducing its interest costs. Other
uses may include general corporate purposes, including capital
expenditures.
RATINGS RATIONALE
Movida's Ba3 rating reflect its competitive position as the second
largest company in the Brazilian car and fleet rental market. It
has a flexible business model, which helps it to weather economic
and auto market slowdowns. The company's adequate liquidity, stable
operating performance, and Moody's expectation of an adequate
leverage over the next 12-18 months also support the rating. The
rating also incorporates Movida's relevance for Simpar S.A. (Ba3
stable) and benefits derived from being controlled by Simpar
group.
Simpar is one of the largest logistics, autos, fleet and equipment
rental groups in Brazil, with a significant size, scale and market
position. In addition to Movida, the group controls the largest
supply-chain management service provider and truck logistics
transportation company in Brazil through JSL S.A. (JSL); largest
truck and equipment leasing company in Brazil through Vamos
Locação de Caminhões, Máquinas e Equipamentos S.A. (Vamos); and
one of the largest network of car dealerships in Brazil (Automob),
among others. The group's solid business model encompasses
long-term service agreements, a wide service portfolio, a
diversified client base and cross-selling opportunities, providing
resiliency to operations during downturns, an additional credit
positive. Simpar's subsidiaries have flexible business models and a
proven ability to manage the return on invested capital (ROIC)
throughout the life cycle of its vehicles and equipment, ensuring
adequate profitability and cash generation through economic
cycles.
Moody's perceives strong incentives of Simpar to influence Movida's
financial policies and to support the company in case needed.
Simpar has a 65% ownership stake and it indicates 3 board members
out of 5. There are no limitations on access to dividend upstream
from subsidiaries including Movida, JSL, and Vamos, despite the
minority carve-outs in all these subsidiaries. All subsidiaries of
the group benefit from the scale and diversity of the combined
entities. Despite the strategic and operating links, there are no
legal debt binding among Simpar holding company and Movida with
respect to guarantees. In Moody's view the limited relevant formal
debt linkages with its subsidiaries gives Simpar holding company
certain flexibility to recycle its portfolio in case the stake in
any of the subsidiaries is no longer accretive to the group.
Moody's believes Simpar offers its subsidiaries certain operating
independence. Movida is managed independently with an executive and
administrative team exclusive to Movida, and its brand identity is
distinct from the group.
Constraining the ratings of Movida is the capital-intensive nature
of the car rental business, because of that Moody's expects the
company to maintain gross leverage at around 4.0x – 4.5x. In
2023, Moody's-adjusted gross leverage reached 4.3x. Although the
company has the ability to fairly cover maintenance capex by
divesting of used vehicles it is also expanding its fleet which
requires funding obtained from third-party debt. Additionally,
Movida's ratings incorporate the lack of significant international
footprint with most of its revenues generated in Brazil; the
Government of Brazil (Brazil, Ba2).
The stable rating outlook reflects Moody's expectations that Movida
will continue to grow, while maintaining profitability, cash
generation and adequate leverage, including a large unencumbered
fleet.
GOVERNANCE CONSIDERATIONS
Governance considerations reflect the concentrated control by the
Simpar group, tempered by a track record of adequate financial
policy, the good transparency and adequate financial disclosures.
Movida's shares are traded on B3 S.A. (Ba1, Stable), Brazilian
stock exchange, and comply with Novo Mercado standards, the highest
level of corporate governance in local equity markets.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Movida's rating could be upgraded if the company is able to
increase market share, geographic diversification and revenue while
maintaining healthy credit metrics. Quantitatively, a rating
upgrade would require total Moody's-adjusted gross debt/EBITDA
below 3.5x and EBIT/interest above 2.5x on a sustained basis. A
rating upgrade would also require an upgrade of Simpar S.A.
The ratings could be downgraded if Movida's liquidity deteriorates
because of weakness in operations and inability to sell used
vehicles. Negative rating pressure would emerge if EBITDA growth
does not materialize, such that Movida's Moody's-adjusted gross
leverage remains above 4.5x on a sustained basis.
The principal methodology used in these ratings was Equipment and
Transportation Rental published in February 2022.
Headquartered in Sao Paulo, Brazil Movida operates car rental,
fleet management business and has a used-car-sales business. The
company is owned by Simpar S.A. (Ba3, stable), which holds a 65%
stake in Movida. In 2023 the company had a total fleet of 243,931
vehicles in Brazil and Portugal. Movida is the second-largest
rent-a-car and fleet management provider in Brazil by revenue and
fleet size. In 2023, the company reported net revenues of BRL10.3
billion (USD 2.1 billion) and Moody's adjusted EBITDA of BRL3.8
billion (USD 756 million).
SYLVAMO CORP: Moody's Affirms 'Ba2' CFR, Alters Outlook to Stable
-----------------------------------------------------------------
Moody's Ratings affirmed Sylvamo Corporation's Ba2 corporate family
rating and Ba2-PD probability of default rating. Moody's also
affirmed the Ba2 ratings on the senior secured bank credit
facilities (which include the Term Loan A, Term Loan F, Revolving
Credit Facility) and the B1 rating on the backed senior unsecured
notes. Speculative Grade Liquidity rating of SGL-1 remains
unchanged. Moody's also changed the outlook to stable from
positive.
RATINGS RATIONALE
Sylvamo's Ba2 CFR reflects the company's leading global market
positions in uncoated free sheet (UFS), geographic diversity and
operational flexibility with seven low cost operations across
Brazil, the United States, and Europe. The rating is supported by
strong credit metrics with Moody's adjusted debt/EBITDA of 1.7x at
the end of 2023 and EBITDA/Interest of 8.8x, the company's strong
cash flow generation and very good liquidity. However, the company
has significantly increased shareholder remuneration and (retained
cash flow - capex)/debt fell to about 14% from 30% a year earlier.
At the same time, the company's 2023 performance came short of
Moody's expectations due to customer destocking, lower prices and
unabsorbed fixed costs as a result of the downtime in its European
and North American operations. Moody's currently expects a further
decline in earnings in 2024 as the secular decline for printing and
writing paper in developed markets continues and as prices
decline.
An industry leader has recently announced plans to idle a mill
starting in the second half of the year. This will reduce North
American capacity by 4% and could help stabilize prices later in
the year and into 2025. However, further capacity reductions are
going to be needed over time to continue to offset secular demand
decline.
