/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/240510.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, May 10, 2024, Vol. 25, No. 95 Headlines B A H A M A S FTX TRADING: Files Amended Reorganization Plan B A R B A D O S PORTLAND (BARBADOS): Misses Bond Payment B R A Z I L GOL LINHAS: Loses Bid to Lock Up Plan Votes in Chapter 11 Cases LIGHT SA: Fitch Affirms 'D' LT IDR OI SA: Q1 Losses Skyrocket 120% to $545 Million TRIDENT ENERGY: Fitch Assigns 'B+' LongTerm IDR, On Watch Pos. C O L O M B I A CREDISERVICIOS SA: Fitch Affirms IDR at 'RD' J A M A I C A DIGICEL GROUP: Hikes Prices Across the Region JAMAICA: Ministry Looking to Boost Local Pepper Farming M E X I C O BANCO VE POR MAS: Fitch Affirms 'BB-' LT IDR, Alters Outlook to Pos - - - - - ============= B A H A M A S ============= FTX TRADING: Files Amended Reorganization Plan ---------------------------------------------- Seventeen months after filing for chapter 11 in the District of Delaware, FTX Trading Ltd. (d.b.a. FTX.com) and its affiliated debtors on May 7 filed their anticipated amended Plan of Reorganization and accompanying Disclosure Statement with the United States Bankruptcy Court for the District Court of Delaware. Subject to being finalized and approved by the Bankruptcy Court, the Plan contemplates the centralized distribution to customers and other creditors around the world of virtually all of the assets associated with FTX at the time of its collapse in November 2022, regardless of where the assets were located at that time. FTX forecasts that the total value of property collected, converted to cash and available for distribution will be between $14.5 and $16.3 billion. This amount includes assets under the control of the chapter 11 debtors as well as assets under the control of the Joint Official Liquidators of FTX Digital Markets, Ltd. (Bahamas), the Securities Commission of The Bahamas, the Joint Official Liquidators of FTX Australia, the United States Department of Justice and dozens of private parties that have cooperated in the recovery efforts. FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims. As previously disclosed, FTX.com had a massive shortfall at the time of the chapter 11 filing in November 2022 -- holding only 0.1% of the Bitcoin and only 1.2% of the Ethereum customers believed it held. Accordingly, the Debtors have not been able to benefit from the appreciation of these missing tokens during the chapter 11 cases. Instead, the Debtors have had to look to other sources of recoverable value to repay creditors. The Plan contemplates payment in full of all non-governmental creditors based on the value of their claims as determined by the Bankruptcy Court. In addition, the Plan contemplates a subordination arrangement with governmental creditors that allows payment of interest to the primary classes of customers and creditors at up to a 9% rate from the commencement of the chapter 11 cases through the date of distribution. There also may be the opportunity for certain creditors to receive additional payments through the Supplemental Remission Fund described in Section 1.F of the Disclosure Statement. For creditors holding claims in an allowed amount of $50,000 or less, the Plan creates a special "convenience class". Because of this classification, if the Plan is approved by the Bankruptcy Court, the Debtors anticipate that 98% of the creditors of FTX by number will receive approximately 118% of the amount of their allowed claims within 60 days after the effective date of the Plan, subject to know-your-client and distribution information requirements. At the heart of the Plan are a series of settlements reached consensually with the key economic stakeholders. The key settlements (including those that are still subject to finalization and Court approval) include: -- Resolution of the $24 billion in claims filed by the Internal Revenue Service for periods prior to the chapter 11 cases in return for a $200 million cash payment and a $685 million subordinated claim that will rank below claims of all creditors and governmental entities. -- A proposed agreement with the Internal Revenue Service to also subordinate tax claims arising after the commencement of the chapter 11 cases to payment of creditors in full with interest at the Consensus Rate. -- A proposed agreement with the Commodity Futures Trading Commission and potentially other governmental claimants to both subordinate their claims to the payment of non-governmental creditors in full with interest at the Consensus Rate, and to contribute any recoveries on these subordinated claims to a special fund created by the Debtors for purposes of making supplemental restitution to certain customers and creditors. The Debtors have proposed that the Supplemental Remission Fund be made available to all customers and digital asset lenders. Details of this arrangement remain to be finalized. -- A proposed arrangement with the Department of Justice pursuant to which over $1.2 billion of forfeiture proceeds can, if the Department of Justice decides, be distributed to customers and creditors through the chapter 11 cases with no incremental administrative expense or delay. -- The previously disclosed customer property settlement with the Ad Hoc Committee of Non-U.S. Customers, the Class Action Claimants and the Official Committee of Unsecured Creditors, which provides for the arm's-length settlement of customer property assertions in return for a special priority for customers in the Plan. -- The previously approved settlement with the Joint Official Liquidators of FTX Digital Markets, Ltd., which allows for FTX.com customers to elect to have their claims reconciled in either the chapter 11 cases or the liquidation of FTX DM with materially equivalent financial results. -- The previously approved settlement with BlockFi, the largest creditor of FTX. John J. Ray III, Chief Executive Officer and Chief Restructuring Officer of FTX, said: "We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors. On behalf of FTX's independent Board of Directors, I want to extend our deepest appreciation to the numerous governmental agencies, including the United States Department of Justice, the Commodity Futures Trading Commission, the Internal Revenue Service and the Securities Commission of The Bahamas, for their tireless efforts, cooperation and assistance through this complex recovery process. I also want to thank the Joint Official Liquidators of FTX Digital Markets, the Ad Hoc Committee of Non-U.S. Customers, the Class Action Claimants, BlockFi, the Official Committee of Unsecured Creditors and all of their professionals for their hard work in the development of the Plan and its resulting achievements. Finally, I want to thank all the customers and creditors of FTX for their patience throughout this process." About FTX 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 troughly $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 (doing business as FTX.com), West Realm Shires Services Inc. (doing business as 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. More entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 million 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 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/HomeIndex The official committee of unsecured creditors tapped Paul Hastings, LLP as bankruptcy counsel; FTI Consulting, Inc. as financial advisor; and Jefferies, LLC as the investment banker. Young Conaway Stargatt & Taylor, LLP is the committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. =============== B A R B A D O S =============== PORTLAND (BARBADOS): Misses Bond Payment ---------------------------------------- RJR News reports that the Michael Lee-Chin run Portland (Barbados) Ltd missed the final payment of principal and interest on a US$23 million short-term bond. The Trinidad Guardian is reporting that the facility, with an 8.25 per cent return matured last Tuesday, April 30, according