/raid1/www/Hosts/bankrupt/TCRLA_Public/240905.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, September 5, 2024, Vol. 25, No. 179
Headlines
A R G E N T I N A
ARGENTINA: MercadoLibre Slams Banks for 'Cartel' Tactics
ARGENTINA: Milei Lowers 'Impuesto PAIS,' Key Import Tariff
B R A Z I L
BRAZIL: Creditors Struggle to Seize Land as Bankruptcies Surge
BRAZIL: Lula's Airline Rescue Plan Wins Approval in Lower House
C H I L E
BANCO DE CREDITO: S&P Rates New Perpetual Notes 'BB+'
C O L O M B I A
TERMOCANDELARIA POWER: S&P Rates New Senior Unsecured Bond 'BB'
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: 2.8 Million Dominicans Out of the Workforce
E L S A L V A D O R
INVERSIONES CREDIQ: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
G U A T E M A L A
ENERGUATE TRUST: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
J A M A I C A
JAMAICA: Cost of Health Related Services up 4.3% for Yr-Ended July
P U E R T O R I C O
CARIBE ENTERTAINMENTS: Seeks to Hire Rodriguez Espola as Accountant
- - - - -
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A R G E N T I N A
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ARGENTINA: MercadoLibre Slams Banks for 'Cartel' Tactics
--------------------------------------------------------
Bloomberg News reports that MercadoLibre Inc. accused Argentine
banks of "illegally concentrating" under one payments platform as
an anti-competitive tactic against the company's fintech arm.
Latin America's largest company by market valuation filed a legal
complaint before Argentina's National Commission in Defense of
Competition after banks - under their shared platform MODO - filed
their own legal complaint in May alleging similar anti-competitive
strategies by the firm's Mercado Pago unit, according to the
report.
While Mercado Pago claims 80% of all deposits in Argentina's
financial system are held by the 36 banks backing MODO, the banks
says Mercado Pago is home to 80% of all e-commerce retail sales in
South America’s second-largest country, notes the report.
"The 36 banks that are part of the MODO wallet make up a cartel to
avoid competing between its own digital wallets," the report quoted
MercadoLibre as saying in a statement Monday, Aug. 26, accusing
banks of "coordinated practices destined to hurt the fintech
industry and its users."
Bloomberg News says this is the latest sign of tensions between
burgeoning fintech platforms and the traditional banks as the once
cash-heavy economy is quickly converting to more digital
transactions.
MODO, founded in 2020, responded to MercadoLibre's complaint,
dismissing the company's accusations that the banks unfairly
collude to lure users with discounts and other promotions, notes
the report.
"Instead of improving its promotion offers, MercadoLibre wants to
block ours with complaints, avoiding competition that provides
better benefits to users," the report quotes Santiago Eraso
Lomaquiz, MODO's director for legal, compliance and public affairs,
as saying in a statement. MercadoLibre "intends with this complaint
to close the market so it can continue abusing its dominant
position."
Founded in 1999, MercadoLibre is now Latin America's most valuable
publicly listed company with a market capitalization of $101.4
billion, notes the report. While it initially started solely as an
e-commerce platform, its payments and financial services arm has
grown to represent more than 40% of revenue, 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 Lowers 'Impuesto PAIS,' Key Import Tariff
----------------------------------------------------------
Patrick Gillespie at Bloomberg News reports Argentina is lowering a
key import tariff in an effort to further cool inflation as
President Javier Milei weighs the trade-offs between economic
targets often at odds.
Economy Minister Luis Caputo announced Argentina would lower a levy
known as the PAIS tax on imports from 17.5 percent to 7.5 percent,
according to Bloomberg News. The Milei administration actually
increased the tax after taking office December 10 in an effort to
boost federal revenues and close a fiscal deficit, but the higher
tariff has elevated prices on imports, Bloomberg News relays.
