/raid1/www/Hosts/bankrupt/TCRLA_Public/240917.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, September 17, 2024, Vol. 25, No. 187
Headlines
A R G E N T I N A
ARGENTINA: Inflation Rises Slightly to Monthly 4.2% in August
ARGENTINA: Posts Slightly Higher Than Expected August Inflation
BUENOS AIRES: Fitch Affirms 'B-' LongTerm IDRs, Outlook Stable
B R A Z I L
USIMINAS: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Economist Criticizes Venezuela's Oil Threats
G U Y A N A
GUYANA: Paid $306 Billion in Taxes for ExxonMobil and Partners
J A M A I C A
JAMAICA: Dollar Rebounds After BOJ Intervention
JAMAICA: Special Resolution Regime Now Before Parliament, Says BOJ
[*] JAMAICA: Earned More From Mining Exports for January to April
M E X I C O
OPERADORA DE SERVICIOS MEGA: Moody's Cuts CFR to C, Outlook Stable
P E R U
PETROPERU: Peru to Take on Remaining Debt Payments in 2004
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A R G E N T I N A
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ARGENTINA: Inflation Rises Slightly to Monthly 4.2% in August
-------------------------------------------------------------
Buenos Aires Times reports inflation in the Dominican Republic rose
slightly to a 4.2 percent in August, the INDEC national statistics
bureau reported, dashing government hopes of a continuing
deceleration.
Prices have increased by 94.8 percent since the turn of the year
and by 236.7 percent over the last 12 months, Buenos Aires Times
cites INDEC as saying.
August's hikes were led by housing, utilities and fuels, which rose
seven percent, followed by education at 6.6 percent, the report
notes.
Owing mostly to increases in the cost of bus and train fares,
transport was third with 5.1 percent, ahead of communications (4.9
percent), restaurants and hotels (4.8 percent) and household
equipment and maintenance (4.3) percent, which were all above
average, the report relays.
At the other end of the scale, clothing and footwear rose only 2.1
percent, the report discloses.
Price hikes were higher in the Northwest and Patagonia (5 percent
and 4.6 percent) than anywhere else. Food and non-alcoholic
beverages saw the highest rises in all regions – except in the
Greater Buenos Aires region (GBA) – with increases of 3.6
percent, the report says.
Most private analysts had forecast a rate of monthly 3.9 percent
for August, just one tenth of a point lower than July's figure,
while government officials had spoken of a round four percent, the
report relays.
Nevertheless, the figure – 0.2 points higher than the preceding
month – underlines that the era of runaway price hikes in
Argentina is over and boosts President Javier Milei's narrative
that his government has inflation under control, the report notes.
The August rate matched data published by the Buenos Aires City
government. It showed inflation of 4.2 percent, almost one point
down on the 5.1 percent recorded in July in the capital, the report
discloses.
Services rose 4.9 percent in the month, with goods up 3.1 percent
in the capital. The cost of transport fares and public services
increased the most, with food and beverages rising 3.1 percent, the
report relays.
Expectations for September
Economy Minister Luis Caputo, speaking before the release of the
national data, had predicted a rate of around four percent while
speculating that September's rate would lower even more due to a
10-percent reduction in the so-called 'PAIS tax' import tariff
announced earlier this month, the report notes.
"I guess it will be close to the July level, hopefully a little
lower, but it will be in that environment, I guess," he said in a
radio interview, the report relays.
"I think that in September it will go down, one because of the PAIS
tax, two because we are taking more measures, some that we will
announce and that will contribute to lowering costs," he added.
"This decline will continue. Argentina is a country that no longer
issues more pesos, it is not an overheated economy . . . the
conditions are in place for inflation to continue falling," Caputo
forecast bullishly, the report notes.
The most recent REM survey of market expectations, tracked by the
Central Bank, predicts that September's inflation will slow to 3.5
percent. Economists and experts quizzed for the poll forecast an
annual rate for 2024 of 122.9 percent, the report discloses.
Caputo and Milei want to lower inflation to a monthly two-percent,
equal to the 'crawling peg' rate of devaluation, even if it comes
at the cost of sacrificing Central Bank reserves to narrow the gap
between the official and Argentina's multitude of other exchange
rates, the report relays.
Thus far, the minister has managed to tame Argentina's multiple
exchange rates, but has been unable to lower price hikes to below
four percent a month, the report notes.
Earlier, Finance Secretary Pablo Quirno said that the Milei
administration had "cleaned up the Central Bank, the fiscal
numbers, the commercial debt, and all of this has led to a very
rapid reduction in inflation," the report discloses.