to RJR News. According to the bond's trust deed, the missed payment is considered a default, "if the company (Portland Barbados) fails to pay within seven business days, following the due date, any principal, interest and arrears of interest under this trust deed," the report notes. The report relays that Guardian is reporting that Republic Bank, which serves as trustee for the bond issue, wrote to bondholders the day after Portland Barbados missed the payment. The correspondence says "if the company (Portland Barbados) does not make the April payment within seven days of the April payment date (Thursday, May 9, 2024), an event of default would be deemed to have occurred," the report discloses. It is understood that Mr. Lee-Chin requested a meeting of bondholders, the report relays. He is expected to ask for a 90-day extension, the report adds. This would give Portland Barbados time to pay the principal, interest and arrears of interest on the bond, the report notes. =========== B R A Z I L =========== GOL LINHAS: Loses Bid to Lock Up Plan Votes in Chapter 11 Cases --------------------------------------------------------------- Douglas S. Mintz, Esq., Abbey Walsh, Esq., and Christiana G. Johnson, Esq., of Schulte Roth + Zabel, on May 2 disclosed that in an opinion issued on April 22, 2024, Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York rejected the debtors' efforts to "lock up" plan votes in the chapter 11 cases of GOL Linhas Aereas Inteligentes S.A. and certain of its affiliates. The debtors sought approval to lock-up provisions that would have bound counterparties to vote in favor of the debtors' plan without detailing the specific terms of the plan itself or providing any conditions to terminate the lock-up agreement. While courts widely approve of lock-up provisions commonly seen in the form of restructuring support agreements, Judge Glenn declared the lock-up provisions at issue, "an impermissible lockup, not a common RSA." See In re GOL Linhas Aereas Inteligentes S.A., No. 24-10118 (MG) (Bankr. SDNY Apr. 22, 2024). Background GOL, a Brazilian aerospace company, and certain of its affiliates filed chapter 11 bankruptcy petitions on Jan. 25th, 2024. Thereafter, the debtors filed four motions seeking approval of settlements with certain of their prepetition aircraft lessors. Within each of the settlement agreements, the debtors included a provision requiring the settling creditor to vote in favor of the debtors' plan so long as (i) the terms of said plan were not inconsistent with the terms of the settlement agreement, (ii) the plan provided exculpation for the settling creditors and (iii) the debtors would meet a minimum liquidity and leverage ratio on the effective date of the plan. The lock-up did not require that the plan comply with any other provisions, leaving the debtors free to formulate a plan with the benefit of knowing that the settling creditors would be obligated to vote in favor of it. Each of the settlement agreements provided that the lock-up provision would not be enforceable if the Court determined that it violated applicable law. This gave the Court the option to approve the settlements without also approving the lock-ups. The US Trustee and the Unsecured Creditors' Committee objected to the approval of the lock-up provisions within the settlements (but did not object to the approval of the settlements, which resolved disputes regarding unpaid lease payments and provided for the assumption of the leases subject to certain agreed modifications). The objections alleged that the lock-up provisions were improper vote solicitations in violation of Section 1125(b) of the Bankruptcy Code. Section 1125(b) of the Bankruptcy Code states: An acceptance or rejection of a plan may not be solicited after the commencement of the case . . . from a holder of a claim . . . unless, at the time of or before such solicitation, there is transmitted to such holder the plan or a summary of the plan, and a written disclosure statement approved, after notice and a hearing, by the court as containing adequate information. The US Trustee argued that a lock-up of votes prior to the formulation of a plan would allow the debtors to build "creeping support" for any plan of their choosing and further, that the lock-ups could act as a "poison pill" to thwart any plan opposed by the debtors. Similarly, the Creditors' Committee argued that approval of the lock-ups could open the floodgates for the debtors to gather support for an unknown plan, which would have the effect of disenfranchising creditors. The debtors defended the lock-ups by arguing that they would allow the debtors the certainty needed to move the cases forward and that the lock-ups were permissible under existing case law. However, none of the cases cited (In re Grupo Aeromexico, S.A.B. de C.V., No. 20-11563 (SCC) (Bankr. SDNY 2022); In re AMR Corp., No. 11-15463 (SHL) (Bankr. SDNY 2018); and In re Avianca Holdings S.A., No. 20-11133 (MG) (Bankr. SDNY 2023)) resulted in written opinions. Decision In a bench ruling, Judge Glenn approved the settlements with the aircraft lessors, but refused to approve the lock-up provisions. Subsequently, Judge Glenn issued a written opinion to discuss the rejection of the lock-ups and to differentiate them from restructuring support agreements, which are commonly approved by bankruptcy courts. Judge Glenn made clear that his decision takes no issue with existing precedents that except restructuring support agreements from Section 1125's prohibition of solicitation of votes on a plan prior to approval of a disclosure statement. Those precedents provide that an RSA can be approved if it provides (1) the agreeing creditors with meaningful information about the plan they are agreeing to support and (2) the ability to rescind the agreement if the plan does not materially comply with the agreed terms. RSAs create a "˜base camp' for parties when there is no obvious path to an easily confirmable plan," by outlining the basic elements of a plan or a timetable of events. Op., at 13. This accomplishes two policy objectives: First, it provides creditors with adequate and accurate information, and second, it encourages productive negotiations. Op., at 13-14. In contrast, the opinion notes that the lock-ups at issue in the GOL settlement agreements complied with neither of those requirements, because the lock-ups were not tied to "any adequate information about plan terms," and there was no meaningful ability for the settling creditors to rescind the lock-up agreement because the purported conditions to the lock-up were illusory, "requiring their vote without regard for any legitimate concerns they may have with the plan." Op., at 23, 24. As a result, the settling creditors had effectively agreed to lock-up their vote without adequate information regarding the terms of a plan or meaningful choice as to how to vote on a plan, "essentially disenfranchising their votes at a nascent stage in these cases." Op., at 22. This was an improper solicitation under Section 1125(b). Takeaways RSAs are critical to the bankruptcy process and used regularly by debtors to drive consensus prior to the confirmation process. Their success, however, depends on the level of information shared between the parties and the ability of the creditor counterparty to make a meaningful choice when a plan is proposed. While this opinion does not threaten or impair a debtor's ability to negotiate a proper RSA with creditors, it does rebuke an attempt by the debtors to indefinitely lock-up votes on a plan without meaningful disclosure of the contents of the plan and the inclusion of conditions under which the locked-up creditors may terminate the agreement. Debtors, at least in the SDNY, must take heed of these requirements in seeking approval of an RSA or other lock-up agreement. 