/raid1/www/Hosts/bankrupt/TCRLA_Public/240904.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
Wednesday, September 4, 2024, Vol. 25, No. 178
Headlines
A R G E N T I N A
ARGENTINA: 10K Firms Shuttered, 265K Jobs Lost Since November 2023
ARGENTINA: Milei's Shares Plans for State Media
GAUCHO GROUP: All Six Proposals Approved at Annual Meeting
YPF SOCIEDAD: Moody's Rates New Senior Unsecured Notes 'Caa3'
B R A Z I L
AZUL SA: S&P Downgrades ICR to 'CCC+', Outlook Negative
ELETROBRAS: Moody's Rates USD1BB Sr. Unsecured Notes 'Ba2'
ELETROBRAS: S&P Rates Proposed Senior Unsecured Notes 'BB'
C H I L E
CHILE: IMF OKs 2-Year UDS13.8BB Arrangement Under FCL
J A M A I C A
JAMAICA: IMF Urges Caution as Central Banks Ease Interest Rates
JAMAICA: Reports Progress in ABM Standards Amid Hurricane
P E R U
BANCO DE CREDITO: S&P Rates Proposed Subordinated Notes 'BB+'
V E N E Z U E L A
CITGO PETROLEUM: Elliott Leads Bidding for Firm
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A R G E N T I N A
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ARGENTINA: 10K Firms Shuttered, 265K Jobs Lost Since November 2023
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Buenos Aires Times reports almost 10,000 private companies have
closed their doors since last November due to the ongoing economic
crisis, a new report has found.
Over the same period - lasting six months, November 2023-May 2024 -
more than 260,000 registered jobs have been lost, with large firms
generally laying off more, according to Buenos Aires Times.
The study, released by the Centre for Political Economy (CEPA)
think-tank, indicates that activity across all industries was down
16.5 percent in the first half of 2024 compared to the same period
of the previous year, the report notes.
Excluding the Covid-19 lockdown of 2020, activity was at its lowest
in nine years, the report relays.
CEPA's data is based on information published by the SRT
Superintendency of Occupational Hazards, which records data from
workers and employers. It shows all industrial sectors surveyed
reduced their use of year-to-year installed capacity in June 2024,
the report discloses.
The main collapse was found in the auto industry (down 39.9
percent) and production of tobacco and related products (down 37.7
percent), the report says.
Use of installed industrial capacity was 54.5 percent: nearly
identical to June 2020, in the middle of the pandemic (53.3
percent), the report relates.
Drop in Registered Workers
The drop in activity has been matched by the loss of more than a
quarter of a million registered jobs since last November, said
CEPA, the report relays.
The report indicated that those most affected by the economic
downturn were companies with up to 500 workers, with 9,927 fewer
companies seen in May 2024 compared to last November, the report
notes. Of those with less than 500 workers, there were an
additional 45 firms lost, the report says.
However, the firing or laying off of jobs was greater at larger
companies - 70 percent of those let go (186,357) were employed by
firms with more than 500 workers, the report discloses.
The report observes that in May, 9,101 salaried jobs were lost in
the private sector, the report notes. The destruction of a further
12,498 jobs is expected for June, notes the report.
Unlike previous months, the majority were not lost in construction
but in manufacturing, according to the report.
Makro Sell-Off
The recession's impact on the economy can be seen in a number of
high-profile departures, relates Buenos Aires Times. The latest is
wholesaler and low-cost retailer Makro, which announced that it is
leaving Argentina and putting its 24 branches up for sale.
The company, owned by Dutch group HSV, has hired an international
bank to assist its departure and started negotiations with
potential buyers, including players in the wholesale business and
other supermarket chains, the report says.
Makro's assets in Argentina are said to be worth around US$200
million, the report discloses. The firm is active in 10 provinces
and competes with several other national chains, including
Maxiconsumo, Diarco, Vital and Yaguar.
The chain had started operations in Argentina in 1988, with a
supermarket in Olivos, in partnership with businessman Francisco de
Narvaez, who at the time controlled the Tia chain.
Makro had already reduced its presence in Latin America, divesting
itself of operations in Peru, Venezuela and Brazil, 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.
ARGENTINA: Milei's Shares Plans for State Media
-----------------------------------------------
Julian D'Imperio at Buenos Aires Times reports that President
Javier Milei took office vowing to sell off Argentina's state media
outlets, but how is his plan going?
"In the long run, there is no doubt that the intention was and is
to privatize state media," said a source at TV Publica, according
to Buenos Aires Times.
The source recalled that the original version of President Milei's
sweeping 'Ley de Bases' reform bill sought to include Radio y
Television Argentina (Radio Nacional and TV Publica, what was
formerly known as Canal 7) as "subject to privatisation," the
report notes. But in its quest to win the necessary votes in
Congress, the Executive Branch gave in and had to strip it from the
list, the report relays.
However, in the subsequent months, content production has been
hollowed out and workers have been pushed out, whether via
voluntary redundancy schemes or below-market wages, the report
relays. There's even been an attempt to sell off the most
successful programs to private companies, the report discloses.