Sylvamo's rating is constrained by its significant exposure to the
long-term secular decline of commodity paper in North America and
Western Europe which continues to be replaced by digital
alternatives. Moody's view this as a long-term credit risk because
the company may need to lever up to enter into a different business
to grow revenue and earnings and sustain returns to shareholders
over the long term. In the near term, Moody's believe the company's
lower cost assets will allow it to continue to produce as other
market participants may have to reduce capacity amid demand
decline. The rating is further constrained by the company's
relatively short track record as an independent company with an
evolving financial policy. The company's management is currently
committed to being a pure play UFS producer and has been able to
reinvest in the business and increase shareholder returns over the
last two years, while also lowering debt. The company paid off
approximately 38% of debt since it was spun off from International
Paper (IP) in 2021 and its balance sheet is currently close to its
absolute debt target of $1 billion, which allows it to maintain
strong credit metrics even at the trough of the cycle. Moody's does
not expect further significant debt reduction. Moody's expects that
credit metrics will remain strong with leverage below 2x in 2024 as
the company adjusts its cost structure in anticipation of lower
volumes. Sylvamo markets 655,000 tons (or about 20% of its total
capacity) produced by two IP mills. IP currently has the option to
convert these mills from paper to containerboard and Sylvamo will
be able to stop taking volume from these mills in 2025 and 2026.
The company may not be able to maintain similar earnings levels and
shareholder returns without increasing debt, which limits the
rating at the current level.
Sylvamo's revolving credit facility and term loans are rated Ba2,
in line with the corporate family rating, reflecting their dominant
position in the capital structure, which also includes senior
unsecured notes. The notes are rated B1, in accordance with Moody's
Loss Given Default for Speculative-Grade Companies methodology.
Sylvamo's SGL-1 Speculative Grade Liquidity Rating reflects very
good liquidity, supported by about $800 million of liquidity
sources versus amortization payments of approximately $41 million
over the next 12 months. Liquidity sources include $220 million of
unrestricted cash on hand (as of December 2023), $429 million of
availability under a $450 million revolver due in 2026 (after $21
million letters of credit) and Moody's projected about $110 million
of free cash flow after regular dividends over the next 12 months.
In addition, the company has a $120 million accounts receivable
finance facility that matures in 2025, which has been almost fully
drawn. The revolving credit facility has a maximum consolidated
total leverage covenant of 3.75x. As of December 2023 the company
had significant cushion under its covenant and Moody's expect this
to continue. Most of the assets are pledged as collateral for the
secured loans, but Sylvamo owns about 250,000 acres of forest
plantations in Brazil which are not pledged as collateral and could
be monetized to provide alternate liquidity if required, after
making a $100 million payment to IP. IP is currently engaged in a
tax dispute with Brazilian authorities, but Sylvamo's potential
exposure is capped at $120 million. The restricted cash of $60
million can be used to settle this liability.
The stable outlook reflects expectations of strong credit metrics
despite weaker graphic paper volume and pricing expectations,
offset by initiated cost reductions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade the rating if:
-- Sylvamo demonstrates and maintains conservative financial
policies
-- The company reinvests in its business while maintaining a
sustainable level of shareholder returns
-- Improves diversification such that most of its sales are
generated by products not in secular decline without stretching
credit metrics
-- Sustains strong credit metrics such as Debt/EBITDA below 3x and
(RCF-Capex)/Debt above 12%
Moody's could downgrade the rating if:
-- The company experiences a sustained deterioration in operating
performance that results in weaker credit metrics and cash flow
-- Debt/EBITDA is sustained above 4x and (RCF-Capex)/Debt
declines below 6%
Sylvamo Corporation is the largest global producer of uncoated
freesheet (UFS) paper (used primarily for photocopying and
commercial printing applications). The company generated sales of
$3.7 billion in the twelve months ended December 2023.
The principal methodology used in these ratings was Paper and
Forest Products published in December 2021.
===============
C O L O M B I A
===============
CANACOL ENERGY: Fitch Lowers LongTerm IDR to 'B', Outlook Negative
------------------------------------------------------------------
Fitch Ratings has downgraded Canacol Energy Ltd.'s (CNE) Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B'
from 'BB-'. The Rating Outlook remains Negative. Fitch has also
downgraded CNE's USD500 million senior unsecured notes due in 2028
to 'B'/'RR4' from 'BB-'.
CNE's two-notch downgrade reflects the continued reduction in
reserves life indices in both PDP and 1P reserves, at 1.5 years and
4.4 years as of FY 2023, respectively. The downgrade also reflects
a mismatch compared to the weighted average life of contracts
estimated at 4.5 years. On a per barrel of oil equivalent (boe)
basis, CNE's debt to PDP and debt to 1P metrics increased to
$40.6/boe and $13.5/boe, respectively, the highest among its peers.
Fitch expects these metrics to remain elevated over the next three
years.
The Negative Outlook reflects the uncertainty surrounding reserves
replacement during the 2024 campaign and the possibility of
reversing the downward trend in the reserve life indices. This
includes keeping production close to 175 million cubic feet per day
(MMcfd) on average over the next three years.
KEY RATING DRIVERS
Low Reserves Life: CNE reported its third consecutive year of
declining 1P reserves in FY2023, marked by capacity restrictions at
some of CNE's gas fields due to issues at the Jobo gas treatment
facility, as well as at certain producing wells. PDP reserves were
reported to be 17mmboe, 39% lower than incorporated in Fitch's
previous projections. The reserve life index was 1.5 years based on
current production levels. 1P reserves were 52mmboe and reserve
life index of 4.4 years, below the weighted average life of
contracts estimated at 4.5 years.
Higher Leverage: The negative outlook reflects Fitch's base case
projection that CNE's debt to 1P reserves will average $45.0/boe
and $15.0, respectively over the next three years, applying a
reserve replacement ratio of 91% between 2024-2026. EBITDA leverage
will be close to 3.0x in 2024, then decrease to close to 2.3x by YE
2026, reflecting higher average realized prices as the company
renegotiated some of its long-term take-or-pay contracts. EBITDA
interest coverage should average of 5.0x over the rating case.
Fitch is assuming that the company will halt dividends
distributions until further notice in order to preserve its
financial profile.
Production Profile: Fitch projects gas production be close to
165MMcfd in 2024, and average of 172MMcfd (approximately 31,000
boed) between 2025-2027. Fitch previously forecast production would
reach 300MMcfd driven by El Tesorito (a 200MW thermo-power plant)
and the Jobo-Medellin pipeline with a total capacity of 100 MMcfd.
The decrease stems from lack of exploration success during 2023.
Improved Profitability: Fitch expects CNE's EBITDA to be USD255
million in 2024, as the company realizes higher average prices in
2024, as a result of higher spot market prices and renegotiations
of some of its long-term take-or-pay contracts. Fitch's base case
assumes volumes sold, as percentage of total gas production, under
long-term take-or-pay contracts are 75% in 2024.
Strategic for Energy Transition: Gas represents 70% of the regional
energy matrix and will play an important role as a back-up power
generation as Colombia moves away from other alternatives with
higher greenhouse gas (GHG) emissions. As the key gas producer and
supplier for the highly dependent Caribbean coast of Colombia, CNE
holds a strong competitive position, given the high start-up costs
and limited conventional gas reserves. Fitch expects that the
company will remain the largest supplier to Colombia's northern
coast region.