Speaking at a seminar organised by a chamber of insurers, Quirno
complained that the "inflation expectations of analysts were 50
points away from reality in the first six months," the report
relays.
New Methodology
Earlier, INDEC chief Marco Lavagna confirmed that the national
statistics provider would be introducing a new method for measuring
inflation that will increase the number of products surveyed in the
bureau's consumer price index (CPI), the report notes.
"We are in the final tests. We have to be very careful about when
we make the changes so that this is well understood," the economist
said in a radio interview, the report discloses.
The methodology includes a change in the structure of the sample
and in the weighting of the goods and services included, following
an update of the National Household Expenditure Survey (ENGHO), the
report relays.
Since 2004, the index has surveyed 320,000 prices at 16,700
businesses. "With the new methodology, the surveys will cover
500,000 prices at 24,000 informants," according to Lavagna, 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: Posts Slightly Higher Than Expected August Inflation
---------------------------------------------------------------
Buenos Aires Times reports Argentina's monthly inflation rose
slightly above expectations in August, representing a setback for
President Javier Milei's efforts to tame price increases while his
austerity drive slashes generous public subsidies.
Consumer prices rose 4.2 percent in August from July, above the
four percent median forecast of economists surveyed by Bloomberg,
according to Buenos Aires Times. Annual inflation slowed to 236.7
percent, according to government data published, the report notes.
Utilities, education and transportation led all categories in price
increases last month, while the largest category, food, remained
below headline inflation, the report relays.
Bus fares in Buenos Aires jumped nearly 40 percent last month as
Milei rolled back generous transport subsidies, the report
discloses. Water, gas, electricity and fuel prices all picked up
marginally as the president also reined in long-existing government
aid, the report says. Consumer price prints for September may get
some relief on the Milei administration's decision to trim the
country's main import tax from 17.5 percent to 7.5 percent, the
report relays.
Milei's victory lap is expected to continue, with economists
forecasting that annual inflation will drop sharply to 44.7 percent
in the next 12 months, according to a monthly survey conducted by
the nation's Central Bank, the report notes.
The Central Bank's survey posted September 5 shows economists
expect annual inflation to fall to 122.9 percent by the end of
2024, 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.
BUENOS AIRES: Fitch Affirms 'B-' LongTerm IDRs, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed the city of Buenos Aires' (CBA)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
at 'B-' with a Stable Rating Outlook. Fitch has also affirmed the
Short-Term IDRs at 'B'. Fitch has affirmed the city's euro
medium-term note program (EMTN) and series 12 7.50% senior
unsecured notes at 'B-'. CBA's Standalone Credit Profile (SCP)
remains at 'b+'. The IDR is capped by Argentina's 'B-' Country
Ceiling.
CBA continues to meet Fitch's criteria requirements to be rated at
'B-', above Argentina's sovereign rating by maintaining a strong
budget, no need to undertake external refinancing of debt, and have
sufficient liquidity available.
Key Rating Drivers
Risk Profile: Vulnerable
The 'Vulnerable' assessment, for all Argentine local and regional
governments (LRGs), weighs the sovereign IDR below B category
rather than Argentina's implied operating environment of 'bb';
thus, the risk profile reflects Fitch's view of a very high risk of
the issuer's ability to cover debt service with the operating
balance weakening unexpectedly over the scenario horizon due to
lower revenue, higher expenditure, or an unexpected rise in
liabilities or debt-service requirements.
Revenue Robustness: 'Midrange'
This key risk factor is 'Midrange' due to the resiliency of CBA's
revenue structure and high fiscal autonomy in the context of
volatile national economic performance and its strong GDP per
capita (2022: USD42,065) in the national (USD13,725) and
international context. Amid a complex national and imbalanced
fiscal framework for LRGs, compared with argentine LRGs and similar
to other international peers (like Lagos State, Nigeria), CBA has a
high revenue autonomy underpinned by the importance of the service
sector in its economic structure, and therefore a low reliance on
federal transfers.
The share of federal revenues that stem from a 'CC' sovereign
counterparty decreased from 24.3% in 2020 to 11.8% in 2023 derived
from Federal Law no. 27606 that returned CBA's federal
co-participation coefficient share to 1.4%. The measure affects
federal revenue predictability and risk. The lack of compliance
with the Supreme Court's ruling on re-composition of daily and
automatic co-participation transfers to the city sets a negative
precedent in the tax distribution framework between the nation and
provinces, as jurisdictions are exposed to increasingly uncertain
and discretionary decisions at the executive level.
During 2023 the city has not received budgetary current transfers
derived from Law no. 27606. From August 1, the National Government
is sending discretionary transfers equivalent to 1.55% of the
revenue-sharing resources on a weekly basis. Fitch will monitor the
compliance with the Supreme Court's ruling over time. However,
overall CBA maintains a high level of local revenues reflecting its
resilient revenue structure and expenditure flexibility.
