/raid1/www/Hosts/bankrupt/TCRLA_Public/241001.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, October 1, 2024, Vol. 25, No. 197
Headlines
A R G E N T I N A
ARGENTINA: May Combine Final Two IMF Reviews Before New Talks
ARGENTINA: May Implement Power Cuts to Cope With Summer Demand
ARGENTINA: Three Million New Poor Created so Far This Year
BANCO GALICIA: S&P Rates New Unsec. Notes of Up to $400MM 'CCC'
B A H A M A S
FTX GROUP: Customers Shouldered Costs in Bankman-Fried Conviction
B R A Z I L
BRAZIL: Agricultural Production Value Set to Decline in 2024
BRAZIL: Online Gambling Craze May Be Hitting Consumer Spending
C H I L E
AGROSUPER SA: Moody's Affirms 'Ba1' CFR & Alters Outlook to Stable
LATAM AIRLINES: Moody's Ups CFR to Ba2 & Rates New $1BB Notes Ba2
LATAM AIRLINES: S&P Rates Proposed Senior Secured Notes 'BB+'
C O L O M B I A
LIFEMILES LTD: Fitch Gives 'B' Rating on Secured Term Loan Due 2026
H O N D U R A S
INVERSIONES ATLANTIDA: S&P Alters Outlook on 'B' ICR to Negative
J A M A I C A
JAMAICA: Suppliers Report Ackee Shortage in Country
P U E R T O R I C O
LUCENA DAIRY: Seeks Extension for Cash Collateral Use Until Oct. 31
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: May Combine Final Two IMF Reviews Before New Talks
-------------------------------------------------------------
Buenos Aires Times reports that Argentina's government may condense
negotiations with International Monetary Fund (IMF) staff on its
US$44-billion programme before opening talks on a new agreement
that could include new money, Economy Minister Luis Caputo told
investors in New York, according to people with direct knowledge.
The country could combine the final two staff-level reviews of the
current program into one, then proceed with negotiations for a new
program that would take about three to six months, Caputo said,
according to people with knowledge of his closed-door presentation
at JPMorgan Chase & Co's offices, according to Buenos Aires Times.
The minister didn't specify how much additional money he would seek
from the IMF, the report notes.
In a response to Bloomberg News, Caputo said he didn't estimate any
time line for talks, the report relays.
"There isn't any time frame estimate, nor have we defined yet if we
will request a new agreement," Caputo responded, the report
discloses.
The IMF referred to comments by chief spokesperson Julie Kozack
earlier this month at a press conference about ongoing technical
discussions between IMF staff and Argentine officials, the report
notes.
Although Caputo announced months ago Argentina would seek a new
programme, talks haven't advanced after President Javier Milei
criticised the policy views of IMF Western Hemisphere Director
Rodrigo Valdes, the report relays. The IMF announced earlier this
month that Valdes chose to step away from the Argentina programme
and delegate negotiations to his deputies, the report says.
Although Argentina's past government combined IMF reviews when it
was behind schedule, it's unclear if IMF rules permit a government
to move forward a review, the report notes. Argentina's final two
reviews of the current programme were scheduled for August and
November, according to the last staff report from June, the report
discloses.
The government has met its fiscal and monetary targets within the
IMF program, an improvement from the previous administration that
missed all of its benchmarks, the report says. However, the
Central Bank still struggles to build up its foreign reserves that
are crucial to lifting currency controls at some point and
returning to international markets, the report notes. Argentina's
net international reserves are at negative levels of around US$5
billion, according to private consulting firms, the report relays.
Caputo also told investors the government has already secured
dollars for the interest payments on its global bonds in January,
but is still studying different vehicles to be able to make
principal payments due at the same time, the report discloses. He
reiterated that the government does not plan to return to the
market until January 2026, the report relays.
Milei's economy minister confirmed the government plans to slow the
pace of its currency crawling peg from the current two-percent pace
as monthly inflation continues to ease too, the report notes.
Earlier this year, Milei said he would slow the peg to one-percent
a month once certain inflation metrics reached two percent, the
report discloses. Although the peg has brought down Argentina's
real exchange rate, Caputo said he's not worried about its level,
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.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authories an immediate disbursement of an equivalent of
US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. 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 that it would likely consider to be distressed.
In June 2023, Fitch ratings also upgraded 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-'.
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 2023. The new 'CC' rating signals a
default event of some sort appears probable in the coming years.
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: May Implement Power Cuts to Cope With Summer Demand
--------------------------------------------------------------
Buenos Aires Times reports Argentina plans to resort to scheduled
power cuts to cope with electricity demand this Southern Hemisphere
summer amid forecasts for high temperatures that would force
customers to crank up air conditioning.
Cabinet Chief Guillermo Francos told Radio Mitre that the
government is planning the cutoffs after years of neglect, which
has left the grid unable to meet sudden demand peaks, according to
Buenos Aires Times.