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 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 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. LIGHT SA: Fitch Affirms 'D' LT IDR ---------------------------------- Fitch Ratings has affirmed Light S.A. (Light) and its wholly owned subsidiaries Light Servicos de Eletricidade S.A. (Light Sesa) and Light Energia S.A. (Light Energia)'s Local Currency and Foreign Currency Long-Term Issuer Default Ratings at 'D' and Long-Term National Scale Ratings at 'D(bra)'. Fitch has also affirmed the ratings of Light Sesa and Light Energia senior unsecured bonds at 'C'/'RR4'. The ratings affirmation reflects the fact that Light remains under bankruptcy protection, granted on May 15, 2023, whose effects extend to its subsidiaries. KEY RATING DRIVERS Ongoing Judicial Recovery: Light remains under bankruptcy protection. Fitch expects the judicial recovery plan (JRP) to be voted by creditors in May 2024. After the potential debt restructuring, the agency will review Light's ratings based on the new capital structure, updated assumptions for operating performance and expectations in terms of financial flexibility going forward. Given the utilities nature of Light's businesses, the group's operations have not yet been critically affected by the credit default, despite cuts in expenses and investments. Debt Restructuring: Under Fitch's base case, assuming the JRP's proposed capital structure, the group's net leverage would average 2.9x in the 2024-2027 period, or 2.6x, excluding off-balance debt of BRL700 million related to guarantees provided for non-consolidated companies. The estimates assume some increase in the regulatory limit for Light Sesa's energy losses. Light's JRP includes equity injection of at least BRL1.0 billion and requires a debt conversion of BRL2.2 billion as the minimum amount to avoid explicit haircut. Light Sesa's debt restructuring is necessary to adequate leverage metrics on a regulatory basis, thus avoiding losing the concession right and making room for its renewal, under conditions yet to be established by the government. Fitch's base case considers both the debt exchange and the equity injection to occur in 2024, after the expected concession renewal. Light Sesa's concession expires in June, 2026. Credit Environment Limits Recovery: Fitch caps the recovery ratings of Light's debt instruments at 'RR4', resulting in 'C' rating for the bonds. This cap reflects concerns over the enforceability of creditor rights in certain jurisdictions, where average recoveries tend to be lower. Without the cap, recovery rates of the group's unsecured debt instruments would be 'RR2' for debts issued by Light Energia and 'RR3' for Light Sesa, resulting in 'CCC-' and 'CC' ratings, respectively, according to Corporates Recovery Ratings and Instrument Ratings Criteria. The recovery prospects, not incorporated in the instruments' ratings, reflect the beneficial treatment for Light Energia's debts and Light Sesa's right to receive around BRL10.1 billion from the government, as indemnification for unamortized assets in case of non-renewal concession. DERIVATION SUMMARY Light's ratings reflect the fact that the company has filed for bankruptcy protection on May 12, 2023, which was granted by the court on May 15, 2023. KEY ASSUMPTIONS - Capital increase of BRL3.2 billion in 2024: equity injection of BRL1.0 billion plus debt conversion of BRL2.2 billion; - Interest accrual totaling BRL405 million since the standstill was granted; - Issuance of BRL3.4 billion, with eight years-term, at IPCA + 5% per annum, with first instalment due 2028; - Issuance of BRL3.0 billion, with 13 years-term, at IPCA + 3% per annum, with first instalment due 2028; - Issuance of BRL670 million, with 10 years-term, at CDI + 0.5% per annum, with first instalment due 2028; - Existing debt instruments: BRL77 million of debts issued by Light Energia, to be paid according to original terms, after interest accrual; - Upfront payment of BRL300 million for small creditors in 2024. Assumptions for Light Sesa's operations: - Increase in the regulatory limit for energy losses, as proposed by ANEEL's technical department in September 2023; - Effective energy losses flat at 60% of the reference market; - Zero market growth as of 2024; - Annual capex of BRL1.3 billion in 2025-2027. RECOVERY ANALYSIS Disregarding any debt restructuring, Fitch's recovery analysis considers that the group's liquidation value, based on the expected indemnification for Light Sesa's regulatory asset base (BRL10 billion), after an advance rate of 80%, would be greater than the enterprise value as a going concern (BRL7.3 billion). The enterprise value estimate assumes an enterprise value/EBITDA multiple of 3.5x and a going concern EBITDA of around BRL2.1 billion, already considering some increase in the regulatory limit for Light Sesa`s energy losses. The liability waterfall indicates a 'RR2' recovery for Light Energia's outstanding debt and 'RR3' for Light Sesa's debt, after administrative claims of 10%. The group's outstanding debt in December 2023 (BRL10.6 billion) was fully comprised of unsecured instruments. The 'RR2' and 'RR3' Recovery Ratings reflect recovery prospects ranging from 71%-90% and 51%-70%, respectively. Nevertheless, the cap for issuers in Brazil is 'RR4', with recovery prospects between 31% and 50%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Success in completing a debt restructuring and Light exiting the bankruptcy protection. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Negative rating actions are not possible as Light is at the lowest level of the rating scale. LIQUIDITY AND DEBT STRUCTURE Liquidity Compromised: Fitch considers that Light's ability to raise new debt after the debt restructuring will be limited. If the company succeeds in implementing the JRP's proposed capital structure, Fitch believes it would be fully funded over the projection horizon (2024-2027), assuming minimum cash balance of BRL1.5 billion on a consolidated basis and some increase in the regulatory limit for Light Sesa's energy losses. Light SESA's debt (BRL9.8 billion, including partial interest accrual since the stay period was granted) would be exchanged by tranches with first instalments due 2028, while debts issued by Light Energia (BRL1.9 billion, with partial interest accrual, or BRL1.3 billion, disregarding debts that have already been excluded from the JRP) would not be restructured, provided that certain conditions are met. At the end of 2023, Light had BRL2.1 billion in cash and short-term debt of BRL11.3 billion, mostly concentrated in Light Sesa (BRL9.8 billion). The group's adjusted consolidated debt of BRL12.0 billion was composed by debentures (62%), bonds (25%), swaps (6%), bank loans (2%) and off-balance debt (6%), related to Light's proportional guarantee in favor of Norte Energia S.A., owner of Belo Monte hydropower plant. ISSUER PROFILE Light is a publicly-traded holding company in Brazil. It fully controls Light Sesa, the fourth largest power concession in Brazil, which serves more than 70% of Rio de Janeiro's consumption, and Light Energia, a power generation company with 511 aMW of assured energy, from concessions expiring in 2028. Light Sesa accounts for about 60% of the group's EBITDA and its concession expires on June, 2026. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch excluded revenues and costs related to construction from income statements. 