/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/240913.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 Friday, September 13, 2024, Vol. 25, No. 185 Headlines A R G E N T I N A AEROLINEAS ARGENTINAS: Strike Affects 150 Flights & 15K Passengers B R A Z I L AEGEA SANEAMENTO: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable BANCO DAYCOVAL: Fitch Hikes LongTerm IDR to 'BB', Outlook Stable ELETROBRAS: To Issue International Bonds EMBRAER SA: Moody's Affirms 'Ba1' CFR & Alters Outlook to Positive C H I L E WOM SA: America Movil, Telefonica Mull Asset Buy D O M I N I C A N R E P U B L I C [] DOMINICAN REPUBLIC: Puerto Plata's Tourism Rebounds E C U A D O R ECUADOR: Goldman and BofA Working on a Debt-Swap Deal J A M A I C A [*] JAMAICA: Agricultural Industry Grew by Estimated 2.7% in Q2 M E X I C O OPERADORA DE SERVICIOS: S&P Cuts LT ICR to 'SD' on Missed Payment P A R A G U A Y FRIGORIFICO CONCEPCION: S&P Affirms 'B' ICR, Outlook Negative P U E R T O R I C O NEW FORTRESS: Gets OKs to Export LNG to Non-FTA Countries - - - - - ================= A R G E N T I N A ================= AEROLINEAS ARGENTINAS: Strike Affects 150 Flights & 15K Passengers ------------------------------------------------------------------ Buenos Aires Times reports Aviation workers launched a strike on Friday, Sept. 6, in demand of improved pay, forcing the suspension of 183 flights and affecting more than 15,600 passengers. Travellers at Aeroparque Jorge Newbery and Ezeiza International Airport had to make alternative arrangements as pilots, crew and other aviation staff who work for state carrier Aerolineas Argentinas walked off the job, according to Buenos Aires Times. "The measures announced will affect some 150 flights and over 15,000 passengers," said the company in a press release, the report notes. The strike began at 5:00 a.m. local time and ran until 2:00 p.m. in the afternoon, the report relays. No Aerolineas planes took off during those hours, though flights on their way to Buenos Aires did land, the report relays. Some domestic flights were cancelled, while international journeys were reprogrammed to run from 4:00 p.m. onwards, the report discloses. Low-cost operators Flybondi and Jetsmart, as well as international carriers, generally operated as normal, the report says. At Aeroparque Jorge Newbery in the capital, passengers congregated around the terminal in large numbers as the strike kicked in early morning, though numbers soon thinned out as they learnt of the industrial action, the report relays. Presidential spokesman Manuel Adorni, said that the strike action was "completely illogical," adding that workers who walked off the job would be docked pay, the report relays. Aviation unions have been staging strikes for weeks now in demand of salary increases, with wildcat worker assemblies forcing flights to be rescheduled, the report discloses. As previously reported, President Javier Milei's government announced that it had reduced the workforce of Aerolineas Argentinas by 13 percent in the last six months, losing 1,500 employees, mostly through voluntary redundancy or retirement schemes. The strike was called by two unions, the Asociacion de Pilotos de Lineas Aereas (APLA) and the Asociacion Argentina de Aeronavegantes (AAA), the report notes. In a press release, the pilots and navigators unions demanded a "serious business proposal" from the government "in keeping" with "demands of salary recomposition," the report relays. Aerolineas Argentinas boss Fabian Lombardo denounced "extortionate and illogical strike" and said the company would not give in to extortion, the report notes. "It's a decidedly extortionate strike at the very least, which to us has no logic because at no time have conversations been closed for them to take such a measure. They're harming the company, its passengers, and that is not the path we're looking for," said Lombardo in a radio interview, the report relays. He confirmed that President Milei still intends to privatise the loss-making state airline, the report notes. The "mandate is to move forward towards cleaning up this company to make it attractive for capital investment and its privatisation - something which for now is outside what has been approved by Congress," said Lombardo, the report discloses. "In the meantime we have to get this company to stop losing money and to make it efficient," he added, notes the report. About Aerolineas Argentinas Headquartered in the Torre Bouchard, located in San Nicolas, Buenos Aires, Aerolineas Argentinas, formerly Aerolineas Argentinas S.A., is Argentina's largest domestic and international airline. It is the national airline and carries around 70% of Argentina's domestic traffic and 40% of international flights from Ministro Pistarini International Airport, which is located in Ezeiza, Buenos Aires. Aerolineas Argentinas is currently owned in its majority by the Argentine government, which seized the airline from Spanish tourism company Grupo Marsans in 2009. In June 2001, the airline filed for protection from creditors and went into administration. In 2002, a Buenos Aires judge accepted its debt restructuring agreement with creditors. =========== B R A Z I L =========== AEGEA SANEAMENTO: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Aegea Saneamento e Participacoes S.A.'s (Aegea) Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) at 'BB' and the National Long-Term Rating (NLTR) of Aegea and its subsidiaries at 'AA(bra)'. Fitch has also affirmed the rating of Aegea Finance S.a.r.l's (Aegea Finance) senior unsecured notes at 'BB', irrevocably guaranteed by Aegea and the NLTR (AA[bra]) of the senior unsecured debenture issuances of Aegea and its subsidiaries. The corporate Rating Outlook is Stable. Aegea's