DERIVATION SUMMARY
CNE's credit profile is weaker when compared to other independent
gas producers in both Latin America and North America, including
Hunt Oil Company of Peru L.L.C., Sucursal del Peru (BBB/Stable),
CNX Resources Corporation (BB+/Stable), Ascent Resources Utica
Holdings, LLC (B+/Positive) and Comstock Resources, Inc.
(B+/Stable).
CNE has a strong competitive position due to the sector's high
start-up costs and limited conventional gas reserves. However, its
strategic switch towards increasing exposure to the gas spot market
compares negatively to peers. Hunt Oil is the closest peer in the
region. It owns an equity stake in the Camisea blocks 86 and 56 in
Peru, which are strategically important for that country, providing
86% of its natural gas supply. Similarly, CNE is regionally
important to the Caribbean coast of Colombia, which is a large
consumer of gas and is very comparable to Camisea.
Fitch estimates that CNE's 2024 total debt to EBITDA to be 3.0x,
higher than Hunt's 1.0x, and above average among its U.S. peers
(CNX, Ascent and Comstock) of 1.4x, as CNE deploys its capex plan.
Fitch projects CNE's total debt to 1P to average $16.0/boe over the
next four years, which is highest among all peers.
KEY ASSUMPTIONS
- Gas production volumes of 165,000 Mcf/d in 2024; average of
175,000 Mcf/d between 2025 and 2027;
- Contracted gas sales as percentage of total production of 75% in
2024, 80% between 2025 and 2027;
- Average realized price net of transportation of $6.5 per USD/Mcf
in 2024; $6.0 per USD/Mcf between 2025 through 2027;
- Opex average of $.0.45 USD/Mcf between 2024 through 2027;
- Royalties average of $0.90 USD/Mcf between 2024 through 2027;
- G&A cost average of $0.50 USD/Mcf between 2024 through 2027;
- FY 2024 capex of USD140 million;
- No dividend distributions over the rating horizon.
RECOVERY ANALYSIS
The recovery analysis assumes that Canacol would be a going concern
(GC) in bankruptcy and that it would be reorganized rather than
liquidated.
GC Approach:
- A 10% administrative claim.
- The GC EBITDA is estimated at USD235 million. The GC EBITDA
estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
valuation of Frontera.
- EV multiple of 3.0x.
With these assumptions, Fitch's waterfall generated recovery
computation (WGRC) for the senior unsecured notes is in the 'RR2'
band. However, according to Fitch's Country-Specific Treatment of
Recovery Ratings Criteria, the Recovery Rating for corporate
issuers in Colombia is capped at 'RR4'. The Recovery Rating for the
senior secured notes is therefore 'RR4' with a WGRC output
percentage at 50%.
RATING SENSITIVITIES
The Negative Outlook may be revised to Stable if the company
managed to reach an adequate reserve replacement ratio over the
next 12 months.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade is unlikely but may be considered if CNE reaches PDP
and 1P RLI of at least 2.5 and five years, respectively, over the
rating horizon; and 80% or more of its production sold under long
dated contracts in Colombia with high quality off-takers, while
maintaining total EBITDA of 3.0x or below.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sustained EBITDA gross leverage at or above 4.0x;
- Cash balance falling below USD40 million;
- Negative FCF;
- Production size declining below 30,000boed on sustained basis.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: As of FY 2023, CNE had cash on hand of USD39
million. The company has a manageable debt maturity profile, with
its first major maturity expected to be the USD200 million drawn
from the RCF in 2027, followed by the USD500 million bond maturity
in 2028.
ISSUER PROFILE
Canacol Energy Ltd. (CNE) is a publicly listed exploration and
production company focused on onshore natural gas in Colombia. The
company's average production was 32,366 boe/d in 2023YE, 98%
corresponded to natural gas. As of 2023, CNE had 52mmboe of 2P
natural gas reserves and 1P reserve life of 4.4 years.
ESG CONSIDERATIONS
Canacol Energy Ltd. has an ESG Relevance Score of '4' for Exposure
to Social Impacts due to the potential impact of social pressures
and possible pushback from the communities in the region where it
operates. This has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
Canacol Energy Ltd. has an ESG Relevance Score for Management
Strategy of '4' given the change it their contract strategy as it
is no longer consistent with its previous assessment of the
company's business profile as a utility-like company. In Fitch's
view, this change will bring higher volatility to cash flows and
profitability. This has a negative impact on the credit profile,
and is relevant to the ratings in conjunction with other factors.
Canacol Energy Ltd. has an ESG Relevance Score for Financial
Transparency to '4' due to untimely disclosure of unexpected
production capacity restrictions the Jobo gas treatment facility as
well as certain of its producing wells that commenced in August
2023. This has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Canacol Energy Ltd. LT ID B Downgrade BB-
LC LT IDR B Downgrade BB-
senior unsecured LT B Downgrade RR4 BB-
SOCIEDAD CONCESIONARIA: Fitch's Outlook on BB+ Rated Sr. Notes Pos.
-------------------------------------------------------------------
Fitch Ratings has affirmed the 'BB+' rating of Sociedad
Concesionaria Operadora Aeroportuaria Internacional, S.A.'s (OPAIN)
USD415 million senior secured notes. The Rating Outlook has been
revised to Positive from Stable. OPAIN is the concessionaire of El
Dorado International Airport in Bogota, Colombia.
The rated notes coexist on a pari-passu basis with one Colombian
peso denominated loan of COP315 billion, which matures in December
2028. The COP100 billion loan granted by the Fondo Nacional de
Garantías was fully repaid in 2023, deleveraging OPAIN's debt
position.
RATING RATIONALE
The Outlook revision to Positive reflects the favorable operational
and financial performance of the project, which has surpassed
Fitch's expectations in the last two full years, and which is
anticipated to continue in the future. In addition, the Positive
Outlook reflects the effects that the concessionaire's sound
strategy of cost control has had and which has allowed it to prepay
debt. Should traffic, revenue and costs continue performing as
observed in 2023, Fitch could adjust its projections upwards and
financial metrics could improve to levels consistent with a higher
rating.
The rating reflects El Dorado airport as a strategic asset for
Colombia, being the main gateway to the country and the
third-largest airport in Latin America in terms of traffic volume.
The airport has a robust traffic base, comprising mainly origin and
destination (O&D) passengers and has a demonstrated history of
strong traffic performance with relatively low volatility. The
rating also reflects a dual-till rate-setting framework, with an
adjustment mechanism for regulated revenues that tracks local and
U.S. consumer prices indices. The debt is fixed-interest rate and
fully-amortizing with a six-month debt service reserve account
(DSRA) and standard covenant package and structural features.
