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/raid1/www/Hosts/bankrupt/TCRLA_Public/240409.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, April 9, 2024, Vol. 25, No. 72 Headlines A R G E N T I N A ARGENTINA: Milei Races to Ease Inflation, Retain Voter Support SCC POWER: Fitch Affirms 'CC' Rating on Sr. Secured Notes C H I L E WOM SA: CEO Leaves Days After Chapter 11 Filing D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: 8 Risks that Will Impact Business Environment J A M A I C A DACOSTA FARMS: Closes on Rising Costs & Falling Patron Numbers JAMAICA: Businesses Expect Stable Inflation for the Next Year P E R U PERU: Chinese Lenders Raise Concerns About $1.3 Billion Port Deal P U E R T O R I C O OPTIME LLC: Unsecured Creditors to Split $12K Over 48 Months T R I N I D A D A N D T O B A G O HERITAGE PETROLEUM: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable TRINIDAD & TOBAGO: Central Bank Maintains Repo Rate at 3.5% - - - - - ================= A R G E N T I N A ================= ARGENTINA: Milei Races to Ease Inflation, Retain Voter Support -------------------------------------------------------------- Buenos Aires Times reports that Javier Milei finds himself up against the clock just four months into his term as Argentina's president. Since taking the reins in December, he has cut federal aid for local governments, devalued the peso, announced plans to terminate 70,000 state jobs and done away with price controls. But for all the economic pain that his "shock therapy" has unleashed on Argentines - annual inflation has soared to 276 percent - voter support is little changed from when he ascended to office, according to Buenos Aires Times. Now, Milei, who won with 56 percent of the vote in November, is in a race against time to bring inflation back down and hold on to that popularity, the report notes. "I'm worried that if he takes too long to lower inflation, and the recession and the job losses along the way are too harsh, the government will start to lose that," said Guido Sandleris, the president of Fundacion Ecosur, professor at Johns Hopkins University and Central Bank governor under former president Mauricio Macri, the report relays. Hurdles abound. Soy, Argentina's top export, is selling at lower prices than expected, jeopardising Milei's hopes for a swift economic turnaround, the report discloses. And the opposition-led Congress, where his party holds only about 15 percent of seats, could curtail his post-victory honeymoon, the report notes. The lower house Chamber of Deputies has already picked apart a version of his sweeping 'omnibus' bill that sought to radically remake the government, even after the legislation had been stripped of its most controversial measures, including tax hikes and the privatisation of state oil company YPF, the report relays. For now, Milei is still coasting. His approval rating is 49 percent, only a three-point slip since December, according to top polling firm Isonomia, the report discloses. The country's sovereign bonds are the best performing among emerging markets so far this year after Ecuador, according to a Bloomberg index, the report relays. Unprecedented Phenomenon Despite half of Argentines saying they struggle to make ends meet each month, around a third of that group still supports the president, Buenos Aires Times discloses. Juan Germano, the director of Isonomia, called this an "unprecedented" phenomenon. "Milei's voters understand the present is bad, but they are very convinced about the future," he added. Many bond traders echo that confidence, notes Buenos Aires Times. Dollar bonds due in 2030 are trading at some 52 cents on the dollar, levels not seen since the notes were issued in a September 2020 debt restructuring, the report relays. The debt, which has handed holders a return of roughly 13 percent since then, has rebounded as Milei took office after months of intense volatility surrounding the libertarian's emergence in last year's vote, the report notes. "Debt performance means investors are giving Milei the benefit of the doubt," said Luca Sibani, a Milan-based money manager at Epsilon SGR, the report disclsoes. Markets have grown less worried Argentina will default in July, when it has US$1.7-billion due on hard currency bonds issued under New York law, the report relays. A local risk barometer is also approaching its lowest level in roughly three years, a signal to some money managers that it might be time to buy into the buzz, the report says. "More investors are at least willing to test the waters," said Mauro Roca, a managing director at the Los Angeles-based TCW Group, the report notes. While Milei's economic reforms started strong, it's all relative: he inherited an economy in tatters, the report relays. For average Argentines, the trauma of hyperinflation still looms large, the report discloses. Roadblocks Yet things could go awry - and fast, the report relays. As the peso has stabilized, monthly inflation has slowed in recent months from a December peak of 26 percent percent, the report discloses. But analysts expect progress to stall as students return to school, unions negotiate wage hikes and the state strips subsidies that could eventually lead to some energy bills skyrocketing by as much as 700 percent, the report notes. Diego Ferro, founder of M2M Capital in New York and a sceptic on Argentina bonds, said Milei wants to do the right thing, but "between trying and accomplishing it, there is a big difference," the report relays "The core of Milei's economic revamp is downsizing the state - in terms of both public expenditure and regulations. The longer it takes for Milei to negotiate it with Congress, the higher the risk that he needs to devalue the currency again, way before he has any chances of lifting currency controls. That would send a new inflationary wave into what is already a rather fragile economy, and could erode his popular support - and his ability to deliver on his plans," said Adriana Dupita, a Bloomberg economist for Brazil and Argentina, the report notes. The weather gods may also scuttle Milei's plans. While Argentina's soy harvest is expected to be bountiful this year, low international prices could limit its export windfall, the report relays. "There's a big question-mark around what will happen in the next harvest, which means the government has no political power to spare," said Ignacio Garciarena, a former agriculture official under Macri, the report discloses. In Buenos Aires, Congress has halted progress on Milei's two biggest initiatives: the omnibus bill, which sought to expand executive powers, slash spending and reform the political system, along with a decree that deregulated vast swathes of the economy, the report says. Milei got word of the lower house's evisceration of the omnibus, the centrepiece of