/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/240926.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, September 26, 2024, Vol. 25, No. 194 Headlines B R A Z I L AGROGALAXY: Files for Judicial Recovery Amid Financial Turmoil AZUL SA: Moody's Cuts CFR to 'Caa2' & Alters Outlook to Negative BRAZIL: Online Gambling Craze May Be Hitting Consumer Spending LD CELULOSE: Fitch Assigns 'BB-' LongTerm IDRs, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Hotel Sector Urges Caution on Tax Reform DOMINICAN REPUBLIC: Introduces New Reforms to Curb Public Spending DOMINICAN REPUBLIC: Plans to Merge Customs & Revenue Agencies G U Y A N A GUYANA: Moving Towards Establishing Oil & Gas Data Repository J A M A I C A JAMAICA: Cost of Alcohol and Tobacco up 7% for Year to August JAMAICA: EPOC Urges BOJ to Balance Inflation Control P A N A M A NG PACKAGING: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable - - - - - =========== B R A Z I L =========== AGROGALAXY: Files for Judicial Recovery Amid Financial Turmoil -------------------------------------------------------------- globalinsolvency.com, citing Rio Times, reports that AgroGalaxy's financial struggles reached a critical point and the company, a major player in Brazil's agricultural input retail sector, filed for judicial recovery on Sept. 18. The decision to file for judicial recovery came after months of financial turmoil, according to globalinsolvency.com. AgroGalaxy's board of directors approved the filing, which was submitted to the court under confidential terms, the report notes. Earlier in the day prior to the filing, a series of high-profile resignations rocked the company's leadership structure, the report relays. AZUL SA: Moody's Cuts CFR to 'Caa2' & Alters Outlook to Negative ---------------------------------------------------------------- Moody's Ratings has downgraded Azul S.A. (Azul)'s corporate family rating to Caa2 from Caa1. At the same time, Moody's downgraded to Caa1 from B3 the rating of the senior secured first lien debt and to Caa2 from Caa1 rating of the senior secured debts of Azul Secured Finance LLP (Delaware), and to Caa3 from Caa2 the senior unsecured debt ratings of Azul Investments LLP. The outlook for the issuers was changed to negative from positive. RATINGS RATIONALE The downgrade of Azul's ratings reflects the weaker results the company posted during 2024 and the resulting cash burn, which heightened liquidity risks. Azul generated BRL1.2 billion in EBIT during the first half of 2024, but high working capital needs, debt burden and capital expenditures led to a cumulative cash burn of BRL1.2 billion in the same period. Azul's cash position declined to BRL1.4 billion at the end of June 2024 from around BRL 1.9 billion at the end of 2023, and the company has BRL5.9 billion in financial and lease obligations coming due in the short term. Accordingly, Azul's liquidity risk have increased, and the company will need to pursue additional renegotiations with lessors and additional financing to bridge its liquidity needs. Azul's Caa2 corporate family rating (CFR) reflects Azul's exposure to the volatility of the airline industry and rising macroeconomic risks, combined with its still-weak credit metrics. Azul has a highly leveraged balance sheet and weak interest coverage, which limit the company's free cash flow (FCF) generation. The company's ability to raise liquidity, refinance its financial obligations and control cash burn or cash needs will remain key in assessing its rating. Finally, the rating captures the company's intrinsic exposure to foreign-currency and fuel price volatility. Azul has an unique business position in Brazil (Ba2 positive) as the only carrier on about 80% of its routes, which results in lower competition and strong pricing power. Azul's ability to reduce costs during the pandemic and its conservative financial policies are additional credit positives. The rating also captures the faster-than-expected post-pandemic recovery in passenger traffic in Brazil, and more rational competition and capacity in the Brazilian market, which has enabled carriers to increase airfares, mitigating the effect of higher jet fuel prices and other inflationary cost pressures. LIQUIDITY As of June 2024, Azul's cash position was BRL1.4 billion, which was enough to cover about 24% of the company's total debt due in the short term (including leases). The company has about BRL5.6 billion of leasing payments scheduled until the end of 2025, in addition to BRL1.8 billion of debt to be repaid through 2025. The company has around BRL1.4 billion in other potential liquidity sources, such as short-term receivables and financeable deposits, in addition to unencumbered assets that could be used in secured financing transactions. Moody's estimate that Azul's operating cash generation will recover to between BRL3.5 and BRL5 billion in 2024-25, while the company will manage cash outflow by delaying the delivery of aircraft to reduce capital spending and manage cash generation. Nevertheless, the company will still need to refinance its debt maturities to avoid a significant cash burn in the coming years. NOTCHING CONSIDERATIONS The Caa3 rating assigned to Azul Investments LLP's unsecured notes is one