Mr. Francos said the idea was to reach agreements with industrial
users, something governments have also done when there have been
natural gas shortages, the report notes.
A La Nina climate pattern that is forming globally would make
Argentina's summer warmer and drier than normal, the report
relays.
The country has had problems in recent years with unexpected summer
blackouts after electricity distributors saddled by price controls
struggled to pay for upkeep, the report discloses.
While distributors have gotten fee increases under President Javier
Milei, issues remain elsewhere in the grid, the report says. In
particular, Argentina doesn't have enough high-voltage transmission
lines needed to grow power generation with new plants, the report
notes.
This isn't the first time the government has said it might need to
turn the lights out: Energy Undersecretary Eduardo Chirillo issued
a warning as far back as January, and energy and mining official
Daniel Gonzalez also mentioned it earlier this month, 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.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authories an immediate disbursement of an equivalent of
US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. 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 that it would likely consider to be distressed.
In June 2023, Fitch ratings also upgraded 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-'.
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 2023. The new 'CC' rating signals a
default event of some sort appears probable in the coming years.
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: Three Million New Poor Created so Far This Year
----------------------------------------------------------
Buenos Aires Times reports that around three million "new poor"
have been created in Argentina since the turn of the year,
according to the estimates of poverty experts.
According to the estimates of specialists, poverty reached around
52 percent in the first half of the year, the report notes. That
implies that some three million people have slipped below the
poverty line since the previous figure issued by the INDEC national
statistics bureau for the second half of 2023, which was 41.7
percent - the highest official rate since 2004, Buenos Aires Times
relays.
The widely respected Observatorio de la Deuda Social poverty
watchdog of the Universidad Catolica Argentina (Social Debt
Observatory of the Catholic University of Argentina, UCA) sees this
first half as the result of averaging out two different stages: a
first quarter where poverty reached 54.9 percent, before dipping to
49.8 percent and leaving an average of 52 percent, the report says.
The ODSA-UCA calculations are based on microdata from INDEC's EPH
(Encuesta Permanente de Hogares) household survey for the first
three months of the year, the report discloses.
"There was a first quarter in which the shock of inflation and
recession carried more impact and a second when the recession
persisted while receding," explained the body's director Agustín
Salvia. "This along with lower inflation and a certain recovery in
the wages of all the formally employed produced a dip in poverty,"
the report notes.
The poverty 'Nowcast,' produced by the Universidad Torcuato Di
Tella, came up with a similar figure, indicating that poverty
reached 51.9 percent while the official in the first half of 2024,
the report relays.
Yet Leo Tornarolli, an economist and University of La Plata
researcher, is more pessimistic in his estimations: "My impression
is [a rate of] around 55 percent," the report discloses.
He detailed: "The situation in the second quarter has not improved
too much with regard to the first when we know that poverty was
54.5 to 55 percent so that I would see a similar level for the
entire half," the report relays.
But Tornarolli cautioned: "Any precision is difficult in the
absence of the income distribution data, which INDEC normally
publishes before its September poverty figure but this year they
are going to publish afterwards," the report says.
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.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authories an immediate disbursement of an equivalent of
US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. 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 that it would likely consider to be distressed.
In June 2023, Fitch ratings also upgraded 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-'.
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 2023. The new 'CC' rating signals a
default event of some sort appears probable in the coming years.
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.
BANCO GALICIA: S&P Rates New Unsec. Notes of Up to $400MM 'CCC'
---------------------------------------------------------------
S&P Global Ratings assigned its 'CCC' issue rating to Banco De
Galicia Y Buenos Aires S.A.U.'s proposed senior unsecured
amortizing notes for up to $400 million, with up to four years
tenor, subject to market conditions. The bank will use the proceeds
for general corporate purposes.
The rating on the notes reflects their pari passu ranking with the
bank's other senior unsecured debt obligations, and as a result,
it's the same as the long-term issuer credit rating on the bank.
The new issuance accounts for about 4% of Banco Galicia's total
funding base. Therefore, S&P doesn't expect the issuance to change
its view of the bank's funding profile.
The sovereign credit ratings on Argentina (CCC/Stable/C) continue
to constrain the long-term rating on Banco Galicia (CCC/Stable/--),
as its stand-alone credit profile is 'b+'. S&P rarely rates
financial institutions higher than the sovereign where they operate
because S&P considers it unlikely that these institutions would
remain unaffected by developments in domestic economies.
=============
B A H A M A S
=============
FTX GROUP: Customers Shouldered Costs in Bankman-Fried Conviction
-----------------------------------------------------------------
Alison Frankel at Reuters reports that customers whose money was
frozen when crypto exchange FTX entered bankruptcy in 2022 suffered
in at least two ways from the U.S. government's rush to prosecute
FTX CEO Sam Bankman-Fried, according to a new friend-of-the-court
brief in Bankman-Fried's appeal of his conviction.