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 Recovery Prior ----------- ------ -------- ----- Light Servicos de Eletricidade S.A. LT IDR D Affirmed D LC LT IDR D Affirmed D Natl LT D(bra)Affirmed D(bra) senior unsecured LT C Affirmed RR4 C Light Energia S.A. LT IDR D Affirmed D LC LT IDR D Affirmed D Natl LT D(bra)Affirmed D(bra) senior unsecured LT C Affirmed RR4 C Light S.A. LT IDR D Affirmed D LC LT IDR D Affirmed D Natl LT D(bra)Affirmed D(bra) OI SA: Q1 Losses Skyrocket 120% to $545 Million ----------------------------------------------- Richard Mann at Rio Times Online reports that Oi SA, a major Brazilian telecommunications provider, faces a severe financial crisis while navigating its second judicial reorganization since March 2023. The company disclosed a first-quarter 2024 net loss of BRL2.78 billion ($545 million), soaring 120% from the BRL1.26 billion ($247.1 million) loss in the same period last year, according to Rio Times Online. Furthermore, revenues slipped to BRL2.18 billion (approx. $427.5 million), down from BRL2.5 billion (approx. $490.2 million) the previous year, the report notes. Meanwhile, first-quarter operating expenses expanded dramatically, reaching BRL2.36 billion ($462.7 million), the report relays. Routine EBITDA, a critical profitability metric before depreciation and taxes, fell sharply to a negative BRL41 million ($66.9 million), the report discloses. That was a marked decline compared to last year's negative BRL26 million ($5.1 million), the report says. Thus, Oi's net debt, calculated with amortized costs and discount rates ranging between 12% and 15%, reached BRL25 billion ($4.9 billion), up from BRL20.9 billion ($4.1 billion) in the same quarter last year, the report notes. In total, the company now bears a significant debt burden of BRL38.5 billion ($7.5 billion), the report relays. Oi closed its first judicial recovery process in 2022 after meeting all stipulated obligations, the report recalls. However, despite adhering to the original debt repayment plan, Oi could not secure long-term sustainability, the report notes. Market shifts, particularly the decline in fixed-line telephone service demand, severely impacted revenue, the report says. In 2016, these services brought in BRL10 billion ($2 billion). However, revenue is now projected to fall below BRL1 billion ($196.1 million) by 2024, the report relays. These challenges reveal a larger trend in which the pivot from traditional telephony to digital services transforms the telecommunications industry, the report notes. Therefore, Oi's soaring debt and heavy losses emphasize the trials legacy telecom firms face amid this rapid evolution, the report discloses. The report says that the resolution of Oi's recovery will profoundly affect its stakeholders, workforce, and the country's communications sector. Achieving success will require strategic innovation and firm financial management to stabilize and expand in this fast-changing landscape, the report adds. As reported in the Troubled Company Reporter-Latin America on Nov. 7, 2023, Fitch Ratings has affirmed Oi S.A.'s Long-Term Foreign Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs) at 'D' and its Long-Term National Scale Rating at 'D(bra)'. Fitch has also affirmed Oi's senior unsecured notes due 2025 and senior secured 2026 notes at 'C'/'RR4'. TRIDENT ENERGY: Fitch Assigns 'B+' LongTerm IDR, On Watch Pos. -------------------------------------------------------------- Fitch Ratings has assigned Trident Energy L.P. (Trident) a Long-Term Issuer Default Rating (IDR) of 'B+' and Trident Energy Finance PLC's upcoming senior unsecured notes - to be guaranteed by Trident - an expected senior unsecured rating of 'B+(EXP)'. The Recovery Rating is 'RR4'. Both the IDR and senior unsecured rating have been placed on Rating Watch Positive (RWP). Trident's IDR reflects the group's small scale and concentrated asset base consisting of a few fields in less favourable operating environments in Brazil and Equatorial Guinea, as well as high expenditure. Rating strengths are very low leverage, strong cash flow generation due to fairly low capex, strong reserve life, and low-risk production growth. The RWP reflects the pending acquisition of assets in the Republic of Congo, which is expected to close in 4Q24 and will significantly enhance the group's scale, while adding another country of operation with no material negative impact on the group's leverage profile. Fitch will resolve the Rating Watch on acquisition close, which may take more than the six months. The assignment of the final rating is contingent on the receipt of final issuance documentation conforming in all material respects to documentation already received. KEY RATING DRIVERS Transformative Acquisition Pending: The assets in Congo are being acquired from TotalEnergies SE (AA-/Stable), and Chevron Corporation. The acquisition is set to close in 4Q24 subject to regulatory approvals, and once completed, will bolster the group's scale, deepen its geographical diversification, and improve profitability, while maintaining its conservative financial profile. Low but Increasing Production: The rating reflects the small, albeit increasing scale of production. Trident's producing assets in Equatorial Guinea and Brazil produced volumes of around 33,000boe/d in 2023, but Fitch expects pre-acquisition production to rise to around 42,000boe/d in 2024 and to around 60,000boe/d on average in 2026 and thereafter, on the back of low-risk development projects mainly consisting of well re-connections, infill drilling, and other forms of production optimisation. The acquisition of Congo assets represents further upside to the improving production trajectory, putting Trident on track to reach over 70,000boe/d total production in 2024, and around 90,000boe/d on average in the latter years of its forecast, which is in line with peers with similar profiles rated at 'BB-'. Geographic Concentration: Trident's production is currently highly concentrated in Brazil, and after the acquisition of assets in Congo will be significantly exposed to operations in Equatorial Guinea and Congo, which Fitch views as less favourable operating environments. While Fitch will continue to apply Brazil's Country Ceiling of 'BB+', the increasing exposure to less favourable jurisdictions will be incorporated in the rating. Favourable Reserve Dynamics: Trident's 1P reserve life of 13 years and 2P reserve life of 21 years is strong and, while it is likely to decline as production ramps up, will continue to be supportive of the rating. Trident also maintains full operatorship of its asset base, which provides high autonomy around the structure and timing of development plans and capex. This allows Trident to optimise its reserve base, as evident in the 47% organic reserve replacement ratio achieved since it commenced operations, as well as to conserve capital during periods of market stress. While Fitch assumes the acquisition of Congo assets will dilute reserve life, reducing pro-forma 2P reserve life to 12 years in 2024, this will still be commensurate with the peers rated in the 'BB' category. Strong Cash Flow Generation: While Trident's assets are higher-cost with operating expenditure of around USD29/bbl as of 2023, the business requires lower capex given the lack of greenfield projects and exploration spending. The payback period of development and optimisation projects is also fairly short, supporting positive free cash flow (FCF) generation post-dividends for 2024-2028. Excluding the Congo acquisition, the business is assumed to generate on average post-dividend FCF of around USD80 million a year for 2024-2028, and post-acquisition around USD172 million. Low Leverage: Fitch expects Trident to maintain low leverage through the cycle both on an as-is and post-Congo basis, with EBITDA leverage averaging around 1x and EBITDA net leverage averaging around 0.5x to 2028. Fitch expects Trident will continue to fund all capex from internal sources, utilising incremental debt only for future acquisitions. Fitch further assumes that dividends will commence in 2025 and will amount to 75% of excess operating cash flows after capex, debt service requirements, while meeting the group's minimum cash requirements. Good Liquidity: Following the proposed refinancing of Trident's existing debt, liquidity will be strong with no maturities to 2028 and a proposed USD250 million reserve-based loan (RBL), to be undrawn at transaction close, providing liquidity to the business. While the pending acquisition of Congo assets is likely to be funded, in