notch lower than the company's Caa2 CFR, reflecting the effective subordination of unsecured creditors. The senior unsecured notes rank below Azul's existing and future secured claims, which account for around 95% of the company's debt. Azul's consolidated debt is mainly composed of finance leases collateralized by aircraft, secured notes collateralized by cash flow and receivables generated by Azul Fidelidade and Azul Viagens, and debentures collateralized by credit card receivables. The exchanged secured notes due 2029 and senior secured notes due 2030 are rated Caa2, in line with Azul's CFR, primarily reflecting the instruments' pool of collaterals, which include a second-priority lien on, among other assets, certain cash flow and receivables generated by Azul Fidelidade and Azul Viagens, and certain intellectual property of the two businesses, and intellectual property of the Azul airline business; and a security on a first-lien basis (subject to future permitted priming debt) by Azul Cargo. The first priority secured notes due 2028 are rated Caa1, one notch higher than the company's secured ratings, reflecting the instruments' collateral package and protection features, which include first priority lien on, among other assets, certain cash flow and receivables generated by Azul Fidelidade and Azul Viagens, and certain intellectual property of the two businesses, and intellectual property of the Azul airline business; fiduciary assignments and transfers in place to ring-fence the receivables for the noteholder's protection even in a bankruptcy scenario; high affirmation likelihood of the collateral because of the mission-critical intellectual property required for Azul to continue operations under the airline brand; the intellectual property included in the transaction scope, which will be owned by a bankruptcy-remote offshore special-purpose vehicle; and segregated collection accounts with a protective lockbox structure, whereby cash collections are blocked at all times until enough cash is reserved for debt obligations due on the next payment date. RATING OUTLOOK The negative outlook reflects Azul's tight liquidity profile and the company's reliance on additional renegotiations with lessors or additional refinancing initiatives that could be considered distressed exchanges to remain solvent. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Moody's could downgrade Azul's ratings if liquidity concerns increase, or the company is unable to strengthen its credit metrics further increasing the risk of default on its financial obligations. Moody's could upgrade Azul's ratings if risks and uncertainties reduce significantly, and passenger demand exceeds pre-pandemic levels on a sustained basis. An upgrade would also require Azul to continue to improve its capital structure; maintain adequate liquidity, with cash consistently above 15% of revenue; and improve key metrics, with debt/EBITDA below 6x and (funds from operations + interest)/interest above 3x on a sustained basis. COMPANY PROFILE Headquartered in Barueri near the City of Sao Paulo, Brazil, Azul S.A. is a Brazilian airline founded by David Neeleman in 2008. The company is the largest airline in Brazil by number of cities covered and departures, serving more than 160 destinations with an operating fleet of 168 aircraft and operating more than 900 flights daily. The company also flies its aircraft to select international destinations, including Fort Lauderdale, Orlando, Paris, Punta del Este and Lisbon. Azul is the sole owner of the loyalty program Azul Fidelidade, a strategic revenue-generating asset that has more than 17 million members. In the twelve months ended in June 2024, Azul generated BRL18.7 billion ($3.4 billion) in net revenue. The principal methodology used in these ratings was Passenger Airlines published in August 2024. BRAZIL: Online Gambling Craze May Be Hitting Consumer Spending -------------------------------------------------------------- globalinsolvency.com, citing Reuters, reports that soccer-mad Brazilians have fallen hard for online sports betting, yielding a boom of interest from foreign gambling companies that may boost state coffers but also threatens to divert funds from consumer spending in other areas. Latin America's largest economy has seen lower-than-expected growth in consumer spending in the country in recent months, a weakness some banks and think tanks are blaming on gambling, according to globalinsolvency.com. Such a linkage would echo data seen in some U.S. states touched by online gambling fever, the report notes. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian general election. He was sworn in on January 1, 2023, as the 39th president of Brazil, succeeding Jair Bolsonaro. Moody's credit rating for Brazil was last set at Ba2 with positive outlook as of May 2024. S&P Global Ratings raised on Dec. 19, 2023, its long-term global scale ratings on Brazil to 'BB' from 'BB-'. Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable Outlook. DBRS' credit rating for Brazil was last reported at BB with stable outlook at July 2023. LD CELULOSE: Fitch Assigns 'BB-' LongTerm IDRs, Outlook Stable -------------------------------------------------------------- Fitch Ratings has assigned LD Celulose S.A. (LDC) a first-time Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'BB-' and National Scale Long-Term Rating of 'AA(bra)'. Fitch has also assigned a 'BB-' rating to the proposed up to USD650 million senior secured notes due January 2032 to be issued by LD Celulose International GmbH and unconditionally and irrevocably guaranteed by LDC and LD Florestal S.A (Florestal). Proceeds from the senior secured notes will be used to permanently and entirely repay existing senior loans and for general corporate purposes. The Rating Outlook for the corporate ratings is Stable. The ratings reflect LDC's strong operating performance, with stable EBITDA margins, and its competitive cost structure, which supports the company's capacity to generate positive FCF in the rating horizon. The ratings also incorporate LDC's limited scale and diversification, with one dissolving wood pulp mill located in Brazil, and exposure to only one counterparty risk, as Lenzing AG (Lenzing) is the sole off-taker. The classification incorporates the success of the liability management, extending the company's debt maturity profile. The Stable Outlook incorporates the expectation of a gradual leverage reduction, to net debt/EBITDA of 3.5x by 2026, and the maintenance of EBITDA margin close to 45%. Key Rating Drivers Limited Business Diversification: LDC has only one mill, located in Brazil, with an annual production capacity of 550 thousand tons of Dissolving Wood Pulp (DWP), used to produce textile fibers. The company's limited scale of operations could make it vulnerable to a prolonged operational disruption as a result of an accident at the mill. The company has insurance policies in place, covering business interruption. Sustainable Competitive Advantage: LDC has one of the industry's lowest cost structures, arising from its state-of-the-art mill, with high forestry yield and low transportation costs and average distance from the forest to the mill. This competitive cost structure allows LDC to generate strong operating cash flows even in the case of market downturns, ensuring its long-term competitiveness. The company's cash cost, including logistic costs, was USD486/ton in 2023, which placed it firmly in the lowest quartile of the cost curve. Lenzing is the Sole Off-taker: LDC has an estimated market share of 7% of global of DWP, while Lenzing, one of its shareholders, is the third largest global DWP producer, with an estimated market share of 13% including LDC production. LDC sales are concentrated in only one off-taker, Lenzing. Despite long term take or pay contract, the lack of diversification of clients exposes LDC to counterparty risk. Conversely, Lenzing trades in the market half of LDC production to other textile fiber producers, which are served directly by LDC. Lenzing has a leveraged capital structure, with net debt/EBITDA of 6x in 2023. Stable Operating Margins: LDC is expected to generate about USD235 million of EBITDA in 2024 and 2025, with EBITDA margins between 45% and 47%. This compares with EBITDA of USD226 million in 2023. The company's position as a low-cost producer and positive outlook for DWP prices should support strong operating margins. Fitch expects the LDC to report positive FCF, between USD25 million and USD30 million in 2024 and 2025. Base case projections consider investments around USD50 million yearly and no dividends paid in this period. Fitch's base case considers capex for maintenance and forestry base. Leverage Expected to Decline in the Mid Term: LDC's leverage is expected to gradually reduce, as the company should use FCF generation to amortize debt. LDC's net debt/EBITDA reached 4.4x in 2023, as calculated by Fitch, and the agency expects to remain close to 4.0x in 2024 and 2025, reducing to 3.5x by 2026. The company's net debt is expected to gradually reduce to about USD850 million by YE 2026, from USD1 billion in December 2023. Positive Market Dynamics: Tight demand-supply ratio should support DWP price increases. Limited capacity growth is expected to enter the market in the next few years, with only few new volumes from efficiency gains/debottlenecking coming from Latin America, while demand is expected to continue growing at a pace of around 6% each year, compared with an average of 5% growth since 2011. Fitch projects DWP average price close to USD930 per ton in 2024, USD960 per ton in 2025 and USD1,000 per ton in 2026, from USD881/ton in 2023. However, softer demand for textile fibers could frustrate this expectation. Global fiber demand is projected to grow by 15%-20% by 2030 and wood based cellulosic fiber should benefit from increased demand. In 2023, wood based cellulosic fiber represented only about 6.5% of global fiber demand, while synthetic and cotton represented close to 90% of demand. Derivation Summary Similar to other Latin American pulp producers, LDC's pulp production cash costs are among the lowest in the world, ensuring its long-term competitiveness. LDC is rated lower than Suzano S.A. (Suzano; BBB-/Stable), Empresas CMPC S.A (CMPC; BBB/Stable) and Celulosa Arauco y Constitucion S.A (Arauco; BBB/Stable), as the company has limited scale of operations, with only one mill located in Brazil and one offtaker, while these peers