The brief, filed by five bankruptcy law professors, focuses on
FTX's "extraordinary" cooperation with prosecutors from the
Manhattan U.S. Attorney's Office in the days before the company
entered bankruptcy and in the months after FTX filed for Chapter 11
protection in November 2022, according to Reuters.
That cooperation, the law professors argue, had tangible costs for
FTX customers and investors: FTX bankruptcy lawyers from Sullivan &
Cromwell billed the bankrupt company "tens of millions of dollars"
to respond to more than 400 requests from government investigators
and to produce nearly 1.5 million documents for prosecutors, the
report notes.
Moreover, according to the brief, FTX bankruptcy lawyers billed
nearly 200 hours for work related to the government's seizure of
FTX assets, the report relays. That cooperation, the law professors
said, "may have been especially costly to creditors and investors"
if FTX counsel from Sullivan & Cromwell helped prosecutors push to
the front of line for FTX assets, the report says. Ordinarily, the
federal bankruptcy code gives higher priority to creditors' claims
than to fines, penalties and forfeitures, the brief said, the
report notes.
The law professors took no position on Bankman-Fried's conviction
in the filing but said the brief was prompted by scholarly concern
that close coordination between prosecutors and bankruptcy lawyers
in the FTX case would set a "dangerous" precedent, the report
discloses.
"Congress designed the Chapter 11 and criminal justice systems to
be separate, and the boundary between them is not usually
problematic," the brief said, citing the Enron and WorldCom cases
as examples of appropriate separation between bankruptcy and
criminal proceedings, the report says. By contrast, the professors
argued, "the FTX Chapter 11 bankruptcy estate crossed that line
repeatedly, pervasively and persuasively, to the detriment of both
the defendant and FTX's stakeholders," it added.
About FTX
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9, 2022, struck a deal to
sell itself to its giant rival Binance, but Binance walked away
from the deal amid reports on FTX regarding mishandled customer
funds and alleged US agency investigations. SBF agreed to step
aside, and restructuring vet John J. Ray III was quickly named new
CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
billion in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
According to Reuters, SBF shared a document with investors on Nov.
10, 2022, showing FTX had $13.86 billion in liabilities and $14.6
billion in assets. However, only $900 million of those assets were
liquid, leading to the cash crunch that ended with the company
filing for bankruptcy.
The Hon. John T. Dorsey is the case judge.
The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal
North America, LLC as financial advisor. Kroll is the claims
agent, maintaining the page
https://cases.ra.kroll.com/FTX/Home-Index
The Official Committee of Unsecured Creditors tapped Paul Hastings
as counsel, FTI Consulting, Inc., as financial advisor, and
Jefferies LLC as the investment banker. Young Conaway Stargatt &
Taylor LLP is the Committee's Delaware and conflicts counsel.
Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory
T. Donilon, Edward L. Schnitzer, and David M. Banker, is
representing Sam Bankman-Fried in the Chapter 11 cases.
White-collar crime specialist Mark S. Cohen has reportedly been
hired to represent SBF in litigation. Lawyers at Paul Weiss
previously represented SBF but later renounced representing the
entrepreneur due to a conflict of interest.
===========
B R A Z I L
===========
BRAZIL: Agricultural Production Value Set to Decline in 2024
------------------------------------------------------------
Rio Times Online reports that the CNA predicts challenges for
Brazil's agriculture, forecasting a 3.2% decline in Gross
Production Value for 2024.
This decline will bring the total GPV to R$1.239 trillion ($237
billion), down from R$1.280 trillion in 2023. The agricultural
segment expects the most significant drop, with a 4% reduction in
GPV, according to Rio Times Online.
This decrease translates to a fall from R$869.7 billion to R$834.6
billion. The livestock sector also anticipates a downturn, albeit
smaller, with a 1.4% decrease to R$ 404.4 billion, the report
notes.
Soybean production, the largest contributor to agricultural GPV at
37.4%, faces a 17% decline compared to 2023, the report recalls.
This drop stems from lower prices (-12.9%) and reduced production
(-4.7%). Corn production follows a similar trend, with expected
decreases in both output (-12.3%) and price (-8.4%), the report
says.
However, not all crops face decline. Sugarcane production offers a
bright spot, with a projected 5% increase in GPV, the report
notes.
This growth results from higher prices (4.5%) and a slight
production increase (0.5%), the report notes. Sugarcane ranks
third in agricultural GPV contribution, the report relays. The
livestock sector encounters its own challenges, the report
discloses.
Beef cattle and dairy farming anticipate declines of 4.8% and 2%
respectively, the report relays. These reductions stem from price
drops, with beef prices falling 8.8% and milk prices decreasing by
2%, the report says.
This forecast highlights the complex dynamics affecting Brazil's
agricultural sector in 2024, the report notes. Farmers and
policymakers must navigate these challenges to maintain the
industry's vital role in the national economy, the report adds.