Fitch has adjusted its projections to reflect updated macroeconomic
assumptions and actual volume performance in 2023, which surpassed
Fitch's expectations. Under Fitch's rating case, minimum and
average debt service coverage ratio (DSCR) are 1.1x (2024) and 1.2x
(2024-2026), respectively. Currently projected metrics are
consistent with the assigned rating, according to applicable
criteria.
KEY RATING DRIVERS
Revenue Risk - Volume - Stronger
Essential Infrastructure Asset in Colombia: Located in Bogota's
metropolitan area, El Dorado airport is a critical facility that
serves as the country's largest commercial airport and its
international gateway. The airport benefits from a large O&D base,
with traffic volume showing strong positive growth for the last
decade and no meaningful competition from other airports or forms
of transportation. Avianca Holdings S.A. constitutes roughly 40% of
total traffic, however counterparty risk is relatively mitigated by
the airport's strategic and competitive position within the country
and the region.
Revenue Risk - Price - Midrange
Dual-Till Rate Setting: Regulated revenues, which comprise the
majority of OPAIN's revenues, are adjusted yearly to track 95% of
Colombian or the U.S. CPI, depending on the currency denomination
of the tariff. Extraordinary increases in tariffs may occur in case
either CPI varies by more than 10%, since the last tariff update.
Commercial revenues are not subject to a tariff adjustment
mechanism and are negotiated in private agreements with each
tenant.
Infrastructure Dev. & Renewal - Stronger
Well-Maintained Airport: El Dorado is a modern airport in good
condition, with well-defined maintenance needs for the remaining
concession life, which is set to end sometime between January 2027
and July 2030 - the exact date will depend on how quickly the
airport can recoup the earnings it missed out on during the
pandemic. The airport ended the construction phase in January 2019,
and no major works are pending, aside from potential complementary
and voluntary works. According to the independent engineer, capex
related to refitting the airport (replacement capex, or repex) is
adequate to cope with the expected expenses associated to the
concession's expiration.
Debt Structure - 1 - Midrange
Midrange Structural Features: Debt structure comprises the U.S.
dollar-denominated senior secured notes issuance and one non-rated
Colombian peso-denominated loan. The notes are fully amortizing and
have fixed interest rate. The structure benefits from six-month
DSRAs with one offshore account for the rated debt and one onshore
account for the non-rated facility. The offshore account shall
increase over the debt term to 12-months debt service if the
historical DSCR ended on or after June 30, 2024 is less than
1.20x.
Other structure features include adequate debt incurrence and a
dividend distribution test at 1.20x, which provides adequate
mitigation for the absence of a cash waterfall. Exposure to foreign
exchange risk is seen as limited as approximately 75% of revenues
are U.S. dollar-denominated, providing a natural hedge against
Colombian peso/U.S. dollar exchange rate variations.
Financial Profile
DSCR is viewed as the relevant metric for the transaction, given
its short maturity and fully-amortizing nature. Minimum and average
DSCRs under Fitch's rating case are 1.1x (2024) and 1.2x
(2024-2026), respectively. Metrics are consistent with the assigned
rating, according to applicable criteria.
PEER GROUP
El Dorado's closest peer is Mexico City's airport (Grupo
Aeroportuario de la Ciudad de Mexico, GACM), rated 'BBB-' with a
Negative Outlook. GACM and El Dorado are international gateways for
their countries with a sizable O&D market. However, GACM has aged
facilities and significant capacity constraints, while El Dorado is
a modern and well-maintained airport with defined maintenance
needs. GACM's average DSCR is above 2x, while El Dorado shows an
average DSCR of 1.2x.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Annual traffic growth below Fitch's rating case expectations of
2.5%;
- Material deterioration of liquidity that jeopardize the project's
ability to pay debt service.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A strong traffic performance that would lead to Fitch's projected
DSCR above 1.2x.
CREDIT UPDATE
In 2023 traffic volume reached 39.4 million pax, which represented
a 11.6% growth from the prior year, and a 112.5% of the level
observed in 2019, while Fitch's base and rating case assumed 107%
and 101% respectively. Although national traffic volumes continued
to outnumber the international levels, international traffic growth
at 23.4% outpaced the domestic traffic increase of 6.2% in 2023.
Traffic mix in 2023 was 66% national/34% international, which
favorably compares to the 67%/33% mix observed in 2019. According
to the concessionaire, the relatively modest domestic growth has to
do with the exit of airlines Viva Air and Ultra Air from the market
in 2023. Notably, since the beginning of March 2024, Jetsmart
(Chilean airline) started operating 27 domestic routes at the
airport, alongside Wingo, the other low-cost carrier currently
serving the Colombian market.
Total revenues in 2023 were COP1,796 billion (USD415 million),
representing 157% of the levels registered in 2019 and a growth of
19.6% with respect to the prior year. Actual revenues exceeded
Fitch's base and rating case projections by 2% and 7% respectively.
Despite the higher-than-expected recovery in international traffic,
the more modest revenue growth also reflects the appreciation of
the COP/USD, as more than 55% of revenues are USD-denominated.
Operating expenditures in 2023, excluding the concession fee, were
COP332 billion, slightly below Fitch's base case expectation of
COP347 billion, while capex reached COP15 billion, below its
expectation of COP39 billion. According to the concessionaire, the
non-executed capex in 2023 was intentionally deferred to 2024 and
included in this year's repex budget. Starting in 2024, OPAIN
expects to benefit from 'Plan Vallejo', a federal government's
tax-incentive program that allows exporting companies to import
without paying import tariffs.
According to the issuer, pursuant to a concession amendment
(Otrosí No.39), the construction of seven new parking slots on the
former Avianca hangar will be considered a mix of complimentary and
voluntary works and compensated according to the concession
agreement.
Debt service in 2023 was COP339 billion, lower than the COP385
billion projected by Fitch, mainly due to a lower COP/USD exchange
rate in 2023, which impacted debt service of the USD notes when
expressed in COP. Despite the higher variable interest rate (IBR
rate) during the year, the increase in interest payments was
largely mitigated by the full repayment of one of Opain's COP
loans, which had an outstanding balance of COP90 billion.
As a result of lower expenses and lower debt service, DSCR in 2023
was 1.8x, above Fitch's base and rating case projections of 1.4x
and 1.3x respectively.
FINANCIAL ANALYSIS
Fitch's base case reflects actual performance in 2023 and assumes a
4.0% compounded annual growth rate (CAGR) from 2024 to 2026. For
international passengers, the agency assumed a 5.1% CAGR from 2024
to 2026. The budgets for administrative and operating expenses were
stressed by 3%. U.S. CPI reflects Fitch's forecast of 2.7% in 2024
and 2.5% from 2025 onwards, while Colombia's CPI forecast is 6.0%
in 2024, 3.8% in 2025 and 3.5% in 2026. Under this scenario,
minimum (2024) and average (2024-2026) DSCR is 1.2x.