his shock therapy agenda, while on a trip to Israel, the report relays. From there, he ordered his top advisor to kill the legislation and took to X to launch a tirade against the lawmakers who defied him, branding them "beasts" and "traitors," the report notes. Following a spat between Milei and Argentina's provincial governors over a local-funding shortfall, in March a coalition of Peronists and moderates from the south overturned his executive decree in the senate, the report notes. It now awaits its fate in the lower house, the report relays. Milei has invited Argentina's governors and the mayor of Buenos Aires City to sign an agreement by May 25 that will offer them some fiscal relief in exchange for backing his ambitious reforms in Congress, the report discloses. After meeting members of Milei's Cabinet on March 18, Margarita Stolbizer, a moderate congresswoman of the sort that Milei must court, said his government has, finally, begun listening to the other side, the report relays. "The problem is how long that actually lasts and if it coincides with the president's strategy," she said. "Or if tonight, the president will take to Twitter and insult us again," she added, according to Buenos Aires Times. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Javier Milei is the current president of Argentina after winning the November 19, 2023 general election. He succeeded Alberto Angel Fernandez in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. The IMF's executive board completed on August 23, 2023, the fifth and six reviews of Argentina's 30-month Extended Fund Facility (EFF), and approved a US$7.5-billion disbursement to Argentina as part of the larger program, which refinances payments Argentina owes the institution from a previous bailout that failed to stabilize the economy in 2018. Argentina would receive another IMF disbursement in November of about US$2.75 billion pending another staff-level agreement and board approval. S&P Global Ratings, on March 15, 2024, raised its local currency sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale rating to 'raB+' from 'SD'. S&P also raised its long-term foreign currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed its 'C' short-term foreign currency rating. The outlook on the long-term ratings is stable. In addition, S&P revised its transfer and convertibility assessment to 'CCC' from 'CCC-'. S&P said the stable outlook on the long-term ratings balances the risks posed by pronounced economic imbalances and policy uncertainties with the favorable change in near-term debt service obligations. S&P also expect no further debt exchanges that it would likely consider to be distressed. Fitch Ratings upgraded on June 13, 2023, Argentina's Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from 'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'. Fitch typically does not assign Outlooks to sovereigns with a rating of 'CCC+' or below. The upgrade of the FC IDR reflects that Fitch no longer deems a default-like process to have begun, as the authorities have not signaled a clear intention to follow through with an intra-public debt swap announced in March. The new 'CC' rating signals a default event of some sort appears probable in the coming years, regardless of the outcome of upcoming elections. The affirmation of the LC IDR at 'CCC-' follows the peso debt swap in June that Fitch did not deem to be a "distressed debt exchange" (DDE). Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. SCC POWER: Fitch Affirms 'CC' Rating on Sr. Secured Notes --------------------------------------------------------- Fitch Ratings has affirmed SCC Power Plc's $17.861 million first-lien senior secured notes due in 2028, $310 million second-lien senior secured notes due in 2028 and $200 million senior secured notes due in 2032 at 'CC'. RATING RATIONALE The rating reflects SCC Plc's operational stage, moderate operating risks and SCC's dependence on the country's off-taker and electricity market coordinator, Compania Administradora del Mercado Mayorista Electrico (CAMMESA). Fitch views this exposure as systemic but strongly reliant on federal government subsidies. The rating also reflects the weaker debt structure, relying on refinancing and weaker covenant package that allows for some additional indebtedness, which could be preferred in the waterfall ranking. The debt also bares unhedged financial risk, after the PPAs (Power Purchase Agreements) mature, which will be ARS denominated and exposed to FX devaluation. The project also benefits from a six-months debt service reserve account. Ultimately, the ratings reflect SCC's weaker financial profile as its debt matures and weaker assessment for refinancing risk. Additionally, capital controls imposed by the Argentinian Central Bank may provide difficulties in paying upcoming debt service in June 2024 and throughout 2024. After the expiry of the regulated PPAs, in December 2027, the SCC project will be fully exposed to merchant revenues (spot capacity payments) and unhedged financial risks as revenues will be peso denominated. Fitch believes refinancing will be challenging, but possible as the new sponsor is experienced with thermal power plants and Argentina's market framework. The sponsor plans to optimize SCC's cash generation after the PPAs expire, which may support refinancing in 2028 and 2032. KEY RATING DRIVERS Operation Risk - Midrange Internally Operated Assets with Parts Supply at Fixed Prices [Operation Risk: Midrange] SCC's plants are operated in-house by a trained team and overseen by experts from ultimate sponsor, MSU Energy Energy S.A., which also owns three other gas thermal power plants, that together comprise 750 MW. Fitch believes that the sponsor's experience in operating similar plants as a positive for the project. Ultimately, the overhauls are fixed price through long-term agreements with full subsidiaries of Siemens S.A. Supply Risk - Midrange Fuel Supply Fully Mitigated by the Revenue Framework [Supply Risk: Midrange] Both oil and gas are fully supplied by CAMMESA, the projects' sole off-taker. As per the PPA and spot framework, in case of any supply failure the project is not obligated to dispatch, and still receives its fixed capacity payment. This feature helps isolate fuel supply risk to the project. Even after the PPA's expire, per the current regulations, CAMMESA would still be responsible for the fuel supply. Revenue Risk - Weaker Weak Counterparty and Relevant Exposure to Merchant Prices [Revenue Risk: Weaker] The thermal plants' sole off-taker is CAMMESA, a private company which is the wholesale power market administrator and operator in Argentina. Fitch views CAMMESA's payment risk as systemic; however, strongly dependent on transfers from the national government. Due to Argentina's power sector characteristics, Fitch