ratings reflect its strong business position and diversified asset base in the Brazilian water/wastewater industry, with expectations for operational cash generation to increase and leverage to continue trending to more moderate levels as it develops its subsidiaries. Fitch views the high debt at the holding level as manageable, considering the group's proved access to diversified sources of funding and the estimated increase in dividends inflow. Aegea should continue to generate negative FCF due to its relevant capex needs and high interest payments. Aegea's aggressive growth strategy is a key credit consideration for the ratings and may prevent the company to deleverage in case of more meaningful acquisitions. Key Rating Drivers Solid Business Position: Aegea is a relevant private player in the water/wastewater industry in Brazil. The company has a diversified portfolio of assets, which mitigates the operational, hydrological, political and regulatory risks associated with its business. The group's credit profile benefits from predictable demand and ongoing increase of operational scale from recently incorporated operations. The acquisition of Companhia Riograndense de Saneamento (Corsan; AA[bra]/Stable) in July 2023 improved Aegea's diversification and represents its largest operation, accounting for around 30% of consolidated EBITDA generation. Given Aegea's track record, Fitch expects Corsan's efficiency to remain improving and to further strengthen its consolidated cash flow profile. Moderate Leverage: Fitch's rating case assumes Aegea to continue improving efficiency mainly at unmatured operations and support its gradual deleverage to 4.0x in 2024 and 3.4x in 2025 from the 4.9x peak in 2023 as measured by adjusted Net Debt/EBITDA. Projections consider no acquisition through the rating horizon, despite the company's strategy to continuously pursue inorganic growth opportunities. The ongoing development of the nonconsolidated subsidiary Aguas do Rio (AdR) should also benefit deleveraging, given the expected upstreaming of dividends starting in 2026. Debt Concentration at the Holding Level: Aegea's high indebtedness at the holding level is manageable as dividends from subsidiaries are expected to increase. At June 30, 2024, the holding company had outstanding debt of BRL10.6 billion. Fitch's base case assumes Aegea will receive around BRL900 million in annual dividends on average from 2024 to 2025 and increase substantially in 2026 to around BRL2.0 billion as AdR starts to contribute, which is important driver for the holding deleverage capacity. Negative FCF: Fitch projects Aegea's 2024 consolidated EBITDA at BRL5.3 billion (55% margin), growing to BRL6.9 billion (62% margin) in 2025, which represents profitability among the highest of local peers. The agency assumes tariff increase mostly linked to inflation and strong organic growth with average total billed volume increase of 46% in 2024, mainly driven by full year of Corsan's consolidation, and 5% in 2025. Consolidated cash flow from operations (CFFO) should reach BRL2.4 billion in 2024 and BRL3.0 billion in 2025, while FCF should remain negative, averaging BRL2.5 billion in the next two years, pressured by annual average investments of BRL4.0 billion and dividends of around BRL2.0 billion. Rating Equalization: Fitch views Aegea's consolidated profile as stronger than most of its subsidiaries' standalone credit profiles (SCPs). In the case of Prolagos S.A. - Concessionária de SErviços Públicos de Água e Esgoto (Prolagos) and Águas Guariroba S.A. (Guariroba), that are matured subsidiaries, Fitch views the SCP of both companies equal to Aegea's, which justifies the same NLTRs. In the case of Corsan and Águas de Teresina Saneamento SPE S.A. (Teresina), their NLTRs are equalized to Aegea's as Fitch considers the legal incentives of the holding to support them, if needed, as high. This analysis is mainly based on guarantees provided to more than 50% of Teresina's debt and, in the case of Corsan, a cross-default clause on Aegea's bonds. Derivation Summary Aegea's Local Currency IDR is positioned one notch below Companhia de Saneamento Basico do Estado de Sao Paulo (Sabesp; BB+/Stable), which has lower leverage and more predictable cash generation coming from its established tariff framework. Aegea has a more diversified portfolio of concessions in terms of geography, which brings lower operational and regulatory risk. Aegea and Sabesp have strong EBITDA margins, while Sabesp benefits from economies of scale as the country's largest water/wastewater utility and should improve efficiency after its recent privatization. Transmissora Alianca de Energia Eletrica S.A. (BB+/Stable), a power transmission company, has a better credit profile than Aegea given its more predictable cash flow, strong financial profile and lower regulatory risk. Aegea's activity in Brazil is influenced by the country's operating environment, which is subject to volatile macroeconomic conditions and mostly explains the difference in ratings from Wessex Water Limited (WWL; BBB-/Stable), a holding company with water operations in England. WWL subsidiaries' operating position is strong compared with rated peers in the UK water sector due to a long-standing record of strong operational and regulatory performance. Key Assumptions - Annual average total volume billed growth of 46% in 2024, mainly due to a full year of Corsan's operations, and 8% on annual average in 2025-2026; - Tariff increase in line with Fitch's inflation estimates added by already approved real tariff increase for certain subsidiaries; - Average annual capex of BRL3.8 billion in 2024-2026; - Average annual dividend distributions of BRL1.6 billion in 2024-2026; - Equity injection of BRL676 million on nonconsolidated subsidiaries in 2024-2026; - Corsan's EBITDA margin growth to around 60% until 2027; - Dividends upstreamed from AdR to Aegea of around BRL900 million in 2026; - No new acquisition. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Consolidated adjusted net debt-to-EBITDA ratio sustainably below 3.0x and maintenance of adequate liquidity profile. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Unexpected material additional cash contributions from the holding to subsidiaries; - Deterioration of liquidity profile on a consolidated and standalone basis and/or weaker financial flexibility; - Consolidated adjusted net debt-to-EBITDA ratio sustainably trending above 4.0x; - Sustainable EBITDA interest coverage below 2.5x. Liquidity and Debt Structure Proven Financial Flexibility: Aegea benefits from demonstrated debt market access locally and internationally, which provides support for significant planned investments and necessary injections at subsidiaries and sustain adequate liquidity profile. The company needs to continuously fund its negative FCF generation and manage its debt refinancing needs. By the end of June 2024, Aegea's total adjusted debt was BRL24.5 billion, on a consolidated basis. The debt mainly comprised of the outstanding bonds (BRL7.4 billion, adjusted by hedged derivatives) and debentures (BRL11.1 billion). Fitch considered 100% of the Aegea group's BRL1.2 billion outstanding issued preferred shares as debt, according to the agency's criteria. The group's liquidity profile was strong, with cash and equivalents at BRL5.2 billion, which compares with BRL2.2 billion of short-term debt. Issuer Profile Aegea manages and operates water/wastewater concessions in more than 500 municipalities in 15 Brazilian states, supported by long-term contracts. The company is controlled by Equipav Group with 52.8% ownership with remining shares owned by GIC (Singaporean sovereign fund: 34.3%) and Itausa S.A. (12.9%). REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING 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 ----------- ------ ----- Aegea Saneamento e Participacoes S.A. LT IDR BB Affirmed BB LC LT IDR BB Affirmed BB Natl LT AA(bra)Affirmed AA(bra) senior unsecured Natl LT AA(bra)Affirmed AA(bra) Aguas de Teresina Saneamento SPE S.A. Natl LT AA(bra)Affirmed AA(bra) senior unsecured Natl LT AA(bra)Affirmed AA(bra) Companhia Riograndense de Saneamento Corsan Natl LT AA(bra)Affirmed AA(bra) senior unsecured Natl LT AA(bra)Affirmed AA(bra) Prolagos S.A. – Concessionaria de Servicos Publicos de Agua e Esgoto Natl LT AA(bra)Affirmed AA(bra) senior unsecured Natl LT AA(bra)Affirmed AA(bra) Aegea Finance S.a r.l. senior unsecured LT BB Affirmed BB Aguas Guariroba S.A. Natl LT AA(bra)Affirmed AA(bra) senior unsecured Natl LT AA(bra)Affirmed AA(bra) BANCO DAYCOVAL: Fitch Hikes LongTerm IDR to 'BB', Outlook Stable ---------------------------------------------------------------- Fitch Ratings has upgraded Banco Daycoval S.A.'s (Daycoval) Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) and LT Local Currency (LC) IDR to 'BB' from 'BB-', Viability Rating (VR) to 'bb' from 'bb- ', and LT National Rating to 'AA+(bra)' from 'AA(bra)'. The Rating Outlook is Stable. In addition, Fitch has affirmed the Government Support Rating (GSR) at 'ns', Short Term (ST) LC and FC IDR at 'B', and the ST National Rating at 'F1+(bra)'. The upgrades reflect the resilient performance of its financial profile throughout economic cycles, while it has strengthened its risk profile by improving the diversification of clients and sectors covered and increasing its product offerings, especially compared to domestic peers. Daycoval has demonstrated disciplined growth in its credit portfolio, maintaining a conservative risk appetite toward domestic corporates and the middle market, resulting in improved asset quality and earning and profitability metrics. On Sept. 5, 2024, Daycoval announced that it acquired BMG Seguros S.A. (National Long-Term Insurer Financial Strength A-(bra)/Stable) through its controlled insurer Dayprev Vida e Previdência in order to expand products and services based on diversification. Fitch believes the acquisition, when approved, will have no material impacts on Daycoval's creditworthiness due to its size. BMG Seguros currently represents less than 2% of Daycoval's total assets. Key Rating Drivers Established Segmented Franchise, Strong Earnings: Daycoval's IDRs and National Ratings are driven by its intrinsic strength, as reflected in its 'bb' VR, which is in line with the bank's implied VR. Daycoval's ratings reflect its well-established second-tier banking franchise in Brazil, along with a strong market position in the Corporate/SMEs business and moderate risk profile that underpins good operating profitability and well-managed asset quality through the cycles. The ratings also reflect capitalization with adequate buffers over regulatory minimums, prudent liquidity management and a stable funding profile, albeit wholesale oriented. Sustainable Business Performance: Daycoval's revenue profile is mainly focused on net interest income, and the stability of this income has been maintained at a fairly consistent level throughout the cycles. Fitch's 'bb' business profile assessment reflects Daycoval's total operating income (TOI) of USD855 million for the average of 2020-2023 (USD1.1 billion in 1H24 on an annualized basis). Daycoval's TOI is supported by the bank's well-established and specialized banking franchise in the Corporate/SMEs segment, which provides sound origination capacity, as well as a complementary presence mainly in the secured payroll deduction loan, auto loan and FX businesses, all of which helps to defend business volumes through the cycles. Moderate