Revenue Adjustability: 'Weaker'
Fitch considers, for Argentine LRGs, that local revenue
adjustability is low, and, challenged by the country's large and
distortive tax burden and the weak macroeconomy, that impacts
affordability. National GDP recovered 10.4% in real terms during
2021 and in 2022 a further 5.2%; but fell 1.6% in 2023 despite
being an election year. Although GDP fell in 2023, local tax
collection grew by 13.5% due to an increase in tax pressure, and
benefited from the application of gross income revenue to the
remunerated liabilities of the BCRA (starting in July 2024, income
from this tax will be null).
The economic importance of the CBA led to a high ratio of own tax
revenues/total revenues of 78.9% at the end of fiscal year 2023,
compared to 64.5% in 2019. Due to changes in the revenue-sharing
coefficient (currently implemented through discretionary transfers)
starting in August 2024, the elimination of gross income revenue
from BCRA remunerated liabilities from July 2024, and the
restitution of income tax from August 2024, Fitch expects this
indicator to decrease in 2024 and 2025.
Expenditure Sustainability: 'Weaker'
Argentine LRGs have high expenditure responsibilities, in a context
of structurally high inflation. The country's fiscal regime is
structurally imbalanced regarding revenue-expenditure
decentralization.
Local economic strength, revenue growth above inflation, and
expenditure dynamics supported the budgetary performance of the CBA
from 2021 to 2023. Although in 2023, the city's operating balance
was 19.9%, compared to 24.4% in 2022, it remained at elevated
levels. While operating revenues grew in real terms by 6.1% in
2023, operating expenses grew by 12.3%, in the context of an
election year and a real re-composition of the staff cost of 13.1%
in real terms.
The CBA has managed to contain the growth of operating expenses
relative to inflationary pressures from 2020 to 2022, which allowed
for a very strong strengthening of the operating margin, so
although in 2023 this containment was slightly relaxed, the
operating margin remains at still elevated levels. Fitch estimates
that in the period from 2024 to 2026, the average operating margin
would be 17.6%, compared to an average of 20.3% in the last three
years.
Expenditure Adjustability: 'Weaker'
For Argentine subnationals, infrastructure needs and expenditure
responsibilities are deemed high, while leeway to cut expenses is
viewed as low. CBA's capital expenditure averaged 15.1% of total
expenditure in 2019-2023. Capital expenditure recovered to 17.4% of
total expenditure in 2023, compared with 15.1% in 2022 or 12.7% in
2021, within the context of a national and local election year in
the city. In 2023, operating expenditure represented 79.4% of total
expenditure, and staff expenses remained controlled at 43.6%, close
to the historical average of 43.5% for 2019-2023.
Liabilities and Liquidity Robustness: 'Weaker'
Unhedged foreign currency debt exposure is an important weakness
considered, along with the weak national framework for debt and
liquidity and underdeveloped local market. The assessment also
considers a 'CC' sovereign that restructured its debt during 2020,
thus curtailing external market access to LRGs. CBA did not engage
in any debt restructuring processes like other argentine LRGs did
in 2020- 2021.
CBA's debt is mostly composed of issuances and multilateral loans
in USD (95% of total stock in 2023). At YE 2023, direct debt
totaled ARS1,336.8 billion, with an increase of around 267.1%
relative to 2022 due to currency depreciation (352%). CBA has no
significant U.S. dollar capital maturities until USD296.6 million
comes due on June 1, 2025, followed by other U.S. dollar debt
payments that together amount to around USD350 million in that
year. Currently, the city has laws that would allow borrowing up to
USD1.185 billion, which could be used for liability management
operations if market windows arise. Fitch will monitor all debt
operations carried out by the city.
As of March 2024, the city has a strong liquidity position, coupled
with positive operating balance generation and financial
equilibrium, which clears up uncertainty regarding the entity's
payment capacity over the next 24 months.
Liabilities and Liquidity Flexibility: 'Weaker'
Argentine LRGs rely mainly on their own unrestricted cash for
liquidity. CBA's unrestricted cash totaled around ARS932.95billion
at YE 2023 (equivalent to USD1.13 billon dollar at the official
exchange rate of ARS828.25). CBA's liquidity coverage ratio
averaged 2.8x during 2019-2023, and Fitch projects it to remain at
adequate levels (average of 5.2x for 2024-2026).
Part of this liquidity (USD350 million) is allocated in a
countercyclical fund with utilization rules that are already being
met, so it could be used for the payment of debt services in 2024.