One thing is for certain: without a law, Javier Milei's government
cannot sell off state media outlets, the report relays. Rodolfo
Barra, Argentina's Treasury attorney and a privatization expert
during the era of former president Carlos Menem, had to clarify
that fact to Milei, the report discloses.
The Plan
Javier Milei and his sister, presidential chief-of-staff Karina
Milei, have entrusted to Presidential Spokesman Manuel Adorni a
task: to reduce the number of employees at Radio Nacional, TV
Publica, and Contenidos Publicos (Pakapaka, Canal Encuentro and
DeporTV) by half, the report says.
The plan imitates the voluntary retirement scheme implemented at
Telam, which went from having 770 employees to 350, the report
relays. Nearly 500 employees from RTA have already taken
redundancies and there have also been some dismissals, but the La
Libertad Avanza administration does not intend to carry on in this
way, the report discloses.
In total, RTA employees number over 2,400, including staff at the
49 radio stations from across the country, the report relays. The
offer made by Eduardo Gonzalez, the state media auditor appointed
in February this year, is poor in financial terms, the report
notes.
"Collective bargaining [offers] have also been worse than any other
agreement at private television channels and nobody wants voluntary
retirement. There are plenty of people who, after working for so
many years, deserve better," the source told Perfil, the report
discloses.
'Lack of Neutrality'
Via a resolution published in the Official Gazette, signed by
President Milei and then-Interior minister (now Cabinet Chief)
Guillermo Francos, an audit of Argentina's state media outlets got
underway, the report relays. It called for greater "efficiency"
and a lowering of expenditure.
For Adorni, however, officials have been frustrated by a "lack of
neutrality" and "the abundance of Kirchnerite ideology," as he
stated at a recent press conference, the report says.
This could be one of the reasons why - as opposed to making
decisions that would deliver savings for state coffers - the
government has preferred to move ahead with the elimination of a
large part of TV Publica's programming, the report notes.
The headline removal was the long-running show Cocineros
Argentinos, though management itself acknowledged that the show was
not loss-making, the report relays. It could also explain why the
national government continued to broadcast Argentina's matches from
the recent Copa America, though it did so with advertisements sold
by Telefe, the report notes.
"Programming is unstable - there are days when it falls because
they don't want to pay extra for working on feriados ("bank
holidays)," said one source, the report relates.
Relaunch?
Failed attempts to "privatize" programming or to seek external
financing have forced the government's hand: it has decided to
activate a general "relaunch" of state media outlets, the report
relays.
The newly created Agencia de Publicidad del Estado Sociedad Anonima
(APESA) state advertising agency, which will be run by 100
ex-Télam employees at its former offices in Buenos Aires City, is
a key part of this and will be a producer of journalistic and
artistic content, the report notes.
The report discloses that there will also be the relaunch of iconic
PakaPaka programmes such as Zamba," where the government made use
of Children's Day to announce its return with an ironic image of
the character, together with a cartoon version of Jose de San
Martin, saying: "Now we're free, can we start over?"
There will also be reinforcements to help with sports programming
on TV Publica (following the success of the Olympics - the state
channel beat all competitors in the ratings)with workers from
DeporTV, as well as a million-dollar investment to pair programs
with famous personalities, the report relays.
Another idea in the works, which has now been dropped, was to
create 'RTA Noticias,' but the government has U-turned on that, the
report notes.
Despite numerous attempts to communicate with government officials
about the future of state media, Perfil received no answer, the
report relays.
The plan, it seems, is up in the air, 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.
GAUCHO GROUP: All Six Proposals Approved at Annual Meeting
----------------------------------------------------------
Gaucho Group Holdings, Inc. disclosed in a Form 8-K filed with the
Securities and Exchange Commission that the Company convened its
2024 Annual General Meeting of Stockholders virtually on Aug. 16,
2024, at which the stockholders:
(1) elected David R. Reinecke to serve a three-year term as a
Class II director until his successor is elected and qualified;
(2) approved, for purposes of complying with Nasdaq Listing Rule
5635(b), the issuance in excess of 19.99% of the Company's
outstanding common stock upon conversion of shares of the Company's
senior convertible preferred stock issued either directly in
connection with, or upon the conversion of convertible promissory
notes issued in connection with, a private placement pursuant to
Rule 506(b) of the Securities Act of 1933, as amended, which may be
deemed a "change of control" under Nasdaq Listing Rule 5635(b);
(3) approved, for purposes of complying with Nasdaq Listing Rule
5635(c), the issuance of shares of the company's common stock to
certain advisors of the Company at a price less than the market
value upon conversion of shares of the Company's senior convertible
preferred stock issued either directly in connection with, or upon
the conversion of convertible promissory notes issued in connection
with, a private placement pursuant to Rule 506(b) of the Securities
Act of 1933, as amended;
(4) approved, for purposes of complying with Nasdaq Listing Rule
5635(d), the issuance of shares of the Company's common stock upon
conversion of shares of the Company's senior convertible preferred
stock issued either directly in connection with, or upon the
conversion of convertible promissory notes issued in connection
with, a private placement pursuant to Rule 506(b) of the Securities
Act of 1933, as amended, without giving effect to the 19.99% cap
provided under Nasdaq Listing Rule 5635(d);
(5) approved an amendment to the Company's 2018 Equity Incentive
Plan to increase the number of shares available for awards under
the plan to 30% of the Company's common stock outstanding on a
fully diluted basis as of the date of stockholder approval, with an
automatic increase on January 1 of each year by the amount equal to
5% of the total number of shares outstanding on a fully diluted
basis on such date; and
(6) ratified and approved Marcum, LLP as the Company's
independent registered accounting firm for the year ended Dec. 31,
2024.