have higher scale of operations and geographic diversification. Its smaller diversification is comparable with Eldorado Brasil Celulose S.A. (Eldorado; BB/Stable), which also has only one mill. LDC is concentrated only in DWP and is therefore more exposed to the cyclicality of prices compared with companies with higher product diversification like Klabin S.A. (Klabin; BB+/Stable), Arauco and CMPC, which are leaders in the packaging, wood products segment and tissue markets, respectively. LDC's net leverage is higher than Suzano, CMPC, Arauco and Eldorado during the rating horizon. The company also has lower liquidity and financial access when compared with these larger peers. Key Assumptions - Production of 550 thousand tons in 2024 and 2025, and 560 thousand tons going forward; - Average DWP of USD930 per ton in 2024, USD960 per ton in 2025 and USD1,000 per ton in 2026; - 98.5% standard grade DWP production from 2025 onwards; - No dividend distribution in 2024 and 2025, and maximum USD5 million in 2026. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Average net debt/EBITDA below 3.0x throughout the DWP price cycle; - Improved credit position of its off-taker. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Average net debt/EBITDA above 4.0x throughout the DWP price cycle; - Increase in short-term debt maturities above its cash flow generation capacity; - Disruptions on the take or pay contract with Lenzing, or a significant deterioration of the off-taker. Liquidity and Debt Structure Adequate Liquidity: LDC had cash and marketable securities of USD76 million as of Dec. 31, 2023 and total debt of USD1.1 billion, of which USD235 million was due in the short term. All debt consisted in bank loans, and it was guaranteed by its shareholders, Lenzing and Dexco S.A. (BB/Stable). Fitch projects total debt of USD1.0 billion in December 2024, with annual debt maturities of USD70 million starting in 2025, considering the success of LDC's liability management plan. Fitch expects positive FCF in the rating horizon, which should be mainly used to reduce debt. The proposed bond and bank loans will pledge most of the company's assets as a collateral, including 80% of its biological assets of USD273 million, which will leave LDC with limited financial flexibility to raise additional debt. Conversely, the company does not have any significant expansion plan in the mid-term and no new debt is expected to be needed at current production capacity. Financial flexibility is expected to be enhanced by a USD75 million unused revolving credit facility. Issuer Profile LD Celulose S.A. (LDC) is a joint venture between the Austrian company Lenzing and the Brazilian company Dexco S.A (Dexco; BB/Stable), and one of the world's largest dissolving wood pulp plants. Located in Minas Geraos, Brazil, the plant has a production capacity of up to 560 thousand tons of DWP through its verticalized operations (sustainable forest + mill facility) per year, in addition to 144 MW of clean energy. The special pulp fibers produced at LD are sold to its one off-taker Lenzing, and used in the textile 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 LD Celulose S.A. has an ESG Relevance Score of '4' [+] for Energy Management as the company sells excess energy to the grid from cogeneration based upon a renewable resource, which has a positive impact on the credit profile, and is relevant to the ratings in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating ----------- ------ LD Celulose International GmbH senior secured LT BB- New Rating LD Celulose S.A. LT IDR BB- New Rating LC LT IDR BB- New Rating Natl LT AA(bra)New Rating =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Hotel Sector Urges Caution on Tax Reform ------------------------------------------------------------ Dominican Today reports that as anticipation builds around a potential tax reform aimed at boosting state revenues, the hotel sector in the Dominican Republic remains vigilant. Industry leaders hope to preserve current tax conditions that have spurred private investment and contributed significantly to tourism growth, according to Dominican Today. Jorge Subero Medina, CEO of Cap Cana, emphasized the need for consensus on tax reform without harming the tourism sector, the report notes. He highlighted that the existing incentives have been crucial in attracting visitors, with projections of over 11 million arrivals by the end of 2024, the report relays. Subero also stressed the importance of regulating Airbnb services as part of the tax reform, noting that such regulation is a global standard and necessary for maintaining high-quality tourism, the report says. Subero called for adaptation to current realities to ensure that the Dominican Republic continues to offer high-quality, luxury tourism experiences, 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. Standard & Poor's credit rating for Dominican Republic was raised to 'BB' in December 2022 with stable outlook. Moody's credit rating for Dominican Republic was last set at Ba3 in August 2023 with the outlook changed to positive. Fitch, in December 2023, affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the outlook to positive. DOMINICAN REPUBLIC: Introduces New Reforms to