views the credit quality of the systemic risk as one notch below Argentina's Local Currency Issuer Default Rating (IDR). Until 2027, the projects' revenues will come from USD denominated fixed capacity payments that cover fixed costs and debt service. From 2028 to 2032, after most of the PPA's expire, the project will rely on spot price revenues, which are indexed in Argentinian pesos and adjusted by the government. Debt Structure - 1 - Weaker Non-Amortizing Debt With Cash Sweep Mechanism [Debt Structure: Weaker] The debt structure of each of the three notes is non-amortizing, with a bullet payment at the maturity dates. Nonetheless, the notes count with a cash sweep mechanism that is triggered quarterly whenever unrestricted cash amounts are higher than USD15 million. Additional debt can be issued for the expansion of some of the already existing power plants, and remediation efforts for one plant, as well as refinancing of current notes without a new rating confirmation. The debt also relies on a six-month debt service reserve account (DSRA). There is no waterfall structure for the onshore accounts and the intercompany loans among subsidiaries are allowed. Financial Profile Under Fitch's base case, the first-lien notes are expected to be paid before maturity through the cash sweep mechanism. The second- and third-lien notes are exposed to FX risk and will need to be refinanced at maturity. The refinancing depends on management's ability to reduce costs and maintain the plants availability levels, and also secure positive cash flows after the current PPA's mature. Despite the expected weak financial profile at notes' maturity, as revenues are expected to be much lower, the ratings reflect Fitch's view that SCC should be able to refinance. This is due to the sponsor's sound access to local market, demonstrated experience with thermal plants operation and the perpetual tenor of the asset's permits. PEER GROUP SCC Power's closest peer is MSU Energy S.A. (MSU Energy; Long-Term Foreign Currency and Local Currency IDRs CCC-), an Argentine electric power company that controls thermal power plants. Despite having the same ultimate parent as SCC, both are evaluated separately, given their different corporate and debt structures. MSU Energy's ratings reflect its dependence on CAMMESA. However, it has a fully amortizing debt that will mature when PPAs are still in place. Therefore, different from SCC Power, MSU Energy's rated notes are not exposed to refinancing risk or spot capacity revenues. Fitch expects MSU Energy's leverage to continually reduce to 3.8x by 2025, which combined with the later factors, justifies its higher rating. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Substantial worsening of near-term operating performance relative to Fitch's expectations; - Significant payment delays from CAMMESA; - Impairment of project's liquidity levels; - Impossibility of upstreaming cash from the operating companies to the issuer due to capital controls or other market dynamics. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Successful optimization of SCC's future cash flow by management, as evidenced by the effective refinance risk mitigation and the successful remonetization of Matheu's plant equipment; - Further regulatory developments leading to a market less reliant on support from the Argentine government or a sovereign upgrade that could positively affect the company's collections/cash flow. TRANSACTION SUMMARY N.A. CREDIT UPDATE The three operational plants Las Palmas, Lujan and San Pedro simply cycle have reached operations through February, April and May 2018, after the PPA stablished commencement date, and have been paying COD delay penalties, imposed by the regulator. After several injunctions that prohibited operations due environmental related claims, the Matheu plant has been authorized to operate from January 2023 up to July 2023, and remains non-operational after that. On November 2023, the Energy Secretariat in Argentina issued a resolution in which the company was authorized to a new 15-year USD denominated PPA, through a new site, Abasto in the municipality of Brandsen, in the Buenos Aires Province. The issuer expects to use the Matheu's equipment to support the new Abasto project. The PPA hasn't been signed yet, and the process is currently on-hold by the new government instructions. Prior to the actual signing of the new Abasto PPA, the Matheu PPA will be terminated. Also, in late April 2023, the Argentinian Central Bank issued a communication establishing new requirements for access to foreign exchange market, that among others required approval from the Central Bank for the payment of interest on related party loans. This restriction imposes additional difficulties for the upstreaming of cashflows from the Argentinian companies to the issuer. Throughout 2023, the issuer was able to honor minor debt service payments due to the grace period and PIK (Payment-In-Kind) period of the notes that will end in June 2024, when the issuer is expected to have more significant debt service payments. Las Palmas, Lujan and San Pedro's simple cycle have operated at an average 93% availability rate, with Lujan plant's availability levels being slightly below the average from January to September 2023. In September 2023, management communicated the termination of the Las Palmas' and San Pedro's plants operations agreements with Siemens, for a USD 4.8 million termination penalty. The operation and maintenance will be handled by an internally hired team, instructed by MSU's Energy Personnel. The same operational scheme is applied through all the MSU Energy plants. Additionally, the conversion to combined cycle of the San Pedro plant was announced on March 14th. The combined cycle will serve an additional 15-year PPA in the regulated market, whose revenues are committed to another financing and will not be used to repay the SCC Power notes debt. Throughout the year of 2023 up to March 2024, the currency devaluation represented almost 430%. The currency devaluation should have little impact on cashflows throughout the PPA contracted period, that ends in 2028. From 2029 onwards, the foreign exchange currency devaluation has negatively impacted the cashflow generation, based in ARS tariffs. Through January to September 2023, the company's EBITDA and net cashflow generation of the period were approximately USD 52 million and USD 21 million, in line with management's prior expectations for the period. FINANCIAL ANALYSIS Given the level of the rating, Fitch did not develop base and rating case scenarios. Fitch performed a qualitative assessment of the level of default risk and the extent of any remaining margin of safety indicated by the issuer's overall operating and financial risk profile. SECURITY Secured first-lien notes: US$17,861,000; Interest Rate: 6% ; Maturity: 2028; Secured second-lien notes: US$310,000,000; Interest Rate: 8%; Maturity: 2028; Secured third-lien notes: US$200,000,000; Interest Rate: 4% ; Maturity: 2032; Amortization of all the notes is bullet at the maturity date and the debt structure is secured in first priority lien by a pledge of substantially all assets of the issuer and its subsidiaries, including receivables and equipment, and counts with a cash sweep mechanism. Criteria Variation A variation was proposed to the treatment of systemic risk defined in the Infrastructure and Project Finance Rating Criteria, which would in principle detach payment risk from any individual counterparty's credit quality. CAMMESA's payment risk is viewed as systemic due to the role it plays in the country's power system. However, it is strongly dependent on transfers from the national government, which have been significantly delayed over the years. Therefore, systemic risk in the Argentinian power sector is viewed to have a credit quality one notch below Argentina's Local Currency IDR. 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 ----------- ------ ----- SCC Power Plc SCC Power Plc/Energy Revenues - First Lien/1 LT LT CC Affirmed CC ========= C H I L E ========= WOM SA: CEO Leaves Days After Chapter 11 Filing ----------------------------------------------- Clara Geoghegan at law360.com reports that WOM SA has replaced its CEO days after it filed for bankruptcy in Delaware, the company announced. WOM is a Chilean telecommunications provider, focused on offering mobile voice, data, and broadband services, along with a rapidly expanding "Fiber to the Home" broadband offering, to consumers and businesses in Chile. Since the acquisition of Nextel Chile in 2015 through Novator Partners LLP's investment vehicle NC Telecom AS, WOM has expanded from having virtually no market share to establishing itself as the second-largest mobile network operator in Chile. WOM sought relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Del. Lead Case No. 24-10628) on April 1, 2024. In the petition filed by Timothy O'Connoer, as independent director, the Debtor reports estimated assets and liabilities between $1 billion and $10 billion each. The Honorable Bankruptcy Judge Karen B. Owens oversees the case. The Debtors tapped WHITE & CASE LLP as general bankruptcy counsel, RICHARDS, LAYTON & FINGER, P.A., as local bankruptcy counsel, RIVERON CONSULTING LLC as financial advisor, and ROTHSCHILD & CO US INC. as investment banker. KROLL RESTRUCTURING ADMINISTRATION LLC is the claims agent. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: 8 Risks that Will Impact Business Environment ----------------------------------------------------------------- Dominican Today reports that LLYC, a global corporate affairs and marketing firm, presented the report "Dominican Context: Challenges for the business environment," revealing the country's main reputational risks for the current year. This comprehensive analysis evaluated over 3 million digital mentions, identifying the most critical challenges facing the Dominican Republic in public and private spheres, according to Dominican Today. The report highlights that instability and forced migration from Haiti, the effects of El Nino and Hurricanes, the impact on tourism from multi-regional conflicts, and misinformation are among the main risks, underscoring the need for informed and strategic decision-making to address these issues. This analysis was based on the work of specialized Public Affairs, Risk, and Deep Learning teams, which employed advanced artificial intelligence and machine learning tools, the report relays. "Dominican Context: challenges for the business environment" offers essential strategic insight at a crucial time for the country: presidential elections combined with a convulsive and volatile international environment. The report provides a vital decision-making tool for corporate entities and the subsequent political leaders, highlighting the importance of proactively and effectively addressing these reputational risks,Dominican Today discloses. Dominican Today relays that the construction of the Dominican Republic Reputational Risk Prioritization Map was carried out by LLYC's team of international experts, employing data intelligence supported by advanced artificial intelligence and machine learning tools and the team's analysis of country indicators and reports, which resulted in the identification and prioritization of the challenges for the country: Risk 1. Impact on tourism due to multi-region hostilities: in the face of fear due to multiple war conflicts, we analyzed what actions can be implemented as a country to protect one of the main economic activities. Risk 2. El Nino phenomenon and hurricanes: as an island nation, extreme weather events have a cross-cutting impact on the country's economic activities, so implementing resilient infrastructure and establishing early warning systems to protect the population and minimize financial losses are vital actions to address them. Risk 3. Instability and forced migration from Haiti: The international community's and companies' perceptions of the impact of the prolonged crisis in the neighboring country pose a significant long-term threat to the Dominican Republic. Risk 4. Inflation and its economic impact: the economic challenge would require resilience measures for the country to adapt to a volatile global environment. Likewise, public-private collaboration that guarantees investment conditions will be vital this year. Risk 5. Elections, new government, or ratification? This topic concentrates the greatest volume of conversation analyzed, as well as the diversity of communities and scope. Uncertainty, polarization, and confrontations between the different political forces are evident. Risk 6. Cybersecurity and the role of AI: This is an accelerating territory with very limited communities. The media mainly exposes capabilities, applications, and associated risks. Risk 7. Citizen security: Given this risk, it is essential to design strategies to mitigate the problem and strengthen a more favorable environment for its citizens and, therefore, for businesses. According to the Reputational Risk Prioritization Map, this risk has a high impact and moderate probability. Building solutions that foster social peace will allow for a better development of the country. Risk 8. Disinformation: In the Dominican context, disinformation is presented as a crucial risk for public opinion, as some political organizations and influential figures may contribute to the spread of unverified information. According to Iban Campo, General Director of LLYC Santo Domingo, "Managing the context and not only reacting to it will allow organizations to design mitigation strategies to