Fitch's rating case assumes a 2.7% CAGR for domestic traffic from
2024 to 2026. For international passengers, Fitch assumed a 2.3%
CAGR from 2024 to 2026. The budgets of administrative, operating
and capital expenses were stressed by 5%, macro assumptions were
the same as the base case. Under this scenario, minimum (2024) and
average (2024-2026) DSCRs are 1.1x and 1.2x, respectively.
SECURITY
The ANI granted OPAIN a 20-year concession to operate and expand El
Dorado International Airport on September 2006. Located in Bogota,
the capital city of Colombia, El Dorado is the third-busiest
airport in Latin America in terms of traffic and the most active in
the region in terms of cargo. It has an estimated catchment area of
10.7 million people and serves all major Colombian cities at 41
domestic routes and major international destinations at 50
international routes across the Americas and Europe.
The concession agreement excludes the runways and air traffic
control, taxiways, administrative buildings, and designated
military, police and government facilities. The airport airfield
consists of two parallel independent runways. In January 2019,
OPAIN ended the construction phase. All the mandatory works have
been carried out including the construction of a new passenger
terminal, new cargo facilities, new office buildings and new
apron.
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
----------- ------ -----
Sociedad Concesionaria
Operadora Aeroportuaria
Internacional S.A.
Sociedad Concesionaria
Operadora Aeroportuaria
Internacional S.A./Airport
Revenues - First Lien/1 LT LT BB+ Affirmed BB+
=============
E C U A D O R
=============
FIDEICOMISO MERCANTIL 5: Fitch Affirms CCC+sf Rating on 2 Tranches
------------------------------------------------------------------
Fitch Ratings has affirmed the IMS Ecuadorian Mortgage 2021-1 Trust
certificates at 'AA+sf'. The Rating Outlook is Stable. Fitch has
also affirmed the series A notes issued by Fideicomiso Mercantil
Titularizacion Hipotecaria de Banco Pichincha 5 (FIMEPCH 5) at
'CCC+sf'.
Entity/Debt Rating Prior
----------- ------ -----
IMS Ecuadorian
Mortgage 2021-1 Trust
2021-1 44970EAA1 LT AA+sf Affirmed AA+sf
Fideicomiso Mercantil
Titularizacion
Hipotecaria de Banco
Pichincha 5
A3 LT CCC+sf Affirmed CCC+sf
A4 LT CCC+sf Affirmed CCC+sf
KEY RATING DRIVERS
FIMEPCH 5
Rating Capped at Transaction Account Bank: The series A notes are
capped at the rating of the Transaction Account Bank provider
(currently Banco Pichincha; rated CCC+). For the 'Bsf' rating
category, the Transaction Account Bank must have at least the same
rating as the notes, according to Fitch's "Structured Finance and
Covered Bonds Rating Criteria". However, in this case, the eligible
bank has been defined as an entity with a rating equal to or
maximum one notch below Ecuador's 'CCC+' sovereign rating, which
constrains the ratings.
Stable Pool Characteristics: Pool characteristics remained similar
since issuance. As of January 2024, Fitch has updated the weighted
average foreclosure frequency at base case to 9.2% from 8.3% from
last review, and weighted average loss given default to 8.0% from
8.7%, similar from initial assumptions.
These assumptions consider the stability of the assets main
characteristics: average original loan-to-value of 67%, assets
original term averaging 18 years, remaining term averaging 13
years, and 30.4% of the portfolio concentrated in properties valued
equal to or less than 300 minimum wages at origin. As of January
24, on a cumulative basis, just 30 loans (0.8%) reached 180 dpd,
while Fitch's initial assumption for the same period was 3.1%. Only
eight loans (0.3%) have been restructured. The portfolio has
performed better than Fitch's initial expectations.
Adequate Capital Structure Supports Ratings: The series A notes
benefit from a sequential pay structure, where their target
amortization payments are senior to interest and principal payments
on the series B notes. Series A also benefits from credit
enhancement (CE) of 18.2% as of January 2024, higher than the 13.0%
observed in January 2023, and an interest reserve account
equivalent to 3x their next interest payment. In addition, although
they benefit from excess spread, due to their net weighted average
coupon feature, Fitch does not consider this variable.
Operational Risk Mitigated: Pursuant to the servicer agreement,
Banco Pichincha will perform the role of primary servicer. Fitch
has reviewed Banco Pichincha's systems and procedures and is
satisfied with its servicing capabilities. Additionally,
Corporacion de Desarrollo de Mercado Secundario de Hipotecas CTH
S.A. (CTH) has been designated as master and back-up servicer,
mitigating the exposure to operational risk.
IMS Ecuadorian Mortgage 2021-1 Trust
DFC Credit Quality Supports Rating: The rating assigned to the
2021-1 certificates is commensurate with the guarantee provider's
credit quality. The DFC's credit quality is directly linked to the
U.S. sovereign rating (AA+/F1+/Stable), as guarantees issued by,
and obligations of, the DFC are backed by the full faith and credit
of the U.S. government, pursuant to the Foreign Assistance Act of
1969.
Reliance on DFC Guaranty: Fitch assumes the payment on the notes
will rely on the DFC guaranty. Through this guaranty the DFC will
unconditionally and irrevocably guarantee the receipt of proceeds
from the underlying notes in an amount sufficient to cover timely
scheduled interest amounts (considering the minimum between the
class A2 and A4 interest rate minus trust expenses and 3.4%) and
the ultimate principal amount on the certificates.
The DFC guaranty effectively protects noteholders, taking into
consideration the scope of the guaranty, the claim process and the
timing required for the guarantor to disburse the funds to the
issuer.
Ample Liquidity: The transaction benefits from liquidity, in the
form of a five-day buffer between payment dates on the underlying
notes and payment dates on the certificates. Additionally, the
certificates benefit from a three-month debt service reserve
account at the underlying note level and a guaranty fee reserve
account that was funded at transaction closing. This will be
utilized throughout the life of the certificates to ensure the
guaranty fee due to the guarantor is paid in a timely manner.
Fitch considers this sufficient to keep debt service current on the
guaranteed certificates until funds are received under a DFC
Guaranty claim and that the guaranty will not terminate as a result
of a failure to pay the guaranty fee.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
For the RMBS transaction, the ratings are sensitive to the
Ecuadorian sovereign's country ceiling, as well as Banco
Pichincha's (acting as the transaction account bank holder) credit
quality. A downgrade of Ecuador's Country Ceiling to levels below
the transaction current rating or a downgrade of Banco Pichincha
would result in a downgrade of the series A notes. Considering the
performance of the collateral observed and the increased OC levels,
Fitch does not expect any negative rating actions based on asset's
performance.