Risk Profile: Fitch has revised its risk profile assessment of Daycoval to 'bb' from 'bb-'. Daycoval's risk profile considers the bank's more diversified loan book compared to midsized banks in the country (73% of total assets at the end of June 2024) and its securities portfolio (13%), which is primarily invested in Brazilian government debt. Despite the concentration of Daycoval's loan book in Corporate/SMEs (70% of total expanded loans), Fitch recognizes the bank's extensive experience and proven risk pricing expertise in this segment, both of which have led to lower credit costs and write-offs relative to peers. In addition, the bank's exposure to payroll deductible loans (27% of total expanded loans), which have less cyclical delinquency rates, has also supported credit costs. Well-Managed Asset Quality Risks: Fitch has revised its asset quality assessment of Daycoval to 'bb' from 'bb-', reflecting the adequate core metrics and the trend toward improvements. Daycoval's impaired loan ratio (D-H risk loans) was 4.5% at June 2024 versus 5.2% in 2023 and in line with the four-year average (4.45%). Daycoval was well-positioned to withstand an increase in delinquency rates in 2022 and 2023, even in more adverse scenarios than Fitch had previously expected from structurally higher rates and inflation. Fitch expects Daycoval to maintain the core ratio close to 4.0% in 2024 and 2025, driven by write-offs, and a moderation in the inflow of impaired loans. Loan loss provisions for impaired loans are around 80% and remain at the high end of the company's domestic peers' average. Improving Profitability: Fitch has revised its earnings and profitability assessment of Daycoval to a positive outlook. Daycoval's operating profit/risk-weighted assets (RWAs) ratio of 4.3% in June 2024 improved from 3% in 2003, in line with the bank's four-year average of 4.2%. That is above its peers' average, and underpins its earnings and profitability assessment of the bank at 'bb'. Fitch expects Daycoval's profitability to remain sound through 2024-2025, as asset-quality risks should gradually ease relative to the prior year. There should also be some moderation on operating expenses after the company's strong business expansion in the previous years. Adequate Capitalization: Fitch believes Daycoval is well-capitalized relative to its risk profile. Daycoval's capital buffers have improved through 2023 and 1H24, reflecting adequate earnings generation and lower risk weighted assets inflation, with a common equity Tier 1 (CET1) ratio of 12% at June 2024. The bank's total regulatory capital ratio increased to 13.8% given its capital enhancement through the issuance of Tier 1 hybrid instruments from the shareholder. The bank's ratios well exceed the Central Bank regulatory minimum total capital requirement and are in line with Basel III rules. Stable Funding and Liquidity: Daycoval's non-deposit funding to non-equity funding is around 60%, a level that compares favorably to other midsized banks in the country. That explains the bank's four-year average core loans-to-deposits ratio of 209% at June 2024, given a lower share of customer deposits relative to peers. Fitch assigns a funding and liquidity score of 'bb', which is above the implied score of the 'b and below' category and reflects Daycoval's ample liquidity, comfortable asset-liability management and a large proportion of long-term funding given good access to debt markets. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Fitch's downward revision of the score of the operating environment in Brazil, for example, due to much slower economic growth than its forecasts, which could result in pressures on the bank's overall financial performance; - Asset-quality deterioration that puts downward pressure on the operating profits to RWA ratio consistently below 1.25% of RWAs, and the CET1 ratio falls below 11%. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - A positive rating action on Daycoval's IDRs and VR is limited at this point, considering Brazil's sovereign ratings, operating environment, and the bank's moderate scale and less diversified business model than higher rated peers; - In the medium to long term, Daycoval's National Ratings are sensitive to the strengthening of its business profile by a material increase in its TOI level closer to USD3.0 billion, while maintaining its good financial performance. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS Senior Debt - Daycoval's senior unsecured debt is rated in line with its IDRs as the likelihood of default on these obligations reflects the likelihood of default of the entity. Government Support Rating The GSR of 'No Support' (NS) reflects Daycoval's small franchise within the Brazilian financial system (less than 1% of customer deposits at June 2024). In Fitch's view, there is no reasonable assumption of support being forthcoming. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Senior Debt - Daycoval's senior unsecured debt rating is sensitive to changes in its IDR. Therefore, a downgrade of the bank's IDR would automatically trigger a downgrade of the debt ratings; - Daycoval's senior unsecured debt rating is sensitive to changes in its IDR. Therefore, an upgrade of the bank's IDR would automatically trigger an upgrade of the debt ratings. GSR - Daycoval's GSR of 'ns' is sensitive to changes in Fitch's assessment about the ability and/or propensity of the sovereign to provide timely support to the bank, and would only be likely to occur with a significant increase in the bank's systemic importance. VR ADJUSTMENTS The VR was assigned in line with the implied VR. The 'bb-' for Funding and Liquidity was assigned above the implied 'b' Funding and Liquidity Score due to a Non-Deposit Funding adjustment (positive). 