Milei's top priority is to slash runaway inflation that reached 26
percent per month after his currency devaluation last December, but
has since eased to four percent by July, Bloomberg News discloses.
However, his austerity measures to reach a fiscal balance, such as
removing subsidies on home utilities and public transit, risk
pushing prices higher, Bloomberg News says.
Lowering the import tariff could help relax price pressures as
Milei marches forward with subsidy cuts in a bid to both lower
inflation and close the deficit, the report relates.
The libertarian also pledged during his campaign to cut taxes,
making the move a symbolic gesture to voters that he made good on
his word, Bloomberg News notes.
More broadly, lowering the PAIS tax is a small step in Milei's
efforts to normalise Argentina's economy as the government seeks a
new agreement with the International Monetary Fund to replace the
current US$44-billion deal, Bloomberg News says. So far, talks on
a new programme haven't moved forward in concrete terms while Milei
maintains currency controls on a peso that Argentines see as
overvalued, Bloomberg News notes.
Through July, the government has collected 4.3 trillion pesos
(US$4.5 billion) in revenues from the PAIS tariff, which makes up
around six percent of total tax revenues, according to government
figures, Bloomberg News discloses. The tax is applied on a range
of transactions beyond imports, notes the report.
Still, Milei and Argentina have a long way to go, Bloomberg News
relays. For example, the PAIS tax is applied at a different level
when Argentines exchange pesos for dollars at banks. That rate
isn't changing for now, nor the US$200 monthly limit that
Argentines can exchange as Milei maintains currency controls,
Bloomberg News 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.
===========
B R A Z I L
===========
BRAZIL: Creditors Struggle to Seize Land as Bankruptcies Surge
--------------------------------------------------------------
Bloomberg News reports that a court decision in the Amazon
rainforest city of Sinop that shielded a corn and soybean
producer's land from seizure by creditors is reverberating through
Faria Lima Avenue, the Brazilian equivalent to Wall Street.
According to the report, the ruling is raising concerns among
lenders that it may be harder than anticipated to take control of
acreage pledged as backing for agribusiness receivables
certificates, or CRAs, a class of relatively new fixed-income
securities used to finance grain and oilseed growers. As bountiful
harvests and anemic crop prices drive a surge in Brazilian farm
defaults, creditors are facing the prospect of costly, drawn-out
legal fights to take possession of the collateral.
Bloomberg News notes that the impact could be significant. As
recently as July 31, Brazilian investors held roughly 145 billion
reais ($24 billion) in CRAs, according to data provider Uqbar, says
the report. The notes often offer farmers better terms than
traditional bank loans, while retail investors covet their
tax-exempt status. CRAs are typically backed by real estate and
other assets in a structure that allows creditors to hold ownership
of collateral until the debt is fully repaid.
However, that assumption was turned on its head when a Sinop court
denied demands from creditors that corn and soybean grower
Agropecuaria Tres Irmaos Bergamasco Ltda. surrender real estate
pledged as backing for 36 million reais in CRAs, relays the report.
The company successfully argued that because the land is essential
to its recovery efforts, it should be shielded from seizure for the
duration of bankruptcy protection.
The initial 180-day period of bankruptcy protection has since
expired, prompting creditors including funds managed by Galapagos
Capital and SFI Investimentos to put the land up for auction, notes
Bloomberg News. But Tres Irmaos still has the option of petitioning
the court for another six months of protection, which could block
any sale.
Other cash-strapped farming companies including North Agro
Agropecuaria Ltda. are pursuing the same strategy. Neither Tres
Irmaos nor North Agro replied to requests for comment, the report
relates.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed
the Government of Brazil's long-term issuer and senior
unsecured bond ratings at Ba2, senior unsecured shelf rating at
(P)Ba2 and changed the outlook to positive from stable. Moody's
assesses thatBrazil's real GDP growth prospects are more robust
than in the pre-pandemic years, supported by the implementation of
structural reforms over multiple administrations, as well as the
presence of institutional guardrails that reduce uncertainty
around future policy direction. The outlook change to positive is
underpinned by Moody's assessment that more robust growth combined
with continued, albeit gradual, progress towards fiscal
consolidation, may allow Brazil's debt burden to stabilize.
