/raid1/www/Hosts/bankrupt/TCRLA_Public/240613.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, June 13, 2024, Vol. 25, No. 119
Headlines
A R G E N T I N A
ARGENTINA: IMF Urges Increased Assistance for Poorest
B A H A M A S
FTX GROUP: Bahamas Chief Gets 7.5-Year Jail Sentence
FTX GROUP: Examiner's Report Reveals Lingering Exposures
B R A Z I L
GOL LINHAS: Swaps Finance Chief Amid Bankruptcy Process
JBS SA: Probed by Rosen Law for Potential Securities Claims
RUMO SA: Moody's Affirms 'Ba2' CFR & Alters Outlook to Stable
C A Y M A N I S L A N D S
AUB SUKUK: Fitch Affirms 'BB+' Rating on Sr. Unsecured Notes
D O M I N I C A N R E P U B L I C
[*] DOMINICAN REPUBLIC: Abinader Discloses 23% Increase in Exports
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Undergoing Economic Recovery, IMF Says
TRINIDAD GENERATION: Fitch Affirms BB Rating on 2027 Unsec. Notes
- - - - -
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A R G E N T I N A
=================
ARGENTINA: IMF Urges Increased Assistance for Poorest
-----------------------------------------------------
Buenos Aires Times reports that the International Monetary Fund
(IMF) called on President Javier Milei's government to increase
social welfare for those living in poverty and ensure his austerity
program does not fall "disproportionately on working families."
The Fund's chief spokesperson, Julie Kozack, said at a press
conference that the multilateral lender is continuing to "monitor
Argentina's delicate social situation," according to Buenos Aires
Times.
"We have been emphasising the need to increase social assistance to
support the poor and ensure that the burden of adjustment does not
fall disproportionately on working families," said Kozack as she
responded to questioning over Milei's economic policies.
President Milei assumed office last December vowing to halt the
decline and to slash public spending. But new data released found
that more than half of Argentines now live in poverty, with levels
rising non-stop since a year ago and quickening under the new
government.
All economic indicators are pointing to a crushing impact on the
population of Milei's austerity measures, with falling employment
and annual inflation exceeding 200 percent.
The IMF has been positive about the Milei government's efforts to
restore fiscal balance and slow inflation, but Kozack indicated
that "additional calibration based on the evolution of social and
poverty indicators" will be "necessary."
The Fund official also underlined the importance of winning broad
political support for Milei's reform plans.
"As we have said many times in the past, it remains critical to
work to broaden policy support for macroeconomic stabilisation and
reform," said Kozack.
The IMF spokesperson also said that the Milei administration should
"give greater priority to micro-level reforms that can unlock
barriers to entry that can promote formal employment in the country
and attract private investment."
When asked, the spokeswoman said that the IMF staff will meet
'soon' to discuss the approval of the latest audit of the country's
economic programme, which would allow the disbursement of US$800
million.
"This agreement reflects strong ownership and decisive
implementation by the authorities. All key programme targets were
met by wide margins,' the spokeswoman emphasised.
"The road ahead for Argentina remains challenging. Building on
early achievements means that policies will have to evolve in areas
we have already discussed," she said.
Kozack revealed that the IMF executive board would meet "soon" to
discuss the latest quarterly review of Argentina's US$44.5-billion
credit programme with the multilateral lender.
Once the review is signed off by the IMF's board, Argentina will
receive some US$800 in funds to meet upcoming repayments.
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.
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B A H A M A S
=============
FTX GROUP: Bahamas Chief Gets 7.5-Year Jail Sentence
----------------------------------------------------
Ava Benny-Morrison of Bloomberg News reports that the former chief
executive of FTX's Bahamas subsidiary was ordered to spend 7 1/2
years in prison, the first of Sam Bankman-Fried's close associates
to be sentenced in the wake of the cryptocurrency exchange's
implosion.
Ryan Salame dropped his head as Judge Lewis A. Kaplan sentenced him
in a Manhattan courtroom Tuesday, May 28, 2024, eight months after
he reached a plea deal with federal prosecutors over the
multibillion dollar collapse of FTX.
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9, 2022, 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. Bankman-Fried agreed to
step aside, and restructuring vet John J. Ray III was quickly named
new CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
billion in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
According to Reuters, SBF shared a document with investors on Nov.
10, 2022, showing FTX had $13.86 billion in liabilities and $14.6
billion in assets. However, only $900 million of those assets were
liquid, leading to the cash crunch that ended with the company
filing for bankruptcy.
The Hon. John T. Dorsey is the case judge.
The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal
North America, LLC as financial advisor. Kroll is the claims
agent,
maintaining the page https://cases.ra.kroll.com/FTX/Home-Index
The Official Committee of Unsecured Creditors tapped Paul Hastings
as counsel, FTI Consulting, Inc., as financial advisor, and
Jefferies LLC as the investment banker. Young Conaway Stargatt &
Taylor LLP is the Committee's Delaware and conflicts counsel.
Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory
T. Donilon, Edward L. Schnitzer, and David M. Banker, is
representing Sam Bankman-Fried in the Chapter 11 cases.
White-collar crime specialist Mark S. Cohen has reportedly been
hired to represent SBF in litigation. Lawyers at Paul Weiss
previously represented SBF but later renounced representing the
entrepreneur due to a conflict of interest.