Curb Public Spending ------------------------------------------------------------------ Dominican Today reports that the Dominican Republic government is preparing a second wave of reforms aimed at curbing public spending as part of its continued restructuring efforts. During a press briefing at the National Palace, Finance Minister Jose Manuel Vicente outlined several cost-cutting measures, including limiting state advertising to educational and informative content, restricting the purchase of luxury or non-essential vehicles, and prohibiting spending on institutional events and celebrations, according to Dominican Today. Additionally, all institutional reports will now be digital, eliminating printing costs, the report notes. Another key reform is freezing the number of public employees in each institution at August 2024 levels, with exceptions for police, military, medical, and teaching personnel, the report relays. Extraordinary exemptions may be approved by the Ministry of Public Administration (MAP) if deemed necessary, the report discloses. The government is also tightening controls on international travel, requiring approval from relevant governing bodies, the report notes. Minister Vicente emphasized that the government will no longer allow public funds to be used for events, prioritizing the reallocation of these resources for more essential institutional needs, 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. Standard & Poor's credit rating for Dominican Republic was raised to 'BB' in December 2022 with stable outlook. Moody's credit rating for Dominican Republic was last set at Ba3 in August 2023 with the outlook changed to positive. Fitch, in December 2023, affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the outlook to positive. DOMINICAN REPUBLIC: Plans to Merge Customs & Revenue Agencies ------------------------------------------------------------- Dominican Today reports that the Dominican Republic government plans to merge the Directorate General of Customs (DGA) and the Directorate General of Internal Revenue (DGII) into a single Tax Administration. This move is part of broader efforts to streamline public institutions, reduce government spending, and introduce comprehensive tax reform, according to Dominican Today. The goal is to eliminate redundancy by consolidating entities with similar functions, which will also pave the way for tax process simplification, the report notes. A new "monotributo" system will be introduced to replace advance payments for small and micro businesses (SMEs), alongside the implementation of "Tax Scoring," a tool to help taxpayers monitor and correct their tax status, reducing late fees and sanctions, the report relays. Additionally, the government seeks to address significant tax evasion, currently estimated at 47% for the ITBIS tax and 63% for income tax, the report discloses. The reform includes potential mergers of other ministries, such as combining the Ministries of Education, Sport, and Culture, and merging the Ministries of Youth and Women into a Family Ministry to eliminate duplicated functions and reduce costs, the report relays. The Chamber of Accounts may also be merged with the General Comptroller's Office to create a unified auditing and government accounting entity, the report notes. These measures follow recommendations from international organizations like the Inter-American Development Bank (IDB) to improve state efficiency, 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. Standard & Poor's credit rating for Dominican Republic was raised to 'BB' in December 2022 with stable outlook. Moody's credit rating for Dominican Republic was last set at Ba3 in August 2023 with the outlook changed to positive. Fitch, in December 2023, affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the outlook to positive. =========== G U Y A N A =========== GUYANA: Moving Towards Establishing Oil & Gas Data Repository ------------------------------------------------------------- RJR News reports that the Guyana government says it intends to implement later this year an oil and gas data repository that will enable the country to consolidate all historical and current petroleum data in a centralized local facility. At present, Guyana's data is stored in Houston, Texas, according to RJR News. Companies seeking additional information related to Guyana's oil prospects must make a special request to access this overseas facility, the report notes. Natural Resources Minister Vickram Bharrat described the initiative as an ambitious project aimed at fostering job creation and revenue generation by keeping data within the country, the report relays. ============= J A M A I C A ============= JAMAICA: Cost of Alcohol and Tobacco up 7% for Year to August ------------------------------------------------------------- RJR News reports that Jamaicans paid more for alcoholic beverages this year when compared with last year. In its latest consumer price bulletin, the Statistical Institute of Jamaica (STATIN) said the cost of goods in the grouping "Alcoholic Beverages, Tobacco and Narcotics" was up an average 7 per cent for the 12 months ended August 2024, according to RJR News. For the month of August 2024 alone, those prices