However, there are risks to the government's execution of
continued fiscal consolidation.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain
a
strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's
Long-TermForeign-Currency Issuer Default Rating (IDR) at 'BB' with
a StableOutlook. Fitch said Brazil's ratings are supported by its
large and diverse economy, high per-capita income, and deep
domestic markets and a large cash cushion that support the
sovereign's financing flexibility and its high local-currency debt
share. Strong external finances support resilience to shocks,
underpinned by a flexible exchange rate, robust international
reserves and a sovereign net external creditor position. The
ratings are constrained by weak economic growth potential,
relatively low governance scores, high and rising government
debt/GDP, and budgetary rigidities. A new fiscal framework
introduced this year aims to anchor a gradual consolidation process
and address these fiscal weaknesses, but its effectiveness is
increasingly unclear.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-TermForeign
and Local Currency - Issuer Ratings to BB from BB (low).At the same
time, DBRS Morningstar confirmed Brazil'sShort-term Foreign and
Local Currency - Issuer Ratings at R-4.The trend on all ratings is
Stable (March 2018).
BRAZIL: Lula's Airline Rescue Plan Wins Approval in Lower House
---------------------------------------------------------------
Bloomberg News reports that Brazilian lawmakers approved a
long-awaited financial aid plan for the airline sector that is
expected to provide BRL5 billion ($914 million) in credit for
troubled carriers.
The program, already passed by the Senate, was cleared in the lower
house, according to the report.
It now needs to be signed by president Luiz Inacio Lula da Silva,
who campaigned on a pledge to restore prosperity in Brazil and
wants to cut fares enough to allow the poor to fly regularly, the
report notes.
The government expects airlines to use the funds to purchase and
maintain aircraft as well as invest in training their workforces,
relays the report.
According to Bloomberg News, Lula's program will use funds from
Brazil's national civil aviation fund to back loans from the
country's development bank, BNDES.
The new government funds will be available for all airlines, but
Gol Linhas Aereas Inteligentes SA's eligibility remains a question
mark, the report relates. According to Brazilian law, companies
that are restructuring their debts in court face restrictions when
accessing credit from public funds.
The report notes that the government seeks to work on a solution
for the carrier. One possibility for Gol would be accessing the
funds through a private partner. "We will have a meeting with BNDES
and Gol and see how we can help," the report quotes Ports and
Airports Minister Silvio Costa Filho as saying at an Aug. 13 news
conference.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
As reported in the TCR-LA on May 6, 2024, Moody's Ratings affirmed
the Government of Brazil's long-term issuer and senior
unsecured bond ratings at Ba2, senior unsecured shelf rating at
(P)Ba2 and changed the outlook to positive from stable. Moody's
assesses thatBrazil's real GDP growth prospects are more robust
than in the pre-pandemic years, supported by the implementation of
structural reforms over multiple administrations, as well as the
presence of institutional guardrails that reduce uncertainty
around future policy direction. The outlook change to positive is
underpinned by Moody's assessment that more robust growth combined
with continued, albeit gradual, progress towards fiscal
consolidation, may allow Brazil's debt burden to stabilize.
However, there are risks to the government's execution of
continued fiscal consolidation.
S&P Global Ratings raised on Dec. 19, 2023, its long-term global
scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the
long-term ratings is stable. S&P affirmed Brazil's global scale
short-term ratings at 'B' and its national scale long-term rating
at 'brAAA'. S&P also raised the transfer and convertibility
assessment on the country to 'BBB-' from 'BB+'. S&P said, "The
stable outlook reflects our expectation that Brazil will maintain
a
strong external position, thanks to strong commodity output and
limited external financing needs. We also believe Brazil's
institutional framework can sustain stable and pragmatic
policymaking based on extensive checks and balances across the
executive, legislative, and judicial branches of government. We
expect a very gradual fiscal correction but anticipate fiscal
deficits will remain large."
