/raid1/www/Hosts/bankrupt/TCRLA_Public/240813.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 13, 2024, Vol. 25, No. 162
Headlines
A R G E N T I N A
ARGENTINA: Discusses Raising US$1 Billion Through Santander
YPF SA: To Sell Units as it Ramps Up Divestments in Shale Push
B R A Z I L
BANCO BRADESCO: Partners with John Deere to Tap Into Agribusiness
GOL LINHAS: Fitch Affirms Then Withdraws 'D' LongTerm IDR
SABESP: Revenue and Cost Management Drive Q2 2024 Success
C A Y M A N I S L A N D S
ALBARAKA MTN: Fitch Puts 'B-' Final LT Rating to Sr. Unsec. Certs.
C O L O M B I A
BANCOLOMBIA: Posts $367.1 Million Second-Quarter Net Income
M E X I C O
GRUPO AXO: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
P E R U
VOLCAN COMPANIA: Fitch Ups LT IDR to CCC+ on Improved Debt Profile
P U E R T O R I C O
ZAGACITY TECH: Plan Exclusivity Period Extended to October 28
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A R G E N T I N A
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ARGENTINA: Discusses Raising US$1 Billion Through Santander
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Buenos Aires Times reports that Argentina's government is in talks
with Banco Santander SA for a potential US$1-billion loan, part of
President Javier Milei's move to secure cash ahead of a January
debt payment, according to people familiar with the matter.
Santander would act as the manager of a special purchase vehicle in
the deal, which would take the form of a repurchase agreement, or
'repo', said the people, who asked not be named because discussions
are private, according to Buenos Aires Times.
Government or Central Bank bonds will be offered as collateral,
they said, adding that the Spanish lender is pitching the
transaction to international and local money managers to weigh
their interest in participating as a way of sharing the risk, the
report notes.
Representatives for Argentina's Central Bank and Economy Ministry
didn't reply to requests for comment, notes the report. Santander
declined to comment.
Repos, as they are known, are commonly used to raise short-term
capital, the report relays. In the United States, the US Federal
Reserve turns to the repo market as a tool to help implement
monetary policy, the report says. In Argentina, the administration
of former president Mauricio Macri took on repo loans with
international banks to raise billions of dollars, the report
discloses.
The structure under discussion in this deal includes a floating
interest rate of 550 basis points over the Fed's Secured Overnight
Financing Rate on a loan maturing in 2027, according to a term
sheet seen by Bloomberg, the report relays. It includes a
two-percent commitment fee and a six-month window during which the
government could draw on the line, according to the terms, the
report discloses.
The structure is subject to change, the people said, adding that
discussions over the potential transaction are preliminary, the
report relays.
Economy Minister Luis Caputo told brokers in Argentina late last
month that the government had an agreement with international banks
on a repo line and the funds would go toward US$4.7 billion in
payments due in January on hard-currency bonds, according to people
who attended the meeting, the report discloses.
The repo line would signal that officials are keen to service bond
payments, the report notes. Since taking office last year, Milei
and Caputo have tried to reassure debt holders that the country
will make good on its obligations, the report relays.
Investor confidence, however, has taken a hit in recent weeks as
authorities burned through foreign currency reserves to prop up the
currency in parallel markets, the report adds.
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 Aug. 8, 2024, affirmed its 'CCC/C' foreign
and local currency sovereign credit ratings on Argentina. S&P also
affirmed its 'raB+' national scale rating on the country. The
outlook on the long-term ratings remains stable. S&P's 'CCC'
transfer and convertibility assessment for Argentina remains
unchanged.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and other
uncertainties with recent progress in making fiscal adjustments,
reducing inflation, and undertaking structural reforms to address
long-standing microeconomic weaknesses that have contributed to
poor economic performance for many years.s 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.
YPF SA: To Sell Units as it Ramps Up Divestments in Shale Push
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Buenos Aires Times reports that Argentina's state-run oil company,
YPF SA, is moving to sell several business units and stakes as a
divestment plan aimed at focusing its efforts on heralded shale
patch Vaca Muerta gathers steam.
YPF is receiving bids for its businesses in Brazil and Chile, where
it sells refined products like lubricants and jet fuel, Chief
Executive Officer Horacio Marin said on an earnings call, according
to Buenos Aires Times.
Argentina's biggest oil and gas producer has also started the
process of selling its 50 percent stake in refiner Refinor, the
report relays. And it is committed to divesting a 70 percent stake
in natural gas distributor Metrogas SA - but only once President
Javier Milei's free-market reforms, which feature utility price
hikes, have driven up Metrogas' value, the report discloses.
It's all part of a strategy to streamline YPF and boost the
company's share price by prioritising drilling in Vaca Muerta. YPF
expects to finish up selling aging conventional oil fields -
freeing up hundreds of millions of dollars for shale spending - in
the second half of the year, the report relays.
Shale accounted for 52 percent of YPF's second-quarter production
of the equivalent of 539,000 barrels of oil a day, up from 45
percent in the same period last year, the report discloses.
Industry plans that it's spearheading for a new shale oil pipeline
are also accelerating, with drillers already negotiating to fill
two thirds of capacity, Marín said, the report relays. Shale
fields that Exxon Mobil Cor. has put up for sale in Argentina are a
strong fit for YPF, but Marin wouldn't comment further on the
confidential bidding process, the report notes.
YPF isn't exiting all of its non-core businesses, the report says.
Marin said it will keep its 50 percent stake in Profertil SA, which
turns natural gas into fertilisers, and look for a new partner to
help it boost production there as Canadian giant Nutrien Ltd eyes
the door, the report discloses. Research and development arm Y-TEC
won't be sold either, the report says. But it will have a strict
mandate to work on projects for shale drilling, shrinking a
portfolio that's included farming and the energy transition, the
report relays.