part, by amortising asset-level debt Fitch assumes the highly cash-generative nature of the group's assets will be sufficient to cover debt service and that leverage will remain sufficiently low to facilitate timely refinancing of the new facility ahead of any amortisation cliffs. DERIVATION SUMMARY Fitch rates Trident at the same level as Kosmos Energy Ltd. (B+/Stable), SierraCol Energy Limited (B+/Stable) and GeoPark Limited (B+/Negative), and one notch lower than Energean plc (BB-/Stable). Trident's through-the-cycle production from existing assets is close to that of Kosmos (63,000boe/d) and above that of SierraCol (43,000boe/d) and GeoPark (40,000boe/d). Energean has a significantly higher production of 123,000boe/d from the successful ramp-up of a new field in 2023. With the acquisition of Congo's assets and growth from existing Brazil assets, Fitch expects Trident's production to be closer to Kosmos' pro-forma run-rate of around 90,000boe/d after its offshore gas project comes online. Trident also exhibits lower risk in meeting its production volume targets, as it does not rely on large-ticket, highly complex projects but rather just using infill drilling and other production optimisation measures. Its assets also have decades of production record. In contrast, Kosmos has experienced multiple delays around its LNG project in Mauritania and Senegal, most recently causing one year of foreseeable delay to first gas, and Kosmos' Ghanaian assets have recently seen production under-performance. Energean, while much larger in scale, also experienced a delayed ramp-up and initial production difficulties with its gas assets in the Mediterranean both due to geological developments and geopolitical events. Trident's current and post-acquisition 2P reserves base of 247mmboe and 344mmboe, respectively, is smaller than Energean's (1,115mmboe) and Kosmos' (520mmboe) as of end-2023. However, this is still larger than SierraCol's 118mmboe and GeoPark's 115mmboe. Kosmos is better diversified geographically than Trident's post-acquisition business profile, but Trident will be better diversified than SierraCol, GeoPark, and Energean. Fitch expects Trident to maintain conservative EBITDA leverage at around 1x in 2025-2028 after increasing to almost 1.5x in 2024 due to the acquisition. This compares well with GeoPark's 1x and SierraCol's 1.1x. In 2023 Kosmos had higher EBITDA leverage of 2.0x but this is expected to decrease to 1.5x by 2026. KEY ASSUMPTIONS - Brent crude oil price to 2028 in line with its base case price deck - Congo acquisition to close in 4Q24 - Deferred consideration for the Congo assets acquisition treated as debt - Production averaging 85,000boe/d to 2028 including Congo assets - Capex averaging around USD300 million a year to 2028 - Earn-out payments averaging around USD72 million per year to 2028 - Refinancing of the Congo RBL in 2026 with a facility with similar characteristics - Dividend payments commencing in 2025 - Planned senior unsecured notes issue of USD500 million in 2024 RECOVERY ANALYSIS Fitch's Key Assumptions for Recovery Analysis: - Its recovery analysis assumes that Trident would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated - Trident's GC EBITDA reflects its view on EBITDA generation from the group's existing assets in Brazil and Equatorial Guinea, assuming a sustained period of low Brent prices. This is followed by moderate recovery yielding a GC EBITDA of around USD225 million. Fitch will only consider GC EBITDA and liquidation value attributable to the relevant collateral pool backing the rated instrument. Therefore, Fitch will exclude the Congo RBL and GC EBITDA and liquidation value attributable to the Congo assets from recovery calculation. - Fitch has applied an enterprise value (EV)/EBITDA multiple of 3.5x to calculate a GC EV, reflecting the risks associated with the small size and assets located in less favourable jurisdictions. - The planned senior unsecured notes, which Fitch assumes will amount to USD500 million, will rank subordinated to the USD250 million corporate RBL. The notes will be guaranteed on a senior basis by Trident, and on a senior subordinated basis by several restricted subsidiaries owning the assets in Brazil and Equatorial Guinea. These will also be the guarantors of the USD250 million RBL. Once the acquisition is closed, the Congo subsidiaries will provide guarantee to the notes on a senior subordinated basis, but will primarily be backstopping the Congo RBL and therefore are considered a separate creditor group. - After deducting 10% for administrative claims and taking into account its Country-Specific Treatment of Recovery Ratings Criteria, its analysis generated a waterfall-generated recovery computation (WGRC) in the 'RR4' band, indicating an expected 'B+(EXP)' instrument rating. The WGRC output percentage on current metrics and assumptions is 50%. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Closing of the Congo acquisition under the terms outlined would likely result in a one-notch upgrade - If the Congo acquisition does not proceed, production increasing above 75,000boe/d on a sustained basis would be positive for the rating - EBITDA gross leverage below 1.5x or EBITDA net leverage below 1x on a sustained basis Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - The ratings are on RWP, making negative rating action unlikely. Fitch would however consider removing the RWP, affirming the ratings and assigning a Stable Outlook if the Congo acquisition fails to proceed as planned - If the Congo acquisition fails to proceed, EBITDA gross leverage above 2x or EBITDA net leverage above 1.5x on a sustained basis would be negative for the rating - Failure to achieve production above 50,000boe/d on a sustained basis - Aggressive shareholder distributions or deteriorating liquidity - EBITDA from Brazil failing to cover gross interest expense LIQUIDITY AND DEBT STRUCTURE Good Liquidity: As of end-2023, Trident had unrestricted cash and cash equivalents of USD119 million. The RBL matures in 2027 and has started amortising in 2023. The proposed notes issue will fully repay the RBL and extend Trident's maturity profile to 2029 while Trident will receive a new USD250 million RBL as an additional liquidity source for the group. Trident has strong FCF generation and Fitch projects that capex will be funded with internal cash flow. However, it will require external funding for the acquisition. ISSUER PROFILE Trident is a small oil and gas company operating in Brazil and Equatorial Guinea. 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 Recovery Prior ----------- ------ -------- ----- Trident Energy, L.P. LT IDR B+ New Rating WD Trident Energy Finance PLC senior unsecured LT B+(EXP)Expected Rating RR4 =============== C O L O M B I A =============== CREDISERVICIOS SA: Fitch Affirms IDR at 'RD' --------------------------------------------- Fitch Ratings has affirmed Credivalores - Crediservicios S.A.'s (Credivalores) Long- and Short-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'Restricted Default' (RD) and its long- and short-term National Scale Rating at 'RD(col)'. Fitch has also affirmed Credivalores' USD210 million senior unsecured notes due 2025 at 'C'/'RR4' and the company's partial credit guarantee (PCG) local issuance national rating at 'CCC+(col)'/'RR4'. KEY RATING DRIVERS Credivalores' IDRs are based on its Standalone Credit Profile (SCP), which is below the implied SCP due to Fitch's assessment of the company's funding, liquidity and coverage at the lowest possible level on its scale. The rating reflects the restricted default on Credivalores' USD210 million senior unsecured notes due 2025. Restructuring Continues: Credivalores made progress on the exchange offer of its 2025 notes for new senior secured notes due 2029, backed by a loan portfolio of USD168 million with step-up interest. The company confirmed that discussions with bondholders have been completed and will continue