FTX GROUP: Examiner's Report Reveals Lingering Exposures
--------------------------------------------------------
Alison Frankel at Reuters reports that the California law firm that
acted as lead outside counsel for crypto exchange FTX until just
before its collapse in 2022 remains under investigation in the FTX
Chapter 11 bankruptcy, according to a report, opens new tab issued
by an independent court-appointed examiner.
Fenwick & West was the only law firm "entrusted with a birds-eye
view" of what was happening at FTX and its sister hedge fund
Alameda Research, according to bankruptcy examiner Robert Cleary of
Patterson Belknap Webb & Tyler, who was appointed earlier this year
at the behest of federal bankruptcy watchdogs, according to
Reuters.
Fenwick's legal work for FTX and Alameda, the Cleary report said,
"closely intersected with core aspects of the FTX Group's improper
operations and management," including the diversion of more than $2
billion in "founder loans" to FTX insiders as well as efforts by
FTX and Alameda executives to hide the close relationship between
the exchange and the hedge fund from regulators, the report notes.
Fenwick said in an email statement that it has and will continue to
cooperate with the ongoing investigation described in Cleary's
report, the report relays.
"The examiner's status report did not include any finding of
wrongdoing on Fenwick's part," the law firm's statement said.
"Fenwick stands behind the integrity of the work we performed on
behalf of FTX," it added.
Cleary's report referred to Fenwick & West only as Law Firm-1, not
by name. But because the examiner noted that lawyers Daniel
Friedberg and Can Sun moved from Law Firm-1 to in-house roles at
FTX and Alameda, it's clear that Law Firm-1 is Fenwick & West,
where the two attorneys previously worked, the report relays.
Cleary's primary job as examiner was to assess whether FTX's lead
bankruptcy lawyers at Sullivan & Cromwell were conflicted because
of their work for the exchange in the months before its collapse,
the report relays. As my Reuters colleague Dietrich Knauth
reported, the examiner concluded that Sullivan & Cromwell
bankruptcy lawyers were not complicit in FTX's fraud.
Cleary concluded that Delaware federal bankruptcy judge John Dorsey
acted within his discretion when he approved Sullivan & Cromwell as
lead counsel for the bankrupt exchange, the report notes. The firm
has earned more than $180 million in that role, the report
discloses.
The examiner did ask Dorsey to authorize additional investigation
of Sullivan & Cromwell's representation of former FTX CEO Sam
Bankman-Fried in his $500 million purchase of Robinhood shares in
2022, the report relays. Federal prosecutors subsequently accused
Bankman-Fried of using misappropriated customer funds to buy his
Robinhood stake, the report discloses. (Bankman-Fried was
convicted last November in a Manhattan federal jury trial.)
Sullivan & Cromwell said in an email statement that if the court
approves any additional investigation of its work on the
Bankman-Fried's Robinhood deal, it will cooperate with the
examiner, the report relays.
"Sullivan & Cromwell remains confident in our prepetition work for
FTX and the commencement of the Chapter 11 cases, and we welcome
the examiner's findings to date rejecting various baseless
allegations about our work for FTX," the statement said, the report
notes.
In addition to recounting his own findings on Sullivan & Cromwell,
Cleary disclosed investigations by FTX bankruptcy lawyers from
Quinn Emanuel Urquhart & Sullivan into potential claims against
scores of law firms and accountants that worked for the crypto
exchange, the report says. (The examiner does not appear to have
conducted an independent investigation of any of FTX's law firms
except for Sullivan & Cromwell.)
Cleary said Quinn found no evidence that most of FTX's outside law
firms were aware of misconduct by FTX insiders. But according to
his report, Quinn's extensive investigation of Fenwick & West —
which included the review of nearly 185,000 documents turned over
by the law firm and nearly 70,000 documents Quinn obtained from
FTX's internal database — shows Fenwick lawyers were "directly
involved" in matters that allegedly helped FTX insiders
misappropriate customer money and hide that misconduct, Reuters
relays.
The examiner also noted that Fenwick and FTX executives used the
ephemeral messaging app Signal for many communications. Of the 144
Signal conversations disclosed by Fenwick, only 18 still show
actual messages, the report discloses.
Cleary's report does not specifically assert that Fenwick was aware
of the insiders' misconduct, the report says. And notably, Quinn
Emanuel has not filed a complaint in the FTX bankruptcy against
Fenwick, which allegedly earned more than $22 million in legal fees
from FTX and Alameda between 2018 and 2022, the report notes.
Quinn has brought lawsuits in FTX's Chapter 11 proceeding against
such defendants as Bankman-Fried's parents and FTX's former chief
compliance officer, a onetime Fenwick partner, the report relays.
Cleary's report includes some interesting background on FTX's
relationship with Fenwick, which was originally selected to
represent the crypto exchange by Bankman-Fried's father, Stanford
Law School professor Joseph Bankman, the report relays. He
"maintained unusually close personal relationships" with Fenwick
lawyers, the report said, "which sometimes translated into
subsidizing perks for certain [Fenwick] attorneys, such as paying
for travel and admittance to sporting events," the report
discloses
Bankman did not immediately respond to an email query.
Both Fenwick & West and Sullivan & Cromwell have been sued by FTX
customers in consolidated litigation in Miami federal court over
the exchange's collapse, the report relays. Both law firms, as
I've told you, have moved to dismiss the lawsuits, arguing that FTX
customers have offered no credible evidence that they were aware of
wrongdoing by Bankman-Fried and other FTX and Alameda insiders, the
report discloses.
Lawyers cannot be liable, the firms contend, for providing routine
legal services to fraudsters unless the lawyers knew of the fraud,
the report notes.