For IMS Ecuadorian Mortgage 2021-1 Trust, the certificates' rating
is directly linked to the credit quality of DFC, the guaranty
provider. The DFC's credit quality is directly linked to the U.S.
sovereign rating, as guarantees issued by, and obligations of, DFC
are backed by the full faith and credit of the U.S. government,
pursuant to the Foreign Assistance Act of 1969. The rating could be
downgraded if the U.S. sovereign rating is downgraded.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The ratings assigned to the class A notes issued by FIMEPCH 5 are
sensitive to the credit quality of the Ecuadorian sovereign, as
well as to the credit quality of Banco Pichincha (acting as the
transaction account bank holder). An upgrade of Banco Pichincha, or
the replacement by another entity with a higher rating, could
result in an upgrade of the series A notes.
For IMS Ecuadorian Mortgage 2021-1 Trust, the certificates could be
upgraded in the case of an upgrade on the U.S. sovereign rating, as
it could affect the credit quality of DFC.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The IMS certificates are linked to the credit quality of DFC. A
change in Fitch's assessment of the credit quality of the DFC would
automatically result in a change in the Rating on the IMS
certificates.
The ratings on Series A notes from FIMEPCH 5 are driven by the
rating of Banco Pichincha, as it currently acts as a rating cap.
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.
=============
J A M A I C A
=============
[*] JAMAICA: Economy Grew 1.7% in Fourth Quarter of 2023
--------------------------------------------------------
RJR News reports that the Statistical Institute of Jamaica (STATIN)
says the economy grew by 1.7 per cent during the fourth quarter of
2023 when compared to the fourth quarter of 2022.
It noted that this was the result of growth in both the services
and goods producing industries, according to RJR News.
The services industry grew by 2.0 per cent, while the goods
producing industry grew by 0.8 per cent, the report notes.
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.
===========
M E X I C O
===========
BANCO AZTECA: Fitch Lowers LongTerm IDR to 'BB-', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has downgraded Banco Azteca, S.A. Institucion de
Banca Multiple's (Banco Azteca) Viability Rating (VR) to 'bb-' from
'bb', its Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) to 'BB-' from 'BB' and its National Long-Term Rating
to 'A(mex)' from 'A+(mex)'. The Rating Outlooks for the Long-Term
IDRs and National Rating are Stable.
The Short-Term Foreign and Local Currency IDRs and National
Short-Term Rating were affirmed at 'B' and 'F1+(mex)',
respectively. The 'F1+(mex)' Short-Term National Rating is the
higher of two possible options corresponding to the 'A(mex)'
Long-Term National Rating, and reflects Fitch's opinion about the
bank's good funding and liquidity profiles. The government support
rating (GSR) was also affirmed at 'bb-'.
The downgrade follows the heightened risks Banco Azteca is assuming
by the weak corporate governance practices of its controlling group
and the sustained high related-party commercial loans at the bank.
Fitch also considers the deteriorated bank's risk profile as a
result of the riskier underwriting standards in its commercial
portfolio with high concentration per individual borrower that has
influenced its financial performance in the last two years.
KEY RATING DRIVERS
ESG Governance Structure: Fitch has revised the ESG Relevance Score
of Governance Structure to '5' from '4' as high related-party loans
weigh relevantly in Banco Azteca's ratings. The bank's IDRs and
national scale ratings are driven by the bank's stand-alone
creditworthiness reflected in its 'bb-' VR. The VR considers
Fitch's assessment of the bank's business profile (BP) underpinned
by a good and stable market position in consumer lending and retail
deposits, that has resulted in a reasonable financial performance.
However, Fitch adjusted downwards the score of the BP to 'bb' with
a negative trend from 'bb+' stable, as corporate governance
practices around its controlling group has increased the bank's
risks that to some extent are limiting its financial performance.
The negative trend reflects that the BP score could continue with
downward adjustments if corporate governance practices further
impact the bank's financial performance. In the past months a
relevant related-party transaction deteriorated and required and
will continue to require the bank additional loan loss allowances
(LLAs). At YE23, related-party loans represented 28.2% the bank's
common equity Tier 1 (CET1), level that Fitch considers high and
that differs from best international practices.
Systemic Importance Limits Further IDRs Downgrades: Banco Azteca's
IDRs are at the same level of the bank's GSR at 'bb-'. Fitch
considers the bank's good market position and relevant role of
providing financial services to an ample share of the population
will drive the government support in case of need and limit future
IDR downgrades beyond 'BB-'.
That is if Banco Azteca's VR is downgraded to 'b+' or below, the
IDRs and national ratings would be driven by the GSR considering
the 'Higher Of' approach about Fitch's perception of the government
support that the bank could receive, if need arises. As of November
2023, Banco Azteca's deposits were about 2.9% of the Mexican
banking system; while it had a 7.9% share in the consumer lending
segment. In both figures it ranked eighth and fifth, respectively.
Asset Quality Pressured by Credit Concentrations: Fitch considers
the ample experience and long track record in its core business
line, which is mainly focused on middle- to low-income customers.
Banco Azteca has been handling well its core business under the
high inflationary environment despite its more sensitive business
focus on low income individuals. However, Banco Azteca's commercial
loan portfolio underwriting standards continue to add pressure on
its asset quality.
At YE23, Stage 3 loans to total loans ratio decreased to 4.2% from
5.3% in 3Q23, although write-offs increased compared to 2022
(+47.3%) partly by the above mentioned deteriorated related party
loan. At the same date, the adjusted impaired loan ratio as
calculated per Fitch (Stage 3 loans plus write-offs in the last 12
months) was 12.7% (YE22: 10.2%). The top 20 borrowers represented
1.5x CET1, while five represented more than 10% of CET1
individually.
Sensitive Profitability: Banco Azteca's profitability continues to
be benefited from its high interest margin business model. However,
loan impairments charges (LICs) have increased by both, from its
core business and commercial loans. This, despite the bank had
additional LLAs. At YE23, LICs increased 35.5% compared to YE22 and
losses from loan portfolio sales also weigh on the bank's recent
profitability metrics. At YE23, the operating profit to
risk-weighted assets (RWA) ratio was 1.8% (YE22: 1.7%), while LICs
to pre-impairment operating profit ratio rose to 80.8% from 77.3%
in 2022. Fitch considers the bank's profitability performance lags
from the Mexican commercial banking system and will remain
sensitive to asset quality pressures.
Reasonable Capitalization: Capitalization levels of Banco Azteca
remain reasonable with a CET1 to RWA ratio of 14.5%, above 13.7% at
YE22. During the second half of 2023, the bank's core
capitalization ratio was supported by a capital injection of
MXN1.05 billion from its shareholder (Grupo Elektra, S. A. B. de C.