"Our goal is to improve profits for you," Marin said on the
investor call. "There is no other goal," he added.
About YPF SA
YPF S.A. is a vertically integrated, majority state-owned
Argentine energy company, engaged in oil and gas exploration and
production, and the transportation, refining, and marketing of gas
and petroleum products.
Founded in 1922, YPF was an oil company established as a state
enterprise. YPF was later privatized under president Carlos Menem
and was bought by the Spanish firm Repsol in 1999, and the
resulting merged company was call Repsol YPF.
In 2012, about 51% of the firm was renationalized and this was
initiated by President Cristina Fernandez se Kirchner. The
government of Argentina agreed to pay $5 billion compensation to
Repsol.
In April 2023, S&P Global Ratings lowered its local and foreign
currency ratings on YPF SA to 'CCC-' from 'CCC+'. The outlook on
these ratings is now negative. The downgrade follows a similar
action on S&P's long-term foreign currency ratings and T&C on
Argentina, following announced plans that, if implemented, would
oblige some nonfinancial public-sector entities to exchange or
sell their holdings of global- and local-law dollar-denominated
bonds issued during the 2020 restructuring for other locally issued
peso debt, likely dollar- and/or inflation-linked bonds. In S&P's
view, the lack of clarity and the apparent motivation for the
potential transaction underscore heightened credit vulnerabilities,
in particular given the increasing pressures from the severe
drought that Argentina is facing, which further constrains the
already disrupted FX market. This expected greater pressure on the
FX markets also explains S&P's downward revision of the T&C
assessment to 'CCC-'.
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B R A Z I L
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BANCO BRADESCO: Partners with John Deere to Tap Into Agribusiness
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Rio Times Online reports that Banco Bradesco S.A. recently
announced its partnership with John Deere Brasil S.A. by acquiring
a 50% stake in Banco John Deere.
The partnership aligns with Banco Bradesco S.A.'s strategy to
enhance its role in Brazil's crucial agribusiness and construction
sectors, according to Rio Times Online.
Through this initiative, Bradesco will extend its financial
services to John Deere's extensive customer base across Brazil, the
report notes.
Jose Ramos Rocha Neto, Vice President of Bradesco, noted that this
collaboration will expand financing options for John Deere
customers, the report relays.
It aims to strengthen Bradesco's market presence by leveraging John
Deere's established client base in key equipment sectors, the
report relays.
Despite the transaction, Banco John Deere will maintain its brand
identity, now backed by Bradesco's financial strength, the report
discloses.
The financial specifics remain undisclosed, yet Bradesco confirms
that the deal will not impact its capitalization ratio negatively,
the report notes. This indicates a strategically sound financial
approach, the report says.
John Deere Brasil S.A., part of the global leader Deere & Company,
significantly impacts the agricultural, construction, and forestry
equipment industries, the report discloses.
This partnership will enhance Banco John Deere's portfolio,
diversifying its financial services, as highlighted by Jorge
Sivina, regional director at John Deere Financial, the report
says.
Both companies anticipate creating synergies, providing more robust
financial solutions for the agribusiness sector, the report
relays.
The partnership's completion depends on standard regulatory and
competitive approvals, the report notes. These steps ensure the
alliance adheres to market regulations and supports fair
competition, the report relays.
This strategic alliance marks a significant step for Bradesco as it
aims to bolster its footprint in agribusiness and construction
financing, the report notes.
By merging John Deere's industry expertise with Bradesco's
financial acumen, the partnership promises to deliver superior
value to customers, the report discloses.
It also aims to drive growth in essential segments of Brazil's
economy, highlighting the critical role of strategic collaborations
in sectoral financing, the report adds.
About Banco Bradesco
As reported in the Troubled Company Reporter-Latin America on Jan.
2, 2024, Fitch Ratings has revised the Rating Outlook on Banco
Bradesco S.A.'s (Bradesco) Long-Term Local and Foreign Currency
Issuer Default Ratings (IDRs) to Negative from Stable and affirmed
the IDRs at 'BB+'. Fitch has also affirmed Bradesco's Viability
Rating (VR) at 'bb+' and National Long-Term rating at
'AAA(bra)'/Outlook Stable. Fitch has affirmed NCF Participacoes
S.A.'s (NCF) Long-Term National Rating at 'AA+(bra)'/Outlook
Stable.
GOL LINHAS: Fitch Affirms Then Withdraws 'D' LongTerm IDR
---------------------------------------------------------
Fitch Ratings has affirmed GOL Linhas Aereas Inteligentes S.A.'s
(GOL) and its subsidiary GOL Linhas Aereas S.A.'s Long-Term Foreign
Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs)
at 'D', its Long-Term National Scale Rating at 'D(bra)'. Fitch has
also affirmed the rating of the senior unsecured global notes
issued by Gol Finance Inc. at 'C'/'RR5' and subsequently withdrawn
the ratings for all three issuers.
The ratings affirmation reflects the fact that GOL continues to
undergo the Chapter 11 process.
The ratings have been withdrawn for commercial reasons.
Key Rating Drivers
Chapter 11 Process: On Jan. 25 2024, GOL announced that it had
voluntarily filed for Chapter 11 in U.S. Bankruptcy Court, seeking
to restructure its finances while continuing to fully operate. This
followed GOL's ongoing difficult renegotiation with lessors and
sequential delays in new aircraft delivery from its manufacturer.