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 ----------- ------ ----- Banco Daycoval S.A. LT IDR BB Upgrade BB- ST IDR B Affirmed B LC LT IDR BB Upgrade BB- LC ST IDR B Affirmed B Natl LT AA+(bra)Upgrade AA(bra) Natl ST F1+(bra)Affirmed F1+(bra) Viability bb Upgrade bb- Government Support ns Affirmed ns senior unsecured LT BB Upgrade BB- ELETROBRAS: To Issue International Bonds ---------------------------------------- Luana Maria Benedito at Reuters reports that Brazilian power company Eletrobras said that its board of directors had approved a bond issue in the international market, which will be used to refinance the company's debt. "The terms and conditions for the bond issue will be defined in due course and are subject to market conditions," Eletrobras said in a securities filing, not providing any details on size or schedule for the issue, according to Reuters. About Eletrobras Eletrobras (NYSE: EBR) or Centrais Eletricas Brasileiras S.A. -- eletrobras.com -- is a major Brazilian electric utilities company. It is Latin America's biggest power utility company, having a generating capacity of about 43,000 MW. The company holds stakes in a number of Brazilian electric companies and employs more than 25,000 people. The Brazilian federal government owns 52% stake in Eletrobras. The company was founded in 1962 and is based in Rio de Janeiro, Brazil. Its subsidiaries include Eletrobras Distribuicao Acre; Eletronorte (Centrais Eletricas do Norte do Brasil SA); Eletrobras Electropar; CHESF (Companhia Hidro-Eletrica do Sao Francisco; Sao Francisco's Hydroelectric Company); and Eletrobras CGTEE. As reported in the Troubled Company Reporter-Latin America on September 4, 2024, Moody's Ratings has assigned a Ba2 rating to the up to USD1 billion senior unsecured notes due 2035 (Notes) to be issued by Eletrobras. The outlook is stable. 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. The TCR-LA also reported on September 4, 2024, that S&P Global Ratings assigned its 'BB' issue rating to Eletrobras' 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 S&P's 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. Fitch Ratings in May 2024 affirmed Eletrobras' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and outstanding senior unsecured bond rating at 'BB-'. Fitch has affirmed the National Scale ratings for Eletrobras and its subsidiary Companhia Hidro Eletrica do Sao Francisco (Chesf), including Chesf's local debenture issuance, at 'AA(bra)'. The Outlook for the corporate ratings is Negative. EMBRAER SA: Moody's Affirms 'Ba1' CFR & Alters Outlook to Positive ------------------------------------------------------------------ Moody's Ratings has affirmed Embraer S.A. (Embraer)'s Ba1 Corporate Family Rating and changed the outlook to positive from stable. RATINGS RATIONALE The change in Embraer's rating outlook to positive reflects the company's improvement in credit metrics, track record of conservative financial policies and liquidity, which will allow Embraer to build additional cushion in its credit quality. Embraer's ongoing improvement in credit metrics relates to a gradual recovery in deliveries, operating performance and backlog, as well the company's proactive debt reduction. The company's adjusted gross leverage declined to 3.4x in the twelve months that ended June 2024, while operating margins recovered to 7.3% from 5.6% at the end of 2023. Despite the delays in production related to supply chain and labor issues, the company was able to increase deliveries of aircrafts in the commercial segment, grow revenue for the services and support segment, executive jets, and post higher profitability in the defense and security business with the commercialization of the KC-390 aircraft. Embraer also improved its liquidity profile with non-core asset sales, initiatives to reduce cash burn and costs and the business combination of the eVTOL business EVE Holding, Inc. (EVE). Embraer generated about BRL3.6 billion in free cash flow since 2021, and paid down $1.3 billion in debt in the same period, increasing its cushion to withstand future volatility in operations. Moody's expect that Embraer's adjusted gross leverage will decline further to 2.5x-3.0x in the next 12-18 months, while net leverage ratios will remain within 0.5x-1.0x, as the company increases deliveries further and ramps up its defense and security business profitability, and uses proceeds from cash generation to strengthen its balance sheet further. Despite potential volatility in existing contracts with the Brazilian government, Embraer's backlog will continue to grow with additional orders in the commercial aviation segment, as illustrated by the recently announced agreements that led to a total backlog of $21.1 billion at the end of June 2024 up from $18.7 billion at the end of 2023. Embraer's liquidity may also benefit from the resolution of its agreement with Boeing, which could bring additional proceeds to the company, and potentially speed up deleveraging. The company's liquidity profile also improved with proceeds from non-core asset sales, as the business combination and IPO of EVE in 2022, and with Embraer's strategy to reduce cash burn through efficiency gains, such as better inventory management, reduction in the production cycle of aircraft, and the optimization of investments to respond to market the conditions, as illustrated by the postponement of the 175-E2 jet entrance to 2027-28 from 2022 because of the pilot contract scope clause limitations in the United States. The company also announced in October 2022 a new $650 million committed credit line due in 2025, which was upsized to $1 billion in August 2024 and extended until 2029. Embraer also proactively managed liabilities