V., rated by Fitch at BB-/Stable), as well as due to better
efficiencies in RWA accounting through models approved by the local
regulator. Fitch expects CET1 ratio may be pressured by the
continued growth of its loan portfolio and credit concentrations,
although it will remain at levels close to 14% and supported by
consistent reinvestment of earnings.
Good Funding and Liquidity Position: Fitch considers the bank's
funding and liquidity position to be its main financial strength,
as it has an ample, diversified and low-cost customer deposit
franchise with proven stability through the economic cycle. At
YE23, customer deposits represented 88.0% of total non-equity
funding and were mainly composed of demand deposits (YE23: 76.8% of
total customer deposits).
At the same date, the loans to deposits ratio was 79.0%, slightly
affected with respect to YE22 and this was mainly explained by a
higher credit growth, although the core metric is still at levels
that compares favorably with peers. Liquidity coverage ratio and
net stable funding ratio remain at sustained levels above the
regulatory minimum.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Banco Azteca's VR could be downgraded if the financial profile
materially weakens due to asset quality deterioration resulting in
an operating profit to RWA metric consistently below 1.25% and the
a CET1 to RWA ratio sustained below 11%. This deterioration must be
accompanied with a weaker business profile reflected in lower
business volumes or corporate governance practices that affect the
bank's financial profile;
- Banco Azteca's IDRs and National Ratings further downgrades are
limited due to Fitch's appreciation of government support in case
of need it.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Banco Azteca's IDRs, VR and National Ratings could be upgraded by
Fitch's appreciation of a reduced risk appetite in its commercial
loan portfolio, in addition to consistently deliver operating
profit to RWA ratio above 2% and CET1 to RWA ratio above 17%;
- Strengthening of corporate governance practices of Banco Azteca's
controlling group that eases Fitch's concerns of reputational risks
could also led to an upgrade.
Government Support Rating (GSR): Banco Azteca 'bb-' GSR reflects
Fitch's expectation that although the bank is not a domestic
systemically important bank (D-SIB), there is moderate probability
of sovereign support in case of need, given the bank's ample base
of retail depositors and moderate market share of customer
deposits.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The GSR could be downgraded if Fitch believes that the
government's propensity to support the bank has declined due to
reasons such as a material loss in the market share of retail
customer deposits.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upside potential for Banco Azteca's GSR is limited and could only
occur over time with a material gain in the bank's systemic
importance.
VR ADJUSTMENTS
Fitch has assigned a Business Profile score of 'bb', which is below
the 'bbb' category implied score, due to the following adjustment
reason(s): Management and Governance (negative).
Fitch has assigned an Asset Quality score of 'b+', which is below
the 'bb' category implied score, due to the following adjustment
reason(s): Concentrations (negative).
Fitch has assigned a Funding & Liquidity of 'bbb-', which is above
the 'bb' category implied score due to the following adjustment
reason(s): Deposit Structure (positive).
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch classified pre-paid expenses and other deferred assets as
intangibles and deducted from total equity due to the low loss
absorption capacity under stress of these assets.
Financial figures are in accordance to the Comision Nacional
Bancaria y de Valores criteria. Figures for 2022 and 2023 include
recent accounting changes in the process to converge to
International Financial Reporting Standards. Prior years did not
include these changes and Fitch believes they are not directly
comparable.
ESG CONSIDERATIONS
Fitch has revised Banco Azteca's ESG Relevance Score of Governance
Structure to '5' from '4' due to the corporate governance concerns
and the relevant related-party transactions. This has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Banco Azteca,
S.A. LT IDR BB- Downgrade BB
ST IDR B Affirmed B
LC LT IDR BB- Downgrade BB
LC ST IDR B Affirmed B
Natl L A(mex) Downgrade A+(mex)
Natl ST F1+(mex)Affirmed F1+(mex)
Viability bb- Downgrade bb
Government Support bb- Affirmed bb-
NEMAK S.A.B.: S&P Alters Outlook to Negative, Affirms 'BB+' ICR
---------------------------------------------------------------
On April 1, 2024, S&P Global Ratings revised its outlook on Mexican
auto supplier Nemak S.A.B. de C.V. to negative from stable. S&P
also affirmed its long-term global scale 'BB+' and national scale
'mxAA-' issuer credit ratings, and its 'BB+' issue-level rating on
Nemak's sustainability-linked bonds due 2028 and 2031. The recovery
rating remains at '3' (56%).
The negative outlook indicates a potential downgrade if EBITDA
remains constrained due to delayed industry-wide electrification
transition, higher inflation, and lower-than-expected light-vehicle
sales worldwide. This would mean that we could lower the ratings in
the next 12-18 months if the company fails to reduce its debt to
EBITDA to close to 2x or if its liquidity position weakens.
Difficult auto industry conditions took a toll on the company's
financial results. Nemak S.A.B. de C.V.'s revenue and profitability
took a hit from supply-chain disruptions, inflationary pressures,
and foreign-exchange volatility (about $44 million) in the past 12
months. To address the situation, the company worked with its
customers to pass through about 70-80% of the increase in raw
materials and labor costs, in both the U.S. and the EU. However,
auto sales in 2023 worldwide did not increase as expected, thereby
affecting the whole vertical integration of the industry. On the
other hand, Nemak implemented discretionary cost reductions and
deployed short week production schedules to partly compensate for
its exposure to the strike against the Detroit Big 3 original
equipment manufacturers (OEMs; GM, Ford, and Stellantis).
Leverage metrics have not yet improved as expected toward 2x, but
Nemak has put in place specific deleveraging targets for the next
12-18 months. In 2023, Nemak's EBITDA was $572 million, below our
expectations of $615 million, and reported adjusted debt was $1.6
billion above our forecast of $1.4 billion. This has raised debt to
EBITDA to 2.8x in 2023, versus our expectation of 2.3x, which was
line with our outlook downside scenario. However, the company
maintains stringent financial policy targets, in line with its
compromises with the board and investors, through which it expects
to bring debt to EBITDA toward 2.0x in the next 12-18 months. These
targets include:
-- Continuity of negotiations with OEMs regarding pass-through of
commodity-price volatility;
-- Reduction in capital expenditure (capex) and rescheduling;
-- Cancellation of dividend payments until leverage targets are
reached;
-- Comfortable debt maturity schedule for the next two years; and
-- Inventory optimization.
S&P said, "Given delays in electrification, we believe Nemak will
benefit from diversification of its installed capacity and order
book. Nemak has diversified its production into electric vehicles
(EVs) and structural components in the past three years, expanding
its installed capacity and order book. This also strengthened
Nemak's relationship with its main customers (OEMs) that allows
linking expected production with investments made in new plants to
ensure future return on capital. Hence, we believe that the
company's operating cash flow will come from internal combustion
engine (ICE) production and EVs. In addition, if the industry
continues to face a prolonged delay in the transition to EVs, Nemak
would expand its cash generation by lowering capex. On the other
hand, if the transition to electrification resumes its pace, Nemak
would benefit from higher margins and revenue, thereby compensating
for higher investments.