Fitch Ratings affirmed on Dec. 15, 2023, Brazil's
Long-TermForeign-Currency Issuer Default Rating (IDR) at 'BB' with
a StableOutlook. Fitch said Brazil's ratings are supported by its
large and diverse economy, high per-capita income, and deep
domestic markets and a large cash cushion that support the
sovereign's financing flexibility and its high local-currency debt
share. Strong external finances support resilience to shocks,
underpinned by a flexible exchange rate, robust international
reserves and a sovereign net external creditor position. The
ratings are constrained by weak economic growth potential,
relatively low governance scores, high and rising government
debt/GDP, and budgetary rigidities. A new fiscal framework
introduced this year aims to anchor a gradual consolidation process
and address these fiscal weaknesses, but its effectiveness is
increasingly unclear.
DBRS Inc., on August 15, 2023, upgraded Brazil's Long-TermForeign
and Local Currency - Issuer Ratings to BB from BB (low).At the same
time, DBRS Morningstar confirmed Brazil'sShort-term Foreign and
Local Currency - Issuer Ratings at R-4.The trend on all ratings is
Stable (March 2018).
=========
C H I L E
=========
BANCO DE CREDITO: S&P Rates New Perpetual Notes 'BB+'
-----------------------------------------------------
S&P Global Ratings assigned its 'BB+' issue-level rating to the
proposed perpetual notes of Banco de Credito e Inversiones
(A-/Stable/A-2). The bank will use the proceeds for general
corporate purposes.
The issue rating on the additional Tier 1 notes is four notches
lower than the 'a-' stand-alone credit profile on the bank,
reflecting:
-- One notch for contractual subordination,
-- Two notches for the risk of coupon nonpayment, and
-- One notch for the risk of principal write-down if the bank
faces distress or nonviability.
S&P also views the notes as having intermediate equity content,
because:
-- They are perpetual, subordinated to all senior debt, regulatory
Tier 1 capital instruments;
-- They contain no step-up features;
-- They aren't callable within five years of the issue date; and
-- They can absorb losses on a going-concern basis by not paying
coupons.
===============
C O L O M B I A
===============
TERMOCANDELARIA POWER: S&P Rates New Senior Unsecured Bond 'BB'
---------------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue rating to Colombia-based
power generator Termocandelaria Power S.A.'s announced new notes
and affirmed its 'BB' issuer credit rating on the company.
The outlook continues to be stable and reflects S&P's view that the
company will generate roughly $300 million in EBITDA in 2024 while
its debt to EBITDA stays between 3.0x and 3.5x in 2024-2025. S&P's
expectation is that it will only use capital expenditures (capex)
for maintenance going forward.
TPL intends to issue a new bullet bond to prepay the existing bond
due in 2029. The total amount will be equal to the amount of the
outstanding bond, so S&P doesn't expect any incremental debt from
this initiative. The terms and conditions don't differ materially
from the existing terms and conditions, but the bullet maturity
will remove the annual coupons of $44.7 million, improving
liquidity.
In addition, TPL currently has an affordable debt maturity
schedule. S&P said, "As a result, we don't envision a conventional
default if this initiative doesn't take place, and we do perceive
it to be a pure liability management operation. We believe this new
bond sets the company's capital structure for years to come, with
TPL having already extended the $115 million syndicated facility to
2027."
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: 2.8 Million Dominicans Out of the Workforce
---------------------------------------------------------------
Dominican Today reports that approximately 2.8 million Dominicans
aged 15 and older are currently out of the labor market or
inactive, according to the National Continuous Labor Force Survey
(ENCFT) for the April-June 2024 quarter, released by the Central
Bank.