At the 2024 AGM, Peter J.L. Lawrence, a Class II director of the
Company, did not stand for re-election.
As described in the Company's Current Reports on Forms 8-K as filed
with the SEC on May 21, 2024 and July 3, 2024, Gaucho Group filed a
Certificate of Designation of Senior Convertible Preferred Stock
with the Delaware Secretary of State, designating 100,000 shares of
preferred stock of the Company, par value $0.01, as Senior
Convertible Preferred Stock.
The Board of Directors of the Company approved the commencement of
a private placement of shares of Senior Convertible Preferred Stock
and 8.5% promissory notes for aggregate proceeds of up to $7.2
million (up to $6 million with a 20% overallotment) pursuant to
Section 4(a)(2) of the 1933 Act and Rule 506(b) of Regulation D
thereunder. The Preferred Shares will be issued at a price per
share of $100; provided that the Company is limited to the sale of
up to 6,731 Preferred Shares for gross proceeds of $637,100 until
such time as stockholder approval is granted pursuant to Nasdaq
Rule 5635(d) at the Company's Annual General Meeting of
Stockholders on Aug. 18, 2024.
The Notes, with 8.5% annual interest, become convertible into
Preferred Shares at a price of $100 per share on the date the
Company obtains stockholder approval of its Proposals No. 2, 3, and
4 at the 2024 AGM.
At the 2024 AGM, the Company obtained the requisite stockholder
approval, and the Notes comprised of $3,306,425 and $41,396 in
interest were automatically converted into an aggregate of 33,488
Preferred Shares based on a conversion price of $100 per Preferred
Share. For this sale of securities, no general solicitation was
used, the Preferred Shares were only offered to a small select
group of accredited investors, all of whom have a substantial
pre-existing relationship with the Company, and no commissions were
paid. The Company relied on the exemption from registration
available under Section 4(a)(2) and/or Rule 506(b) of Regulation D
promulgated under the Securities Act with respect to transactions
by an issuer not involving any public offering. A Form D will be
filed with the SEC within 15 days of Aug. 16, 2024, the date of
conversion of the Notes.
As of Aug. 16, 2024, no shares of Senior Convertible Preferred
Stock have yet been sold in the Private Placement.
About Gaucho Group Holdings
Through its wholly-owned subsidiaries, Gaucho Group Holdings, Inc.
invests in, develops and operates real estate projects in
Argentina. GGH operates a hotel, golf and tennis resort, vineyard
and producing winery in addition to developing residential lots
located near the resort. In 2016, GGH formed a new subsidiary,
Gaucho Group, Inc. and in 2018, established an e-commerce platform
for the manufacture and sale of high-end fashion and accessories.
In February 2022, the Company acquired 100% of Hollywood Burger
Argentina, S.R.L., now Gaucho Development S.R.L, through
InvestProperty Group, LLC and Algodon Wine Estates S.R.L., which is
an Argentine real estate holding company. In addition to GD, the
activities in Argentina are conducted through its operating
entities: InvestProperty Group, LLC, Algodon Global Properties,
LLC, The Algodon - Recoleta S.R.L, Algodon Properties II S.R.L.,
and Algodon Wine Estates S.R.L. Algodon distributes its wines in
Europe under the name Algodon Wines (Europe). On June 14, 2021, the
Company formed a wholly-owned Delaware limited liability company
subsidiary, Gaucho Ventures I - Las Vegas, LLC, for purposes of
holding the Company's interest in LVH Holdings LLC.
New York, NY-based Marcum LLP, the Company's auditor since 2013,
issued a "going concern" qualification in its report dated April
29, 2024, citing that the Company has a significant working capital
deficiency, has incurred significant losses and needs to raise
additional funds to meet its obligations and sustain its
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
YPF SOCIEDAD: Moody's Rates New Senior Unsecured Notes 'Caa3'
-------------------------------------------------------------
Moody's Ratings has assigned a Caa3 rating to YPF Sociedad
Anonima's (YPF) proposed senior unsecured notes. All other ratings
remain unchanged. The outlook is stable.
Net proceeds from the proposed issuance will be used primarily for
the cash tender offer just announced by YPF to purchase up to $500
million in principal amount of its outstanding 8.500% Senior Notes
due in July 2025 and 6.950% Senior Notes due in July 2027. As a
result, the purpose of the transaction is mainly to extend the
company's debt maturity profile and will not result in significant
increase in the company's indebtedness or leverage. Other, more
general use of proceeds, include investment in fixed assets and
general corporate purposes.