Despite operating cash flow improvement since the coronavirus
pandemic, the higher lease payments following their
reduction/postponements during the pandemic in addition to elevated
interest rates pressured GOL's FCF generation, thus resulting in an
unsustainable debt profile.
Evaluating Exit-Financing Alternatives: GOL is still in the process
of evaluating exit financing proposals as part of the Chapter 11
process, as well as any viable and competitive alternative
transactions, including opportunities presented by potential
sources of equity and debt capital.
Derivation Summary
GOL's downgrade to 'D' follows its Jan. 25, 2024 Chapter 11
bankruptcy filing. The bankruptcy filing follows operating
pressures since the pandemic.
Key Assumptions
Key Assumptions do not apply due to the unclear capital structure
and the company's operating scale/fleet size on exit from Chapter
11.
Recovery Analysis
The recovery analysis assumes that GOL would be considered a going
concern in bankruptcy and that the company would be reorganized
rather than liquidated. Fitch has assumed a 10% administrative
claim.
Going-Concern Approach: GOL's going concern EBITDA is BRL1.9
billion which incorporates the low-end expectations of GOL's EBITDA
post-pandemic, adjusted by lease expenses. The going-concern EBITDA
estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
valuation of the company. The enterprise value (EV)/EBITDA multiple
applied is 5.5x, reflecting GOL's strong market position in the
Brazil.
Fitch applies a waterfall analysis to the post-default EV based on
the relative claims of the debt in the capital structure. The debt
waterfall assumptions consider the company's pro forma total debt
including the DIP Financing. These assumptions result in a recovery
rate for the for the unsecured notes within the 'RR5' range.
RATING SENSITIVITIES
Rating Sensitivities do not apply as the ratings have been
withdrawn.
ESG Considerations
Gol Linhas Aereas Inteligentes S.A has an ESG Relevance Score of
'4' for Management Strategy due to the announcement of a corruption
case and charges implemented by the SEC and Department of Justice
(DOJ) during 2022. This has a negative impact on the ratings in
conjunction with other factors.
GOL has an ESG Relevance Score of '4' for Group Structure due to
the its relatively new and larger airline operational group (ABRA),
which has a negative impact on the credit profile, and is relevant
to the rating in conjunction with other factors.
GOL has an ESG Relevance Score of '4' for Governance Structure due
to the relatively new operational group (ABRA) that has lately
demonstrated aggressive financial policies, which has a negative
impact on the credit profile, and is relevant to the rating in
conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Following the withdrawal of ratings for GOL Linhas Aereas
Inteligentes S.A. Fitch will no longer be providing the associated
ESG Relevance Scores.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
GOL Linhas Aereas
Inteligentes S.A. LT IDR D Affirmed D
LT IDR WD Withdrawn D
LC LT IDR D Affirmed D
LC LT IDR WD Withdrawn D
Natl LT D(bra) Affirmed D(bra)
Natl LT WD(bra)Withdrawn D(bra)
Gol Finance Inc.
senior
unsecured LT C Affirmed RR5 C
senior
unsecured LT WD Withdrawn C
GOL Linhas
Aereas S.A. LT IDR D Affirmed D
LT IDR WD Withdrawn D
LC LT IDR D Affirmed D
LC LT IDR WD Withdrawn D
Natl LT D(bra) Affirmed D(bra)
Natl LT WD(bra)Withdrawn D(bra)
SABESP: Revenue and Cost Management Drive Q2 2024 Success
---------------------------------------------------------
Rio Times Online reports that Brazil's sanitation giant Companhia
de Saneamento Basico do Estado de Sao Paulo's (Sabesp) reported a
net profit of R$ 1.2 billion ($216 million) for the second quarter
of 2024.
This represents a significant annual increase of 62.6% compared to
the same period in the previous year. This financial report marks
the last one released by Sabesp as a state-owned entity, according
to Rio Times Online.
According to the report, Key Financial Highlights show:
* Net Income: Sabesp achieved a net profit of R$ 1.2 billion ($216
million) in Q2 2024. This reflects a 62.6% increase from the
previous year.
* Adjusted EBITDA: The company's adjusted earnings before
interest, taxes, depreciation, and amortization (EBITDA) rose by
35.5% year-on-year. It reached R$ 2.9 billion ($522 million).
* Revenue Growth: Revenue from sanitation services, excluding
construction revenue, increased by 14.3% from April to June
2024. This totaled R$ 5.9 billion ($1.06 billion). The net
operating revenue rose by 9.7%, reaching R$ 6.7 billion ($1.21
billion) in the same period.
* Cost Management: Administrative and operational expenses
decreased by 15.5%. These expenses amounted to R$ 3.3 billion
($594 million).
Factors Contributing to Revenue Growth
The report relays that Sabesp attributed its improved revenue
performance to several factors:
* Tariff Adjustments: A tariff adjustment of 9.6% was implemented
in May 2023. Another increase of 6.4% followed in May 2024.
Increased Billing Volume: The total billed volume increased by
3.2%.
* Construction Revenue: Construction revenue increased annually by
R$ 10.6 million ($1.91 million) from April to June 2024. It rose
by R$ 167.8 million ($30 million), or 6.9%, in the quarter.
Expense Analysis
The rise in expenses was mainly due to:
* A 14.8% increase in billing.
* A non-recurring tax credit adjustment of R$ 81.6 million ($14.7
million) in Q2 2023.
Despite these increases, the combined administrative and commercial
costs decreased by 15.5% from January to June 2024 compared to the
previous year, the report relays.
These costs represented 60.3% of the net sanitation service revenue
in the first half of 2024, the report discloses. This was down
from 69.1% in the same period of 2023, the report says.