with regulatory filings. In Fitch's opinion, the reprofiling of its debt is part of the company's strategy to strengthen its capital structure and contribute to its long-term financial sustainability. Credivalores continues facing execution risks related to the restructuring plan. Fitch believes this offer constitutes a distressed debt exchange (DDE) under its criteria, as the transaction will lead to a material reduction in terms and, in its view, is being conducted to avoid a default. Fitch will reevaluate the IDRs based on the new capital structure and credit profile upon completion of the exchange offer. Funding, Liquidity and Coverage Remain a Constraint: Fitch has maintained the Funding, Liquidity and Coverage score at 'rd' with high importance as the company has not completed the debt agreement. The debt restructuring will include an increase in secure debt as the exchange will be guaranteed with a portion of the loan portfolio, supporting the funding strategy based on asset-backed securities. Fitch expects the ratio of unsecured debt to total debt to decline from 69.4% in December 2023 to below 20%, while the core ratio of liquid assets and undrawn committed facilities to short-term funding should remain below 0.4x. Business Profile Affected by Leverage, Funding and Profitability: Credivalores is the largest NBFI in Colombia engaged in consumer lending to the low to mid-income population that is not served by traditional banks in small and mid-sized cities. The company business profile has been affected by structural issues regarding leverage, funding and profitability together with a higher risk loan portfolio. The company has been able to generate relatively stable total operating income (TOI) in the last four years with an average of USD31 million from 2019 to 2023 amid a challenging operating environment and the restructuring of its financial liabilities. Weak Asset Quality: Asset quality remains a challenge as the level of impaired loans, at Stage 3 to total loans further deteriorated to 21.8% at YE 2023. The reserve coverage ratio increased to 112% given the semi-secured portion of the portfolio and the decrease in the credit card business. The economic slowdown and the gross portfolio contraction are likely to affect the metrics, mainly for the unsecured segment. Fitch expects non-performing loans remain above 17% and asset quality gradually improve once the company's strategy on payrolls starts to weigh on the loan portfolio. Weak Profitability: The company reported low but positive results during 2023 after significant losses reported during 2022. The pre-tax ROAA of 0.4% as of December 2023 is similar to the average of 2018-2021 of 0.4%. A strong contraction on business volumes as a consequence of its restructuring plan, 2022 payment of the financial commitments, Colombian economy deceleration and high provision expenses, were not offset by the increase on interest rate and the positive impact of foreign echange. Fitch expects limited profitability improvements, contingent to the materialization of the new debt strategy and the resume of the payroll strategy. Tight Capitalization and Leverage: At YE 2023, the company's debt to tangible equity ratio of 11.6x reversed the negative result of 2022 due to the capital injection and earnings generation in 2023. Fitch expects the DDE, if agreed, to result in an improved debt maturity structure and a gradual improvement in internal capital generation, with a debt to tangible equity ratio below 7x at YE 2024. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - The IDR will be downgraded to 'D' if a bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure or that has otherwise ceased business and debt is still outstanding. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Fitch will reassess the IDRs upon the completion of a debt restructuring process; the updated IDRs will reflect the new capital structure and credit profile of the issuer. DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS Partial Credit Guarantee (PGC) Issuance Credivalores' partial guarantee bond local issuance for COP160.000 million is rated four notches above its national long-term rating. The level of enhancement above the base recovery corresponds to the additional recovery that the guarantee gives to the notes, which improves the recovery rate for the bond holders is case of default. The notes have an irrevocable partial guarantee for 70% for payment of interest or principal from Fondo Nacional de Garantias rated 'AAA(col)'. Credivalores' senior unsecured debt is in line with its respective corporate rating level, as the debt is senior unsecured. The 'RR4' Recovery Rating assigned to Credivalores' senior unsecured issuance reflects average recovery prospects. DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES - The company's senior unsecured debt is expected to move in line with the Long-Term IDR, although a material increase in the proportion of secured debt could result in the unsecured debt being notched down from the IDR; - The four-notch relativity of the PCG issuance above Credivalores' Long-Term National Scale rating could be reduced by future increases in the issuer rating or by an improvement in its intrinsic recovery according to Fitch's methodology; - A downward move in Credivalores' Long-Term National Scale rating would negatively affect the PCG ratings. ADJUSTMENTS The SCP has been assigned below the implied SCP due to the following adjustment reason(s): Weakest Link - Funding, Liquidity & Coverage (negative). The Business Profile score has been assigned below the implied score due to the following adjustment reason(s): Business model (negative), Historical and future developments (negative). The Earnings & Profitability score has been assigned above the implied score due to the following adjustment reason(s): Historical and future metrics (positive). The Capitalization & Leverage score has been assigned below the implied score due to the following adjustment reason(s): Risk profile and business model (negative). ESG CONSIDERATIONS Credivalores has an ESG Relevance Score of '4' for Management Strategy due to risks associated with the company's ability to execute its strategy to pay and refinance its senior unsecured debt. These execution risks have a negative impact on the credit profile and are relevant to the rating 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 ----------- ------ -------- ----- Credivalores- Crediservicios S.A. LT IDR RD Affirmed RD ST IDR RD Affirmed RD LC LT IDR RD Affirmed RD LC ST IDR RD Affirmed RD Natl LT RD(col) Affirmed RD(col) Natl ST RD(col) Affirmed RD(col) senior unsecured LT C Affirmed RR4 C guaranteed Natl LT CCC+(col)Affirmed RR4 CCC+(col) ============= J A M A I C A ============= DIGICEL GROUP: Hikes Prices Across the Region --------------------------------------------- David Rose at Jamaica Observer reports that consumers across the region are set to face price hikes for services purchased from telecommunications firms Digicel and Flow come June 1. Digicel sent a notice to its customers earlier in Jamaica that some of its prepaid and postpaid plans would be increasing in a matter of weeks, according to Jamaica Observer. In the notice, the company said its postpaid Prime - Intro plan which now costs $3,500 will be increased to $3,900 per month, and the plan is to be upgraded to Prime - Intro Plan 2, the report notes. The cost to send a SMS (text message) to another local network would also be increased to $5.75 per text, the report says. The accumulated roll-over data would also be capped at 500GB, the report relays. Digicel customers in Trinidad & Tobago also received a notice of increasing service package costs with an average price increase of about five per cent on three fibre packages, the report discloses. An example is with the Modern Fibre 200+ rising from TT$390 to TT$410, the report notes. However, there was also a reduction ranging from 32 to 40 per