to extend its debt schedule further. Such milestones help abate liquidity risks coming from the capital intensity of its business and the development costs of the new eVTOLs business and investments needed to comply with new service agreements -- which require less employed capital than the jet business --, freeing up cash for additional debt reduction. Historically, Embraer has maintained a conservative financial management, prioritizing debt reduction over dividend distributions, and Moody's expect the company to maintain this strategy to preserve liquidity and credit metrics. Embraer's Ba1 rating reflect its solid position as a leading regional jet maker and its reputation as a reliable airplane producer, bolstered by its good liquidity derived from large cash balances and a manageable debt maturity profile and adequate credit metrics. The Ba1 ratings also take into consideration the fact that funding from Brazilian public banks would be available, if needed. In Moody's view, Embraer is still a strategic asset to the Government of Brazil (Ba2 positive), which owns a golden share in Embraer with veto rights. The rating is constrained by the cyclical nature of the aviation business and increasing competition, particularly given the significant investments required on an ongoing basis to keep up with evolving customer needs. The capital intensity of the aircraft manufacturing business related to working capital pressure and high investments requirement is an additional rating constraint, particularly when considering Embraer's smaller size than those of its main competitors in the commercial aviation segment. LIQUIDITY Embraer has good liquidity and a track record of consistently maintaining a high cash balance that matches the level of its outstanding debt. At the end of June 2024, the company's cash on hand and short-term investments of $1.5 billion ($1.3 billion excluding EVE) were enough to cover all its debt maturities through 2027. Embraer also has $1 billion in committed credit lines due in August 2029. Historically, the company's cash availability fluctuates during the year because of seasonal working capital requirements, with the overall cash flow being the strongest during the latter part of the year when most aircraft tend to be delivered. The company generated negative FCF of BRL93 million ($19 million) for the 12 months that ended June 2024, and Moody's expect Embraer to record positive cash generation of about $100 million-$300 million over the next 12-18 months, despite the investments required at EVE. Moody's also expect Embraer to continue to proactively pursue liability management initiatives to lengthen its debt tenor and reduce debt cost, thus preserving its liquidity profile. RATING OUTLOOK The positive outlook reflects Moody's expectations that Embraer's credit metrics will continue to improve through 2025 and that the company will maintain its good liquidity to mitigate risks related to volatile market conditions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Additional upward rating pressure would require further improvement in Embraer's credit metrics and liquidity, such that the company builds cushion under stress scenarios. Quantitively, an upgrade would require positive free cash flow generation on a sustained basis, gross leverage ratios strengthening further to below 2.5x and interest coverage (measured by EBIT/interest) above 4x on a sustained basis. The maintenance of a strong liquidity profile and of conservative financial policies would also be required for an upgrade. Declines in demand or deliveries of new aircraft, particularly if not matched by additional sources of liquidity, could result in a rating downgrade. A downgrade could also result from wider liquidity concerns, for instance because of cost inflexibility, or from clear expectations that the company will not be able to maintain financial metrics compatible with a Ba1 rating with gross adjusted leverage above 4x, interest coverage below 2x and retained cash flow/net debt below 15% on a sustained basis. COMPANY PROFILE Embraer is a leading manufacturer of commercial jets with up to 150 seats, with a growing defense and security segment, and a line of business jets, including new types for the medium-sized and super-medium-sized segments. Embraer also owns 89.5% of EVE, an eVTOL business in development stage. Founded in 1969 by the Brazilian federal government and privatized in 1994, Embraer is headquartered in Sao Jose dos Campos, Brazil. In the 12 months that ended June 2024, the company reported net revenue of BRL28.3 billion ($5.2 billion) with an adjusted EBITDA margin of 15.9%. The principal methodology used in this rating was Aerospace and Defense published in October 2021. ========= C H I L E ========= WOM SA: America Movil, Telefonica Mull Asset Buy ------------------------------------------------ mobileworldlive.com reports that America Movil and Telefonica penned a non-binding agreement to explore a potential purchase of WOM Chile's assets, arguing any move would bolster the nation's telecoms market as the operator negotiates a Chapter 11 bankruptcy process. In a joint statement, Telefonica and America Movil explained they would explore options to take part in a sale of WOM's assets after it sought safe harbour in a US court in April in a bid to remain viable while undertaking refinancing, according to mobileworldlive.com. Telefonica and America Movil emphasised they "may decide at any time not to submit an offer", and any move would "be subject to the bidding procedure" and regulations under WOM's reorganization procedure, the report notes. The operators argued any move for the assets of WOM and its affiliates would benefit consumers in Chile, with healthy competition and