The allegations discussed in the examiner's report overlap
substantially with claims in the customer lawsuits, the report
relays. A lead lawyer in the customers' cases, Adam Moskowitz of
The Moskowitz Law Firm told me by email that Cleary's report lends
support to his lawsuits, the report says.
The examiner "specifically found Fenwick was intricately involved
with all of FTX's core functions and Sullivan specifically gave FTX
instructions and advice on how to hide [Bankman-Fried's] purchase
of millions of dollars in Robinhood stock," Moskowitz said, adding
that he's particularly gratified that Cleary wants to continue
investigating Sullivan & Cromwell's role in Bankman-Fried's
Robinhood stock purchase, the report discloses.
The examiner's report has no direct impact on the customers' case,
although Fenwick & West can't be too happy that Cleary aired
details about Quinn Emanuel's Chapter 11 investigation of the firm
just as U.S. District Judge Michael Moore of Miami is weighing
Fenwick's motion to dismiss the customers' lawsuit, the report
notes.
In the next few months, Fenwick should know if its FTX woes are
over — or just beginning, the report adds.
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9, 2022, 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. Bankman-Fried agreed
to
step aside, and restructuring vet John J. Ray III was quickly
named
new CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
billion in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
According to Reuters, SBF shared a document with investors on Nov.
10, 2022, showing FTX had $13.86 billion in liabilities and $14.6
billion in assets. However, only $900 million of those assets were
liquid, leading to the cash crunch that ended with the company
filing for bankruptcy.
The Hon. John T. Dorsey is the case judge.
The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal
North America, LLC as financial advisor. Kroll is the claims
agent,
maintaining the page https://cases.ra.kroll.com/FTX/Home-Index
The Official Committee of Unsecured Creditors tapped Paul Hastings
as counsel, FTI Consulting, Inc., as financial advisor, and
Jefferies LLC as the investment banker. Young Conaway Stargatt &
Taylor LLP is the Committee's Delaware and conflicts counsel.
Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory
T. Donilon, Edward L. Schnitzer, and David M. Banker, is
representing Sam Bankman-Fried in the Chapter 11 cases.
White-collar crime specialist Mark S. Cohen has reportedly been
hired to represent SBF in litigation. Lawyers at Paul Weiss
previously represented SBF but later renounced representing the
entrepreneur due to a conflict of interest.
===========
B R A Z I L
===========
GOL LINHAS: Swaps Finance Chief Amid Bankruptcy Process
-------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Brazilian
airline Gol announced that its board elected Eduardo Gotilla as its
new chief financial officer, while also posting preliminary results
for April including net debt of $4.5 billion as part of the
carrier's ongoing bankruptcy proceedings.
Gotilla was the CFO of power company Light through last January,
according to globalinsolvency.com. He replaces Mario Tsuwei Liao
in the same role at Gol and is set to start on June 3, the airline
said in a securities filing, the report notes.
Gol added that Tsuwei will serve as an adviser for special projects
for the airline, the report relays. In a separate filing, Gol
released preliminary results for April, part of the monthly data it
must disclose due to the bankruptcy process the Brazilian airline
entered in the United States earlier this year, the report notes.
Gol reported a $76 million net loss for April, which was adjusted
to exclude exchange rate losses, the report discloses.
About Gol Linhas
GOL Linhas Aereas Inteligentes S.A. provides scheduled and
non-scheduled air transportation services for passengers and cargo;
and maintenance services for aircraft and components in Brazil and
internationally. The company offers Smiles, a frequent-flyer
program to approximately 20.5 million members, allowing clients to
accumulate and redeem miles. It operates a fleet of 146 Boeing 737
aircraft with 674 daily flights. The company was founded in 2000
and is headquartered in Sao Paulo, Brazil.
GOL Linhas Aereas Inteligentes 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.
JBS SA: Probed by Rosen Law for Potential Securities Claims
-----------------------------------------------------------
Rosen Law Firm, a global investor rights law firm, continues to
investigate potential securities claims on behalf of shareholders
of JBS S.A. (OTC: JBSAY) resulting from allegations that JBS may
have issued materially misleading business information to the
investing public.
SO WHAT: If you purchased JBS securities you may be entitled to
compensation without payment of any out of pocket fees or costs
through a contingency fee arrangement. The Rosen Law Firm is
preparing a class action seeking recovery of investor losses.
WHAT TO DO NEXT: To join the prospective class action, go to
https://rosenlegal.com/submit-form/?case_id=22976 or call Phillip
Kim, Esq. toll-free at 866-767-3653 or email case@rosenlegal.com
for information on the class action.
WHAT IS THIS ABOUT: On February 28, 2024, Reuters published an
article entitled "New York sues meatpacking giant JBS over climate
claims." The article stated, in pertinent part, that "JBS, the
world's largest beef producer, was sued by New York state's
attorney general, which accused it of misleading the public about
its impact on the environment in order to boost sales. Attorney
General Letitia James said JBS USA Food Co, the Brazilian company's
American-based unit, has "no viable plan" to reach net zero
greenhouse gas emissions by 2040, making its stated commitment to
achieving that goal false and misleading."
On this news, JBS' American Depositary Receipts ("ADRs") fell $0.22
per ADR, or 2.4%, to close at $9.02 per ADR on February 28, 2024.