Among this group, 326,285 people are classified as having potential
labor force status, meaning they are available to work even if they
haven't actively searched for a job, according to Dominican Today.
The remaining 2.48 million individuals neither sought employment
nor were available for work, the report notes.
The ENCFT also revealed that the employment rate reached a historic
high of 61.9% during this period, marking a 1.8 percentage point
increase from the same quarter in 2023, the report relays. The
unemployment rate for those actively seeking work decreased
slightly by 0.3 percentage points, from 5.6% in April-June 2023 to
5.3% in 2024. Additionally, the SU3 labor force underutilization
rate, which includes both the openly unemployed and those willing
to work despite not currently seeking employment, fell by 1.0
percentage points, from 11.8% to 10.8%, the report discloses.
These positive labor market indicators are seen as a reflection of
the Dominican economy's resilience amid challenging global economic
conditions, the report relays. Despite high interest rates in
international markets, geopolitical conflicts in the Middle East
and Eastern Europe, and volatile raw material prices, the Dominican
labor market has demonstrated robust performance, in line with
expectations and ongoing domestic economic reforms, the report
adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On December 4, 2023, the TCR-LA reported that Fitch Ratings has
affirmed Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the Outlook to Positive
from Stable. Fitch says the Positive Outlook reflects a trend
improvement in governance, and robust growth prospects that should
lead to continued gains in per capita income. According to Fitch,
growth has decelerated in 2023, but it expects Dominican Republic
to recover to high levels during 2024-2025. External liquidity
metrics have improved in recent years, and foreign currency share
of government debt is on a downward path.
In August 2023, Moody's Investors Service changed the outlook on
the Government of Dominican Republic's ratings to positive from
stable and affirmed the local and foreign-currency long-term issuer
and senior unsecured ratings at Ba3. Moody's said the key drivers
for the outlook change to positive are: (i) sustained high growth
rates have enhanced the scale and wealth levels of the economy; and
(ii) a material decline in the government debt burden coupled with
improved fiscal policy effectiveness will support medium-term debt
sustainability.
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
S&P Global Ratings, in December 2022, raised its long-term foreign
and local currency sovereign credit ratings on the Dominican
Republic to 'BB' from 'BB-'. The outlook on the long-term ratings
is stable. S&P affirmed its 'B' short-term sovereign credit
ratings. S&P also revised its transfer and convertibility (T&C)
assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's
expectation of continued favorable GDP growth and policy continuity
over the next 12-18 months that will likely stabilize the
government's debt burden.
In February 2023, S&P said its BB ratings reflect the country's
fast-growing and resilient economy. It also incorporates the
country's historical political and social challenges in passing
structural reforms to contain fiscal deficits, despite recent
improvements in the electricity sector. The ratings are constrained
by relatively high debt, a hefty interest burden, and limited
monetary policy flexibility.
=====================
E L S A L V A D O R
=====================
INVERSIONES CREDIQ: Fitch Affirms 'B' LongTerm IDR, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Inversiones CrediQ Business S.A.'s
(ICQB) Long- and Short-Term Issuer Default Ratings (IDRs) at 'B'.
The Rating Outlook for the long-term rating is Stable.
Key Rating Drivers
Non-bank Holding Company: ICQB is a non-bank financial holding
company that consolidates the financial division of GrupoQ, a major
vehicle distributor with broad operations in Central America. Its
ratings are tied to its largest subsidiary, CrediQ Inversiones
C.R., S.A. (CrediQ), which represented around 45% of ICQB's
consolidated earning assets as of 2Q24. Fitch believes that the
main subsidiary significantly influences the holding company's risk
profile because of its large size within the group. Fitch views
ICQB's consolidated liquidity as low. As of June 2024, the liquid
assets, without restricted funds, accounted for 0.1x of its
short-term funding. However, it has available credit lines of
approximately USD200 million as of 2Q24.