continued investment in high-speed connectivity "key to the digitalisation of the country," the report relays. When it filed for Chapter 11 protection, WOM CEO Chris Bannister said the company was committed to "connect millions of Chileans with 5G" as part of a drive to close the digital divide, the report notes. Telefonica and America Movil stated an increased "capacity to continue investing and competing in high-speed and coverage networks" is an important element in sustaining Chile's telecoms sector, the report adds. About WOM SA WOM is a Chilean telecommunications provider, focused on offering mobile voice, data, and broadband services, along with a rapidly expanding "Fiber to the Home" broadband offering, to consumers and businesses in Chile. Since the acquisition of Nextel Chile in 2015 through Novator Partners LLP's investment vehicle NC Telecom AS, WOM has expanded from having virtually no market share to establishing itself as the second-largest mobile network operator in Chile. WOM sought relief under Chapter 11 of the Bankruptcy Code (Bankr. D. Del. Lead Case No. 24-10628) on April 1, 2024. In the petition filed by Timothy O'Connoer, as independent director, the Debtor estimated assets and liabilities between $1 billion and $10 billion each. The Honorable Bankruptcy Judge Karen B. Owens oversees the case. The Debtors tapped White & Case, LLP as general bankruptcy counsel; Richards, Layton & Finger, P.A. as local bankruptcy counsel; Riveron Consulting, LLC, as financial advisor; and Rothschild & Co US Inc. as investment banker. Kroll Restructuring Administration, LLC, is the claims agent. =================================== D O M I N I C A N R E P U B L I C =================================== [] DOMINICAN REPUBLIC: Puerto Plata's Tourism Rebounds ------------------------------------------------------ Dominican Today reports that the revival of Puerto Plata's tourism industry is beginning to take shape, even though the highly anticipated Punta Bergantin project is still in its early stages. This recovery is already noticeable in the number of tourists arriving by air, with a significant increase in arrivals, according to Dominican Today. A report from the Central Bank reveals that from January to July 2024, Puerto Plata welcomed 280,290 tourists by air, a substantial recovery from the 2021 low of 87,559, Dominican Today discloses. The primary markets for the northern coast of the Dominican Republic remain Canada and the United States, Dominican Today notes. This is reflected in the Punta Bergantin project, which aims to attract North American visitors with prestigious hotel brands like Hyatt, set to manage the first hotels in the area, Dominican Today relays. Puerto Plata is also experiencing a boom in cruise tourism, solidifying its position as the country's leading destination for cruise passengers, thanks to its prominent ports, Amber Cove and Taino Bay, Dominican Today relays. The Central Bank report highlights a 21.9% year-on-year increase in cruise passenger arrivals during the first seven months of 2024, totaling 1,402,386 visitors, Dominican Today 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 C U A D O R ============= ECUADOR: Goldman and BofA Working on a Debt-Swap Deal ----------------------------------------------------- Bloomberg News reports that Goldman Sachs Group Inc. and Bank of America Corp. are laying the groundwork for a swap that will help Ecuador manage its debt financing costs in exchange for a pledge to protect part of the Amazon rainforest. The two investment banks are preparing a deal ahead of formally engaging with potential investors for the transaction, said the people who asked not to be identified discussing private talks, according to Bloomberg News. The Nature Conservancy, a non-governmental organization, will be an adviser on the deal, the report notes. ============= J A M A I C A ============= [*] JAMAICA: Agricultural Industry Grew by Estimated 2.7% in Q2 --------------------------------------------------------------- RJR News reports that Jamaica's agricultural industry grew by an estimated 2.7 per cent in the second quarter. Director General at the Planning Institute of Jamaica Dr. Wayne Henry says growth for the April to June period was supported by more favourable weather conditions, according to RJR News. This contributed to an increase in output per hectare and a 2.4 per cent expansion in the area of domestic crops reaped, the report notes. "The performance of the industry was due to a 3.8 per cent growth in the output of other agricultural crops. Increased production was recorded in eight of the nine crop groups, including potatoes, up 9.6 per cent, yams, up 6 per cent, vegetables up 4.2 per cent, cereals up 12.6 per cent, and legumes up 11.5 per cent, which largely affected higher production of sugarcane, up 22.6 per cent, and banana up 2.4 per cent," he reported, the report relays. Dr. Henry said the production of traditional export crops increased by 6.4 per cent, notes the report. "These increases were sufficient to outweigh an estimated 15. per cent decline in cocoa production. However, animal farming was estimated to have contracted by 2.1 per cent, attributed to a decline in broiler meat production of 2.8 per cent," he added, RJR News relays. 