increased by 0.6 per cent, the report notes. STATIN says the upward movement was primarily due to a 0.7 per cent increase in 'Alcoholic Beverages' specifically, the report relays. There were increases for all the classes in the group, with the largest rise recorded in 'Wine' prices, the report discloses. These were up an average 1.3 per cent, followed by a 1 per cent increased in 'Spirits and liquors,' the report says. Beer prices increased by an average 0.5 per cent compared to July, 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. In September 2023, S&P Global Ratings raised 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', with a stable outlook. In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. JAMAICA: EPOC Urges BOJ to Balance Inflation Control ---------------------------------------------------- Javaughn Keyes at RJR News reports that the Economic Programme Oversight Committee is urging the Bank of Jamaica to balance controlling inflation and encouraging economic growth. Speaking at this quarter's EPOC press briefing, Chairman Keith Duncan said while tighter monetary policy is one step to help stem price increases, it cannot be to the stagnation of economic growth, according to RJR News. "The Bank of Jamaica is quite focused on inflation targeting, but we believe that the BOJ's mandate could possibly take into consideration, balancing inflation targeting with the growth dynamics of the economy, especially given that Jamaica has a little margin for erosion of growth as the economy normalizes in its long-term growth range of 1 to 2%," the report notes. "Looking ahead, the risk to the domestic GDP forecast are skewed to the downside over the short to medium term, and this depends on the pace of easing of monetary policy, including the pace and quantum of reduction of interest rates, domestic and external demand, also the risk of weather-related shocks," he asserted, the report relays. While welcoming the central bank's downward adjustment of the policy interest rate by 0.25 basis points, the private sector has been calling for more to be done to encourage economic growth, the report discloses. The US Federal reserve's lowering of its benchmark rate is a sign there could be further adjustments in the local policy interest rate which sits at 6.75 per cent, the report says. The next monetary policy decision is due September 30, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. In October 2023, Moody's upgraded the Government of Jamaica's long-term issuer and senior unsecured ratings to B1 from B2, and senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has been changed to positive from stable. The upgrade of Jamaica's rating to B1 reflects the government's sustained commitment to fiscal consolidation and debt reduction. The positive outlook reflects Moody's assessment that a continuation of the favorable fiscal trajectory will further increase Jamaica's credit resilience. S&P Global Ratings raised on September 13, 2023, its long-term foreign and local currency sovereign credit ratings on Jamaica to 'BB-' from 'B+', and affirmed its short-term foreign and local currency sovereign credit ratings at 'B'. The stable outlook reflects S&P's expectation that the government will remain committed to prudent fiscal policies and reducing debt, as well as supportive economic policies including a flexible exchange rate regime and effective monetary policy. In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. =========== P A N A M A =========== NG PACKAGING: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed NG Packaging & Recycling Corporation Holdings S.A.'s Long-Term Issuer Default Rating (IDR) at 'BB+' with a Stable Rating Outlook. Fitch has also affirmed the unsecured notes co-issued by NG PET R&P Latin America S.A. and San Miguel Industrias PET S.A at 'BB+'. The notes are guaranteed by all material subsidiaries from NG Packaging & Recycling Corporation Holdings S.A. (SMI) and NG Packaging & Recycling Corporation Holdings II S.A.(Sinea), which manufactures closures. The company reports combined accounts for NG Packaging & Recycling Corporation Holdings S.A. and NG Packaging & Recycling Corporation Holdings II S.A. The ratings and Stable Outlook reflect the SMI group's (SMI and Sinea) resilient business model as a one-stop-shop for rigid plastic packaging. Fitch anticipates that the company's net leverage will reach approximately 3.0x by 2025, following a phase of substantial capex for expansion in its recycling facilities, which has temporarily increased net leverage. Key Rating Drivers Elevated but Improving Leverage: Fitch projects SMI Group's net leverage will remain relatively high at above 3.5x in 2024. This is due to working capital needs and some ongoing higher capex related to recent expansion of the company's recycling facilities in Colombia and Guatemala. Fitch expects net leverage to return to historic levels of around 3.0x in 2025, with strong EBITDA growth driven by volume growth and some margin improvements, while capital intensity is expected to trend towards 4.5% as expansion capex winds down. Higher contribution from recycled resin relating to recent investments should reinforce the company's ability to secure long-term contracts and could