The rating of the proposed notes assumes that the final transaction
documents will not be materially different from draft legal
documentation reviewed by us to date and assume that these
agreements are legally valid, binding and enforceable.
RATINGS RATIONALE
YPF's Caa3 ratings mainly reflect the company's large oil and gas
production and reserve size; solid cash generation and credit
metrics for its rating category; status as the largest industrial
corporate and energy company in the domestic market; and links with
the Government of Argentina (Argentina, Ca stable), its controlling
shareholder, which combine YPF's underlying caa3 Baseline Credit
Assessment (BCA) that expresses a company's intrinsic credit risk,
and Moody's view of moderate support from and high dependence on
the Argentine government. The rating reflects Moody's view that the
company's creditworthiness cannot be completely de-linked from the
credit quality of the Argentine government and, thus, the ratings
need to closely reflect the risk that the company shares with the
sovereign. Also incorporated in the rating, are YPF's adequate
liquidity.
Key rating challenges for YPF's ratings are its concentration of
operations in Argentina, a moderate-to-high foreign-currency risk
given that most of the company's debt is denominated in foreign
currency, coupled with refinancing risk; and its portfolio of
majority mature producing fields and rigid labor cost structure.
YPF is the largest integrated oil and gas company in Argentina,
with an extensive portfolio of assets in the country including,
among others, a large portfolio of oil and gas concessions and
reserves; refining assets that account for over half of Argentina's
refining nameplate capacity; a broad network of service stations
and logistics assets; a petrochemical business integrated with its
downstream business; a separation and fractioning of natural gas
liquids (NGL) business; and a power generation business through YPF
Energia Electrica S.A. (YPF Luz, Caa3 stable), a company jointly
controlled with GE EFS Power Investments B.V.
The proposed notes will incorporate a net leverage incurrence ratio
covenant, initially set at 3.0x, which will remain in effect until
its 4.000%/9.000% Step Up Senior Secured Notes due 2026 are fully
repaid. Upon this repayment and until December 2027, the incurrence
ratio will increase to 3.5x. Starting January 2028 the ratio will
rise to 4.0x and will remain in place up until the maturity of the
proposed notes.
The liquidity position of YPF is adequate, with liquidity
indicators demonstrating strong cash and securities holdings to
service debt, but with certain dependance on external sources to be
able to comply with its budgeted capital expenditures. As of June
2024, the company held approximately $1.4 billion in cash and
marketable securities. Furthermore, Moody's estimate YPF to
generate around $5.0-5.5 billion in cash from operations over the
subsequent 12-month period. These figures compare favorably to the
company's upcoming debt amortizations, which amount to $1.9 billion
through the end of 2025 (excluding financial leases). Furthermore,
the proposed transaction, which will ultimately use proceeds for a
tender offer of July 2025 and July 2027 notes for up to $500
million, will reduce YPF's overall short-term debt exposure. The
company's access to bank lending from various financial
institutions, coupled with its ability to tap into both local and
international capital markets, further demonstrates its adequate
financial footing. Given these factors, along with the company's
cash holdings and future cash generation, the servicing of its debt
over the next 12-18 months is deemed manageable.
YPF will likely continue experiencing negative free cash flow in
2024 primarily due to its extensive capital expenditure program.
Over the next few years, YPF aims to boost shale oil and gas
output, thereby increasing its oil net exports and altering
Argentina's energy landscape by reducing LNG imports in favor of
increased domestic output with YPF and others leading the charge,
supported by new infrastructure. The company is also developing a
significant Liquefied Natural Gas (LNG) export project in Vaca
Muerta formation in the south of Argentina with PETRONAS LNG Ltd.
as a partner, planning industry-wide involvement in its next phase.
YPF has set 2027 objectives, including producing 250,000
barrels/day of shale oil—80% of its total oil output—at
sub-$40/barrel costs, improving downstream margins by $3/barrel,
and maintaining a around 50% fuel market share. The final
investment decision for the first phase of a global-scale LNG
plant, seeking to make renewables about 25% of its energy matrix,
is expected to occur during the second half of 2025. YPF targets a
$3 billion investment in shale for 2024 within a $5 billion capex,
mostly for shale exploration and production. This includes pivoting
from mature conventional fields towards shale, reallocating $800
million from conventional to shale development, and divesting
around 50 mature blocks to enhance profitability and efficiency,
including deploying three additional rigs in Vaca Muerta.
YPF's capital spending program is being funded through internally
generated cash flow and the reinvestment of earnings, leading YPF
to forego dividend distributions. In addition, the company also
relies on forming partnerships with strategic partners and securing
loans as alternative financing sources. In 2023, YPF allocated $5.3
billion to capex, an increase from $3.9 billion the previous year.
In 2024, Moody's expect capital expenditures will remain around
$5.0 billion. YPF intends to maintain a net debt/EBITDA ratio
target of 1.5x-1.7x even if that requires reducing its capital
investment; it had a 1.7x net leverage ratio as of December 2023
and June 2024, and will likely be able to remain in that
neighborhood through the remainder of 2024.