Financial Profile: 'aa' category
The score reflects a 'aaa' primary payback ratio of 0.9x for 2024
under Fitch's rating case. Also, financial profile factors in an
override from the 'aa' actual debt service coverage ratio (ADSCR)
of 2.8x in 2024. In 2025, the city will have external debt capital
payments from its Series 12 bond.
The Financial Profile and the city's operating balance capture the
city's local economic strengths, budgetary balance and smoother
debt maturity profile, which presents no external refinancing risks
until 2025. The projected ADSCR remains aligned with the city's
2019-2023 average of 2.2x.
Derivation Summary
CBA's 'b+' SCP is derived from a 'Vulnerable' risk profile and 'aa'
financial profile score. The SCP notch specific derivation also
considers comparison with international peers, including Argentine
and Nigerian peers. Fitch does not apply any asymmetric risk or
extraordinary support from upper-tier government. CBA meets Fitch's
criteria requirements to be rated at 'B- ', which is above the
current sovereign 'CC' foreign-currency rating. CBA's ratings are
capped by Argentina's 'B-' Country Ceiling, which results in an IDR
of 'B-'. The short-term rating of 'B' is derived from CBA's
Long-Term IDR.
Key Assumptions
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Midrange'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Financial Profile: 'aa'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap: 'B-' (Country Ceiling)
Sovereign Floor: 'N/A'
Quantitative assumptions - Issuer Specific:
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2019-2023 figures and 2024-2026 projected
ratios. The key assumptions for the scenario include the
following:
- Operating revenue average growth of 126.2% for 2023-2025;
assuming growth below average inflation towards the medium term to
stress operating margins;
- Operating expenditure average growth of 128.4% for 2023-2025;
assuming growth above average inflation towards the medium term to
assume real term expenditure re-composition;
- Average capital expenditure/ total expenditure levels of around
15.4%; similar to the 2019-2023 historical average of 15.1%;
- Cost of debt considers non-cash debt movements due to currency
depreciation with an average exchange rate of ARS1,005.4 per U.S.
dollar for 2024 (YE 1,400), ARS1,873.1 for 2025 (YE 2,213.5), and
ARS2,674.7 for 2026 (YE 2,932.6);
- Consumer price inflation (annual average % change) of 256.4% for
2024, 117.3% for 2025, 49.8% for 2026.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade on Argentina's Country Ceiling above 'B-' could
positively benefit CBA's ratings provided that their payback ratio
remains below 5x.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
A downgrade of Argentina's Country Ceiling would negatively affect
CBA's ratings as well as any introduction of regulatory impediments
for the Argentine provinces to access foreign exchange. The IDR
could be downgraded if the ADSCR drops below 1.0x in tandem with a
liquidity coverage ratio below 1.0x underpinned by lower operating
margins and unrestricted cash; regardless of whether the payback
ratio remains below 5x. Thus, CBA will not meet all the conditions
to be rated above the sovereign.
Issuer Profile
CBA is Argentina's federal capital and the country's most important
social and economic center. The city represents approximately 20.6%
of the country's GDP, and the surrounding province generates an
additional 31.7% of the national GDP.
Public Ratings with Credit Linkage to other ratings
CBA's ratings are capped by Argentina's Country Ceiling.
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
----------- ------ -----
Buenos Aires, City of LT IDR B- Affirmed B-
ST IDR B Affirmed B
LC LT IDR B- Affirmed B-
LC ST IDR B Affirmed B
senior unsecured LT B- Affirmed B-
===========
B R A Z I L
===========
USIMINAS: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed Usinas Siderurgicas de Minas Gerais
S.A.'s (USIMINAS) Long-Term Foreign and Local Currency Issuer
Default Ratings (IDRs) at 'BB' and National Scale rating at
'AA+(bra)'. Fitch has also affirmed the 'BB' rating for the senior
unsecured notes due in 2026 issued by Usiminas International S.a
r.l. and guaranteed by Usiminas. The Rating Outlook is Stable.
Usiminas' rating reflects its leading position in the Brazilian
flat steel market, high portion of value-added products,
conservative financial metrics and sound financial flexibility. The
ratings are constrained by depressed profitability due to the
company's fourth quartile cost position in both steelmaking and
iron ore mining, as well as weaker steel prices caused by high
imports. The company's inability to improve profitability within
the next two or three quarters could pressure ratings. Fitch
expects Usiminas to remain proactive in its liability management
strategy to avoid major refinancing risks in the short term and
maintain net leverage of around 0.8x in 2024 and in 2025.