Context and Future Outlook
Sabesp's financial performance in the second quarter of 2024
showcases its robust growth trajectory. Strategic tariff
adjustments and efficient cost management drove this growth, the
report relays.
As the company transitions from a state-owned entity, these
financial results may set a strong foundation for its future
operations in the private sector, the report notes.
The company's ability to increase revenue while reducing
operational costs highlights its effective management strategies,
the report relays.
This positions it well for future challenges and opportunities in
the sanitation industry, the report adds.
About Sabesp
As reported in the Troubled Company Reporter-Latin America on April
17, 2024, Fitch Ratings has affirmed Companhia de Saneamento Basico
do Estado de Sao Paulo's (Sabesp) Foreign Currency (FC) and Local
Currency (LC) Issuer Default Ratings (IDRs) at 'BB+'. Fitch has
also affirmed Sabesp's National Scale Rating and its unsecured
debenture issuances at 'AAA(bra)'. The Rating Outlook is Stable.
===========================
C A Y M A N I S L A N D S
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ALBARAKA MTN: Fitch Puts 'B-' Final LT Rating to Sr. Unsec. Certs.
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Fitch Ratings has assigned Albaraka Turk Katilim Bankasi A.S.'s
(Albaraka Turk; B-/Positive), USD1 billion trust certificate
issuance programme, housed under Albaraka MTN Ltd, a final
long-term rating of 'B-' and short-term rating of 'B'. The Recovery
Rating is 'RR4'.
The final ratings are the same as the expected ratings published on
1 August 2024.
The ratings are in line with Albaraka Turk's Long- and Short-Term
Foreign-Currency Issuer Default Ratings (IDR) of 'B-' and 'B',
respectively, and apply only to senior unsecured certificates
issued under the programme. The programme documentation allows for
the issuance of both senior unsecured and subordinated notes, but
the programme ratings only apply to the senior unsecured debt
class.
Albaraka MTN Ltd, the issuer and trustee, is a special purpose
vehicle, incorporated in the Cayman Islands, solely to issue
certificates (sukuk) under the programme and enter into the
transactions contemplated by the transaction documents. Albaraka
Turk is the obligor, seller and servicing agent. BNY Mellon
Corporate Trustee Services Limited is the delegate of the trustee.
Fitch understands that the proceeds will be used in accordance with
the terms of the transaction documents and as further specified in
the applicable pricing supplement.
Key Rating Drivers
The trust certificate issuance programme's ratings are driven
solely by Albaraka Turk's Long- and Short-Term IDRs, which in turn
are driven by the bank's Viability Rating (VR) of 'b-'. This
reflects Fitch's view that default of these senior unsecured
obligations would equal a default of Albaraka Turk in accordance
with Fitch's rating definitions. The key rating drivers and
sensitivities for Albaraka Turk's ratings are outlined in its
rating action commentary dated 15 March 2024 (see Fitch Upgrades 18
Turkish Banks; Places 5 VRs on Rating Watch Positive on Sovereign
Upgrade).
Fitch has given no consideration to any underlying assets or any
collateral provided, as it believes that the trustee's ability to
satisfy payments due on the certificates will ultimately depend on
Albaraka Turk satisfying its unsecured payment obligations to the
trustee under the transaction documents described in the base
offering circular and other supplementary documents.
In addition to Albaraka Turk's propensity to ensure repayment of
the certificates, in Fitch's view, Albaraka Turk would also be
required to ensure full and timely repayment of the trustee's
obligations due to Albaraka Turk's various roles and obligations
under the transaction structure and documentation, which include -
but are not limited to - the features below:
Albaraka Turk will ensure sufficient funds are available to meet
the periodic distribution amounts payable by the trustee under the
certificates of the relevant series on each periodic distribution
date. Albaraka Turk may take certain measures to ensure that there
is no shortfall and that the payment of principal and profit are
paid in full, and in a timely manner.
On any dissolution or obligor event (as described in the base
offering circular), the aggregate amounts of the outstanding face
amount of the certificates and any due and unpaid periodic
distribution amount relating to the certificates will become
immediately due and payable. Thereafter, the trustee will have the
right under the purchase undertaking to require Albaraka Turk to
purchase all of the trustee's rights, title, interests, benefits
and entitlements under the exercise price specified in the
documentation, and more generally, pursuant to the terms of the
purchase undertaking.
On any dissolution or default event (as described in the base
offering circular), the aggregate amounts of the deferred sale
price then outstanding pursuant to the master murabaha agreement
will become immediately due and payable; and the trustee will have
the right under the purchase undertaking to require Albaraka Turk
to purchase all of its rights, title, interests, benefits and
entitlements, present and future, in, to and under the relevant
assets in consideration for payment by Albaraka Turk of the
relevant exercise price.
The outstanding deferred sale price payable by Albaraka Turk under
the master murabaha agreement and the exercise price payable by
Albaraka Turk under the purchase undertaking together are intended
to fund the dissolution distribution amount payable by the trustee
under the relevant certificates, which should equal the sum of the
outstanding face amount of such series; and any accrued but unpaid
periodic distribution amounts for such certificates, or other
amount specified in the applicable pricing supplement as being
payable upon any dissolution date.
The payment obligations of Albaraka under the service agency
agreement, master declaration of trust, purchase undertaking and
the master murabaha agreement will be direct, unsubordinated and
unsecured obligations (subject to certain negative pledge
provisions) and will at all times rank at least pari passu with
claims of all other unsecured and unsubordinated creditors of
Albaraka Turk from time to time outstanding, save those whose
claims are preferred solely by any bankruptcy, insolvency,
liquidation or other similar laws of general application.