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.
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.
=========
C H I L E
=========
AGROSUPER SA: Moody's Affirms 'Ba1' CFR & Alters Outlook to Stable
------------------------------------------------------------------
Moody's Ratings has affirmed Agrosuper S.A.'s Ba1 Corporate Family
Rating and senior unsecured notes Ba1 rating. The outlook was
changed to stable from negative.
RATINGS RATIONALE
The outlook change to stable is based on Agrosuper's recovery in
credit metrics during 1H 2024, driven by enhanced profitability and
debt reduction. The company's robust cash flow generation during 1H
2024, supported by higher prices and lower raw material costs,
allowed Agrosuper to reduce debt by $254 million to $1,272 million
as of June 2024, lowering gross debt to EBITDA ratio to 2.7x as of
the last twelve months (LTM) through June 2024, from 5.5x in
fiscal-year ended December 2023, and net debt to EBITDA to 2.0x
from 4.6x in the same period. The company has also strengthened
liquidity by performing liability management operations to extend
the duration of its debt and by securing two new committed
revolving credit facilities worth around $100 million in Q1 2024.
Agrosuper's prompt action to lower leverage demonstrates a strong
commitment to maintaining its financial policy goal of 0.5x-2.0x
net debt to EBITDA.
Agrosuper's credit profile is supported by its varied product
range, maintaining a significant presence across multiple segments
such as pork, chicken, salmon, turkey, and processed foods.
Agrosuper holds leading market shares in the domestic chicken and
pork Chilean market and is the third largest salmon exporter
worldwide. The company's vertical integration throughout its
production and commercial chain enhances efficiency and
profitability compared to regional peers and has a diversified
portfolio of clients across the globe (62% of Q2 2024 revenue from
exports). The company maintains a good liquidity position to
support its operations and growth initiatives.
Agrosuper's credit profile is mainly constrained by its sensitivity
to protein and grain price changes, the cyclical protein industry,
climate risks, and environmental regulations. Also, the company
faces potential trade barriers in international markets. These
risks are exacerbated due to the concentration of its production
facilities in Chile. While family-owned, Agrosuper adheres to good
governance practices in compliance with local capital markets
regulations.
As of LTM through June 2024, Agrosuper's EBITDA rose to $484
million, compared to $282 million in fiscal year 2023, when
Agrosuper faced challenges like increased grain costs, lower
poultry and salmon prices, and protein segment oversupplies.
Additionally, avian flu outbreaks in Chile impacted chicken and
turkey plants in 2023, which added to the strain. These issues led
to higher operational costs and reduced revenue, significantly
affecting profitability. But higher prices and lower raw material
costs in H1 2024 increased LTM EBITDA margin to 11.7%, from 6.8% in
2023, and Moody's expect will remain around 12.5%-14.5% in FY
2024-2025. Furthermore, Moody's expect Agrosuper's will maintain
indebtedness at around $1.10-$1.20 billion in 2024-2025, a
reduction from $1.30 billion as of June 2024 and $1.54 billion as
of December 2023. As a result, Agrosuper's gross debt to EBITDA
ratio will be around 2.0x-2.2x in that period, or 1.4x-1.8x on a
net debt basis, which aligns with the target level stipulated in
the company's fiscal policies and with the company's Ba1 rating.
The company´s liquidity is good. As of June 30, 2024, Agrosuper
had about $316 million in cash and marketable securities and around
$100 million available under its two committed credit facilities
(unrated). Also, Moody's expect around $400-500 million in cash
flow from operations in the next 12-18 months, which will in turn
support positive free cash flow generation in the same period.
These compare favorably with the company's debt obligations of
around $24 million in 2H 2024 and $121 million in 2025.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive pressure on the ratings would require Agrosuper to show a
resilient performance regardless of the underlying macroeconomic
environment and consumption patterns supported by a broader
geographic distribution of its production facilities, while
maintaining a conservative approach to financial policy regarding
capital expenditure and dividends. An upgrade would be dependent on
the company achieving greater stability in earnings and cash flow
through the cycle so that gross debt to EBITDA is sustained below
2.0x; EBITDA to interest expenses above 8.0x; and retaining cash
flow to net debt above 30%.
Agrosuper's ratings could be downgraded if its liquidity or
operating performance deteriorates. Quantitatively, a downgrade
could also occur if the company's leverage, as measured by
Moody's-adjusted gross debt to EBITDA ratio, remains above 3.0x,
while EBITDA to interest expense falls below 7.0x, and retained
cash flow to net debt ratio dips below 25%.
Founded in 1955 and headquartered in Rancagua, Chile, Agrosuper is
a vertically integrated protein producer with more than 2,000
fresh, frozen and value-added products. Through its meat business,
Agrosuper produces chicken, pork, turkey and processed food;
through its aquaculture business, it produces Pacific and Atlantic
salmon.