Capital and Liquidity Fungibility: ICQB's ratings are moderately
affected by its low restriction to capital and liquidity
upstreaming to it as the holding company. Only one of its
subsidiaries, which provides financial consumer lending in
Honduras, is regulated and likely to comply with capital
requirements. However, dividend flows to ICQB have historically
been steady. Its double leverage remained low and was close to 102%
as of June 2024.
International Diversification: Fitch's assessment of ICQB reflects
its exposure in other Sector Risk Operating Environments (SROE) in
Central America and their upstreaming liquidity to the holding
company. Higher participation or improvements in financial
performance in subsidiaries with higher SROEs might be favorable
for the ratings.
Stable Financial Performance: As of June 2024, ICQB's impaired
loans represented 1.6% of the portfolio, or reserve coverage of
nearly 130%, which Fitch considers sufficient. Its pre-tax income
to average assets was almost 3% as of June 2024, and the debt
represented 4.8x times the tangible equity, despite the consistent
dividend payments. Unsecured debt represented nearly 48.3% of total
financing, which provides some flexibility.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Increased participation in consolidated assets of subsidiaries in
higher risk countries;
- Double leverage consistently above 120% and limitations to
subsidiaries' ability to upstream liquidity.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Higher participation or improvements in financial performance in
subsidiaries with higher SROEs;
- Significant improvement in liquidity coverage, to above 1x times
near-term maturities at the holding company level.
Summary of Financial Adjustments
Fitch reclassified prepaid expenses as intangibles and deducted
them from equity to reflect their lower loss absorption capacity.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
Public Ratings with Credit Linkage to other ratings
ICQB's ratings ae linked to the ratings of its Costa Rican
subsidiary CrediQ Inversiones C.R.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Inversiones CrediQ
Business S.A. LT IDR B Affirmed B
ST IDR B Affirmed B
=================
G U A T E M A L A
=================
ENERGUATE TRUST: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings affirms Energuate Trust's (Energuate) Long-Term Local
and Foreign Currency Issuer Default Ratings (IDRs) and its USD330
million bond due in 2027 at 'BB'. The Rating Outlook is Stable.
Energuate's ratings reflect the company's exposure to the
Guatemalan sovereign (BB/Stable) due to the receipt of systemic
government subsidies that have averaged 14% of revenues over the
past three years. Additionally, Energuate provides essential
electricity as the holding company of the combined operations of
the two rural distribution companies Distribuidora de Electricidad
del Oriente S.A. (DEORSA) and Distribuidora de Electricidad del
Occidente S.A. (DEOCSA). These companies serve a large and remote
service area, the energy for which is integral to the country's
overall development.
DEORSA and DEOCSA are owned by Threelands Energy, Ltd. Sàrl (not
rated), a special purpose vehicle created for the purpose of
acquiring and managing Energuate Trust. The ownership structure has
a neutral impact on Energuate's credit profile, as the 2023
purchase added no new debt to the company's balance sheet and has
resulted in financial, managerial and operational continuity.
Key Rating Drivers
Strong Sovereign Linkage: Energuate's direct linkage to the
Guatemalan sovereign rating is based on the company's receipt of
systemic government subsidies that have averaged 14% of the
company's three-year historic revenues. The subsidy supports
electricity availability to low-usage and typically low-income
customers, thereby prioritizing economic development and
advancement among the country's most rural communities.
VAD Tariff Supports Strong Cash Flow: Energuate's gross margin is
primarily driven by regulated value added from distribution (VAD)
tariff charged to customers, which represents an average 99% of
total ratepayers. The VAD tariff is set by the independent
regulator Comision Nacional de Energia Electrica (CNEE) every five
years to recover the company's operating expenses, capex and a 7%
regulatory weighted average cost of capital (WACC).
The current VAD cycle renews in November 2024 and will maintain
semi-annual adjustments for inflation and foreign exchange rates,
as well as quarterly adjustments for the variable cost of
electricity generation. Distribution charges account for 30% of
end-user energy bills, generation accounts for 65%, and
transmission 5%, with the latter two costs passed through in full
to end-users.