The transaction documents also include an obligation on Albaraka
Turk to ensure that at all times the tangibility ratio is more than
50%. Failure by Albaraka Turk to comply with this obligation will
not constitute an obligor event. However, if the tangibility ratio
falls below 33% (a tangibility event), this would result in the
certificate holders having a put right. The certificates would then
be delisted and each certificate holder can exercise a put option
to have their holdings redeemed, in whole or in part, at the
dissolution distribution amount within 30 days after a tangibility
event notice is given. In this event, there would be implications
for the certificates' tradability and the listing of the
certificates.
Fitch expects Albaraka Turk to maintain the tangibility ratio at
above 50% with support from its extensive asset base. Albaraka
Turk's sukuk programme includes negative pledge and cross-default
provisions, financial reporting obligations, obligor events of
default and restrictive covenants.
Certain aspects of the transaction are governed by English law
while others are governed by the Turkish and Cayman Islands law.
Fitch does not express an opinion on whether the relevant
transaction documents are enforceable under any applicable law.
However, Fitch's rating on the certificates reflects the agency's
belief that Albaraka Turk would stand behind its obligations.
When assigning ratings to the certificates to be issued, Fitch does
not express an opinion on the certificates' compliance with sharia
principles.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The programme ratings are sensitive to negative changes in Albaraka
Turk's IDRs. The ratings may also be sensitive to any changes to
the roles and obligations of Albaraka Turk under the sukuk's
structure and documentation.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The programme ratings are sensitive to positive changes in Albaraka
Turk's IDRs.
Date of Relevant Committee
18 July 2024
Public Ratings with Credit Linkage to other ratings
Albaraka MTN Ltd ratings are driven by Albaraka Turk's IDRs.
Entity/Debt Rating Recovery Prior
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Albaraka MTN Ltd
senior unsecured LT B- New Rating RR4 B-(EXP)
senior unsecured ST B New Rating B(EXP)
===============
C O L O M B I A
===============
BANCOLOMBIA: Posts $367.1 Million Second-Quarter Net Income
-----------------------------------------------------------
expressnews.com reports that Bancolombia SA (CIB) reported
second-quarter net income of $367.1 million.
The bank, based in Medellin, Colombia, said it had earnings of
$1.44 per share, according to expressnews.com.
The results exceeded Wall Street expectations, the report
discloses. The average estimate of three analysts surveyed by
Zacks Investment Research was for earnings of $1.43 per share, the
report notes.
The financial holding company posted revenue of $2.73 billion in
the period, expressnews.com says. Its revenue net of interest
expense was $1.77 billion, which missed Street forecasts, the
report adds.
As reported in the Troubled Company Reporter-Latin America on June
27, 2024, Fitch Ratings has assigned a final rating of 'BB-' to
Bancolombia S.A.'s U.S. dollar T2 subordinated notes for USD800
million at 8.625% due December 2034. The net proceeds of these
notes will replace a portion of the existing 2027 notes and be used
for general corporate purposes.
===========
M E X I C O
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GRUPO AXO: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
------------------------------------------------------------
Moody's Ratings affirmed Grupo Axo, S.A.P.I. de C.V.'s (Axo) Ba2
corporate family rating. The outlook remains stable.
The affirmation and stable outlook reflect Moody's expectation that
despite a difficult consumer spending environment, Axo will
continue to drive profitable growth while maintaining a balanced
financial policy and strong credit metrics, including maintaining
leverage within a range of 2.0 to 2.5 times through 2026. Moody's
also expect liquidity to remain good supported by solid generation
of cash from operations and recent liability management.
RATINGS RATIONALE
Axo's Ba2 CFR continues to reflect its solid market position,
well-known brands, broad product offering, and track record of
growth both organically and through new licenses and acquisitions.
Moreover, Axo's business model has proved resilient supporting
Moody's expectations of strong operational performance amid
challenging macroeconomic conditions. Through a profitable business
model that leverages the company's clout with suppliers, and
obtains synergies from its integration throughout the entire
apparel business cycle and price points, Axo has been able to
sustain cash generation and improvements in its credit metrics.
Specifically, with leverage declining from 3.8x in 2021 to 2.3x in
the LTM ended in March 31, 2024. The company's track record
supports Moody's expectation of further deleverage to below 2.0x by
2026, without considering any future margers and acquisitions.
Axo's recent liability management reduces refinancing risk allowing
it to sustain good liquidity. On July 16, 2024, Axo announced
entering into a credit agreement with several Mexican banks.
Proceeds from the disburment of the credit agreement were used to
redeem debt instruments amounting close to MXN8 billion ($410
million) originally maturing in 2026, out of which MXN1.7 billion
were related to local notes and $325 million to the 5.75% global
notes. Although the transaction was largely neutral to leverage,
it reduced refinancing risk providing the company with more ample
financial flexibility.
Nevertheless, Axo should continue to timely address debt maturities
going forward. Also Moody's expectation of high capex –
considering capitalized leases – and working capital needs to
sustain expansions may pose a challenge to the company to improve
interest coverage metrics, specifically, maintaining EBIT/interest
expense below 3.0x and EBITDA minus capex to interest expense below
2.5x through 2026. Axo's history of expanding through acquisitions
heightens its execution risk despite its solid track record of
integrating the acquired operations. A business model focused on
apparel also leaves it exposed to fashion risk, while its license
concentration renders the company more susceptible to shifts in
brand strategies and reputations.