RATING OUTLOOK
The stable outlook reflects Moody's view that YPF's main
shareholder, the Argentine State, i) will exert no influence over
the company to spend in capital expenditures or dividends beyond
its operating cash flow generation capacity and ii) has incentives
to maintain prices of crude and oil products at a level that makes
it economically attractive for oil companies to invest to increase
production and reduce the country's dependence on imports of oil
products and natural gas. YPF´s creditworthiness cannot be
completely de-linked from the credit quality of the Argentine
government, and thus its ratings also incorporate the risks that it
shares with the sovereign. Also, the stable outlook reflects
Moody's view that possible losses for senior unsecured creditors
will not be greater than those associated with a Caa3 rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
YPF's ratings could be upgraded if there is an upgrade of the
Government of Argentina's Ca rating and YPF maintains good credit
metrics for its rating category. Upgrade pressure could also be
triggered if the company further expands and diversifies its
operations outside Argentina while maintaining an adequate
liquidity profile.
YPF's ratings could be downgraded if the company registers a
significant deterioration in liquidity or if it loses access to
debt markets or foreign currency, significantly restricting the
company's ability to meet debt obligations. The ratings could also
be downgraded if Moody's believe possible losses for senior
unsecured creditors would be greater than those associated with a
Caa3 rating or if the Government of Argentina's rating is
downgraded.
The methodologies used in this rating were Integrated Oil and Gas
published in September 2022.
YPF Sociedad Anonima (YPF) is an Argentina-based integrated energy
company, with operations in the exploration, development and
production of crude oil, natural gas and liquefied petroleum gas,
as well as downstream operations engaged in the refining, chemical
production, retail marketing, transportation and distribution of
oil and petroleum products. YPF is controlled by the Argentine
state, which holds 51% of the company's shares. YPFs' revenue
amounted to ARS11,620 billion ($17.9 billion) in the 12 months
through June 2024, with total assets of ARS25.074 billion ($28
billion). The company conducts its operations and has properties
and customers in Argentina. Its operations outside the country
include exploration activities in Chile and Bolivia, and the
marketing of lubricants and specialties in Brazil and Chile.
===========
B R A Z I L
===========
AZUL SA: S&P Downgrades ICR to 'CCC+', Outlook Negative
-------------------------------------------------------
On Sep. 2, 2024, S&P Global Ratings lowered its global scale issuer
credit rating on Brazilian airline Azul S.A. to 'CCC+' from 'B-'
and its national scale rating to 'brBB-' from 'brBBB-'. At the same
time, S&P lowered its rating on Azul's senior unsecured notes to
'CCC-' from 'CCC' and affirmed the '6' recovery rating, indicating
its expectation of minimal recovery (0%) on the remaining unsecured
notes due 2024 and 2026 in the event of a payment default.
The negative outlook reflects that S&P could lower the ratings in
the next six to 12 months if Azul's cash flow generation and
ability to access long-term financing weaken.
The depreciation of the Brazilian real (R$) and a reduction in
capacity and yields hampered Azul's second-quarter results.
S&P said, "We now forecast 3%-4% revenue growth for 2024. We still
forecast a healthy EBITDA margin of about 28.0%, versus 25.2% in
2023. We expect Azul's EBITDA to grow to about R$5.2 billion this
year from R$4.7 billion in 2023, but capital expenditures (capex)
and lease payments to weigh on earnings. We forecast material FOCF
deficits after lease payments of about R$1.6 billion this year and
2025."
Azul used slightly over R$450 million in cash in the first half of
the year. As of June 30, 2024, it held cash of about R$1.5 billion.
Although financial debt maturities in the next 12 months aren't
substantial, operating leases and capex needs are meaningful
(totaling approximately R$5 billion per year in 2024 and 2025).
The company has confirmed it is under negotiations with lessors to
convert part ($558 million) of its lease liabilities into equity
and is also working on some alternatives to get new secured
financing to strengthen liquidity.
ELETROBRAS: Moody's Rates USD1BB Sr. Unsecured Notes 'Ba2'
----------------------------------------------------------
Moody's Ratings has assigned a Ba2 rating to the up to USD1 billion
senior unsecured notes due 2035 (Notes) to be issued by Centrais
Eletricas Brasileiras SA-Eletrobras (Eletrobras). The outlook is
stable.
The assigned rating is based on preliminary documentation received
by us as of the rating assignment date. Moody's do not expect
changes to the documentation reviewed over this period nor does it
anticipate changes in the main conditions that the notes will
carry. Should issuance conditions and/or final documentation of the
notes deviate from the original ones submitted and reviewed by the
rating agency, Moody's will assess the impact that these
differences may have on the ratings and act accordingly.
RATINGS RATIONALE
The notes are rated at the same level of Eletrobras' Corporate
Family Ratings (CFR) of Ba2, reflecting the strength of the cash
flows generated at the operating holding level and its currently
robust liquidity position, that does not rely on structurally
subordinated dividends for its debt service. Eletrobras senior
unsecured Notes will rank pari-passu to the outstanding and future
unsecured debt of the company. The proposed issuance has a similar
structure to that of the company's dollar-denominated senior
unsecured notes due in 2025 and 2030, which does not encompass
financial covenant tests. Moody's view the proposed transaction as
part of the company's plans for 2024, which net proceeds from the
notes will be used for liability management.