"The negative outlook on Nemak reflects our view that its leverage
metrics are weakening because of lower-than-expected EBITDA due to
delayed sales of EV segments in turn delaying the the
materialization of previous investments made in this segment. A
prolonged period of debt to EBITDA close to 3x could lead us to
revise our assessment of the company's financial risk profile to a
weaker category. Hence, we will evaluate if Nemak's initiatives
will affect its financial results in the next 12-18 months."
S&P could lower the ratings on Nemak during the next 12-18 months
if:
-- It posts weaker-than-expected credit metrics, with debt to
EBITDA close to 3x on a consistent basis, due to
lower-than-expected sales, while maintaining FOCF to debt below
10%; or
-- EBITDA margins fall below our expectations toward 9%, reaching
below-average levels, according to our industry thresholds; or
-- Its liquidity position deteriorates due to substantial capex,
extraordinary dividend payments, acquisitions, or lower EBITDA.
S&P could revise the outlook to stable if the company's EBITDA
rises thanks to the recovery of the industry and economic
conditions in North America and Europe, causing Nemak's debt to
EBITDA drop toward 2x and free operating cash flow (FOCF) to debt
above 10%. This could also occur if the company reduces its cost
structure and/or improves efficiencies, while cash flow increases,
and debt funding doesn't rise for the next 12 months.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
ARCELORMITTAL: Sale of Point Lisas Mill Close to Finish Line
------------------------------------------------------------
Trinidad Express reports that the final agreement for the sale of
the former ArcelorMittal iron and steel plant in Point Lisas to TT
Iron Steel Company (TTIS) is expected to take place in a matter of
days, according to at least three people familiar with the
purchase.
The sale is close to being finalised after the company received an
interruptible supply agreement for natural gas from the National
Gas Company Ltd (NGC), along with a company valuation, according to
the sources, notes Trinidad Express.
"The last stage is the valuation by the auditors to ensure that we
are paying the proper stamp duties and then we will make the funds
available and start work on the plant," a source told Express
Business, notes the report.
NGC was only able to agree to an interruptible supply because of
the uncertainty of natural gas output, said an NGC source, the
report discloses.
For years, the State-owned company has struggled to provide its
customers with sufficient gas to operate their plants efficiently,
the report notes.
TTIS had promised last year, when it first announced plans to
purchase the plant, that more than 1,000 jobs would be created
during the refurbishment and start-up phase. Additionally, once
fully operational, the plant would provide long-term employment for
500 skilled workers, the report relays.
"TT Iron believes that restarting the plant will indirectly create
many more jobs—for instance through maintenance and construction
services, port services, downstream manufacturing (for instance of
reinforcing bar, fencing, etc), demand for green hydrogen and
renewable energy," the company said, the report discloses.
In June of last year, TTIS announced its agreement to purchase the
idled iron and steel plant from ArcelorMittal, marking the
culmination of a seven-year period since the Luxembourg-registered
company ceased operations in Trinidad and Tobago due to low global
steel prices, the report relays.
Previous sale negotiations with other potential buyers failed to be
completed, the report notes.
Express Business has been told the company was given its Foreign
Investment License from Finance Minister Colm Imbert, in January.
The plant was initially opened in 1980, and will be subject to
refurbishment works, expected cost of between US$150 million and
US$200 million, TTIS said, the report relays.
"Initial refurbishment and restart of the plant is expected to cost
US$150-200 million ($1-1.4 billion) over the next 24 months with
further investment required thereafter," the company estimated, the
report notes.
The plant is one of the largest steel mills in the Americas and
uses natural gas-based Direct Reduced Iron (DRI) technology with
Electric Arc Furnaces for steelmaking, the report discloses.
This is a cleaner process than is used in about 70% of the world's
steel plants in which traditional high-emission coal-based furnaces
are used, the report says.
The plant has historically used gas, but TTIS plans to transition
to green hydrogen in the coming years as it becomes commercially
available, the company said.
"This will reduce the plant's carbon intensity to 0.4 tonnes of CO2
per tonne of steel produced. Restarting the iron and steel plant
and then transitioning to green hydrogen will put Trinidad and
Tobago back on the map as a world leader on the cutting edge of
low-emission steel production technology," TTIS said, the report
relays.
Its president is expected to be Gus Hiller, a veteran of the steel
industry who once led Nucor's operations in T&T and has managed and
operated steel plants across the US and Canada, the report notes.
Commenting on the purchase agreement, last year Hiller said: "We
believe there is great potential for the plant to return to the
forefront of global steelmaking technology and performance. Our
team was drawn to Trinidad and Tobago due to its strategic
location, skilled workforce, potential to be a hydrogen leader and
an enabling business environment.
"We are confident we will be able to bring on stream and operate an
efficient, cutting-edge steel mill which we expect, and hope, will
start production within the next 12 to 18 months; certainly, no
later than December 2024. The restart of this plant will create a
long-term sustainable industry that generates secure employment and
wealth for the citizens of Trinidad & Tobago for generations to
come," he added.
When the agreement was announced last year, chairman of TTIS Joel
"Monty" Pemberton stated that in addition to providing additional
revenue, significant foreign exchange to the treasury, and
utilising more labour per molecule of natural gas/hydrogen on the
island, "the restart of the local steel industry continues the
vision of the Trinbagonian pioneers who conceived it, and we are
enhancing this vision with the full use of green hydrogen in the
shortest possible time frame; this is the fuel of the future. TTIS
is passionate about the development of the downstream manufacturing
sector of higher value iron and steel products in Trinidad &
Tobago, this will further increase employment and wealth creation
in the country, the report notes.
"Our ESG principles are anchored in producing lower carbon
products, the promotion of entrepreneurial activity in Trinidad &
Tobago through the development of the downstream manufacturing
sector, establishing an apprenticeship program for youth
development, thereby creating sustainable employment for
generations in the clean energy industry," he added.
Commenting on TTIS's acquisition of the steel plant last year,
Christopher Kelshall said: "I am thrilled to see this asset being
acquired by a company focussed on the development of Trinidad &
Tobago, especially with the future use of green hydrogen.
"The investment by experienced industry veterans, will see Trinidad
& Tobago continue to be a credible player in the global steel
industry.
"Further, this investment represents a significant step to continue
to diversify the downstream energy industry in Trinidad and
Tobago."
As reported in the Troubled Company Reporter-Europe in May 2020,
Moody's Investors Service downgraded ArcelorMittal's senior
unsecured ratings to Ba1 from Baa3. Concurrently, Moody's has
assigned a Ba1 corporate family rating and a Ba1-PD probability of
default rating to ArcelorMittal.
*********
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