Key Rating Drivers
Solid Business Position: Usiminas is the leading flat steel
producer in Brazil, with a 35% market-share and significant share
in the local automotive industry. The company operates in multiple
segments of the steel value chain, including mining, crude steel
production, transformation, and distribution. Usiminas sales mix in
2023 consisted of 62% value-added products. The high proportion of
value-added acts as a barrier to entry for competitors including
Chinese importers. The differentiation in characteristics between
value-added steel products can open the possibility for Usiminas to
increase its prices in 2H24 without seeing high demand elasticity.
Key Challenges for Steel Segment: Despite still healthy demand in
the Brazilian steel market, high import pressures, weakness of the
Brazilian Real, and uncertainty around Usiminas' ability to lower
costs poses threats to the company's profitability in the medium
term. Chinese steel imports in Brazil were 29% higher in 1H24 than
the same period in 2023, increasing the pressure on steel prices.
Newly implemented Brazilian steel tariffs have failed to protect
prices for domestic steel producers. Fitch does not expect any
major recovery as a result.
Steel Making Cost Pressures: Delays in realizing efficiencies at
their recently revamped Blast Furnace 3, higher coking coal and
personnel expenses, and BRL devaluation are denting Usiminas'
margins. Although the company improved COGS/ton by 9% in their
steel business in 1H24 compared to the previous year, this falls
short of the expected 30% productivity gains.
Fitch expects Usiminas to capture 10% decrease in COGS/ton in 2024,
and an additional 1% decrease in 2025, leading to EBITDA per ton of
USD49.1 and USD60.0, respectively. Mining Consultancy CRU places
Usiminas' steel making costs average of Ipatinga and Cubatao in the
4th quartile of the hot-rolled coil cost curve, close to
USD600/ton.
Weakening Iron Ore Operations: Fitch expects iron ore sales of
around 8.0 million tons in 2024, reflecting the stoppage at the
Leste iron ore treatment facility, and for sales to recover to 8.7
million tons in 2025. Cost levels have deteriorated in the iron ore
business, limiting the company's ability to benefit from high
prices. Cash costs averaged BRL136.4/ton in 1H24, 17% higher than
2023 and 26% higher than 2022, mostly due to higher waste
transportation costs and less dilution of fixed costs because of
the stoppage.
Mining Consultancy CRU places Usiminas' mining costs in the 4th
quartile of the seaborne iron ore cost curve, close to USD60/ton.
Fitch expects a China import iron ore fines 62%, CFR price of
USD105 in 2024, falling to USD90 in 2025 and USD85 in 2026.
Pressured Cash Flows: The company's EBITDA is projected to decrease
to BRL1.4 billion in 2024 from BRL1.5 billion in 2023. However, it
is expected to improve to BRL2.0 billion by 2025, as cost savings
from the blast furnace revamping become more noticeable. Fitch
expects the large working capital swings seen in the past three
years to level off in the forecast period, and believes the company
has flexibility to reduce capex in 2024 and 2025, given the
challenging scenario in the steel segment. Fitch's base case
forecasts negative free cash flow at BRL667 million during 2024,
after BRL1.4 billion of capex and BRL348 million of dividends.
For 2025, FCF remains negative at around BRL440 million, after
BRL1.5 billion of capex and BRL295 million of dividends. Usiminas's
(CFO- Capex)/debt ratio is expected to be negative around 5% in
2024 and 2% in 2025, which indicates the company's sound operating
cash flow generation.
Sound Capital Structure: Usiminas has maintained low leverage in
the last five years. Fitch projects gross and net debt will remain
low, averaging about BRL6.5 billion and BRL1.5 billion between 2024
and 2026. The projected decline in EBITDA in 2024 will temporarily
spike gross leverage to the negative rating sensitivity trigger.
However, this is expected to normalize over the rating horizon.
Fitch foresees gross and net leverage of 4.5x and 0.8x in 2024, and
3.3x and 0.8x in 2025.
Refinancing Risk Partially Managed: Usiminas' strong cash position
and sound financial flexibility are also important rating
considerations. The company is about to close a local debenture
issuance sized between BRL1.6-2.0 billion to refinance a portion of
it BRL4.2 billion bond maturity due in 2026. This liability
management exercise materially reduces the near-term refinancing
risk for the company. Fitch expects the company to actively manage
the refinancing risk for the remainder of the 2026 notes.
New Management and Control: Usiminas' change in ownership and
management control is seen as an opportunity for a more cohesive
management strategy going forward. The Ternium (Tenaris) group
increased its voting capital in July 2023 to 42% from 32.3%, the
largest portion of the 68.6% that forms the control group, with the
approval of Brazil's CADE, the Competition Authority. A new
shareholder agreement was achieved, replacing the one dating from
2018 that used to allow Usiminas control by joint decisions with
Nippon Group.