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. =========== M E X I C O =========== OPERADORA DE SERVICIOS: S&P Cuts LT ICR to 'SD' on Missed Payment ----------------------------------------------------------------- S&P Global Ratings lowered its long-term global scale issuer credit rating on Operadora de Servicios Mega S.A. de C.V. SOFOM E.R. (GFMega) to 'SD' from 'CC'. S&P also lowered the long-term issue-level rating on the 2025 senior unsecured notes to 'D' from 'CC'. Rationale The downgrade reflects GFMega's failure to make an interest payment on its senior unsecured notes due 2025. The company missed the interest payment on the $352 million senior unsecured notes during the 30-day grace period that started on Aug. 12, 2024. According to the company, it's currently negotiating with its creditors over the terms of recapitalization to strengthen its balance sheet. S&P might reassess its ratings on GFMega once there's clarity over its new credit profile, including its liquidity position as well as capital and funding structures. S&P said, "The 'SD' issuer credit rating on GFMega reflects that, as of today, we are not certain if it has defaulted on the payment of any other debt. We could place our issuer credit rating at 'D' if we consider that the company has entered into a general default and that it will fail to pay all or substantially all of its obligations as they come due." This could happen if, for example, the company fails to make interest payments on its 2027 local bond. =============== P A R A G U A Y =============== FRIGORIFICO CONCEPCION: S&P Affirms 'B' ICR, Outlook Negative ------------------------------------------------------------- S&P Global Ratings assigned a negative outlook on its ratings on Paraguayan protein-processing company Frigorífico Concepcion S.A. and removed the ratings from CreditWatch with negative implications. At the same time, S&P affirmed its 'B' issuer credit rating on the company and the 'B' issue-level rating on its senior secured notes. The negative outlook reflects the company's tight liquidity and potentially higher refinancing risk, with high working capital consumption and negative free operating cash flow (FOCF) in 2024 and 2025. S&P said, "We expect Concepcion's liquidity to remain tight in the next six to 12 months because of limited financial flexibility to extend its debt maturity profile, amid high working capital needs to support volume expansion resulting in negative FOCF. The company has successfully rolled over short-term debt in the last three months, but continues to face about $185 million in debt maturities in the next 12 months versus $56 million in cash as of June 2024. "We think extending these maturities could remain challenging amid still high interest rates, with Concepcion's own bonds trading at around 20% in the last three months. However, we view as positive that the company does not have any individual material amortization in the next 12 months--amortizations during that timeframe mostly relate to diversified banking financing." The company increased its consolidated debt to $735 million and gross leverage to 4.5x in the second quarter of 2024, from $625 million and 3.2x in December 2023. However, the higher debt has not extended the maturity profile or relieved liquidity needs. Concepcion's short-term debt has increased every quarter in the last two years. S&P said, "We continue to forecast a solid operating performance with higher volumes, revenues, and EBITDA in 2024 and 2025. We anticipate EBITDA close to $190 million in 2024 and $215 million in 2025, and industry average EBITDA margins around 10%, which would allow the company to roll over short-term debt." However, operating cash flow will not be enough to cover high working capital needs, resulting in negative FOCF of $106 million in 2024 and $18 million in 2025. The company's efforts to reduce working capital consumption in the second quarter of 2024 (mainly through inventory reduction) and through the rest of the year may not be enough to avoid large outflows in 2024. S&P said, "We expect a 15% increase in heads of cattle processed in 2024 versus the previous year and a 34% increase in 2025, especially after Concepcion obtained a license to export to the U.S. from its Paraguayan facility and to China from its Brazilian subsidiary. This will translate into large working capital outflows. As a result, we expect Concepcion's adjusted debt to EBITDA to peak at 4.0x in 2024 and improve to 3.4x in 2025." ===================== P U E R T O R I C O ===================== NEW FORTRESS: Gets OKs to Export LNG to Non-FTA Countries --------------------------------------------------------- Seher Dareen at Reuters reports that New Fortress Energy said it has received authorization from the U.S. Department of Energy to export liquefied natural gas from its offshore Altamira-based plant in Mexico to non-free trade agreement countries. According to the terms of authorization, the company can export up to nearly 1.4 million tonnes per annum of LNG to non-FTA countries from its Fast LNG 1 project for a term of five years, the report notes. The FLNG project had its first output in July, according to Reuters. In the same month, a federal judge had halted the Democrat administration from pausing approval of pending and future applications to export LNG from new projects to non-FTA countries, the report relays. New Fortress is counting on incremental growth in LNG demand in Latin America, including countries such as Brazil and Jamaica, it had said in its second-quarter earnings call, the report adds. As reported in the Troubled Company Reporter-Latin America on Aug. 30, 2024, Moody's Ratings affirmed ratings of New Fortress Energy Inc.'s (NFE), including its B1 corporate family rating, B1-PD probability of default rating, and B1 and Ba3 ratings on its senior secured notes and senior secured term loan B respectively. The SGL-3 Speculative Grade Liquidity rating (SGL) remains unchanged. The outlook was changed to negative from stable. ********* 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 publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members 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. . * * * End of Transmission * * *