Strong Operating Margin, Stable Leverage: Energuate has maintained
a favorable 26% average EBITDA margin over the past five years
supported by the revenue stability and growth afforded by the VAD
tariff. Leverage has averaged 3.2x since 2021 and Fitch's base case
shows 2.6x at the close of 2024, stable yoy from YE 2023 leverage
of 2.5x on account of amortizing debt and regularly adjusted
tariffs. The base case projects leverage to steadily decline
thereafter, ending 2027 at 1.8x barring no new debt issuances.
EBITDA to interest expense is estimated to exceed a favorable 6.0x
over the rating horizon
Challenging Structural Inefficiencies, Cost Savings Plan: The rural
service area presents financial and operational challenges,
including high energy theft, violent crime and an underdeveloped
formal economy. Energy losses will end 2024 at 19.4%, an uptick
above prior years due to increased overall demand, including in
conflict areas and by those with illegal connections.
Management expects that the ongoing loss and theft reduction
measures included in its increased capex plan should reduce this
rate to 18.6% or below going forward. Energuate employs
cost-savings initiatives and technology-based energy theft
reduction improvements to enhance repair response times when theft
occurs. The VAD compensates for approximately 13% of energy losses;
anything above that is a loss for the company.
Geographic Factors Discourage Competition: The low population
density of Energuate's service area, coupled with high investment
requirements to reach new clients, disincentivizes competition and
mitigates risks from the non-exclusivity of the concession. The
concession includes 21 of 22 departments in Guatemala, all except
Sacatepéquez. It includes an area of 101,914 km2 and 95,098 km of
distribution lines that will deliver about 4,199 GWh of electricity
at YE2024. Fitch's base case expects a 3% average energy demand and
customer growth yoy through 2027, based conservatively on
historical averages.
Derivation Summary
Energuate's profitability compares favorably to that of Elektra
Noreste S.A. (ENSA; BB+/Stable), a minority state-owned
distribution company in Panama that is closely linked to the
sovereign. Like Energuate, ENSA is a regulated utility with
entirely domestic cash flows supported, in part, by structural
government subsidies (5% of ongoing revenues for ENSA versus 14% on
average for Energuate). ENSA's average EBITDA margin of around 20%
compares weaker to Energuate, but stronger than regional peers with
margins closer to 13%-14%. Energuate's leverage is improving to
below 3x, compared with ENSA's 3.5x.
Similar to AES Espana B.V. (fka AES Andres; BB-/Positive) of the
Dominican Republic, Energuate derives a material component of its
cash flow from government subsidies. The Guatemalan government,
through the Instituto Nacional de Electrificacion, has maintained a
strict 30-day payment cycle, and Energuate will shut off service if
payments are not made for two months. Nevertheless, Energuate's
central rating sensitivity remains its exposure to a fraught
political environment and material government counterparty risk.
Key Assumptions
- VAD tariff prices based on 2024 renewal, adjusting semiannually
for inflation and foreign exchange;
- Annual average consolidated revenue growth of 4.7% through 2027;
- Annual average inflation of around 3.9% in 2024-2027;
- Annual taxes averaging 25% of income;
- Average energy losses of 17.6% in 2024-2027;
- Minimal foreign exchange fluctuation, reflecting Guatemala's
managed float;
- Average capex of around USD60 million annually through the medium
term, supported by FCF and development bank loans;
- Refinancing of Energuate's bonds before 2027;
- Maintenance of minimum target cash balance post-obligations above
USD8 million policy level;
- Dividends equate to 100% of prior year Net Income, averaging
USD108 million through 2027.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Energuate's geographically limited operations and fundamental
exposure to macroeconomic conditions make an upgrade unlikely
barring a positive rating action on the sovereign rating, in
combination with sustained debt/EBITDA below 3.5x.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Guatemala's sovereign rating;
- A significant weakening in the country's electricity regulation
system, either regarding tariff adjustments or a material change in
subsidies received by Energuate;
- Weaker operational results due to higher than expected energy
losses and lower than anticipated tariff increases;
- A significant interference in Energuate's capital structure that
results in debt/EBITDA sustained at 5.5x or greater.