Eletrobras is an operating holding since its merger with one of its
operating subsidiaries, Furnas Centrais Elétricas S.A. (Furnas),
in July 2024, which represents 38% of the consolidated cash flows.
The holding also receives dividends from three major operating
subsidiaries, Companhia de Geração e Transmissão de Energia
Elétrica do Sul do Brasil (CGT Eletrosul), Centrais Elétricas do
Norte do Brasil S.A. (Eletronorte) and Companhia Hidro Elétrica do
São Francisco (Chesf). In the absence of dividends from its other
operating companies, Moody's expect Eletrobras' own cash
generation to be approximately 2.5 times higher than its annual
interest expenses, on a proforma basis for the transaction.
Following the execution of the liability management strategy, the
new notes will represent around 11% of the holding's indebtedness,
and 8% of the group's.
The net proceeds of the proposed transaction will be used
exclusively to partially repay the BRL4.0 billion syndicated loan
and the BRL2.0 billion commercial notes, both raised in June 2024
with a two-year term to finance the concession grant and renewal
expenses following Eletrobras' privatization. As such, the issuance
of the notes does not change the company's leverage profile but
contributes to extend the debt amortization profile. As of the last
twelve months to June 2024, Eletrobras' consolidated leverage, that
Moody's calculate as the cash flow from operations (CFO) pre
changes in working capital (Pre-W/C) divided by Net Debt, stood at
14.4%, a level that Moody's consider elevated but consistent with
the company's standalone credit profile.
The notes will be denominated in dollars, while Eletrobras' cash
generation profile is in Brazilian reais, creating a currency
mismatch. The sensitivity analysis on foreign exchange fluctuations
that Moody's performed only resulted in slight changes in the
company's credit metrics that do not materially change Eletrobras'
credit profile. While Moody's will continue to monitor this risk,
the Ba2 rating assigned to the notes does not account for any
structural features notching at this point.
In accordance with Moody's Government-Related Issuer methodology
(GRI), Eletrobras' Ba2 CFR incorporates its ba3 Baseline Credit
Assessment (BCA), a measure of its standalone credit quality; the
Government of Brazil's Ba2 rating and a positive outlook; the high
degree of interdependence between the two entities; and the
moderate probability of extraordinary support from the sovereign
government in case of need.
The ba3 BCA factors in the company's strong competitive position as
the market leader in Brazil's power generation business, coupled
with its growing transmission activities, that adds predictability
and stability to the company's cash flow generation profile. It
also factors the business turnaround initiatives, which have been
contributing to efficiency gains and a sustainable expansion of its
operating margins. Eletrobras' credit profile is balanced by a
dispute with Federal government around its shareholder voting
structure, the BRL33.6 billion Energy Development Accounts (CDE)
that weights on its leverage profile, and the exposure to the Angra
3 nuclear power project through its 35.9% ownership of ordinary
voting shares (68.0% of total shares) in Eletronuclear S.A.
The execution of the company's deleveraging strategy, cost
efficiency initiatives and recontracting of maturing power
purchasing agreements also adds to execution risks. Moody's base
case projects the company's CFO pre-WC over net debt will remain
around 14%, with interest coverage remaining slightly above 2.0x
over the next three years. These metrics do not include BRL25.2
billion of off-balance-sheet guarantees to debt issued by
unconsolidated subsidiaries and contingencies of around BRL15.8
billion as of June 2024.
More favorable growth dynamics in the Brazilian economy, reflected
in the sovereign's positive outlook, will benefit Eletrobras' power
generation business. However, an upgrade of the sovereign rating
would not immediately affect the company's Ba2 CFR because of its
intrinsic credit risks.
The stable outlook balances Moody's view that Eletrobras' leverage
will remain stable over the next three years, that progressive
shift towards transmission will add to predictability, along with
the risks associated with the company's evolving business
structure, governance and liabilities settlement.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upgrade would depend on the company's leverage reduction
trajectory, along with maintenance of adequate liquidity.
Quantitatively, positive rating pressure on the standalone credit
profile would materialize if CFO pre-WC/net debt stays above 20%
and interest coverage ratio approaches 4.2x, both on a sustained
basis. A rating upgrade would also depend on a similar action on
the Government of Brazil's rating.
Conversely, the ratings could be downgraded if there is a strategic
shift toward a more aggressive financial policy that encompasses
higher dividend payouts or leveraged acquisitions. Evidence of
detrimental government or regulatory intervention would also
increase negative rating pressure. Quantitatively, Moody's would
consider a rating downgrade if CFO pre-WC/total net debt remains
persistently below 10% and the interest coverage ratio below 2.8x
for a prolonged period.
The methodologies used in this rating were Unregulated Utilities
and Unregulated Power Companies published in December 2023.
ELETROBRAS: S&P Rates Proposed Senior Unsecured Notes 'BB'
----------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue rating to
Eletrobras-Centrais Eletricas Brasileiras S.A.'s proposed senior
unsecured notes of up to US$1 billion, due January 2035.