The stable outlook on Axo's rating reflects Moody's expectation
that it will be able to sustain growth as it leverages its
omnichannel and digital operations, backed by recent strategic
acquisitions and partnerships. This strategy will enable Axo to
safeguard its market position amidst the evolving and competitive
landscape.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's would consider upgrading Axo's rating if the company
demonstrates consistent sales growth, while maintaining solid
operating margins, strong liquidity and a balanced financial
strategy. Quantitatively, a rating upgrade would require Axo to
maintain its debt/EBITDA below 3.5x and EBIT/interest expense above
3.0x, both as adjusted by Moody's.
Moody's would consider downgrading Axo's rating if its credit
metrics deteriorate significantly because of operating difficulties
or a deterioration in its market-leading position. Specifically, a
rating downgrade could result if the company's Moody's-adjusted
leverage is sustained above 4.5x and EBIT/interest expense below
2.0x.
Headquartered in Mexico, Grupo Axo, S.A.P.I. de C.V. (Axo) is a
multibrand fashion platform sourcing and marketing owned and
licensed internationally recognized brands through its own stores
and e-commerce platforms under full-price and discount-price
formats, and through a presence in department stores. Axo has
operations in Mexico, Chile, Peru, and Uruguay. Some of the brands
in its portfolio include Abercrombie & Fitch, Bath & Body Works,
Brooks Brothers, Calvin Klein, Coach, Guess, Hollister, Laces,
Lust, Nike, Old Navy, Olga, Rapsodia, Speedo, Taf, Taf Kids, Tommy
Hilfiger, Victoria's Secret and Warner's. In 2024, Axo announced an
agreement with The TJX Companies, Inc. (A2 stable) to create a
joint venture (JV) that will comprise Axo's more than 200 Promoda,
Urban and Reduced off-price stores. Axo will control the JV –
that is still awaiting approvals -- through a 51% stake. Also in
2024, Axo announced a JV with Ulta Beauty, Inc. to operate Ulta
Beauty in México.
The principal methodology used in this rating was Retail and
Apparel published in November 2023.
=======
P E R U
=======
VOLCAN COMPANIA: Fitch Ups LT IDR to CCC+ on Improved Debt Profile
------------------------------------------------------------------
Fitch Ratings has upgraded Volcan Compania Minera S.A.A.'s (Volcan)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
to 'CCC+' from 'CC'. Fitch has also upgraded Volcan's senior
unsecured notes due in 2026 to 'CCC-'/'RR6' from 'CC'/'RR4' and
assigned a rating of 'B-(EXP)'/RR4' to the new senior secured notes
due 2030.
The upgrades reflect Volcan's improved debt profile following the
conclusion of its 2026 term loan refinancing, which pushed
amortizations to start in 2025 and final maturity to 2029.
The expected 'B-' rating to the proposed exchange offer reflects
significant reduction in Volcan's refinancing risks, with no major
debt due until 2029. The company's moderate financial flexibility
following these recent refinancing efforts and execution risk on
its crucial investment plan to expand its Romina operations remain
rating constraints.
If the proposed tender offer is successfully completed, the IDR
will be upgraded to 'B-', and any remaining existing unsecured
bonds will be upgraded to 'CCC'/'RR6'.
Key Rating Drivers
Exchange Offer Overview: Volcan has entered into a transaction
support agreement with an ad hoc group of note holders,
representing approximately 36.3% of the existing 2026 USD365
million notes and has accomplished refinancing with all of its
syndicate lenders. The exchange offers consist of the 4.375% senior
notes due 2026 for the expected 8.75% senior secured second out
notes due 2030. The new senior secured notes and senior secured
syndicate loan will be secured by a collateral package, including
trusts over receivables, over shares of subsidiaries and mortgages
over material assets.
Not Considered a DDE: Fitch does not consider the exchange as a
distressed debt exchange (DDE) since, at this time, it is not
deemed to have been done to avoid a default. No immediate debt
haircut will occur but a maturity extension and structural
subordination for bondholders that do not accept the deal due to
the larger secured debt profile as well as the elimination of some
restrictive covenants deteriorate the debt agreement terms. Fitch
assesses that Volcan's current cash flow generation, including
improving operations, recovering market conditions, asset sale
proceeds and postponed maturities allow the company to support its
financial obligations.
Improvement on Refinancing Risk: Volcan's loan syndicate was
refinanced diminishing annual installments and postponing
maturities; one quarterly installment of the old syndicate, of
about USD35 million, was paid in 2024 and deducted from the new
secured loan. The 2026 bonds refinancing would provide further
relief on Volcan's debt schedule amortization. The new secured
syndicate loan is due on 2029 and the new secured bonds are due on
2030.
Asset Sales and Other Financing Advance: Signed hydro power plant's
sales for USD78.5 million, of which USD31.70 million already became
cash proceeds, and metals concentrate prepaid sales for USD25
million, add to the USD68 million cash available on June 30, 2024
to bolster Volcan's cash position. No additional asset sales are
considered in Fitch's rating case given the uncertain timeframe and
final value of expected transactions. According to Fitch,
contemplated disposals would total about USD70 million from
Volcan's 16% stake in Cementos Polpaico in Chile and from its land
package near the Chancay port under development.
Additional Financing Needed to Build Romina: Romina requires USD125
million in remaining capex and could add 75,000 of zinc equivalent
MT/year. Romina is a zinc, lead, silver deposit located in the Lima
province, 15 km from the Alpamarca operation, which is depleting in
2024. Romina could use Alpamarca's camp sites, tailings dam and
concentrator plant to speed up ramp up through 2H26. An
environmental study modification is pending but it operates in a
region familiar with mining activities. Fitch expects Romina to
contribute with 9% of revenue in 2026 and 15% on 2027.