face the detected impact, or take an anti-fragility perspective that allows companies to achieve their business objectives and protect their reputation," the report relays. According to Renata Sanchez, Director of Corporate Affairs at LLYC Santo Domingo, "In an environment of permacrisis and constant uncertainty, in which risks are much more complex, having the information supported by insights from Big Data allows designing more powerful strategies in the volatile environment that characterizes the global and Dominican environment," the report discloses. This Reputational Risk Prioritization Map aims to provide the country with an essential tool for making informed and strategic decisions, both for corporate entities and for upcoming leaders, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCR-LA reported in April 2019 that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. On December 4, 2023, the TCR-LA reported that Fitch Ratings has affirmed Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the Outlook to Positive from Stable. Fitch says the Positive Outlook reflects a trend improvement in governance, and robust growth prospects that should lead to continued gains in per capita income. According to Fitch, growth has decelerated in 2023, but it expects Dominican Republic to recover to high levels during 2024-2025. External liquidity metrics have improved in recent years, and foreign currency share of government debt is on a downward path. In August 2023, Moody's Investors Service changed the outlook on the Government of Dominican Republic's ratings to positive from stable and affirmed the local and foreign-currency long-term issuer and senior unsecured ratings at Ba3. Moody's said the key drivers for the outlook change to positive are: (i) sustained high growth rates have enhanced the scale and wealth levels of the economy; and (ii) a material decline in the government debt burden coupled with improved fiscal policy effectiveness will support medium-term debt sustainability. The affirmation of the Ba3 ratings balances the Dominican Republic's strong economic growth dynamics and relatively contained susceptibility to event risks, with a comparatively weaker fiscal position, reflecting long-standing credit challenges which include: (i) a shallow revenue base compared to peers, (ii) weak debt affordability metrics, and (iii) high exposure to foreign currency borrowing. S&P Global Ratings, in December 2022, raised its long-term foreign and local currency sovereign credit ratings on the Dominican Republic to 'BB' from 'BB-'. The outlook on the long-term ratings is stable. S&P affirmed its 'B' short-term sovereign credit ratings. S&P also revised its transfer and convertibility (T&C) assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12-18 months that will likely stabilize the government's debt burden. In February 2023, S&P said its BB ratings reflect the country's fast-growing and resilient economy. It also incorporates the country's historical political and social challenges in passing structural reforms to contain fiscal deficits, despite recent improvements in the electricity sector. The ratings are constrained by relatively high debt, a hefty interest burden, and limited monetary policy flexibility. ============= J A M A I C A ============= DACOSTA FARMS: Closes on Rising Costs & Falling Patron Numbers -------------------------------------------------------------- Dashan Hendricks at Jamaica Observer reports that St. Catherine-based family fun park Dacosta Farms and Attractions shuttered its doors on Tuesday, April 2, with the company telling the Jamaica Observer that the action was spurred by it being unable to earn enough from dwindling clientele to keep open. "Since COVID, the business has been in a nosedive," Dave Dacosta, founder and owner of Dacosta Farms and Attractions, told the Business Observer. "I couldn't recoup the rising costs I was facing because I was down in the hole. I borrowed a lot of money to keep the business going, but unfortunately, now I have to make a choice - either it goes or I go down with it, and I don't want to go down with it," he added. Jamaica Observer notes that the attraction, which is located at Hill Run, between Spanish Town and Portmore, is registered as a tourist attraction but gets most of its patrons from the two St Catherine towns and Kingston. He said for those who visit, "it is their Disney World and resort". Most are returning customers who he admits will be disappointed, the report relays. Dacosta said before COVID-19 the location attracted about 700 people on average, each weekend day - Saturday and Sunday - to cover the cost of operating overall since it opened 10 years ago, the report discloses. Dacosta Farms and Attractions operated from Wednesday to Sunday and offered activities such as dune buggy driving, a water park, paintball shooting, roller coaster rides, and train rides as well as a bar and grill on the 86-acre property, the report notes. In the past, the area, which was an old fish farm, allowed patrons to practise their fishing skills with the catch either cooked and consumed at the location or taken home for a meal at a later time, the report says. But Dacosta said since reopening fully two years ago, after the lifting of restrictions aimed at keeping the COVID-19 disease under control, fewer people are patronising the attraction, the report relays. "We need about 500 to 600 persons per weekend day to keep the doors open, and we not getting that," Dacosta added. "I don't know what's causing that. It seems the people are having limited disposable income," he added. It is the second attraction to close its doors in recent times, the other being the Negril-based Kool Runnings. A notice on social media indicated that it was closed permanently, the report notes. Efforts to reach that attraction for comments proved futile, though online it was listed as still operating and is scheduled to open at 10:00 am Wednesday, April 3, the report adds. The closure of Dacosta Farms and Attractions puts 31 people out of work. Dacosta said though "it hurts my heart to close the property", he "couldn't afford to keep it open anymore", having used up all his credit line with the bank, he added. "It put me in a real jam. I am going to sell part of the property to repay the debt and move forward. I never expected it to put me in such a hole," he said as he revealed the debt the property is in amounts to "about $50 million," the report relays. "I want to get back on track as quickly as possible, because no way we can start another business while owing the bank. We not going to get no money to borrow. It's a sticky situation. People see it running and think that you are making money, but they don't know the expenses. The insurance is so high, everything is so high. I really can't