The principal methodology used in these ratings was Protein and
Agriculture published in August 2024.
LATAM AIRLINES: Moody's Ups CFR to Ba2 & Rates New $1BB Notes Ba2
-----------------------------------------------------------------
Moody's Ratings has upgraded to Ba2 from Ba3 LATAM Airlines Group
S.A. (LATAM)'s corporate family rating, the rating of the $1.1
billion senior secured term loan B due in 2027, and the ratings of
the $1.15 billion senior secured notes due in 2027 and 2029,
co-issued by LATAM and Professional Airline Services, Inc., a
Florida corporation and a wholly owned subsidiary of LATAM. At the
same time, Moody's have assigned a Ba2 rating to the proposed
senior secured notes issued by LATAM. The outlook is stable.
The proposed issuance is part of LATAM's liability management
strategy and proceeds will be used along with a portion of LATAM's
cash position to prepay the company's $1.1 billion senior secured
term loan B and other outstanding debt instruments, thus reducing
LATAM's average cost of debt and not affecting the company's debt
protection metrics.
The rating of the proposed notes assumes that the final transaction
documents will not be materially different from draft legal
documentation reviewed by us to date and assume that these
agreements are legally valid, binding and enforceable.
RATINGS RATIONALE
The upgrade of LATAM's ratings to Ba2 follows the announcement of
the proposed new issuance that will reduce its average debt cost
and reflects the continued track record of strong operating and
financial performance of the company during 2023-24 and strong
traffic figures for the third quarter of 2024, which gives us
visibility over the sustainability of the current credit metrics
and liquidity levels. LATAM's Moody's-adjusted leverage improved to
2.5x at the end of June 2024 from 2.8x at the end of 2023, while it
generated $968 million of free cash flow since the beginning of
2023. Moody's expect LATAM's leverage to remain within 2.0-2.5x and
its cash position to amount to above 15% of revenues in the next 2
years, which provides cushion to the company's credit quality even
under stress scenarios. Moody's also expect LATAM to continue
pursuing liability management initiatives to reduce debt costs and
strengthen its interest coverage further after the expensive
issuance of its exit financing. The strong operating performance
and strengthened credit metrics reflect sustained improvements in
LATAM's cost and capital structures, which provides LATAM cushion
to withstand potentially weaker market conditions.
LATAM's Ba2 rating reflects the company's scale and superior
network connectivity, which translate into leading positions in the
five domestic markets in which it operates, in intraregional
flights in Latin America and in international long-haul flights as
of June 2024. The rating also reflects its well-diversified
business portfolio of air transportation services and strategic
alliances. The rating is also supported by LATAM's improved
post-bankruptcy capital and cost structures, and good liquidity,
which will allow the company to weather the volatile recovery of
the industry.
The rating is constrained by LATAM's exposure to the airline
industry and to macroeconomic risks and oil prices. LATAM will have
to contend with higher costs derived from labor (denominated in
local currencies), fuel, and other US dollar-denominated inputs,
which can hamper profitability despite firm demand and capacity
discipline in its key markets.
LATAM's operating performance remains strong in 2024, with
Moody's-adjusted EBIT margin increasing to 12.0% in the twelve
months ended June 2024 compared to 7.5% in 2019. The strong
performance was driven by LATAM's sustained improvements in its
cost base, combined with a disciplined approach towards capacity
and airfares by all Latin American airlines following industry
consolidation, supply chain bottlenecks that prevent major fleet
expansion and tight balance sheets and liquidity. LATAM's CASK
ex-fuel stood at around $4.7 cents in the second quarter of 2024,
$0.2 cents higher relative to 2019 levels, evidencing LATAM's
cost-driven management despite the inflationary pressures faced by
the region in the last four years. The company restructured its
cost base, simplified its fleet, increased the share of variable
costs, outsourced non-core activities and renegotiated over 1,000
contracts, most of which do not contain step-up or termination
clauses, making the improvements sustainable.
So far, air travel demand has remained robust in the region even
amid stagnant economic growth and lower disposable income. LATAM's
total RPK recovered to 102% of 2019 level in July 2024, with Brazil
and Spanish speaking countries RPKs at 121% and 97%, respectively,
and international RPKs at 104%.
LIQUIDITY
LATAM has a good liquidity profile with $1.9 billion in cash and
$650 million in debt maturing before the end of 2026. The company's
cash balance covers short term financial debt maturities of $214
million by 9x. The company's debt amortization schedule is
comfortable, with most of the upcoming maturities represented by
the exit financing notes and the new proposed notes, due beyond
2027. The company also has two secured, undrawn revolving committed
credit facilities amounting to $1.1 billion since November 2022,
which were upsized to $1.55 billion in July 2024 and extended until
July 2029, and generated $968 million of free cash flow since the
beginning of 2023. The company's cash generation benefits from a
reduction of about 40% in annual fleet cash costs from 2019 levels
following the renegotiation of the fleet contracts done during
Chapter 11, and the company continues to have flexibility in terms
of fleet and non-fleet capex. Moody's expect that LATAM will
generate about $2.0-2.5 billion in cash flow from operations
annually, which is sufficient to cover annual capex needs by about
1.5x, including fleet renewal and expansion. Moody's also expect a
neutral to positive free cash flow from 2024 onwards, reflecting
flexibility in maintenance capex and costs. The company also has
other potential liquidity sources, including unencumbered assets
that could be used in potential secured financing transactions.