Derivation Summary
Usiminas' business risk is similar to that of peer Companhia
Siderurgica Nacional (BB/Stable), as both are highly exposed to the
local steel industry in Brazil. While CSN has greater business
diversification, with larger mining operations and operations in
the cement industry, Usiminas' robust business position in its
niche markets is a competitive advantage. CSN's position in the
first quartile of CRU's HRC cost curve compares favorably against
Usiminas' position in the lower fourth quartile or Gerdau S.A.'s
(BBB/Stable) position in the third quartile.
Both Usiminas and CSN have a weaker business position compared with
the other Brazilian steel producer, Gerdau, which has a diversified
footprint of operations with significant operating cash flows from
its assets abroad, mainly in the U.S., and a more flexible business
model that allows it to better withstand economic and commodities
cycles. Gerdau production capacity of 17 million tons of crude
steel per year outsizes Usiminas' 5 million tons and CSN's 5.6
million tons.
International peers United States Steel Corporation (US Steel,
BB/RWP) and JSW Steel Limited (BB/Stable) have similar operating
profiles to Usiminas as primarily BF/BOF based flat steel
producers. However, US Steel and JSW are much larger in terms of
steel shipments compared to Usiminas. JSW is better positioned in
the first half of the CRU steel cost curve, while US Steel is
similarly positioned Usiminas in the fourth quartile. US steel and
Usiminas are also similarly positioned with low EBITDA net leverage
below 1.0x, and JSW has a higher level around 3.0x.
Among the three Brazilian business steel producers, Gerdau has
consistently maintained the strongest balance sheet, the most
manageable debt amortization schedule, and has consistently made
efforts to improve its capital structure through assets sales or
equity issuances.
Gross debt levels at CSN remain high relative to Gerdau and
Usiminas. Usiminas has maintained lower net leverage levels of 0.5x
over the past 5 years compared to Gerdau's 0.8x and CSN's 2.6x.
Key Assumptions
- Iron ore prices in line with Fitch's commodity price assumptions
(iron ore prices average USD105/ton in 2024, USD90/ton in 2025 and
USD85/ton in 2026);
- Iron ore COGS/ton decrease 5% in 2024, 19% in 2025; and 8% in
2026;
- Iron ore sold decrease to 8.0 million tons in 2024 before
recovering to 8.7 million tons in 2025 and 2026;
- Total steel volumes sold increases to 4.1 million tons in 2024
and to 4.2 million tons in 2025 and beyond;
- Steel EBITDA/ton grows to USD49.1 in 2024 and to USD60.0 in
2025;
- Iron Ore EBITDA/ton falls to USD10 in 2024 and rises to USD14 in
2025;
- Flexibility to reduce capex to around BRL1.4 billion in 2024 and
BRL1.5 billion in 2025;
-New debt issuance of BRL1.6 in 2024, with proceeds used to repay
portion of 2026 bond;
-An exchange rate of 5.13 BRL/USD at YE 2024 and 5.2 BRL/USD at YE
2025.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Additional diversification in products and geography;
- Consistent and positive FCF generation;
- EBITDA margins higher than 12% through the cycle;
- Gross debt/EBITDA leverage ratios consistently below 3.5x;
- Net debt/EBITDA leverage ratios consistently below 2.5x.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Persistently negative (CFO-CAPEX)/debt ratio
- Failure to improve cost position consistent with a 3rd quartile
level;
- Gross debt/EBITDA leverage ratios consistently above 4.5x;
- Maintenance of net debt/EBITDA leverage ratios above 3.5x.
Liquidity and Debt Structure
Robust Liquidity Helps to Mitigate Refinancing Risks: Usiminas has
maintained a robust liquidity position and good access to credit
markets, which are important rating considerations. Usiminas had
BRL5.6 billion of cash and marketable securities at the end of June
30, 2024 and BRL6.5 billion of Fitch adjusted debt. The debt mainly
consists of a USD750 million (BRL4.3 billion) note that matures in
2026 and BRL2.2 billion of Brazilian real-denominated debentures
that mature from 2027 to 2032. The company's recent announcement
for BRL1.6-2.0 billion of debentures, with the proceeds intended to
repay a portion of the 2026 notes, will improve their maturity
profile and lessen their refinancing risk.
Issuer Profile
Usiminas is the largest domestic supplier of cold rolled and
electro-galvanized steel products in Brazil, holding approximately
35% share of the flat steel market in the local market. The company
has a robust position within the local automotive industry.
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
----------- ------ -----
Usiminas International
S.a r.l.
senior unsecured LT BB Affirmed BB
Usinas Siderurgicas
de Minas Gerais S.A.