explain. I was just trying and trying and hoping for better, but it's not happening," he continued, the report says. Dacosta admits that when patron numbers were better, the business was doing good and paying the bills, the report notes. "It's not something that you can get rich out of, but it paid the bills . . . but things like security costs was too high for us. If the attraction was smaller and didn't have the high overheads with electricity and security that the tourism authorities asked us to have to keep the place running, we could have survive," the report relays. He said he pleaded with the tourism authorities for help, and to even have it listed among the itineraries for cruise passengers visiting nearby Port Royal, but to no avail, the report discloses. Monday, April 1 was the last day it was opened to the public. On that day, Dacosta said about 220 people visited, which is half what is needed to keep the doors open, the report notes. The revenue earned from them he said is just enough to cover staff costs with other expenses taken care of through loans or personal resources, the report relays. As he reflected on a decade of work he told the Business Observer, "It was good when it was good. But sometimes you have to move on. It's hard to say, but you have to move on," he added. JAMAICA: Businesses Expect Stable Inflation for the Next Year ------------------------------------------------------------- RJR News reports that the Bank of Jamaica says businesses expect inflation to be broadly stable for the next year. In its most recent MPC Report, the BOJ said business inflation expectation for the year starting January, should be about 8.3 per cent, according to RJR News. However, inflation is projected to remain above the central bank's 4 to 6 per cent target range over the March 2024 to June 2025 quarters, the report notes. The BOJ says the higher inflation projection is linked to the continuing impact of past and impending increases in public passenger vehicle (PPV) fares, the report relays. It says, without the impact of the two increases in PPV fares, inflation would fall within the target range for most of 2024, the report discloses. The central bank says, however, that the risks to the inflation outlook are balanced, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. In October 2023, Moody's upgraded the Government of Jamaica's long-term issuer and senior unsecured ratings to B1 from B2, and senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has been changed to positive from stable. The upgrade of Jamaica's rating to B1 reflects the government's sustained commitment to fiscal consolidation and debt reduction. The positive outlook reflects Moody's assessment that a continuation of the favorable fiscal trajectory will further increase Jamaica's credit resilience. S&P Global Ratings raised on September 13, 2023, its long-term foreign and local currency sovereign credit ratings on Jamaica to 'BB-' from 'B+', and affirmed its short-term foreign and local currency sovereign credit ratings at 'B'. The stable outlook reflects S&P's expectation that the government will remain committed to prudent fiscal policies and reducing debt, as well as supportive economic policies including a flexible exchange rate regime and effective monetary policy. In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. ======= P E R U ======= PERU: Chinese Lenders Raise Concerns About $1.3 Billion Port Deal ----------------------------------------------------------------- Bloomberg News reports that Chinese lenders are concerned about future investments at a $1.3 billion port in Peru set to be inaugurated this year, executives told a congressional committee. Peru's government is trying to revoke a deal that granted Chinese state-owned company Cosco Shipping exclusive rights to run the new Chancay Port, according to the report. While most major Peruvian ports have a single operator, Peru argues it didn't have the legal authority to grant the new facility the same treatment, the report notes. "We have received communication from the syndicated banks that gave us the loan and from Cosco saying 'What is going on here, we don't understand,'" Carlos Tejada, adjunct general manager of the Chancay Port, told lawmakers, the report relays. He added that investors have "serious concerns" about continuing to finance future stages of the project. The port, minority owned by Volcan Cia Minera, is set to transform South American trade by creating a direct line from Peru's Pacific Coast to Shangai. China is Peru's biggest trading partner. Chancay was financed with a $975 million loan provided by a group of lenders, including Bank of China and China Minsheng Banking Corp, the report adds. ===================== P U E R T O R I C O ===================== OPTIME LLC: Unsecured Creditors to Split $12K Over 48 Months ------------------------------------------------------------ Optime LLC filed with the U.S. Bankruptcy Court for the District of Puerto Rico a Small Business Disclosure Statement describing Chapter 11 Plan dated March 28, 2024. The Debtor is a corporation duly organized under the laws of the Commonwealth of Puerto Rico. Debtor is in the business of manufacture and sale of textile products, specifically sports clothing and uniforms, among others. The Debtor's business operates from its facilities in Cidra, Puerto Rico and serves directly the nearby cities in the center and east of the Island, however due to the internet communications it also serves clients throughout the Island. OPTIME LLC manufactures and sells sport uniforms, t-shirts, jackets and some other clothing for sports teams, schools, organizations and for individuals as well. Mr. Jose Joel A. Vazquez Vicente is the President and 100% shareholder of the corporation. Since the moment the corporation began operations to the date on which the bankruptcy petition was filed, the officer and director in control of the Debtor has been José Joel A. Vazquez Vicente, President. On August 18, 2023, a seizure notice on Debtor's bank accounts was received from the Puerto Rico Treasury Department due to accumulated sales taxes (IVU) debts. As a direct consequence, the Corporation's President decided to evaluate the possibility of filing of a bankruptcy petition and chose to file a Chapter 11 Petition to create a plan that would allow him to pay off this debt and continue operating the business. Class 1 consists of General Unsecured Claims. This Class shall receive 48 monthly payments of $250.00 each until year 2028. This Class will receive a total distribution of $12,000.00. This class is impaired. The allowed unsecured liabilities total $21,740.61. Payments and distributions under the Plan will be funded by the continued operation of the business of the debtor. A full-text copy of the Disclosure Statement dated