Eletrobras (global scale: BB/Stable/--; national scale:
brAAA/brA-1+/Stable) will use the cash proceeds for liability
management. This transaction is in line with our refinancing
expectations, part of Eletrobras' broader liability program to
extend its debt profile and reduce debt costs.
S&P's ratings on the senior unsecured debt are at the same level as
the issuer credit rating because debt issued by subsidiaries is
mostly unsecured and guaranteed by the holding company,
Eletrobras.
Considering the full incorporation of Furnas and pro forma for this
issuance, the company's secured debt ratio is below 50% of its
consolidated debt.
=========
C H I L E
=========
CHILE: IMF OKs 2-Year UDS13.8BB Arrangement Under FCL
-----------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
approved, a two-year arrangement for Chile under the Flexible
Credit Line (FCL) in an amount of SDR 10.4658 billion (about
US$13.8 billion), equivalent to 600 percent of quota and noted the
cancelation of Chile's previous arrangement. The Chilean
authorities stated their intention to treat the new arrangement as
precautionary and continue to gradually lower access, conditional
on external risk developments.
This is Chile's third FCL arrangement since 2020 with access having
been gradually lowered. The first FCL arrangement was approved on
May 29, 2020 in an amount of SDR 17.443 billion (equivalent to
1,000 percent of quota) (see Press Release No. 20/227). The second
arrangement, approved on August 29, 2022 (see Press Release No.
22/294), was for an amount of SDR 13.954 billion (equivalent to 800
percent of quota).
Following the Executive Board's discussion on Chile, Mr. Bo Li,
Deputy Managing Director, made the following statement:
"The near-term outlook has improved, supported by a pickup in
mining exports and a recovery in consumption. Yet, the Chilean
economy remains exposed to elevated external risks tied to the
uncertainty around the potentially higher-for-longer interest rate
environment in the U.S., a slowdown in China and other key trading
partners, and an intensification of regional conflicts in the
world.
"Against this backdrop, the authorities have continued to implement
very strong policies which have largely resolved macroeconomic
imbalances built during the pandemic. The government's reform
ambitions aim at adding dynamism to the economy, while making it
more inclusive and greener. In particular, key efforts seek to
expedite investment permits, capitalize on Chile's opportunities
from the global green transition, continue to raise
revenues—mainly by enhancing tax compliance—and strengthen
social security.
"Chile's very strong institutional policy frameworks support the
economy's resilience and capacity to respond to shocks. They
include a credible inflation-targeting framework with a flexible
exchange rate, a debt anchor and structural fiscal balance rule,
and effective financial sector regulation and supervision.
"In this context, the Flexible Credit Line (FCL) arrangement will
continue to provide a valuable buffer against tail risks and a
signal of Chile's policy and institutional strengths. The
authorities remain committed to treating the FCL arrangement as
precautionary and gradually reducing access, in the context of
their exit strategy, conditional on external risk developments."
=============
J A M A I C A
=============
JAMAICA: IMF Urges Caution as Central Banks Ease Interest Rates
---------------------------------------------------------------
RJR News reports that as Jamaica and other economies around the
world consider decreasing interest rates, Managing Director of the
International Monetary Fund Kristalina Georgieva said the approach
must be cautious.
"Bring inflation down, keep your fiscal house in order and continue
to focus on jobs and growth of the Jamaican people," she advised,
according to RJR News.
The Bank of Jamaica disclosed a reduction in its policy rate by 25
basis points to 6.75 per cent, the report notes.
The rate cut by the central bank signaled the end of COVID-19
pandemic linked rate hikes, forced by higher inflation, the report
relays.
It was the first cut in the policy interest rate since August 2019,
when it was lowered to 0.5 per cent, the report discloses.
The decision comes after 10 rate hikes by the central bank since
October 2021, which brought the local policy interest rate to 7 per
cent, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
JAMAICA: Reports Progress in ABM Standards Amid Hurricane
---------------------------------------------------------
Karena Bennett at Jamaica Observer reports that the new automated
banking machine (ABM) standards are already positively impacting
network resilience, Bank of Jamaica (BOJ) reported in an update
addressing machine downtime and cash availability four months after
the release of the service-level standards.
However, much of that progress was tested by the recent passage of
Hurricane Beryl, according to Jamaica Observer.
"So far, what we have seen is that there are 20 more ABMs available
across the island compared to April. The availability of ABMs by
banks has increased from 90 per cent to 94 per cent as of June. Of
course, that availability was impacted by Hurricane Beryl, so we
have to understand that there would have been some deterioration
during that month, which would have been broadly unavoidable," Dr.
Jide Lewis, deputy governor of financial institutions supervisory
division at the BOJ, said during the quarterly press conference,
the report notes.
As at June 2024, there were a total of 850 ABMs operational out of
a total of 897 across the island, the report relays.
The central bank reported that despite the disruptions caused by
Hurricane Beryl, the new ABM standards have contributed to a more
resilient network, the report discloses. The Category 4 storm,
which brought heavy rains and widespread power outages across
several parishes, caused temporary service interruptions at some
ABM locations, the report says. However, with new maintenance and
monitoring protocols, financial institutions were able to restore
services more quickly than in past events, the report relays.