(Usiminas) LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AA+(bra)Affirmed AA+(bra)
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Economist Criticizes Venezuela's Oil Threats
----------------------------------------------------------------
Dominican Today reports that Economist Guillermo Caram has
criticized Venezuelan President Nicolas Maduro and Diosdado Cabello
for their claims that Venezuela is using its oil as a weapon
against the Dominican Republic. Caram described these statements
as mere boasts, arguing that they stem from a misconception that
Venezuelan oil is provided at reduced or no cost, similar to
arrangements with countries like Cuba and Nicaragua, according to
Dominican Today.
Caram explained that agreements such as San José and Petrocaribe
involve supplying oil to neighboring countries with a portion of
the cost financed. This setup is essentially a credit arrangement
that could eventually turn into foreign debt, the report notes. He
clarified that Venezuela has never provided oil at discounted
prices or for free, the report relays.
He further noted that the oil supplied under these agreements
allowed Venezuela to manipulate global crude oil prices by cutting
production, the report discloses. The unpaid portion, covered by
consumers paying market prices, has been used by Venezuelan
governments to finance fiscal deficits, contributing to poor fiscal
practices and harming the country's economy, 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.
===========
G U Y A N A
===========
GUYANA: Paid $306 Billion in Taxes for ExxonMobil and Partners
--------------------------------------------------------------
RJR News reports that for 2023, the Government of Guyana had to pay
the combined sum of $306 billion in income taxes for ExxonMobil
Guyana Limited and its Stabroek Block partners, Hess and China
National Offshore Oil Corporation.
This is according to the companies' audited financial statements,
the report notes.
For the same period, Guyana earned $336 billion from its oil,
according to RJR News.
This arrangement which saw the Government paying almost the same
amount it earned from oil in taxes for the oil companies last year,
is as a result of the 2016 Production Sharing Agreement the
previous Coalition Government signed with the U.S oil major, the
report relays.
Last year, the three companies earned $1.3 trillion in profits -
entirely tax-free in Guyana, the report adds.
=============
J A M A I C A
=============
JAMAICA: Dollar Rebounds After BOJ Intervention
-----------------------------------------------
RJR News reports that The Jamaican dollar improved in value by 28
cents on Sept. 12, after hitting a new record low compared to the
US currency at the close of Sept. 11 trading session.
The appreciation occurred after the central bank pumped US$40
million into the market through a flash sale, according to RJR
News.
Eight banks and four cambios were successful in their bids, the
report notes.
At the close of trading Sept. 12, the American dollar was being
sold for an average $158.50, the report relays.
As it relates to the other benchmarks, the Canadian dollar is being
sold for $117.97, the report notes.
The average value of the Pound is $207.10, while the Euro is going
for $176.88, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
JAMAICA: Special Resolution Regime Now Before Parliament, Says BOJ
------------------------------------------------------------------
RJR News reports that the Bank of Jamaica says the Special
Resolution Regime is now before Parliament.
A proposal for this legislation has been made public by the central
bank since at least 2017, according to RJR News.
BOJ Governor Richard Byles says the law, once passed, will help to
safeguard the local banking industry, the report notes.
"It's a piece of legislation that is going to require every bank to
have sufficient capital in a particular manner, such that if they
run into difficulties, they can resolve those difficulties
themselves without calling on the government to put up money," the
report relays
"So, this is an important and delicate piece of legislation, and I
know that the banks are going to be talking to us a lot about it
because it touches them very, very deeply. But we are open to
hearing that conversation, give and take, and arriving at a way to
manage it into practicality," said Mr. Byles, the report notes.
He was addressing day one of a conference organised by the
Insurance Association of Jamaica, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
[*] JAMAICA: Earned More From Mining Exports for January to April
-----------------------------------------------------------------
RJR News reports that Jamaica earned 27 per cent more money from
the export of minerals in the Mining and Quarrying industry from
January to April.
The Statistical Institute of Jamaica says these exports were valued
at US$206.5 million, according to RJR News.
This was supported by higher exports of alumina, the report notes.
Alumina exports were valued at US$183.9 million, 40 per cent above
the $131.4 million earned in the same period last year, the report
relays.
But bauxite exports declined by 5.6 per cent, to US$20.6 million,
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.
===========
M E X I C O
===========
OPERADORA DE SERVICIOS MEGA: Moody's Cuts CFR to C, Outlook Stable
------------------------------------------------------------------
Moody's Ratings has downgraded Operadora de Servicios Mega, S.A. de
C.V., SOFOM, E.R.'s ("Mega") foreign currency senior unsecured debt
rating to C from Caa3 as well as the Corporate Family Rating, to C
from Caa2, and its long-term local and foreign currency issuer
ratings to C from Caa3. The Not-Prime (NP) short-term issuer
ratings, in foreign and local currency, were affirmed. The outlook
was changed to stable, from developing.