cent for four packages with the Fibre 500 dropping from TT$885 to TT$400, the report relays. "Due to increased content costs from our international suppliers and the growing expenses associated with off-island Internet traffic, primarily fuelled by the rising usage of Android TV boxes, Netflix, and other over-the-top (OTT) services, our network faces additional strain. Therefore, we're compelled to implement adjustments accordingly," Digicel told its Trinidadian customers, the report relays. Digicel's prepaid Trinidadian customers benefited from price reductions on April 26 with its new D' Freedom Plan's cost dropping from TT$315 to TT$300, while users of the one-to-three day plans will benefit from lower renewal prices between TT$5 and TT$10, the report discloses. Digicel also implemented a price increase on its Digicel+ customers in the British Virgin Islands on May 1. Digicel Bermuda customers were hit with a BMD$5 increase on April 1 on their Prime Ultra Bronze plan, the report relays. When the Jamaica Observer reached out to Digicel Jamaica for comment on the price increase it said: “[E]ven with the recent average 8 per cent price adjustment to selected Prepaid plans, Digicel prepaid continues to be the value leader in the market, based on widest coverage, fastest speeds, unmatched reliability, and the best customer service,” the report discloses The telecoms firm also mentioned that it increased the price on some Jamaican postpaid plans by six per cent. Digicel's price increases come after its March 31 financial year end which saw Digicel founder and former Chairman Dennis O'Brien relinquish the role to Rajeev Suri, who leads a new board of directors, the report relays. Digicel Group also appointed Marcelo Cataldo as its new chief executive officer on May 1 following the recent debt restructuring which saw its consolidated debt cut by US$1.7 billion and O'Brien's equity interest significantly reduced, the report discloses. "Since our launch here in Jamaica in 2001 we have been at the forefront in the evolution of mobile, working hard to deliver unmatched experiences and superior technologies to our customers, communities, and the country at-large. We recently invested the final tranche of our US$200 million ($31 billion) ‘Digital Jamaica' spend — a massive commitment that furthered our focus on building Jamaica as a digital hub through LTE and fibre network expansions and state-of-the-art broadcast facilities," Digicel added, notes the report. Its major regional competitor Cable & Wireless Communications Limited, which trades as Flow in the consumer market, announced price increases for its customers over the last three months, the report relays. Flow's Trinidadian customers are set to be hit with a minimum five per cent increase on its cable and Internet bundle packages such as Everything You Want from TT$555 to TT$583, the report notes. The price increase takes effect on June 1, which will also affect the Link up Flow packages and numerous connected bundles, the report relays. Flow Jamaican business customers are also set to be hit with an increase on June 1 despite there being a mentioned 25 per cent upgrade in the speed of some broadband packages, the report notes. Flow prepaid customers were faced with an increase of 12 per cent to 15 per cent on its Flow Lyf packages and 8 per cent to 15 per cent on its Anywhere Combo packages on February 7, the report relays. The prepaid rate packages also had an increase on February 16. "Flow Business remains committed to the continued expansion and improvement of our telecommunications network as we provide our customers with superior products and services. Therefore, we periodically review and redesign our product offerings to deliver even greater value to our customers. To this end, effective June 1, 2024, Flow Business will adjust the rates and allocations of some of its broadband, watch, and talk packages," Flow stated to its Jamaican business customers, the report says. Flow customers in St Vincent and the Grenadines had an average three per cent increase on April 1. Flow Turks & Caicos customers faced price increases of at least nine per cent on April 1, while there was a 14 per cent drop in Fibre extreme to US$300 with several packages having speed increases of at least 10 per cent, the report discloses. While Digicel's financials are private, Cable & Wireless Jamaica Limited (CWJ) saw a 10 per cent rise in its revenue in 2022 to $38.31 billion with operating profit climbing 66 per cent to $5.84 billion, the report notes. However, the near doubling of its finance costs saw its net loss jump from $182 million to $531 million as per its annual report, the report adds. About Digicel Group Digicel Group is a mobile phone network provider operating in 33 markets across the Caribbean, Central America, and Oceania regions. The company is owned by the Irish billionaire Denis O'Brien, is incorporated in Bermuda, and based in Jamaica. As reported in the Troubled Company Reporter-Latin America in April 2020, Moody's Investors Service downgraded Digicel Group Limited's probability of default rating to Caa3-PD from Caa2-PD. At the same time, Moody's downgraded the senior secured rating of Digicel International Finance Limited to Caa1 from B3. All other ratings within the group remain unchanged. The outlook is negative. Also in April 2020, the TCR-LA reported that Fitch Ratings has downgraded Digicel Limited to 'C' from 'CCC', and its outstanding debt instruments, including the 2021 and 2023 notes to 'C'/'RR4' from 'CCC'/'RR4'. Fitch has also downgraded Digicel International Finance Limited to 'CCC+' from 'B-'/Negative, and its outstanding debt instruments, including the 2024 notes and the 2025 credit facility, to 'CCC+'/'RR4' from 'B-'/'RR4'. Fitch has removed the Negative Rating Outlook from DIFL. JAMAICA: Ministry Looking to Boost Local Pepper Farming ------------------------------------------------------- RJR News reports that the Agriculture Ministry said it is channeling resources into the development of the local pepper industry. Agriculture Minister Floyd Green says two greenhouses are being built at the Bodles Research Centre in St. Catherine, to boost seed production, especially for scotch bonnet, according to RJR News. "We've moved our seed production from 20,000 seeds, which was [in 2022], to 50,000 seeds last year. And that is work in progress, the report notes. We've also established a new greenhouse at the Montpellier Research Station, again, to drive the production of red pepper, so that we can increase the amounts that we're supplying to our farmers, that we're supplying to our companies," he said, the report relays. "We're also working with the FAO on our scotch bonnett, because again, we want to ensure that we maintain that authentic scotch bonnet flavour profile; establishing our database, we're training 25 people, we're spending with the FAO about US$1 million on that," the minister added, 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. =========== M E X I C O =========== BANCO VE POR MAS: Fitch Affirms 'BB-' LT IDR, Alters Outlook to Pos ------------------------------------------------------------------- Fitch Ratings has affirmed Banco Ve por Mas, S.A. Institucion de Banca Multiple, Grupo Financiero Ve por Mas's (BBX+) Viability Rating (VR) at 'bb-' and Long- and Short-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-' and 'B', respectively and its government support rating (GSR) at 'no support' ('ns'). Fitch has also affirmed the Long- and Short-Term National Scale ratings of BBX+'s, Casa de Bolsa Ve por Mas, S.A. de C.V., Grupo Financiero Ve por Mas (CBBX+) and Arrendadora Ve por Mas, S.A. de C.V. Sofom E.R., Grupo Financiero Ve por Mas (ABX+) at 'A(mex)' and 'F1(mex)', respectively. The Rating Outlook on the Long-Term IDRs and National Ratings has been revised to Positive from Stable. The Positive Outlook considers Fitch's expectation that BBX+ will sustain the improving trend in its