FCF Pressured by Investments: EBITDA is expected to reach about
USD270 million as recent price increases help offset operational
mishaps amid continued albeit slow streamlining efforts. Capex is
expected to increase to more than USD200 million in 2024 and more
than USD260 million in 2025 as the construction of Romina takes
place. Capex is expected to average about 29% of revenue over the
next three years, compared to 20% in the three previous years.
Given no dividend payments expected, FCF is expected to turn
marginally negative in 2024 and remain so in 2025 due to higher
capex needs and weaker expected zinc prices.
Operating Challenges Continue: Zinc prices start to increase from
depressed levels as focus shifts to mine supply from smelter
limitations because of global mine cutbacks. However, demand
remains feeble and CRU, the business intelligence consultancy,
expects new supply to reach the market in 2025 and 2026. The Yauli
unit's approximately one-month partial stoppage will likely affect
Volcan's streamlining efforts. Cost containment strategies were
slowly delivering, prior to the stoppage, as evidenced by unit cost
improvements although it remains higher than in 2019. Volcan
postponed the Romina expansion one year, this project helps address
short mine lives of about five years, and will contribute to cash
flows in 2026.
Derivation Summary
Volcan's production of base and precious metals diversification is
higher than that of peers Ero Copper Corp (B/Stable), Aris Mining
Corp (B+/Stable), Nexa Resources SA (BBB-/Stable), and similar to
that of Compania de Minas Buenaventura SAA (BB-/Stable) or Minsur
SA (BBB-/Stable), but lower than that of Industrias Penoles SAB de
CV (BBB/Stable). Volcan operates in one country (Peru), like
Buenaventura, or Penoles (Mexico), Ero (Brazil) and Aris (Colombia)
whereas Nexa and Minsur have diversified into Peru and Brazil.
Volcan's scale of operations is higher than that of Ero and Aris,
similar to that of Buenaventura, but lower than that of Nexa
Resources and Minsur, and considerably smaller than that of
higher-rated miner Penoles.
Fitch projects that Volcan will have a weaker capital structure and
liquidity than these peers. Its 3.5x and 3.2x gross and net EBITDA
leverage compares poorly with Minsur's 1.2x and 0.8x,
Buenaventura's 2.2x and 1.7x, Nexa's 2.9x and 2.1x. Volcan also
trails behind similarly rated Aris' 2.0x and 1.3x or Ero's 1.6x and
1.2x.
Volcan's cost position in the third quartile of the zinc all-in
sustaining costs is better than that of Buenaventura's fourth
quartile in the gold curve or Ero Copper's fourth in copper,
similar to that of Nexa's third in zinc or Aris Mining's third in
gold.
Volcan's consolidated life of mine of five years of reserves is
also on the lower end, and is comparable with that of another
underground miners, such as Buenaventura without considering its
stake in large and long-lived Cerro Verde copper mine. Volcan's
mine life is lower than Aris Mining's 18 years and Ero's 17 years.
Key Assumptions
- Average zinc price of USD2,700/tonne in 2024, USD2,500/tonne in
2025 and USD2,300/tonne in 2026;
- Average silver price of USD25/oz in 2024, USD23.75/oz in 2025,
and USD21.25/oz in 2026;
- Zinc output of 233,000 MT, 241,000 MT and 251,000 MT in 2024,
2025 and 2026;
- Silver output of 13.1 million oz, 11.8 million oz, and 13.8
million oz in 2024, 2025, and 2026;
- Yauli's zinc and silver production falls 6% and 21%, respectively
in 2024, and rises 7% and 6% in 2025. Fitch expects Yauli to
contribute 60% of revenues in 2024;
- Romina is expected to start operations in mid-2026 and achieve
full production in 2027. Fitch expects Romina expansion, to
contribute 9% of revenues in 2026 and 15% in 2027;
- Capex of USD205 million, USD265 million and USD240 million in
2024, 2025, and 2026;
- No dividends;
- No additional asset sales;
- Loan syndicate is refinanced and bond exchange offer has 90%
acceptance, Romina requires external financing for USD125 million.
Recovery Analysis
Going-Concern Approach
The recovery analysis assumes that Volcan would be considered a
going concern in an event of bankruptcy and that the company would
be reorganized rather than liquidated. Fitch has assumed a 10%
administrative claim. Volcan's going concern EBITDA assumption is
based on zinc at USD2,400/ton and USD2,400/ton in 2024 and 2025,
respectively. The going concern EBITDA estimate reflects Fitch's
view of a sustainable, post-reorganization EBITDA level upon which
it bases the enterprise valuation in a low zinc price environment.
An enterprise valuation multiple of 5x EBITDA is applied to the
going concern EBITDA to calculate a post-reorganization enterprise
value. The choice of this multiple considered the following
factors: the historical bankruptcy case study exit multiples for
peer companies were 4.0x-6.0x, improving financial subfactors, mid
quality assets, and high-quality counterparties despite challenging
dynamics in a volatile and commoditized industry.
Fitch applies a waterfall analysis to the post-default enterprise
valuation based on the relative claims of debt in the capital
structure. The debt waterfall assumptions consider the company's
proforma debt following refinancing and debt exchange as well as
the debt funded capex for Romina.
These assumptions result in a recovery rate for the first-lien
secured bonds within the 'RR1' range, but due to the soft cap of
Peru at 'RR4', Volcan's senior secured notes are expected to be
rated at 'B-'/'RR4'. For the unsecured notes, the recovery is
within the RR6 range, therefore results in a rating downgrade from
the IDR, being rated at 'CCC-'/'RR6'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- If the proposed tender offer is successfully completed, the IDR
will be upgraded to 'B-'.