help improve unit level gross margins over time. Total volume is forecast to grow toward 40 billion-44 billion units for containers, closures and thermoforming through 2026 from 35 billion units in 2023, driven by organic expansion, mainly within the contracted customer base and small and medium businesses market and the ramp-up of contracts in end markets such as soft drinks, edible oil, dairy and home care. FCF Recovery: FCF is forecast to be negative in 2024 due to capex and negative working capital requirements related to the cost of resin and increased volumes. Fitch forecasts capital expenditures to be around USD60 million in 2024, largely due to ongoing expansion-related projects aimed at enhancing recycling capabilities in Colombia and Guatemala. Maintenance capex is estimated to be around USD15 million. FCF is projected to be negative at about USD24 million in 2024, an improvement from negative USD67 million in 2023, with expectations of turning positive in 2025 aided by more favorable working capital effects and lower capex. Fully Integrated Operations: SMI Group, including the NG Packaging & Recycling (SMI) business alongside the Sinea closure business, is a one-stop shop regional supplier, with packaging solutions for containers, closures, thermoforming and recycled resin that create barriers to entry for competitors. Fitch anticipates that the containers segment will represent about 78% of group EBITDA, while the closures business should account for about 19% of total group EBITDA in 2024. Geographic and Product Diversification: Fitch estimates that as of the end of 2023, approximately 62% of the group's EBITDA was generated outside of Peru, particularly in Central America, Colombia, Ecuador, Mexico, and other countries. Peru accounted for 35% of volume in the first quarter of 2024. This geographic and product diversification enables the company to pursue international contracts and negotiate more effectively with international suppliers. Contracted Sales: SMI Group's long-term contracts for its container and closures divisions are positive for the rating, as they provide predictability in cash flow generation and reduce business risk. The company's contracts have a weighted-average life of approximately six years, with over 85% being contracted. In 2023, containers (preforms and bottles) and closures accounted for 43% and 53% of group volumes, respectively. SMI Group's pass-through model offers margin protection against resin price volatility and natural hedges against currency fluctuations, as both equipment and client contracts are denominated in U.S. dollars. Derivation Summary The ratings consider SMI Group's diverse geographic and product portfolio, its substantial contracted revenue base, and its pass-through pricing model that shields against price fluctuations. Although SMI Group has experienced significant growth over the past decade, it is still smaller compared to international counterparts like Amcor plc. The company faces high client concentration due to regional industry patterns, with its top eight clients contributing a substantial share of total revenue. However, this concentration risk is lessened by the increased scale the company has achieved over time. Key Assumptions Fitch's Key Assumptions Within Its Rating Case for the Issuer Include - Fitch-defined EBITDA around USD174 million in 2024 and around USD183 million in 2025; - Capex of about USD60 million in 2024; - Net debt/EBITDA remaining elevated in 2024 before returning to around 3.0x in 2025 RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Net leverage below 2.5x on a sustained basis; - Strong FCF before dividend payments; - Good liquidity. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Net leverage above 3.5x on a sustained basis; - Negative FCF before dividends on a sustained basis; - Weak liquidity Liquidity and Debt Structure Manageable Liquidity: As of the first quarter of 2024, SMI Group reported approximately USD27 million in cash and cash equivalents, alongside USD85 million in short-term financial debt. Additionally, the company had USD27 million in receivables factoring, which Fitch considers as debt. Short-term debt has been refinanced in 2024 following 1Q24. The primary source of debt is the USD380 million senior notes, which mature in 2028. SMI Group is a private company that is majority-owned by Nexus Group, the leading private equity fund in Peru, and is associated with Intercorp Peru Ltd. (BBB-/Negative), one of Peru's largest conglomerates. Issuer Profile SMI Group is a leading rigid plastic packaging solutions company in Latin America, serving the main multinational CPGs in the beverage, food, personal and home care industries. The company benefits from a highly visible and diversified revenue stream with blue chip customers with resin pass-through provisions. 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 ----------- ------ ----- NG Packaging & Recycling Corporation Holdings S.A. LT IDR BB+ Affirmed BB+ San Miguel Industrias PET S.A. senior unsecured LT BB+ Affirmed BB+ NG PET R&P Latin America, S.A. senior unsecured LT BB+ Affirmed BB+ ********* 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. 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