Dr Lewis noted improvements in uptime; however, it still falls
short of the minimum standard required for deposit-taking
institutions, the report notes.
"In terms of recovery time, it has gone from 5.5 hours to 3 hours,
still not down to the one hour that we are requiring for urban
areas and three hours for rural areas, but it's heading in the
right direction," Dr. Lewis said, the report discloses.
The improved resilience of the ABM network during Beryl is largely
attributed to the enhanced security and maintenance protocols
introduced under the new standards, the report says. These
measures included the installation of more robust backup power
systems and improved network redundancy, which helped mitigate the
effects of power outages and communication disruptions, the report
relays.
The BOJ's new service-level standards were issued on April 2 and
DTIs have a nine-month transition period to bring themselves into
conformity with the guidelines, given its far-reaching nature, the
report notes.
These standards introduced several key requirements, including the
adherence to stricter maintenance schedules to ensure machines
remain in optimal working condition and minimise downtime; the
installation of advanced fraud detection systems and encryption
technology to safeguard against unauthorised access and fraud,
regular software updates and backup power systems and standardised
user interfaces which calls for uniformity in user interfaces
across all ABMs to enhance usability and accessibility for all
customers, the report relays.
While failure to implement these standards will not result in
monetary fines, banks could face enhanced scrutiny from the BOJ,
the report discloses. Eventually, banks will also be required to
adhere to supporting legislation under the developing Twin Peaks
system of financial sector regulation, the report notes. This
model will see the BOJ supervising banks and non-bank financial
institutions for prudential matters while the Financial Services
Commission (FSC) will focus on market conduct and consumer
protection, the report says. Implementation is expected in 2026,
the report notes.
"In the grand scheme of things, I understand that members of the
public may still be dissatisfied with the level of service because
it has not yet met the standards we have set. However, we are
still in the transitional period. I encourage anyone facing
challenges to write to us at customer.complaints@boj.org.jm,
specifying the areas where they are experiencing issues, and we
will closely examine those specific complaints," Dr. Lewis said,
adds the report.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
=======
P E R U
=======
BANCO DE CREDITO: S&P Rates Proposed Subordinated Notes 'BB+'
-------------------------------------------------------------
S&P Global Ratings assigned its 'BB+' issue-level rating to Banco
de Credito del Peru S.A.'s (BBB-/Stable/A-3) proposed subordinated
10.5-year (noncall 5.5) notes, subject to market conditions.
S&P said, "We rate the notes one notch below the 'BBB-' issuer
credit rating on the bank (which is below its 'bbb+' stand-alone
credit profile) to reflect contractual subordination. The rating
also incorporates that the notes are nondeferrable and don't have a
mandatory contingent capital clause. In addition, we assign minimal
equity content because these notes--considered as Tier II by the
Peruvian regulator--don't have characteristics of going concern
contingent capital. Thus, we don't consider the instrument as
loss-absorbing capital under our capital model. We believe that the
notes would be subject to a possible write-down only in
resolution.
"Banco de Credito del Peru (BCP) will use the proceeds from the
offering for general corporate purposes, including asset-liability
management. We consider the bank's debt maturity profile to be
manageable and it has a record of adequate debt management. It
maintains sufficient liquidity cushion to handle cash outflows for
the next 12 months.
"The proposed issuance does not affect our view of the bank's
creditworthiness. The notes will represent less than 3% of the
bank's total funding base. BCP's customer deposits remain its main
funding source, accounting for about 80% of its total funding base,
while interbank credit lines and senior and subordinated bonds make
up the remaining share."
=================
V E N E Z U E L A
=================
CITGO PETROLEUM: Elliott Leads Bidding for Firm
-----------------------------------------------
Bloomberg News reports that Elliott Investment Management is the
leading bidder in a U.S. court-ordered auction of the parent
company of Venezuelan-owned refiner Citgo Petroleum Corp.
Elliott was competing against bidders including independent refiner
Vitol Group and Canadian miner Gold Reserve Inc., which was working
on a joint bid with billionaire Carl Icahn's CVR Energy, according
to the report.
Elliott has now been granted exclusivity to negotiate a deal, the
report notes. The auction process has been long and winding, and
Elliott's emergence as the top contender doesn't necessarily mean
it will end up with the asset, the report relays.
About CITGO Petroleum
Citgo Petroleum Corporation is a United States-based refiner,
transporter and marketer of transportation fuels, lubricants,
petrochemicals and other industrial products. Based in Houston,
Texas, Citgo is majority-owned by PDVSA, a state-owned company of
the Venezuelan government (although due to U.S. sanctions, in
2019, they no longer economically benefit from Citgo.)
As reported in the Troubled Company Reporter-Latin America in June
2022, S&P Global Ratings affirmed its 'B-' long-term issuer credit
ratings on CITGO Holding Inc. and core subsidiary CITGO Petroleum
Corp.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2024. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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Information contained herein is obtained from sources believed to
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of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
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* * * End of Transmission * * *