The rating downgrade follows the announcement released by Mega on
September 11 that it had decided to continue to defer interest
payments on certain of its debt obligations, including its 8.25%
international senior bond due February 2025. The announcement was
published at the completion of the original thirty-day grace
period, after missing the interest payment due on August 12, 2024,
thus constituting an event of default under Moody's definition. The
downgrade of the CFR to C reflects the fact that Mega has defaulted
on its debt, and the high likelihood of further defaults on the
company's unsecured debts that represented about two thirds of
total funding in June 2024, and Moody's expectation for below
average recovery for the debt at default.
Governance risks, including financial policies reflected in the
unsustainable capital structure, were material to the rating action
and remain a key consideration to the ratings, as well as a driver
of the rating action. Mega's ESG Credit Impact Score was changed to
CIS-5 is driven by the company's financial policy that tolerates
very high financial leverage and approaching debt maturities.
RATINGS RATIONALE
Mega's ratings downgrade reflects 1) the company's heavily levered
capital structure that Moody's view as unsustainable, 2) weak
liquidity profile and insufficient resources to avoid defaulting on
its $350 million outstanding senior unsecured notes due in February
2025 and its domestic senior notes and credit lines with
international and domestic banks, and 3) growing pressure on the
company's financial conditions that has been challenging Mega's
business continuity. Moody's acknowledge that the company continues
to seek a capital injection in the coming months that would help
improve its solvency capacity and particularly its liquidity
profile, and thus, reduce losses.
In Q2 2024, Mega's liquidity significantly worsened, dropping by
35% from the previous quarter to a mere $33 million by June 2024.
This underscores an urgent requirement for securing additional
funding. Concurrently, there was a marked decline in asset quality
during the same period, evidenced by a substantial shift from Stage
1 to Stage 2 loans, which surged by 73%, accounting for 23% of the
gross loan portfolio. Likewise, Moody's expect that the company's
reported losses as of June 2024 will persist in the subsequent
quarters, further depleting its capital and consequently
compromising Mega's business viability in the near term.
Mega's outlook is stable. The company is in default and any
potential future restructuring process will take time to conclude.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given significant uncertainty around any potential recovery
proceeds and the timing of these for Mega's lenders, Moody's do not
expect any upward rating pressure for the Mega in the near term.
Mega's ratings cannot be downgraded further given the current C
rating is the lowest rating category.
The principal methodology used in these ratings was Finance
Companies published in July 2024.
=======
P E R U
=======
PETROPERU: Peru to Take on Remaining Debt Payments in 2004
----------------------------------------------------------
Marcelo Rochabrun at Bloomberg News reports that the Peruvian
government announced an aid package for ailing state-owned company
Petroleos del Peru, putting the state on the hook for repaying
international bondholders, while forgiving some loans and
increasing its credit line.
Peru's finance ministry will now be in charge of paying any
installments due in the second half of the year with bondholders
and the Spanish Export Credit Agency (Cesce), the decree said,
according to Bloomberg News.
The ministry will also take over $800 million in loans that
Petroperu assumed with the similarly state-owned Banco de la
Nacion, the report notes. That loan will be converted into
Petroperu equity, the report relays. The company will also be
allowed an extended credit line with the same bank worth $1
billion, the report discloses.
The decree, published in Peru's official gazette, caps months of
intrigue as Petroperu's board increasingly called on the government
to rescue the company from what it described as an imminent
insolvency, the report says. The board tendered its resignation,
blaming the government for not making up its mind, the report
notes.
Petroperu has a high level of debt due to the construction of its
new Talara Refinery, which was delayed by several years and ended
up costing much more than initially budgeted, the report adds.
As reported in the Troubled Company Reporter-Latin America in July
2024, globalinsolvency.com, citing Bloomberg News, reports that
Peru's struggling state-owned oil company is asking the government
to convert some of its loans into equity and push back deadlines to
avoid running out of cash this year. Petroleos del Peru SA has
been navigating a worsening liquidity crisis for years, tied to the
construction of a brand new refinery that came in over budget and
was repeatedly delayed, according to globalinsolvency.com.
Petroleos del Peru - Petroperu S.A. (Petroperu) is a Peruvian
state-owned petroleum company under private law and dedicated to
oil production, transportation, refining, distribution and
marketing of fuels and other petroleum-derived products. Refineries
are located at Talara, Iquitos and Conchan.
*********
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.
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* * * End of Transmission * * *