WHY ROSEN LAW: We encourage investors to select qualified counsel
with a track record of success in leadership roles. Often, firms
issuing notices do not have comparable experience, resources, or
any meaningful peer recognition. Many of these firms do not
actually litigate securities class actions. Be wise in selecting
counsel. The Rosen Law Firm represents investors throughout the
globe, concentrating its practice in securities class actions and
shareholder derivative litigation. Rosen Law Firm has achieved the
largest ever securities class action settlement against a Chinese
Company. Rosen Law Firm was Ranked No. 1 by ISS Securities Class
Action Services for number of securities class action settlements
in 2017. The firm has been ranked in the top 4 each year since 2013
and has recovered hundreds of millions of dollars for investors. In
2019 alone the firm secured over $438 million for investors. In
2020, founding partner Laurence Rosen was named by law360 as a
Titan of Plaintiffs' Bar. Many of the firm's attorneys have been
recognized by Lawdragon and Super Lawyers.
Follow us for updates on LinkedIn:
https://www.linkedin.com/company/the-rosen-law-firm, on Twitter:
https://twitter.com/rosen_firm or on Facebook:
https://www.facebook.com/rosenlawfirm/.
Attorney Advertising. Prior results do not guarantee a similar
outcome.
RUMO SA: Moody's Affirms 'Ba2' CFR & Alters Outlook to Stable
-------------------------------------------------------------
Moody's Ratings has affirmed Rumo S.A. (Rumo)'s Ba2 corporate
family rating. At the same time, Moody's affirmed the Ba2 rating of
the $500 million backed senior unsecured sustainability-linked
notes due in 2032 issued by Rumo Luxembourg S.à r.l. and
unconditionally backed by Rumo. The outlook for the ratings was
changed to stable from negative.
RATINGS RATIONALE
The change in Rumo's rating outlook to stable from negative
reflects Moody's expectations that the company will maintain its
adequate liquidity, ample market access, and controlled leverage to
mitigate risks regarding its large capital spending program in the
next 12-18 months and negative free cash flow (FCF) expectation.
The Ba2 corporate family rating (CFR) for Rumo S.A. reflects its
market position as Brazil's largest independent rail operator,
covering regions responsible for approximately 86% of the country's
GDP and grain exports. The company's strong growth prospects,
adequate credit quality and liquidity, with gross leverage having
declined to 3.71x in March 2024, from a peak of 7.3x in 2021, and a
solid shareholder structure and corporate governance and strong
management of Cosan S.A. (Cosan, Ba2 negative) also support its
rating. Moody's estimates EBITDA will reach BRL8.3 billion in 2024,
22.7% higher than in 2023, according to Moody's Adjusted metrics.
Rumo adjusted debt includes BRL19.9 billion in bank and capital
market debt, BRL3.4 billion in leases and BRL3.7 billion in
concession obligations.
Rumo's ratings are constrained by its large exposure to
agricultural commodities, competitive dynamics and high customer
concentration in trading companies, although these risks are
somewhat mitigated by the existence of take-or-pay-contracts. The
lack of geographic diversification and execution risks also
constraint the company's ratings.
LIQUIDITY
As of March 2024, Rumo reported BRL9.4 billion in cash and cash
equivalents, sufficient to cover short-term debt (including leases)
by 4.5x and all debt maturities until 2028.
Historically, Rumo has generated weak to negative FCF because of
high capital spending. Going forward FCF will remain negative as
Rumo executes its capital spending plan to increase its networks
and operating capacity. The new concession agreements signed in
2019-21 and the Lucas do Rio Verde extension will improve Rumo
competitive position and increase transported volumes. Despite the
high capital spending plan and prospects of negative FCF, Rumo has
some mitigants to its liquidity risks, such as its high cash
position, secured long-term funding to cover capital spending,
access to capital markets even during downturns because of its
stable business model and implicit support from its shareholder,
Cosan. Furthermore, the company's covenant compliance is adequate
and sustainable even during the peak of its investment program. The
company has no exposure to foreign-currency volatility because it
hedges all principal and interest payments denominated in USD.
RATING OUTLOOK
The stable outlook reflects Moody's expectation that Rumo will
maintain its adequate liquidity, ample market access, and
controlled leverage to mitigate risks regarding its large capital
spending program in the next 12-18 months and negative free cash
flow outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive pressure on Rumo's ratings could arise if Rumo maintains a
high operating margin while improving its cash generation and
reducing leverage. Quantitatively, positive rating pressure would
require funds from operations (FFO)/adjusted debt to improve to
more than 16.7%, leverage, as measured by Moody's-adjusted
debt/EBITDA, below 4.0x and sustained positive free cash flow
generation.
Moody's could downgrade Rumo's rating if its Moody's-adjusted
leverage remains above 4.5x after the conclusion of its investment
cycle or adjusted interest coverage ratio remains persistently
below 1.0x (1.3x in March 2024). The rating could also be
downgraded if the company's liquidity deteriorates significantly
because of heavy capital spending plans, unfavorable rulings in
judicial disputes or changes in the regulatory framework that hurt
Rumo's business profile (such as the revocation of a concession
without adequate compensation).
COMPANY PROFILE
Rumo S.A. is the largest independent rail-based logistics operator
in Latin America. Operations comprise five long-term rail
concessions, totaling around 15,000 kilometers (km) of rail tracks,
about 1,500 locomotives and over 35,000 railcars, through which the
company transports agricultural commodities and industrial
products. Additionally, Rumo develops the intermodal logistics of
containers and related storage services through Brado Logistica. In
the twelve months ended March 2024, Rumo recorded net revenue of
BRL11.7 billion ($2.4 billion) and Moody's-adjusted EBITDA of
BRL7.1 billion ($1.4 billion).
The principal methodology used in these ratings was Surface
Transportation and Logistics published in December 2021.
===========================
C A Y M A N I S L A N D S
===========================
AUB SUKUK: Fitch Affirms 'BB+' Rating on Sr. Unsecured Notes
------------------------------------------------------------
Fitch Ratings has affirmed Ahli United Bank B.S.C. (c) (AUB)'s
Long-Term Issuer Default Rating (IDR) at 'BB+' with a Stable
Outlook. Fitch has also downgraded AUB's Viability Rating (VR) to
'bb-' from 'bb' and its Long-Term IDR (xgs) to 'BB-(xgs)' from
'BB(xgs)', and removed them from Rating Watch Negative.
The downgrade of the VR to 'bb-' from 'bb' reflects the negative
impact on AUB's credit profile from the sale of subsidiary Ahli
United Bank K.S.C.P (AUBK) to Kuwait Finance House (K.S.C.P) (KFH)
in February 2024.
KEY RATING DRIVERS
AUB's Long-Term IDR incorporates potential support from its
shareholder, KFH (A/Stable), as reflected by the 'bb+' Shareholder
Support Rating (SSR). The Stable Outlook on AUB's Long-Term IDR
reflects that on Bahrain's sovereign rating.
The VR balances the increased exposure to lower-rated countries
against resilient asset quality, improved profitability and a
strong capital buffer. The VR is constrained at one notch above
Bahrain's sovereign rating (B+/Stable), to take into consideration
the bank's material exposure to the domestic market, while Fitch
believes the bank could remain solvent and liquid in case of a
Bahraini sovereign default. AUB's VR of 'bb-' is below its 'bb'
implied VR, due to a negative adjustment for its business profile.
Country Ceiling Constrains Support: In Fitch's view, KFH would have
a high propensity to provide support to AUB given the bank's full
ownership by KFH, its notable role in the group, close operational
parent-subsidiary integration, and a high reputational risk for the
parent from a subsidiary' default. Fitch is not aware of any legal
restrictions on support being provided by KFH to AUB. Nevertheless,
the likelihood of support for AUB from KFH and, hence the bank's
Long-Term IDR, is constrained by Bahrain's Country Ceiling of
'BB+'.
Higher Exposure to Volatile Markets: AUB operates across the strong
markets of the Gulf Cooperation Council (GCC) and in the UK, but
also in the higher-risk Egypt and Bahrain. After AUBK's divestment,
the contribution of AUB's operations in weaker operating
environments rose to 55% of gross financing book at end-1Q24
(end-2022: 29%). This increase is reflected in its assessment of
the operating environment for AUB (revised down to 'bb' from 'bb+')
and its business profile (revised down to 'bb-' from 'bb'), being
constrained by the significant exposure to the domestic market.
Adequate Franchise; Islamic Conversion: AUB is domestic
systemically important bank with regional operations. The core
Bahraini bank obtained an Islamic banking license in 4Q23, while
its subsidiaries will be converted into sharia-compliant units
later this year.
Moderate Risk Appetite: Fitch views AUB's risk appetite as
moderate, with prudent underwriting standards and adequate risk
controls, as underlined by its resilient asset quality.
Resilient Asset Quality: AUB's asset structure changed as a result
of AUBK's demerger, with the net financing book having contracted
to 38% of total assets at end-1Q24 (end-2022: 51%). The impaired
financing exposures made up a low 2.3% of gross financing at
end-1Q24, while total reserve coverage ratio was a high 225% on the
same date. Fitch expects the quality of the financing book to
remain adequate in 2024, due to robust asset structure and stable
operating environments in the GCC region.
Improved Profitability: AUB's profitability has benefitted from the
sale transaction, with operating profit having surged to 6% of
risk-weighted assets (RWAs) in 3M24 (annualised; 2023: 2.3%). This
was caused mostly by lower RWAs, but also wider net interest margin
and stronger investment income. Fitch believes the bank's core
profitability ratio is likely to normalise at about 4% in 2024
after a peak earlier in the year, due to moderate RWA growth.
Increased Capital Buffer: The bank's common equity Tier 1 (CET1)
ratio rose after the demerger (end-1Q24: 17%; end-2022: 13%),
predominately driven by a 53% drop in RWAs. This provides a high
647bp buffer above 10.5% regulatory minimum requirement. Additional
Tier 1 perpetual securities (USD400 million) support AUB's total
capital ratio (end-1Q24: 21%). Fitch expects the CET1 ratio to
improve moderately to 17.6% at end-2024, due to strengthened
internal capital generation.
Deposit Contraction; Adequate Liquidity: AUB's deposit base shrank
by about 50% in 3M24, after the sale transaction, while the bank's
loans/deposits ratio was stable (end-1Q24: 86%). Reliance on
wholesale funding was high (1Q24: 37% of total liabilities), but
the repayment schedule is manageable for the bank. AUB's liquidity
buffer was comfortable and covered 23% of customer deposits at
end-1Q24.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A downgrade of AUB's Long-Term IDR could result from a downgrade of
Bahrain's sovereign rating or Bahrain's Country Ceiling.
A downgrade of the Bahraini sovereign rating would result in a
downgrade of AUB's VR. A downgrade of the VR could also arise from
a material deterioration of the bank's operating environments. A
substantial deterioration in the bank's asset quality, manifested
in the impaired financing exposure ratio rising to above 5%,
combined with an operating profit/RWAs ratio below 1.25% on a
sustained basis, could lead to a VR downgrade.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
An upgrade of AUB's Long-Term IDR would require an upgrade of
Bahrain's Country Ceiling. A VR upgrade would require an upgrade of
the Bahraini sovereign rating and a strengthening of the bank's
business profile, underpinned by the higher exposure to strong
operating environments on a sustained basis, while maintaining
stable financial profile.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The Short-Term IDR of 'B' is the only option mapping to a 'BB+'
Long-Term IDR.
AUB's Long-Term IDR (xgs) is at the level of the VR. The Short-Term
IDR (xgs) is mapped to its Long-Term IDR (xgs).
AUB's senior unsecured debt ratings are aligned with the bank's
IDRs and IDRs (xgs) because Fitch views the likelihood of default
on any senior unsecured obligation the same as that of the bank.
AUB Sukuk Limited (AUBSL) is a special-purpose vehicle incorporated
in the Cayman Islands and established solely to issue certificates
(sukuk). The certificates' long-term ratings are in line with AUB's
Long-Term IDR and Long-Term IDR (xgs), which reflects Fitch's view
that default of these senior unsecured obligations would equal a
default of AUB in accordance with Fitch's rating definitions.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
The senior unsecured debt and sukuk ratings are sensitive to a
change in AUB's IDRs and IDRs (xgs).
An upgrade of AUB's Long-Term IDR (xgs) would require an upgrade of
the bank's VR or KFH's Long-Term IDR (xgs). A downgrade of
Long-Term IDR (xgs) could result from a downgrade of both the
bank's VR and KFH's Long-Term IDR (xgs).
AUB's Short-Term IDR and Short-Term IDR (xgs) are sensitive to
changes in AUB's Long-Term IDR and Long-Term IDR (xgs),
respectively.
VR ADJUSTMENTS
The operating environment score of 'bb' is below the 'bbb' category
implied score due to the following adjustment reasons: sovereign
rating (negative) and international operations (positive).
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The IDRs of AUB are linked to KFH's.
ESG CONSIDERATIONS
As an Islamic bank, AUB needs to ensure compliance of its entire
operations and activities with sharia principles and rules. This
entails additional costs, processes, disclosures, regulations,
reporting and sharia audit. This results in a Governance Structure
relevance score of '4'for the bank, which has a negative impact on
the bank's credit profile in combination with other factors.
In addition, Islamic banks have an ESG relevance score of '3' for
Exposure to Social Impacts, above sector guidance for an ESG
relevance score of '2' for comparable conventional banks, which
reflects certain sharia limitations being embedded in Islamic
banks' operations and obligations, although this only has a minimal
credit impact on the entities.
Except for the matters discussed above, the highest level of ESG
credit relevance is a score of '3'. This 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
----------- ------ -----
Ahli United
Bank B.S.C. (c) LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Viability bb- Downgrade bb
LT IDR (xgs) BB-(xgs)Downgrade BB(xgs)
ST IDR (xgs) B(xgs) Affirmed B(xgs)
Shareholder Support bb+ Affirmed bb+
senior
unsecured LT BB+ Affirmed BB+
senior
unsecured ST B Affirmed B
senior
unsecured ST(xgs) B(xgs) Affirmed B(xgs)
senior
unsecured LT (xgs) BB-(xgs)Downgrade BB(xgs)
AUB Sukuk
Limited
senior
unsecured LT BB+ Affirmed BB+
senior
unsecured LT (xgs) BB-(xgs)Downgrade BB(xgs)
===================================
D O M I N I C A N R E P U B L I C
===================================
[*] DOMINICAN REPUBLIC: Abinader Discloses 23% Increase in Exports
------------------------------------------------------------------
Dominican Today reports that President Luis Abinader has announced
that the country has achieved its best export figures in the last
three years, with a total increase of 23% compared to the period
from 2016 to 2019. The president attributed this success to the
National Export Promotion Plan (PNFE), which was launched in
November 2020 to promote exports and improve competitiveness in
global markets, according to Dominican Today.
Despite the challenges posed by the pandemic and international
trade tensions, the Dominican Republic has managed to increase its
exports by 23% since 2020, with a total value of $45,804 million,
the report notes. The country's main export partner is the United
States, accounting for 54.38% of total exports, followed by other
major destinations such as Argentina, China, and Japan, the report
relays.
The president highlighted the growth of medical instruments and
devices as a key sector, with an increase of over $148 million, the
report discloses. He also emphasized the importance of promoting
women's participation in the national productive process and their
incorporation into international business activities, the report
says.
The PNFE has been implemented in a consensual and coherent manner,
incorporating the perspectives and proposals of national and
international institutions, companies, associations, and
organizations involved in productive and export development, the
report relays. The plan has been recognized as a benchmark in good
international practices and has positioned the Dominican Republic
as a world-class logistics hub, the report notes.
The government has also implemented various initiatives to promote
exports, including the modernization of the General Customs Law,
the lifting of impediments to the entry of Dominican products to
international markets, and the migration to non-face-to-face
channels in the provision of services, the report discloses.
The PNFE has achieved significant progress in its implementation,
with more than 70% of measures completed or in execution, the
report relays. The plan is expected to continue promoting exports
and improving competitiveness in global markets, with a focus on
diversifying exports to new markets and improving product quality
standards, 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.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Undergoing Economic Recovery, IMF Says
---------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
concluded the Article IV consultation with Trinidad and Tobago.
For the first time in a decade, Trinidad and Tobago is undergoing a
gradual and sustained economic recovery. Real Gross Domestic
Product (GDP) is estimated to have further expanded by 2.1 percent
in 2023, reflecting a strong performance of the non-energy sector.
Inflation has declined sharply, mainly due to decelerating global
food and imported goods prices. Banks' credit to the private sector
continues to expand and the financial sector appears sound and
stable. The current account is estimated to remain in a surplus in
2023, and international reserve coverage is adequate at 8.3 months
of prospective total imports. The fiscal deficit in FY2023
continued supporting the recovery and was better than budgeted,
while public sector debt remained below the authorities' soft debt
target.
Economic growth is projected to gain momentum in 2024, supported by
the non-energy and energy sectors, and inflation is projected to
remain low. The current account surplus will narrow mainly due to a
decline in energy prices and energy exports and is estimated at 5.7
percent of GDP in 2024. International reserve coverage is expected
to remain adequate at 7.5 months of prospective total imports.
External public buffers in the Heritage and Stabilization Fund are
large at about 20 percent of GDP. The fiscal position is projected
to remain adequate, reaching a deficit of 2.7 percent of GDP in
FY2024. This reflects lower energy revenues, increased capital
spending, and a higher wage bill—due to the long-standing public
wage settlement with some unions.
The balance of risks is tilted to the downside in the near term but
there are upside risks in the medium term. In the near term,
downside risks stem from external factors affecting energy markets
(e.g., an abrupt global slowdown) and domestic sources such as
disappointments in energy production (e.g., delays to new projects,
or unexpected disruptions to current production). In the medium
term, upside risks stem from new natural gas projects and the
implementation of planned structural reforms which could boost
growth.
Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal.
They welcomed Trinidad and Tobago's sustained economic recovery,
sharp decline in inflation in 2023, and strong external position.
Directors considered that, while the outlook is favorable, the
balance of risks is tilted to the downside in the near-term and to
the upside in the medium term. Going forward, they emphasized the
need for reforms to strengthen the economic recovery, rebuild
buffers, and secure a more diversified, green, resilient, and
inclusive economy.
Directors highlighted that strengthening the medium-term fiscal
position would help rebuild fiscal buffers and maintain public debt
well below the authorities' soft debt target. They agreed that
developing a rules-based fiscal framework and a sound debt
management strategy would help strengthen fiscal management and
mitigate macro-financial risks. Directors underscored the need to
address fiscal risks from the pension system and energy transition
and commended the proclaimed Procurement Act, which should help
improve the efficiency of public spending. Directors also
emphasized the importance of continued efforts to mobilize revenue,
particularly from the non-energy sector.
Directors underscored the importance of maintaining sound and
consistent macroeconomic policies to support the current exchange
rate arrangement. They encouraged the authorities to remain
vigilant and stand ready to increase the monetary policy rate
should potential capital outflow risks intensify. Directors
stressed that addressing foreign exchange (FX) shortages remains a
priority and encouraged adopting a more efficient and
market-clearing infrastructure for allocating FX. They noted that
removing all restrictions on current international transactions and
greater exchange rate flexibility over the medium term would help
meet the demand for FX.
Directors recognized the financial system's resilience, while
emphasizing vigilance against potential vulnerabilities. They
welcomed the progress achieved and encouraged further efforts
toward implementing the 2020 FSAP recommendations. Directors
commended the authorities' progress in strengthening the financial
integrity and international tax transparency frameworks and
encouraged them to continue strengthening the domestic tax
administration and AML/CFT frameworks in line with international
best practices. Enhancing fintech, promoting financial inclusion,
and strengthening the regulatory and supervisory guidance of
e-money and cybersecurity will also be key.
Directors welcomed the authorities' commitment to diversifying the
economy, attracting investment, promoting private sector
engagement, and increasing trade integration. They encouraged the
authorities to further enhance the business environment, tackle
insecurity, and strengthen the efficiency of trade logistics.
Directors commended the authorities' actions to advance their
climate and energy transition agenda and emphasized the importance
of building climate resilient infrastructure.
Directors welcomed the authorities' efforts to improve the quality,
timeliness, and coverage of macroeconomic statistics, which should
be sustained.
It is expected that the next Article IV consultation with Trinidad
and Tobago will be held on the standard 12-month consultation
cycle.
TRINIDAD GENERATION: Fitch Affirms BB Rating on 2027 Unsec. Notes
-----------------------------------------------------------------
Fitch Ratings has affirmed Trinidad Generation Unlimited's (TGU)
senior unsecured notes due 2027 at 'BB'.
The rating reflects TGU's importance to Trinidad and Tobago's (T&T)
energy matrix and the operational integration with its ultimate
parent, the country's government. TGU's generation capacity is
fully contracted under a long-term power purchase agreement (PPA)
through 2041 with the state-owned Trinidad and Tobago Electricity
Commission (T&TEC), for which payments are unconditionally and
irrevocably guaranteed by the government. TGU is a major national
energy provider, and the PPA provides long-term cash stability from
limited business, market, and demand risk.
KEY RATING DRIVERS
Strong Government Linkage: Fitch considers TGU's credit quality as
materially linked to that of T&T, as it is owned by the
government-owned National Investment Fund Holding Company. Fitch
assigns TGU a high score of 45 (out of 60) according to the
Government Related Entity criteria due to the company's strategic
importance to the government and the government's likelihood to
provide financial support if needed.
TGU owns and operates a 720MW net capacity combined-cycle natural
gas-fired plant that provides 34% of the country's installed
capacity and serves approximately 55% of the country's average
demand. The thermal power plant's operations are supported by the
country's large natural gas reserves. Under the sovereign's natural
gas policies, the power sector receives priority for delivery of
natural gas should supply be curtailed.
Toll Structure Underpins Stability: TGU has a 30-year PPA with a
sole off-taker T&TEC that surpasses the company's maturity of
outstanding notes due in 2027. The PPA requires T&TEC to purchase
100% of the company's electricity generation capacity with payments
backed by a government guarantee. Around 99% of TGU's revenue stems
from these stable capacity payments, with the more volatile
generation-related energy sales comprising the balance.
The PPA also provides for the guaranteed supply and provision of
fuel, as well as supply of water, with interruptions in either
yielding no effect on TGU's receipt of capacity revenue. The asset
is aligned with the sovereign's overall strategy to maintain low
energy prices as a competitive edge for private investment.
Increased Capex, Opex to Improve Reliability: Per the PPA, T&TEC's
stable capacity payments to TGU are based the plant's average
equivalent availability (EA) of 93% of total plant capacity (100%
less a 7% allowance for unforeseen outages and downtime) per year.
Recent weather- and systems-driven unplanned and forced outages
reduced the EA to 73% (2022) and 89% (2023), reducing EBITDA in
each year. TGU will increase its capex spending to nearly USD50
million in 2024, a sizeable 40% of forecast revenues, and USD30
million in 2025 (25% of forecast revenues) to enact extensive and
material corrective measures to improve efficiency and reliability,
and regain the 93% EA.
Operational expenses for non-capital work and administrative costs
are simultaneously rising in order to support the capital work
underway and maintain staff longer-term. The company's robust cash
position (USD208 million at fiscal/year end 2023) will materially
decrease in the near term after paying capex, taxes and dividends
(the latter stable at USD10 million/year) but still remain at at
least USD40 million/year going forward.
Stable Capital Structure Expected: Fitch expects 7.7x leverage at
year-end 2024, down from 8.4x in 2023 due to a higher PPA price and
slightly improved EA of 91%. Structural leverage thereafter should
decline and stabilize at around 6x based on a reduced debt load
beginning with a 2025 pre-refinancing of the notes due in 2027, but
then a relatively flat revenue forecast and gradually declining
EBITDA amid increasing opex costs.
Leverage is subject to increase yoy due to EA factor fluctuations
(11.6x in 2022) and lower generation revenues, underscoring the
importance of the capital work underway. The average EBITDA to
interest coverage ratio should approximate 2.0x through 2027. Fitch
forecasts FCF to be neutral to structurally negative over the
rating horizon amid higher capital investments and a consistent
dividend distribution policy.
DERIVATION SUMMARY
TGU's strongest peers are toll-based companies with low business
risk underpinned by predictable and stable cash flow generation.
These include Chile's GNL Quintero S.A. (GNLQ; A-/Stable) and
Transelec S.A. (BBB/Stable), which benefit from Chile's strong
operating environment and regulatory framework. However, TGU's
counterparty risk with the government of T&T effectively anchors
its rating at a level below that of its toll-based peers.
GNLQ's gross leverage has steadily declined over the past several
years, and should reach 1.6x by 2026, down from 3.8x at YE 2022.
TGU's leverage, by contrast, is expected to average just over 6.0x
going forward, including a declining EBITDA position and lower debt
from refinancing. TGU's notes are rated three notches below those
of Transelec, whose leverage should remain around 5.0x-5.5x as the
company expands operations in Chile.
KEY ASSUMPTIONS
- The plant EA will be 91% in 2024 but improve to 93% EA during the
forecast period;
- Incremental annual PPA price changes with T&TEC to approximate
inflation;
- Sustained increase in operating expenses to support additional
staff and wage growth;
- 2024 capex around USD50 million and USD30 million in 2025 for a
major cycle of corrective measures, then average USD9 million
through forecast;
- Fuel supply and costs guaranteed by T&TEC;
- Refinancing of USD450 million in 2025 ahead of the 2027 maturity
date;
- Annual dividends of USD10 million through forecast.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A material improvement in the country's overall economic
condition.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A deterioration of macroeconomic conditions, resulting in weaker
sovereign indicators;
- A material de-linkage from the government;
- A deterioration of TGU's financial flexibility or indication of a
weakening in government support.
LIQUIDITY AND DEBT STRUCTURE
Healthy Liquidity: TGU's liquidity is strong, with USD208 million
in cash and short-term investments as of YE 2023 and USD225 million
as of 1Q2024. The ample cash position should decline beyond 2025 as
the company spends on increased capex and pays down some of the
principal of its USD600 million bond, coincident with a refinancing
of the balance. TGU should maintain at least USD40 million in cash
per year going forward.
ISSUER PROFILE
TGU owns and operates a 720MW net capacity combined-cycle gas-fired
plant located in the Republic of Trinidad & Tobago. TGU is
controlled by the government of the Republic of Trinidad & Tobago
(GRTT) through a holding company, the National Investment Fund
Holding Company Limited.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG CONSIDERATIONS
Trinidad Generation Unlimited has an ESG Relevance Score of '4' for
Governance Structure due to ownership concentration as a wholly
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
----------- ------ -----
Trinidad Generation
Unlimited
senior unsecured LT BB Affirmed BB
*********
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.
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contact Peter A. Chapman at 215-945-7000.
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