Liquidity and Debt Structure
Adequate Liquidity: Energuate's liquidity is supported by stable
cash flows and a comfortable amortization profile. The company's
main financial obligations include a USD330 million 144A/REG S bond
due in 2027 and a USD329 million local currency long-term loan due
in 2043. Fitch expects the company's 2027 bond to be refinanced
prior to maturity.
In May 2024 the company secured a syndicated loan for USD175
million from the International Finance Corporation (IFC, USD100
million) and the Japan International Cooperation Agency (JICA,
USD75 million) to support capex. The loan has a two-year drawdown
period and will finance Eneguate's annual capex from June 2024 to
December 2027. No funds have been drawn as of June 30, 2024.
Liquidity is further supported by short-term revolving lines of
credit for working capital purposes totaling USD80 million, of
which USD25 million is committed and the remaining USD55 million is
uncommitted. Energuate's cash on hand as of March 31, 2024 was
USD68.2 million.
Issuer Profile
Energuate Trust is the holding trust of Guatemala's two largest
rural electricity distribution companies, DEORSA in the northeast
and DEOCSA in the west. The service area covers 73% of the
population, excluding Guatemala City, with approximately 2.3
million regulated customers across 21 of the country's 22
departments at YE 2023.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Energuate Trust LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
senior unsecured LT BB Affirmed BB
=============
J A M A I C A
=============
JAMAICA: Cost of Health Related Services up 4.3% for Yr-Ended July
------------------------------------------------------------------
RJR News reports that Jamaicans spent more on health care and
related services over the last year.
The Statistical Institute of Jamaica says for the year ended July,
the average cost of goods and services in the 'Health' category was
4.3 per cent, according to RJR News.
For the month of July alone, the division rose by 0.2 per cent, the
report notes.
This was attributed to a 0.3 per cent increase in 'Medicines and
Health Products', due to higher prices for some prescription drugs,
the report relays.
STATIN says the group 'Other Health Services' rose by 0.1 per cent,
linked to higher laboratory testing fees, 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.
=====================
P U E R T O R I C O
=====================
CARIBE ENTERTAINMENTS: Seeks to Hire Rodriguez Espola as Accountant
-------------------------------------------------------------------
Caribe Entertainments Group Inc. seeks approval from the U.S.
Bankruptcy Court for the District of Puerto Rico to employ the
Rodriguez Espola (RELLC), LLC as its accountant.
The firm's services include:
(a) review accounting records for preparation of month and
year end accounting and financial reports;
(b) prepare monthly reconciliation of all bank accountants;
(c) accumulate payroll transactions to produce quarterly and
annual payroll tax returns; and
(d) prepare liquidation analysis, financial projections, claim
reconciliation and related financial documents as support for a
plan of reorganization.
Jerry Rodriguez Espola, a certified public accountant at Rodriguez
Espola, will be paid at his monthly rate of $450.
Mr. Espola disclosed in a court filing that the firm is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
The firm can be reached through:
Jerry Rodriguez Espola, CPA
Rodriguez Espola, LLC
P.O. Box 16036
San Juan, PR 00908
About Caribe Entertainments Group
Caribe Entertainments Group, Inc. filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case
No. 24-03026) on July 22, 2024. In the petition signed by Tito
Enriquez Bustamante, president, the Debtor disclosed under $1
million in both assets and liabilities.
The Debtor tapped Jose M. Prieto Carballo, Esq., as bankruptcy
counsel and Rodriguez Espola (RELLC), LLC as its accountant.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Chapman, Editors.
Copyright 2024. All rights reserved. ISSN 1529-2746.
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