RATING OUTLOOK
The stable outlook reflects Moody's expectations that LATAM's
credit metrics and liquidity will remain strong in the next 12-18
months, and that the company will maintain its conservative
approach towards liquidity, costs and capacity management. The
outlook also reflects Moody's expectations that LATAM will continue
to pursue liability management initiatives to reduce its debt cost
further.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
LATAM's ratings could be upgraded if the company strengthens its
balance sheet and liquidity further, such that the company builds
cushion in credit metrics under stress scenarios. Quantitatively an
upgrade would require adjusted leverage (measured by total debt /
EBITDA) sustained below 3.0x and interest coverage (measured by
(FFO + interest expense) / interest expense) above 5.5x on a
sustained basis. The maintenance of an adequate liquidity profile,
with positive free cash flow generation even during times of fleet
expansion would also be required for an upgrade.
The rating could be downgraded if credit metrics deteriorate, with
adjusted leverage remaining above 4.0x and interest coverage below
4.0x on a sustained basis. A deterioration in the company's
liquidity profile or additional shocks to demand or profitability
that lead to cash burn could also result in a downgrade of the
rating.
COMPANY PROFILE
LATAM Airlines Group S.A (LATAM) is a Chile-based airline holding
company formed by the business combination of LAN Airlines S.A. of
Chile and TAM S.A. (TAM) of Brazil in June 2012. LATAM is the
largest airline group in South America, with a local presence for
domestic passenger services in five countries (Brazil, Chile, Peru,
Ecuador and Colombia). The company also provides intraregional and
international passenger services, has a cargo operation that is
carried out using belly space on passenger flights and a dedicated
freighter service and has LATAM Pass, the largest frequent flyer
program in the region and 7th largest in the world in terms of
members. In the twelve months ended June 2024, LATAM generated
$12.5 billion in net revenue. LATAM serves passengers in around 146
destinations in 26 different countries; provides cargo services to
160 destinations in 33 countries; and as of June 2024, had a fleet
of 319 passenger aircraft and 21 dedicated cargo aircraft and a set
of bilateral alliances.
The principal methodology used in these ratings was Passenger
Airlines published in August 2024.
LATAM AIRLINES: S&P Rates Proposed Senior Secured Notes 'BB+'
-------------------------------------------------------------
S&P Global Ratings assigned its 'BB+' issue-level rating and '1'
recovery rating to Latam Airlines Group S.A.'s proposed senior
secured notes.
The 'BB+' rating on the proposed notes is two notches above the
issuer credit rating on the group. The '1' recovery rating
indicates S&P's view that lenders could expect very high (rounded
estimate: 95%) recovery of principal in the event of payment
default.
Latam Airlines plans, subject to market conditions, to use the net
proceeds from this offering and potentially some cash on hand to
repay its outstanding $1.1 billion term loan B and $450 million
first-lien senior secured notes due 2027.
The proposed refinancing aligns with S&P's base-case scenario and
is net leverage neutral. Therefore, the transaction does not affect
its 'BB-' issuer credit rating or positive outlook on Latam
Airlines.
S&P said, "We expect the refinancing to result in overall better
financing conditions and a lower cost of debt for the group. We
anticipate that Latam Airlines will generate about $2.9 billion in
EBITDA this year, with net funds from operations to debt of close
to 40% and S&P Global Ratings-adjusted net debt to EBITDA of 1.8x
in 2024, and 1.7x in 2025.
"The positive outlook indicates that we could raise the ratings in
the next six to 12 months if Latam continues delivering results in
line with our base-case scenario and we gain further conviction
that it will post relatively stable profitability, with EBITDA
margins above 20%. We would also need to see a consistent track
record of sustained capacity increases and passenger traffic
remaining healthy despite softer macroeconomic conditions."
ISSUE RATINGS -- RECOVERY ANALYSIS
Key analytical factors
-- S&P assigned its 'BB+' issue-level rating and '1' recovery
rating to the company's proposed secured notes. The '1' recovery
rating indicates its expectation for very high (rounded estimate:
95%) recovery for lenders in the event of a default. This aligns
with its issue-level and recovery ratings on Latam Airlines'
existing secured debt.
-- At issuance, the proposed notes will include the same
collateral package as the existing term loan B and the 2027 and
2029 notes. However, the package divides collateral into two
categories: permanent (frequent flyer program, intellectual
property, and brands), which will remain in place for the duration
of the new secured debt, and additional collateral (cargo business
and slots), which could be released once the company refinances the
2029 notes.
-- In S&P's opinion, if it faced a new stress scenario, Latam
Airlines would again seek to restructure under U.S. laws, since
these constitute a specialized framework for companies with
international investors and have a precedent of such a
restructuring.
-- S&P valued the company on a going-concern basis using a
discrete asset valuation method, per its assessment for airlines.
S&P's valuations reflect its estimate of the value of the various
assets at default based on net book value for current assets and
appraisals for aircraft and routes, adjusted for expected
realization rates in a distressed scenario.
Simulated default assumptions
-- S&P said, "In our simulated default scenario for 2028, we
contemplate consistently low air passenger volume, low rates from a
steep decline in demand, limited ability to raise ticket prices in
a highly competitive environment, and difficult economic
conditions. This could hurt Latam Airlines' EBITDA and limit its
capacity for debt repayment, as was the case in 2020."
-- S&P also assumes that, at the moment of default, the company
would have used 60% of its revolving credit facilities, totaling
$930 million.
-- Available and restricted cash would plummet by 80%, because
Latam Airlines would have liquidated most of its cash before
defaulting on its debt.
-- S&P applies a 25% dilution rate to receivables, because S&P
believes they would be realized only if the company grants
discounts.
-- Because inventory includes spare parts, we apply a 49% haircut
due to its belief that the company could sell them at a discount
under pressure.
-- S&P assumes a 50% realization rate for building assets.
-- S&P's haircuts spare engines, advanced maintenance, and flight
equipment by 56%. This incorporates our view that under a stressed
scenario, the company's capital expenditure wouldn't be aggressive,
or it would issue additional debt funding. Therefore, Latam
Airlines would use available inventory to address operational
needs.
-- For slots, S&P uses a 25% realization rate, considering that
these slots are at the company's main Brazilian and Peruvian
airports. Airports in both countries have a limited number of
takeoff and landing slots because of infrastructure limitations.
-- For routes, S&P assumes that about 50% of the total are
international routes, to which it applies a 50% realization rate in
line with slots, resulting in an effective realization rate of
25%.
-- S&P expects a mixed realization rate on the company's owned
unencumbered aircraft of 55%-75%, depending on age and asset type,
mainly consisting of 99 aircraft that average almost 16 years old.
-- S&P doesn't include the company's pledge of the cargo business,
brand intellectual property, and interest in the frequent flyer
program, because it thinks those values are embedded in the
attractiveness of its routes, slots, and aircraft.
Simplified waterfall
-- Net enterprise value (after 5% administrative costs): $6
billion
-- Pro forma total senior secured debt: $3.48 billion (including
new secured notes,2029 senior secured notes, 60% of revolving
credit facilities, the spare engine facility, pre-delivery payment,
and other secured debt)
-- Recovery expectations: 90%-100% (rounded estimate 95%)
Note: All debt amounts include six months of prepetition interest.
===============
C O L O M B I A
===============
LIFEMILES LTD: Fitch Gives 'B' Rating on Secured Term Loan Due 2026
-------------------------------------------------------------------
Fitch Ratings has assigned a 'B'/'RR4' rating to LifeMiles Ltd.'s
(LifeMiles) senior secured term loan B loan due 2026 and its
current proposed USD100 million of add-on issuance. Fitch rates
LifeMiles' Long-Term Issuer Default Rating (IDR) 'B'. Proceeds from
the financing will be largely used to fund dividend distribution.
The Rating Outlook is Stable.
LifeMiles' ratings reflect its parent rating of Avianca Group
International Limited (Avianca; B/Stable) as per Fitch's "Parent
and Subsidiary Rating Linkage" (PSL). LifeMiles is 100% owned by
Avianca and is a key subsidiary with a track record of around 20%
contribution to EBITDA, stable free cash flow generation and less
than 10% of Avianca's net debt position. The legal incentive for
support is high and the operational and strategic incentives are
medium to high, resulting in equalization of the ratings.
Avianca's 'B' rating reflects its market position in Latin America,
lean cost structure, moderate leverage with net debt/adjusted
EBITDA of 3.0x-4.0x, and good liquidity. Near-term uncertainties
include refinancing LifeMiles' term loan B during 2025, execution
risks and sustainability of Avianca's new low-cost carrier
strategy, rising fuel costs and macroeconomic pressure. The
industry's high cyclicality, strong competition, limited financial
flexibility reflecting a weak unencumbered asset base and large
share of secured debt should continue to constrain the rating in
the medium term.