March 28, 2024 is available at https://urlcurt.com/u?l=n7EGaq from PacerMonitor.com at no charge. Counsel to the Debtor: Nilda M. Gonzalez-Cordero, Esq. NILDA GONZALEZ-CORDERO LAW OFFICES P.O. Box 3389 Guaynabo, PR 00970 Tel. (787) 721-3437 (787) 724-2480 E-mail address: ngonzalezc@ngclawpr.com About Optime LLC Optime LLC, is in the business of manufacture and sale of textile products, specifically sports clothing and uniforms. The Debtor filed a Chapter 11 bankruptcy petition (Bankr. D.P.R. Case No. 23-02908) on September 14, 2023, disclosing under $1 million in both assets and liabilities. The Debtor is represented by Nilda Gonzalez Cordero, Esq., of Nilda Gonzalez-Cordero Law Offices. ===================================== T R I N I D A D A N D T O B A G O ===================================== HERITAGE PETROLEUM: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Heritage Petroleum Company Limited's (Heritage) Long-Term Foreign and Local Currency Issuer Default Ratings at 'BB' and assessed the Standalone Credit Profile at 'b+'. The Rating Outlook is Stable. Fitch has also affirmed the senior secured notes of $500 million due 2029 at 'BB'. Heritage's rating reflects its strategic importance to Trinidad and Tobago. Heritage and its guarantors, Trinidad Petroleum Holdings Limited (TPHL) and Paria Fuel Trading Company, play a key role in the government's oil and gas development plan, and are a material source of government revenue and economic development in the country. KEY RATING DRIVERS Strategic Importance for Trinidad and Tobago: Heritage's ratings reflect the company's strategic importance for oil production in Trinidad and Tobago, representing over half of crude production in the country in 2023. Over the rated horizon, Fitch expects total production to grow from 43,000boed in 2023, to 52,000boed in 2026. The government take (royalties, supplemental petroleum taxes, and production taxes) is estimated to average USD18.51 per barrel through the rated horizon. The government has supported Heritage in the past by waiving its supplemental petroleum tax for two years in 2019. Stable Production Profile: Heritage's production is expected to average 49,000 boed through the rating horizon, which places the company firmly in the 'b' category. 2023 production was estimated to average 43,000 boed, reflecting production figures are a rating constriction. 1P reserve life of 7.2 years is strong and consistent with a higher rating category. Heritage has demonstrated an ability to replace reserves at a rate of 100% on average in the last three years, and Fitch assumes the company will be able to continue to replace reserves at the same rate of 100% through the rating horizon given the aggressive growth campaigns of 2023 and 2024. High Government Take: Royalties plus taxes and dividends are estimated to average USD28.57boe through the rating horizon, which further highlights the importance of cash flow from Heritage to the Trinidadian government and subsequent reflection of the credit profile of the government on that of the company. Fitch estimated Heritage's half-cycle cost of production at $22.56boe in 2023. Government take was estimated to be $29.81boe in 2023. The estimated netback in 2023 was $54.44boe based on a realized crude export price of $77/bbl. Manageable Leverage Profile: Fitch estimated Heritage's gross leverage, defined as total debt to EBITDA, to be 2.0x in 2023. The estimated net leverage was 1.5x in 2023 and Fitch estimates this metric to average 2.0x over the rated horizon. Total debt to 1P is estimated to be $6.44/boe and total debt to PDP at $8.55/boe for 2023, which is average for the peer group. On average, EBITDA will cover debt service (amortizing debt and interest expense) 2.5x between 2023 and 2026. DERIVATION SUMMARY Heritage Petroleum Company Limited compares most closely to other rated government-related entities (GREs) in the region including Ecopetrol (BB+/Stable), Pemex (B+/Stable), Petrobras (BB/Stable), and YPF (CCC-). Heritage's production is concentrated in oil. Its total production in 2023 represented 64% of total oil production in the country. This compares to Pemex whose oil production is 70% of the country's total output, Ecopetrol at 85%, Petrobras at 95% and YPF at 25%. Fitch views Heritage and all of its GRE peers as strategically important for the energy security of their respective countries. Heritage's half-cycle cost of production is in line with its peers. For 2023, Fitch estimates the company's half-cycle cost was $22.6 boe. This compares most closely to Ecopetrol whose 2023 half-cycle cost was $21.6boe vs. Petrobras at $13.6boe, PEMEX at $35.6boe, and YPF at $27.2 boe. Heritage has the highest government take among its peers. Fitch estimates its government take (royalties, supplemental tax and production taxes) was $19.03boe in 2023. Fitch estimated Ecopetrol at $11.0boe, PEMEX at $5.2boe, Petrobras at $7.0boe, and YPF at $6.4 boe in 2023. Heritage has an estimated stable reserve profile with a 1P reserve life of 8.2 years in 2023, which is higher than YPF (6.2) and Ecopetrol (7.0), lower than Petrobras (10.8), and in line with Pemex (8.0). Fitch estimated Heritage's pro forma gross leverage (defined as total debt to EBITDA) at 2.0x in 2023 and its estimated total debt to 1P at $6.44boe. This compares favorably to Pemex at 5.1x and $14.22 boe per 1P. Ecopetrol's estimated leverage was 2.0x and $14.27boe and Petrobras' was 0.5x and $2.64boe and YPF at 2.0x and $7.64boe, both lower than Heritage. Heritage is in an operational category of its own compared to the national oil and gas producers in the region. For this reason, Fitch is including four issuers as a second group of peers, who operate as independent oil and gas producers in the region: GeoPark Limited (B+/Negative), Frontera Energy Corporation (B/Stable), Gran Tierra Energy Inc. (B/Stable), SierraCol Energy Limited (B+/Stable). Fitch estimates Heritage's production at 43,000 boed in 2023. Its production profile compares favorably to independent oil and gas producers: Geopark's production was 37,000 boed, Frontera was 39,000 boed, and Gran Tierra was 33,000 boed. Heritage is line to its peer SierraCol with a production of 43,000 boed in 2023. Heritage's 1P reserve life of 7.2 years in 2023 compares favorably to its independent oil and gas producer peers: Geopark with 5.2 years, Frontera with 7.6 years, Gran Trierra with 7.6 years, and SierraCol 5.3 years. However, Heritage's gross leverage of 2.0x in 2023 compares unfavorably to its peers: Geopark at 1.1x, Frontera at 1.1x, Gran Tierra at 1.4x and SierraCol at 1.0x. KEY ASSUMPTIONS Fitch made the following Key Assumptions within the Rating Case of the issuer: - Fitch's price deck for Brent of $82bbl in 2023, $80bbl in 2024, $70bll in 2025 and $60bbl long term; - Discount of $3.0bbl to Fitch's Brent price deck; - Average oil production of 45,600bbld between 2024 through 2027; - Production cost of $12.0bbl between 2024 through 2027; - Royalties of 10% per bbl over the rated horizon; - Supplemental petroleum tax (SPT) of 13% per bbl over the rated horizon; - Production tax of $2.72bbl over the rated horizon; - SG&A of $2.46bbl over the rated horizon; - D&A of 5.5% of revenue over the rated horizon; - Royalty income of 3.9% to oil crude and natural gas sales over the rated horizon; - Natural gas liquids sales of 0.1% to oil crude and natural gas sales over the rated horizon; - Corporate Tax rate of 50% over the rated horizon; - Purchases of TTD2,000 per annum over the rated horizon; - Effective cash tax rate of 30% over the rated horizon; - Capex budget of $375 million over the rated horizon, an average of $125 million per annum; - Reserve replacement ratio of 100%; - Dividends payment of 20% to EBITDA per annum. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Material improvement in the country's overall economic condition. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A deterioration of Heritage's financial flexibility, coupled with government inaction to support liquidity, potentially resulting from continued negative FCF or a material reduction of the company's cash on hand, credit facilities and restricted capital markets access; - Sustainable net production falls below 35,000 boed; - Reserve life declines to below 7.0 years on a sustained basis; - A significant deterioration of total debt/EBITDA to 3.0x or more. LIQUIDITY AND DEBT STRUCTURE Adequate liquidity: Heritage reported USD212 million in cash as of YE 2023 and USD191 million as of December 2023. Fitch expects manageable debt maturity consisting of (i) a short-term portion of debt of around USD57 million as of YE2023; (ii) the company is expected to pay on average USD62million - US$114 million per annum in amortizations related to its USD475 million Term Loan over YE 2025 through YE 2029; (iii) and its 2029 notes of USD500 million will be payable in August 2029. Over the rated horizon, the company is expected to be FCF neutral. ISSUER PROFILE Heritage is the largest crude oil producer in Trinidad and Tobago, producing 64% of total crude in the country. It is a state-owned enterprise that is controlled by the government, through TPHL. ESG CONSIDERATIONS Heritage Petroleum Company Limited has an ESG Relevance Score of '4' for Governance Structure due to due to its nature as a majority government-owned entity and the inherent governance risk that arises with a dominant state shareholder, which 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 ----------- ------ ----- Heritage Petroleum Company Limited LT IDR BB Affirmed BB LC LT IDR BB Affirmed BB senior secured LT BB Affirmed BB TRINIDAD & TOBAGO: Central Bank Maintains Repo Rate at 3.5% ----------------------------------------------------------- Paula Lindo at Trinidad and Tobago Newsday reports that the Monetary Policy Committee (MPC) of the Central Bank is maintaining the repo rate at 3.5 per cent, after taking note of global economic conditions and the uncertainties with respect to the policy paths of major central banks. In its monetary policy announcement on March 28, the Central Bank said the Trinidad and Tobago economy continued on a path of steady recovery, supported by good credit expansion, according to Trinidad and Tobago Newsday. At the same time, inflation remained at less than one per cent and short-term interest differentials, while still relatively wide, have started to narrow, the report notes. The latest data from the Central Statistical Office (CSO) showed continued economic recovery led by non-energy activity in 2023, the report recalls. Real GDP rose by 3.6 per cent (year-on-year) during the second quarter of 2023, compared with 1.4 per cent in the previous quarter, the report notes. Indicators monitored by the Central Bank pointed to a continuation of that trend during the second half of the year, with relatively strong performances in the wholesale and retail and the construction sectors, the report relays. Meanwhile, the CSO reported a decline in the unemployment rate to 3.2 per cent in the third quarter of 2023 compared with 3.7 per cent three months earlier, the report discloses. On the price front, headline inflation rose to 0.8 per cent (year-on-year) in February 2024 from 0.3 per cent in January, the report discloses. With core inflation (which excludes food prices) remaining at 1.0 per cent over these two months, food inflation was registered at 0.1 per cent, compared with a small decline recorded in January, the report notes. Financial sector liquidity remained ample but skewed, alongside continued buoyancy of private-sector credit. Commercial banks' excess reserves at the Central Bank stood at $4.5 billion in late March 2024, the report relays. Over the past few months, public-sector domestic capital market activity led to relatively large fluctuations in the liquidity positions of some financial institutions, leading them to occasionally borrow on the interbank market or the Central Bank to satisfy their reserve requirements, the report notes. In the 12 months to January 2024, financial system credit grew by 7.9 per cent, driven by lending to businesses (11.5 per cent) and consumers (9.8 per cent), while real-estate mortgage credit grew by 4.7 per cent, slower than the 6.9 per cent growth evidenced in December 2023, the report says. In the context of government domestic financing activities, interest rates on three-month treasuries in TT have trended upwards, rising by nine basis points in January and a further 12 basis points in the six weeks to mid-March 2024, the report relays. The rise in these rates has led to some narrowing in interest differentials with the US: the indicator of TT-US interest rate differentials on three-month treasuries moved to -432 basis points in February 2024 from -440 basis points in November 2023, the report discloses. Globally, the International Monetary Fund said global economic growth for 2024 is forecast at 3.1 per cent, the report says. This is the same rate as estimated for 2023, the report recalls. Most central banks in advanced and emerging market economies have either held their policy rates stable or have lowered their rates in recent months in the context of inflationary developments, the report notes. In March 2024, the US Federal Reserve (Fed) maintained its federal funds target range of 5.25 per cent-5.50 per cent – unchanged since July 2023, the report notes. The Central Bank will continue to carefully monitor and analyse international and domestic developments and prospects, the report relays. The next monetary policy announcement is scheduled for June 28, the report adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *