/raid1/www/Hosts/bankrupt/TCRLA_Public/240806.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, August 6, 2024, Vol. 25, No. 157
Headlines
A R G E N T I N A
ARCOR SAIC: Fitch Affirms 'B' LT IDR
B A H A M A S
BAHA MAR: Seeks $1.5 Billion in Builder Fraud Trial
FTX GROUP: Ch. 11 Plan Sweetens Crypto Creditor Claim Market
FTX GROUP: Users Say Sullivan & Cromwell Must Face Abetting Claims
C A Y M A N I S L A N D S
SVB FINANCIAL: SVB Cayman Islands Liquidators Hit $294M Transfer
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: CODESSD Proposes Removing ITBIS for Visitors
DOMINICAN REPUBLIC: DOP35,000MM Add'n to 2024 State Budget Gets OK
E C U A D O R
CUENCA DPR: Fitch Affirms B- Loan Rating, Alters Outlook to Stable
M E X I C O
TRUST 2400-GICSA: Fitch Affirms 'BBsf' Rating on Class A-2 MXN Debt
- - - - -
=================
A R G E N T I N A
=================
ARCOR SAIC: Fitch Affirms 'B' LT IDR
------------------------------------
Fitch Ratings has affirmed the instrument ratings for the following
Argentine corporations: Arcor S.A.I.C., IRSA Inversiones y
Representaciones S.A., Pampa Energia S.A., Telecom Argentina S.A.,
Transportadora de Gas del Sur S.A. (TGS).
This rating action includes the application of a criteria variation
to Fitch's published Country-Specific Treatment of Recovery Ratings
Criteria. The variation resulted in the affirmation of the
instruments' Recovery Ratings at 'RR3', which allows for a
one-notch uplift from the companies' Foreign Currency Issuer
Default Ratings (FC IDRs).
Key Rating Drivers
Please refer to Fitch's last press release for each company's Key
Rating Drivers.
RATING SENSITIVITIES
Please refer to Fitch's last press release for each company's
Ratings Sensitivities.
Criteria Variation
The criteria variation applies to the section titled: "When an
Instrument Enters a Distressed or Defaulted State," of the
Country-Specific Treatment of Recovery Ratings Criteria, where the
criteria allows for the assigned Recovery Rating (RR) to be above
the defined cap for distressed issuers when Fitch has reason to
believe that recoveries in an individual case would be consistent
with a higher recovery rating.
Fitch has applied a variation to extend this analytical approach to
all Argentine-based corporates rated 'B-'. This reflect their
highly speculative credit profiles and their operations within a
distressed operating environment (Argentina, FC IDR CC).
Argentina is assigned to Group D, where the assigned Recovery
Ratings are capped at 'RR4'. Fitch believes the recovery prospects
for these issuers are higher than the expected recovery of 31%-50%
for the 'RR4' band. This is based on Fitch's bespoke recovery
analysis for each individual issuer as well as precedents of debt
exchange offerings driven by capital control restriction put into
place by the Argentine Central Bank. In all cases, the calculated
recovery was higher than the expected recovery of 51%-70% for the
'RR3' band, but Fitch capped the Recovery Ratings at 'RR3' to
reflect a less predictable range of outcomes.
A Recovery Rating of 'RR3' supports a one-notch uplift for the
instrument rating from the issuer's FC IDR.
In the cases of Arcor S.A.I.C, IRSA Inversiones y Representaciones
S.A., and Telecom Argentina S.A., there is either a one-notch
differential between the FC IDR of 'B-' and LC IDR of 'B' or no
differential. Fitch has also assigned a criteria variation when
assigning an 'RR3' Recovery Rating, which is permissible under the
criteria when there is a two- to three-notch difference between the
FC and LC IDR, based on the aforementioned reasons.
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
----------- ------ -------- -----
IRSA Inversiones y
Representaciones S.A. LT IDR B- Affirmed B-
LC LT IDR B Affirmed B
senior unsecured LT B Affirmed RR3 B
Transportadora de
Gas del Sur S.A. (TGS) LT IDR B- Affirmed B-
LC LT IDR B- Affirmed B-
senior unsecured LT B Affirmed RR3 B
Telecom Argentina S.A. LT IDR B- Affirmed B-
LC LT IDR B Affirmed B
senior unsecured LT B Affirmed RR3 B
Arcor S.A.I.C. LT IDR B Affirmed B
LC LT IDR B Affirmed B
senior unsecured LT B+ Affirmed RR3 B+
Pampa Energia S.A. LT IDR B- Affirmed B-
LC LT IDR B- Affirmed B-
senior unsecured LT B Affirmed RR3 B
=============
B A H A M A S
=============
BAHA MAR: Seeks $1.5 Billion in Builder Fraud Trial
---------------------------------------------------
Rachel Scharf at law360.com reports that counsel for the
now-defunct developer of the Bahamian luxury resort Baha Mar opened
a bench trial in New York state court arguing the company lost more
than $1.5 billion because of a Chinese state-owned construction
firm's "lies, competing agendas and broken promises."
FTX GROUP: Ch. 11 Plan Sweetens Crypto Creditor Claim Market
------------------------------------------------------------
Emlyn Cameron at law360.com reports that a byproduct of the
collapse of large cryptocurrency businesses - their bankruptcy
claim market - has developed as an unlikely source of security and
a rare positive outcome in the fallout from the so-called crypto
winter, partly reflected in BlockFi's sale of roughly $875 million
in allowed claims against 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 struck a deal to sell
itself to its giant rival Binance, but Binance walked away from the
deal amid reports on FTX regarding mishandled customer funds and
alleged US agency investigations.
At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step
aside, and restructuring vet John J. Ray III was quickly named new
CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
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, 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: Users Say Sullivan & Cromwell Must Face Abetting Claims
------------------------------------------------------------------
Aislinn Keely, writing for law360.com, reports that FTX customers
told a Florida federal judge that Sullivan & Cromwell LLP can't
dismiss customer claims it aided and abetted the defunct
cryptocurrency exchange's fraud as "speculative allegations" when
the customers' complaint "paints a much more detailed and nefarious
picture."
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell
itself to its giant rival Binance, but Binance walked away from the
deal amid reports on FTX regarding mishandled customer funds and
alleged US agency investigations.
At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step
aside, and restructuring vet John J. Ray III was quickly named new
CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
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, 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.
===========================
C A Y M A N I S L A N D S
===========================
SVB FINANCIAL: SVB Cayman Islands Liquidators Hit $294M Transfer
----------------------------------------------------------------
news.bloomberglaw.com reports that Silicon Valley Bank's Cayman
Islands liquidators are asking a US bankruptcy court to void a $294
million distribution made from SVB to its sole shareholder shortly
before it became insolvent.
The US Bankruptcy Court for the Southern District of New York
should declare as null the transfer made to the bank's former
parent, SVB Financial Group, because it is illegal under a
California law barring banks from making transfers when they are
insolvent or near-insolvent, liquidators said, according to
news.bloomberglaw.com.
The payment was made at a time when directors and officers knew the
bank was insolvent, they said, the report notes.
About SVB Financial Group
SVB Financial Group is a financial services company focusing on the
innovation economy, offering financial products and services to
clients across the United States and in key international markets.
Prior to March 10, 2023, SVB Financial Group owned and operated
Silicon Valley Bank, a state-chartered bank. During the week of
March 6, 2023, Silicon Valley Bank, Santa Clara, CA, experienced a
severe "run-on-the-bank." On the morning of March 10, the
California Department of Financial Protection and Innovation seized
SVB and placed it under the receivership of the Federal Deposit
Insurance Corporation. SVB was the nation's 16th largest bank and
the biggest to fail since the 2008 financial meltdown.
On March 17, 2023, SVB Financial Group sought Chapter 11 bankruptcy
protection (Bankr. S.D.N.Y. Case No. 23-10367). The Debtor had
assets of $19,679,000,000 and liabilities of $3,675,000,000 as of
Dec. 31, 2022.
The Hon. Martin Glenn is the bankruptcy judge.
The Debtor tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Centerview Partners, LLC as investment banker; and Alvarez & Marsal
North America, LLC as restructuring advisor. William Kosturos, a
partner at Alvarez & Marsal, serves as the Debtor's chief
restructuring officer. Kroll Restructuring Administration, LLC, is
the claims and noticing agent and administrative advisor.
The U.S. Trustee for Region 2 appointed an official committee to
represent unsecured creditors in the Debtor's Chapter 11 case. The
committee tapped Akin Gump Strauss Hauer & Feld, LLP as bankruptcy
counsel; Cole Schotz P.C. as conflict counsel; Lazard Freres & Co.
LLC as investment banker; and Berkeley Research Group, LLC as
financial advisor.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: CODESSD Proposes Removing ITBIS for Visitors
----------------------------------------------------------------
Dominican Today reports that the Santo Domingo Economic and Social
Development Council (CODESSD) suggested that the upcoming tax
reform in the Dominican Republic should include the elimination of
the Tax on Transfers of Industrialized Goods and Services (ITBIS)
for tourists.
According to CODESSD, this measure would attract consumer tourism,
which is currently lacking, ultimately resulting in greater
benefits for the country, according to Dominican Today.
"We believe this will significantly increase the number of visitors
to the Dominican Republic, as statistics have shown growth wherever
similar measures have been implemented. We urge the authorities to
consider this proposal in the upcoming tax reform," the statement
reads, the report notes.
In a press release, the organization led by Samuel Sena noted that
countries with tax refunds for tourists experience a substantial
influx of consumers year-round. He highlighted that this provision
is already in place in Latin American countries such as Mexico,
Argentina, Colombia, and Chile, the report relays.
In the Dominican Republic, ITBIS is equivalent to the Value Added
Tax (VAT) in other countries, the report says.
It is essential to note that each country has specific rules and
procedures for tax refunds, so specialized advice is recommended to
navigate these processes effectively, 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.
DOMINICAN REPUBLIC: DOP35,000MM Add'n to 2024 State Budget Gets OK
------------------------------------------------------------------
Dominican Today reports that the Chamber of Deputies approved a
bill, in its second reading, that adds over 35,000 million pesos to
the general state budget for 2024. The bill, proposed by the
executive branch, modifies the existing law on the general state
budget for the 2024 fiscal year, according to the chamber.
The report says the initiative received support from deputies of
the ruling Modern Revolutionary Party (PRM), while the opposition
did not support it. The bill proposes an increase in income
amounting to 35,360,004,423 Dominican pesos, the report notes.
A portion of the additional funds will be sourced from the Ministry
of Housing, the Electricity Distribution Companies (EDES), and the
pension system, the report relays.
The Senate submitted the text last week, and it was already
approved in the first reading by the Chamber of Deputies, the
report discloses.
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.
=============
E C U A D O R
=============
CUENCA DPR: Fitch Affirms B- Loan Rating, Alters Outlook to Stable
------------------------------------------------------------------
Fitch Ratings has affirmed the outstanding series 2021-1 and 2023-1
loans issued by Cuenca DPR at 'B-'. The Rating Outlook has been
revised to Stable from Negative.
The revision reflects the latest IMF deal in Ecuador, which is
expected to ease financing risk in the near term, providing
stability to the bank's operating environment. In addition, program
cash flows have continued to perform in line with Fitch's
expectations after the issuance of the series 2023-1 notes.
Entity/Debt Rating Prior
----------- ------ -----
Cuenca DPR
2021-1 G2706*AA4 LT B- Affirmed B-
2023-1 G2706*AB2 LT B- Affirmed B-
Transaction Summary
Cuenca DPR entered into a Loan Agreement with various lenders to
receive a disbursement of $87.5 million in 2021 and $35 million in
2023 as part of a future flow program backed by U.S.
dollar-denominated existing and future diversified payment rights
(DPRs) originated by Banco del Austro S.A. (Austro) of Ecuador.
100% of DPR flows are processed in the U.S. by Citibank N.A.
(Citibank), the sole designated depository bank (DDB) in this
transaction, that executed an Account Agreement (AA) irrevocably
obligating the bank to make payments to an account controlled by
the transaction trustee.
Fitch's rating addresses timely payment of interest and principal
on a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: The
rating of this future flow transaction is tied to the credit
quality of the originator, Banco del Austro S.A. On Nov. 10, 2023,
Fitch affirmed Austro's Long-Term Issuer Default Rating (IDR) at
'CCC+' and Viability Rating (VR) at 'ccc+'.
Austro's rating reflects the slight deterioration of its asset
quality, steady profitability metrics, its adequate capitalization
levels, supported by regulatory changes and a commitment to capital
retention as well as its position in the Ecuadorian market, as the
eighth largest bank in terms of gross loans and assets.
Additionally, the bank's IDR and VR are sensitive to its local
operating environment, Ecuador (CCC+).
Notching Differential Limited by Going Concern Assessment (GCA)
Score: Fitch GCA score to gauge the likelihood that the originator
of a future flow transaction will stay in operation through the
transaction's life. Fitch's Financial Institutions (FI) group
assigns a GCA score of 'GC3' to Austro, which reflects the bank's
position in the Ecuadorian market, as the eighth largest bank as of
May 2024. Although Austro's business model is adequately
diversified, it does not have any relevant product leadership
position within Ecuador, which is also reflected in the GCA score.
Several Factors Limit Notching Uplift from IDR: The 'GC3' score
allows for a maximum uplift of two notches from the bank's IDR,
pursuant to Fitch's future flow methodology. However, uplift is
tempered to one notch from Austro's IDR due to factors mentioned
below, including high future flow debt to non-deposit funding and
DDB concentration risk, among others.
High Future Flow Debt Relative to Balance Sheet: The future flow
issuance represents approximately 4.5% of Austro's total funding
and 64.0% of non-deposit funding when considering the outstanding
balances on the notes issued out of the DPR program as of May 2024
and utilizing financials as of March 2024. Fitch does not allow the
maximum uplift for originators that have future flow debt greater
than 30% of the overall non-deposit funding. Nevertheless, given
the benefits of the structure and the quality of flows, the agency
allows for some differentiation (one-notch) from Austro's Long-Term
IDR.
Coverage Levels Commensurate with Assigned Rating: When considering
average rolling quarterly DDB flows over the last five years (June
2019-May 2024) and the maximum periodic debt service over the life
of the program, including Fitch's interest rate stress, the
projected quarterly debt service coverage ratio (DSCR) is 25.3x.
Additionally, the transaction can withstand a decrease in flows of
approximately 96% and still cover the proposed maximum quarterly
debt service obligation. Nevertheless, Fitch will monitor the
performance of the flows as a sustained decrease could negatively
impact the assigned rating.
Structure Reduces Potential Redirection/Diversion Risk: The
structure mitigates certain sovereign risks by collecting cash
flows offshore until collection of the periodic debt service
amount. In Fitch's view, diversion risk is partially mitigated by
the account agreement (AA) signed by the sole DDB (Citibank) in the
transaction. However, as Citibank processes 100% of DPR flows, the
agency believes this exposes the transaction to a higher degree of
diversion risk relative to other Fitch-rated DPR programs in the
region, limiting the overall notching differential.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The transaction's ratings are sensitive to changes in the credit
quality of Austro. A deterioration of the credit quality of Austro
by one notch would pose a constraint to the rating of the
transaction from its current level.
- The transaction's ratings are also sensitive to the ability of
the DPR business line to continue operating, as reflected by the
GCA score, and a change in Fitch's view on the bank's GCA score
could lead to a change in the transaction's rating.
- Additionally, the transaction's rating is sensitive to the
performance of the securitized business line. The quarterly DSCRs
are expected to be more than sufficient to cover debt service
obligations and should therefore withstand a significant decline in
cash flows in the absence of other issues. Any changes in these
variables will be analyzed in a rating committee to assess the
possible impact on the transaction ratings.
- No company is immune to the economic and political conditions of
its home country. Political risks and the potential for sovereign
interference may increase as a sovereign's rating is downgraded.
However, the underlying structure and transaction enhancements
mitigate these risks to a level consistent with the assigned
rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The main constraint to the program rating is the originator's
rating and Austro's operating environment. If upgraded, Fitch will
consider whether the same uplift could be maintained or if it
should be further tempered in accordance with criteria.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The future flow rating is driven by the credit risk of Austro as
measured by its Long-Term IDR.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
===========
M E X I C O
===========
TRUST 2400-GICSA: Fitch Affirms 'BBsf' Rating on Class A-2 MXN Debt
-------------------------------------------------------------------
Fitch Ratings affirms the international and national scale ratings
assigned to the notes issued by Fideicomiso Irrevocable y
Traslativo de Dominio Numero 2400 (Trust 2400 - Sponsored by
GICSA). The Rating Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Trust 2400 (Sponsored
by GICSA)
A-1 MXN XS2094574584 LT BB+sf Affirmed BB+sf
A-1 MXN XS2094574584 Natl LT AA(mex)vra Affirmed AA(mex)vra
A-1 USD 89835RAA2 LT BB+sf Affirmed BB+sf
A-1 USD 89835RAA2 Natl LT AA(mex)vra Affirmed AA(mex)vra
A-2 MXN XS2094576282 LT BBsf Affirmed BBsf
A-2 MXN XS2094576282 Natl LT A+(mex)vra Affirmed A+(mex)vra
KEY RATING DRIVERS
Consistent Asset Performance: Asset performance has gradually
recovered from the adverse impacts experienced post-issuance due to
the pandemic. The transaction improved its overall occupancy levels
over the last two years, reaching 88.9% as of March 2024 which is
slightly above 88.5% in June 2023 and 85.0% in June 2022, but
remains impacted by a lower occupancy in its office buildings.
Since 2023, the transaction's collection levels started
stabilizing, remaining slightly above Fitch's revenue assumption of
MXN142.77 million. The overall performance continues to be aligned
with Fitch's assumptions used to determine the Fitch Net Cash Flow
(FNCF) at MXN1,211.6 million.
Stable Portfolio Characteristics: Fitch considers that risks
directly related to the pandemic have subsided in the retail sector
although macroeconomic factors continue pressuring consumer demand
alongside the rise of new digital market competitors. Nevertheless,
the office sector continues to weaken showing a long-term decline
in office demand, falling properties values and a difficult
refinancing environment. Consequently, Fitch's cap rate was
adjusted to 10.4% from 9.9%, in line with market expectations.
Portfolio characteristics continue similar to its previous review,
with low turnover in its top tenant concentration focusing on
entertainment, fashion and office and a weighted average remaining
lease term of 30 months as of March 2024. The servicer maintains a
moderate strategy on the rent price increases to retain tenants.
Property Value Updated: After updating the cap rate at 10.4%,
Fitch's property value was adjusted to MXN11,650.0. Since the
amortization period started in 2023, the outstanding balance of the
notes have decreased, with a remaining balance as of March 2024
equivalent to 97.4% of the initial amount. As of March 2024,
considering the current outstanding balance of the notes and
Fitch's property value the agency calculated an LTV of 74.2% for
Class A-1 and 79.2% for Class A-2, comparable to the agency's
previous review figures of 74.5% and 79.4%, respectively, and in
line with the notes' rating level.
Adequate Structural Mechanisms: Since last review, DSCR levels
reduced mainly on principal amortization payment dates. As of March
2024, reported MXN DSCR and USD DSCR were respectively 1.42x and
1.81x (2Q23 1.47x and 2.02x, respectively), with both numbers still
above the trigger's limit. Fitch considers the transaction
structure to be strong and protects the notes from decreasing debt
service coverage or performance deterioration with triggers that
could accelerate amortization or even property disposal.
Additionally, periods of short-term liquidity stress are partially
covered by interest reserves covering three monthly interest
payments.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Ratings could be downgraded if occupancy rates and cash flow
generation deteriorate below Fitch's expectations, resulting in a
consistent use of reserves and lower debt coverage levels;
- Increased operational risks that negatively impact transaction's
collection levels and or limit liquidity could also derive in a
negative rating action;
Fitch analyzed the rating sensitivity to changes to Fitch's NCF and
the results show ratings would not be resilient to a decrease of
10% in the FNCF leading to a downgrade of at least one notch, while
a decrease of 20% or higher in the FNCF could lead to a multiple
notch downgrade.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Sustained higher collection levels derived from stable occupancy
in both sectors and improved LTV and DSCR level could lead to a
positive rating action.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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.
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