Further rating upgrades would depend on:
- Positive to neutral FCF over the rating horizon;
- EBITDA to interest expense coverage ratio consistently above
5.0x;
- A sustained gross debt/EBITDA ratio of less than 3.5x in a
sustained basis;
- A sustained net debt/EBITDA ratio of less than 3.0x in a
sustained basis.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Failure to refinance notes at least 12 months in advance.
- Failure to improve liquidity through asset sales or alternative
options.
- Negative FCF over the rating horizon;
- EBITDA to interest expense coverage ratio consistently below
2.0x;
- A sustained gross debt/EBITDA ratio of more than 4.5x with an
unwillingness or inability to deleverage;
- A sustained net debt/EBITDA ratio of more than 4.0x with an
unwillingness or inability to deleverage.
Liquidity and Debt Structure
Refinancing Efforts Improve Debt Profile: Volcan had USD68 million
of readily available cash and equivalents and about USD790 million
in total debt in June 30, 2024. Debt was mostly comprised of USD365
million syndicate loan maturing in 2026 with payments starting in
2024 and a USD365 million bonds maturing in 2026.
The recently refinanced USD400 million secured syndicate loan
replaces the previous unsecured one. One of the quarterly
amortizations, of about USD35 million, from the previous loan was
paid and will be deducted from the new syndicate loan. Installments
of USD10 million, USD20 million, USD25 million and USD35 million
are due on 2025, 2026, 2027 and 2028, with the rest maturing in
2029.
The new secured bond would be due in 2030 and the bond offer
targets to exchange the USD365 million unsecured bond due in 2026.
The collateral package for the loan and the bond ranks both pari
passu with the same claims over trusts over receivables, over
shares of subsidiaries and mortgages over material assets.
Volcan's liquidity position is hard pressed to finance the USD125
million in capex for Romina in 2024 and in 2025. Hydro power
plant's sales for USD78.5 million and metals concentrate prepaid
sales for USD25 million add to the USD68 million cash available on
June 30, 2024. Additional asset sales or offtake agreements could
be negotiated. However, these processes entail uncertain timing and
final proceeds. Thus, they are not considered in Fitch's rating
case.
Issuer Profile
Volcan is a polymetallic mining company with a third quartile cost
position on the global zinc cost curve per CRU. It has operated in
Peru for over 75 years. Volcan is diversified into the base metals
zinc and lead, and silver.
ESG Considerations
Volcan Compania Minera S.A.A. has an ESG Relevance Score of '4' for
Governance Structure due to the dynamics between its shareholders,
particularly with minority shareholders, such as Picasso and Letts
family, that impact their ability to address the company's
capitalization needs.
Volcan Compania Minera S.A.A. has an ESG Relevance Score of '4' for
Management Strategy due to ongoing governance concerns, which have
impaired management's ability to execute on its strategy, which has
a negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
Volcan Compania Minera S.A.A. has an ESG Relevance Score of '4' for
Waste & Hazardous Materials Management; Ecological Impacts due to
its zinc concentrate leak. In June 2022, a truck careened off the
road spilling 30 tonnes of zinc concentrates in the Chillon river.
This has a negative impact on the credit profile, and is relevant
to the rating[s] in conjunction with other factors. The highest
level of ESG credit relevance is a score of '3', unless otherwise
disclosed in this section. A score of '3' means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity. Fitch's ESG Relevance Scores are not inputs
in the rating process; they are an observation on the relevance and
materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Volcan Compania
Minera S.A.A. LT IDR CCC+ Upgrade CC
LC LT IDR CCC+ Upgrade CC
senior
unsecured LT CCC- Upgrade RR6 CC
senior
secured LT B-(EXP)Expected Rating RR4
=====================
P U E R T O R I C O
=====================
ZAGACITY TECH: Plan Exclusivity Period Extended to October 28
-------------------------------------------------------------
Judge Mildred Caban Flores of the U.S. Bankruptcy Court for the
District of Puerto Rico extended Zagacity Tech LLC's exclusive
period to file a chapter 11 plan of reorganization and disclosure
statement to October 28, 2024.
As shared by Troubled Company Reporter, Debtor explains that it has
concentrated its efforts on expanding its business operations and
margins by aiming to purchase its products directly from the
manufacturer. In order to achieve this, the Debtor is working with
its financial advisor in the process of obtaining post-petition
financing.
Moreover, the Debtor is in the process of gathering the necessary
information to file an action against a supplier who sold defective
products to Debtor which forced the Debtor to provide warranty to
such defective products resulting in significant losses which
forced the filing of the captioned case. The Debtor will engage
into settlement negotiations before filing any action before a
court of competent jurisdiction.
The Debtor claims that it is engaged in continuing the delineation
of its reorganization strategy and identifying the treatment for
the creditors to be included in the plan as well as looking for
alternative scenarios to fund the plan.
Zagacity Tech, LLC, is represented by:
Javier Vilarino, Esq.
Vilarino & Associates, LLC
P.O. Box 9022515
San Juan, PR 00902-2515
Telephone: (787) 565-9894
Email: jvilarino@vilarinolaw.com
About Zagacity Tech
Zagacity Tech LLC distributes and sells technological products,
home appliances, audio and TV, in the home and commercial lines.
Zagacity Tech LLC filed its voluntary petition for relief under
Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 23-03787)
on Nov. 17, 2023. The petition was signed by Nestor G. Cardona as
president. At the time of filing, the Debtor estimated $1 million
to $10 million in both assets and liabilities.
The Debtor tapped Javier Vilarino, Esq., at Vilarino & Associates
LLC as counsel and Albert Tamarez Vasquez, CPA, at Tamarez CPA,
LLC, as accountant.
*********
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