financial profile over the rating horizon by consistent operating income generation and lower credit costs. BBX+ improved its operating profit to risk weighted asset (RWA) ratios in the last two years, trending to a sustained level above 2%. The enhanced capitalization metrics, supported by a stable and gradually increasing revenue generation, also support the Outlook revision. KEY RATING DRIVERS Consistent Business Model: BBX+'s IDRs and national ratings are underpinned by its Viability Rating (VR) of 'bb-'. The VR is influenced by its consistent and relatively diversified business model that have offset its moderate market position within the Mexican banking system. At YE23, BBX+'s total operating income was USD204 million (average 2020-2022: USD146 million) that increased 26.4% from YE22. The financial profile of the bank has strengthened gradually over recent years marked by improvements primarily in profitability and capitalization levels but still behind its local closest mid-sized bank peers. BBX+'s business model is primarily focused on providing commercial loans to medium-sized and large enterprises, SMEs, and financial institutions, as well as mortgage loans. The bank also complements its offering with transactional services, trust services, and derivatives. These products and services are funded through a stable and growing deposit franchise over the years. Controlled Asset Quality Deterioration: At YE23, BBX+'s asset quality improved with a Stage 3 loans to total loans ratio of 2.5%, although in recent years this indicator has fluctuated close to 3%. Fitch expects the mortgage segment will continue to put moderate pressure on asset quality, due to the Stage 2 loan portfolio is partly composed by such credit segment. However, Fitch expects that asset quality deterioration will be controlled due to BBX+'s effort to limit its exposure to sensitive sectors such as mortgage lending from government related agencies or small agricultural producers. At the same date, the top 20 borrowers represented close to 2.1x the bank's Common Equity Tier 1 (CET1) while the loan loss allowances to Stage 3 loans ratio increased to 118.4% (2022: 111.1%). Improved Profitability Metrics: Fitch adjusted upwards the earnings and profitability score to 'bb-' with a stable trend from 'b+' positive, since, in the last two years, the bank improved and stabilized its profitability metrics above 2%. At YE23, the operating profit to RWA ratio was 2.5%, explained by improvements in its net interest margin and a decrease in RWA partly attributed to slower loan portfolio growth. The operational efficiency ratio (non-interest expense to gross revenues) increased to 58.5% from 53.1% at YE22 due to higher administrative expenses (+22.3%) partly driven by increased personnel and technology expenses. Fitch expects BBX+'s profitability to stabilize around 2% as the bank consolidates its growth strategy. Enhanced Capitalization: Fitch adjusted the trend of the capitalization and leverage score to positive from stable due to the improving capitalization levels during 2023. At YE23, the CET1 to RWA ratio was 14.7%, and according to the local regulator, as of February 2024, this indicator improved to 15.7%. The pace of improvement considers a moderate loan portfolio growth of BBX+ and lower than the industry, as well as sustained earnings generation with moderate dividend distributions. Fitch believes BBX+'s capitalization indicator has room to absorb the expected loan portfolio growth for the rating horizon. Adequate Funding and Liquidity Position: BBX+'s funding and liquidity position remains adequate, considering its composition predominantly by customer deposits, which represented 71.1% of non-equity funding at YE23. Demand deposits accounted for 66.1% of total deposits, comparing favorably with most of its closest peers in structure but with higher cost. At the same date, the loans-to-deposits ratio improved to 101.7% (average 2020-2023: 114.1%) supported by a lower growth pace in the loan portfolio (+2.0%) compared to the growth in customer deposits (+10.2%). Liquidity coverage and net stable funding ratios are consistently above the regulatory minimum. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - The Positive Outlook could be revised to Stable if the bank does not sustain recent improvements in its financial profile; - If there were a sustained deterioration of its financial performance marked by a weakened business profile and lower total operating income, the weakening in the bank's asset quality metrics and pressures the bank's operating profit to RWA ratio consistently below 1.25% and a CET1 to RWA ratio consistently below 10%. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - The ratings could be upgraded if the bank maintains the improvement in its financial performance, specifically, with CET1 to RWA metrics consistently close to 15% and an operating profit to RWA ratio consistently above 2%. Government Support Rating: BBX+'s 'ns' GSR reflects Fitch assessment that there is no reasonable assumption that government support will be available since the bank is not considered as a domestic systemically important bank (D-SIB). At YE23, BBX+ customer deposits represented 0.7% of the Mexican banking system. Factors that could, individually or collectively, lead to negative rating action/downgrade: - There is no downside potential for the GSR. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Upside potential is limited and can only occur over time with a material growth of the bank's market share. SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS Ratings Driven by Support: The national ratings of ABX+ and CBBX+ are aligned with those of BBX+, reflecting the alignment with Grupo Financiero Ve por Más, S.A. de C.V. (GFBX+), whose creditworthiness is assumed to be aligned with that of its main subsidiary, BBX+. This incorporates GFBX+'s legal obligation to support its subsidiaries, as well as Fitch's view that they are key and integral parts to the group's overall vision and strategy. SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - Any negative movement would be driven by any negative action on BBX+'s ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Any positive movement would be driven by any positive action on BBX+'s ratings. VR ADJUSTMENTS Fitch has assigned a Business Profile score of 'bb', which is above the 'b' category implied score, due to the following adjustment reason(s): Business Model (positive). SUMMARY OF FINANCIAL ADJUSTMENTS CBBX+: Pre-paid expenses and other deferred assets were classified as intangibles and deducted from total equity due to the low-loss absorption capacity under stress of these assets. ABX+ and BBX+: Pre-paid expenses, other deferred assets and goodwill were classified as intangibles and deducted from total equity due to the low-loss absorption capacity under stress of these assets. Sources of Information The principal sources of information used in the analysis are described in the Applicable Criteria. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The ratings of ABX+ and CBBX+ are driven by the institutional support from BBX+ rated at 'BB-' with a Positive Outlook. 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 ----------- ------ ----- Casa de Bolsa Ve por Mas, S.A. de C.V., Grupo Financiero Ve por Mas Natl LT A(mex) Affirmed A(mex) Natl ST F1(mex)Affirmed F1(mex) Arrendadora Ve por Mas, S.A. de C.V., Sociedad Financiera de Objeto Multiple, Entidad Regulada, Grupo Financiero Ve por Mas Natl LT A(mex) Affirmed A(mex) Natl ST F1(mex)Affirmed F1(mex) Banco Ve por Mas, S.A., Institucion de Banca Multiple, Grupo Financiero Ve por Mas LT IDR BB- Affirmed BB- ST IDR B Affirmed B LC LT IDR BB- Affirmed BB- LC ST IDR B Affirmed B Natl LT A(mex) Affirmed A(mex) Natl ST F1(mex)Affirmed F1(mex) Viability bb- Affirmed bb- Government Support ns Affirmed ns ********* 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 * * *