Key Rating Drivers
Add-On Issuance: The incremental USD100 million will be incurred
under LifeMiles' existing capacity, will have the same maturity and
amortization, and will be pari passu with the existing first-lien
term loans. On Aug. 30, 2021, LifeMiles completed the refinancing
of its term loan B with a principal amount of USD400 million due
2026. Net proceeds of the current add-on issuance will be used to
fund a distribution to Avianca and pay transaction-related fees and
expenses. The loan is secured by a first-priority security interest
in all tangible and intangible assets.
Consolidated Approach: Fitch applies its PSL criteria following the
Stronger Parent path to Avianca and LifeMiles, which is 100% owned
by Avianca. The legal incentive for support is considered to be
high and the operational and strategic incentive to be medium to
high, resulting in equalization of the ratings. Fitch considers
that there are some uncertainties in relation to Avianca's shift to
low-cost carrier and the sustainability of the LifeMiles business
model. LifeMiles has a track record of around 20% contribution to
EBITDA and represents less than 10% of Avianca's net debt
position.
Refinancing Risks Approaching: LifeMiles has a track record of a
low to moderate leverage profile, benefited by its solid operating
cash flow, and has been financially supporting Avianca via dividend
distributions. During 2021, LifeMiles paid USD25 million to Avianca
and USD73 million during 2022. Fitch estimates LifeMiles will pay
around USD90 million in dividends during 2024.
As of June 30, 2024, LifeMiles had USD132 million in cash and cash
equivalents, compared with USD40 million of short-term debt and
total debt around USD290 million that relates to term loan B. On a
pro forma basis, including the new add-on, LifeMiles will have
around USD390 million of debt due August 2026.
Derivation Summary
LifeMiles' ratings reflect the linkage with Avianca, in line with
Fitch's PSL rating criteria.
Avianca's 'B' rating reflects its post-restructuring credit
profile, good asset base compared to its regional peers based in
terms of fleet, network and route diversification, and its
important regional market position. Avianca's rating is below LATAM
Airlines Group S.A.'s (BB-/Positive Outlook) given its lower
business and geographic diversification and weaker financial
flexibility. In terms of Brazilian airlines, Avianca presents lower
leverage ratios and lower refinancing risks. The company's limited
financial flexibility in terms of unencumbered asset base and the
industry's high risks remain as rating constraints.
Recovery Analysis
Key Recovery Rating Assumptions:
The recovery analysis assumes that Avianca would be considered a
going concern in bankruptcy and that the company would be
reorganized rather than liquidated. Fitch has assumed a 10%
administrative claim.
Going-Concern Approach: LifeMiles' going concern EBITDA is USD190
million which reflects average results, plus a discount of 20%. The
going concern EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which Fitch
bases the valuation of the company. The enterprise value
(EV)/EBITDA multiple applied is 5.5x, reflecting LifeMiles' and
Avianca's strong market position in Colombia.
Fitch applies a waterfall analysis to the post-default EV based on
the relative claims of the debt in the capital structure. The debt
waterfall assumptions consider the company's total debt. These
assumptions result in a recovery rate for term loan B and
LifeMiles' single debt within the 'RR1' range. However, due to the
soft cap of Colombia at 'RR4', LifeMiles' senior secured debt is
rated at 'B'/'RR4'.
RATING SENSITIVITIES
LifeMiles' ratings are equalized to Avianca's ratings, per Fitch's
criteria, and rating sensitivities reflect Avianca's thresholds.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Ability to maintain strong cost structure, with adjusted EBITDA
margin above 22% on a sustainable basis;
- Maintenance of strong liquidity position (cash to LTM revenue
consistently 20%) and well-spread debt amortization profile with no
major refinancing risks in the medium term;
- EBITDAR fixed-charge coverage sustained at or above 2.5x;
- Sustainable positive FCF generation;
- Continued solid rebound of Avianca's main markets air traffic.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Liquidity deterioration and/or difficulties continuing to access
credit lines;
- Gross and net leverage ratios consistently above 5.x and 4.0x;
- EBITDA fixed-charge coverage sustained at or below 1.5x;
- Competitive pressures leading to severe loss in market share or
yield deterioration;
- Aggressive growth strategy leading to consolidation movement
financed with debt.
Liquidity and Debt Structure
Strong Liquidity Position: LifeMiles has maintained a solid
liquidity position. As of June 30, 2024, LifeMiles had around
USD132 million in cash and cash equivalents, compared with USD290
million of total debt (term loan B). During the same period,
Avianca's total debt was USD4.9 billion, and was mainly composed of
USD2.6 billion of leasing, USD1.8 billion of Tranch A1 and A2
(exit-financing) due 2028, and LifeMiles' term loan B (USD290
million) due 2026. Avianca's cash position of USD 911 million was
sufficient to cover maturities until mid-2026.
Issuer Profile
LifeMiles is Avianca's world class loyalty program and the leading
loyalty program in Colombia, Ecuador and Central America. LifeMiles
is a core and strategic asset to Avianca, generating around 20% of
Avianca's EBITDA and significant stable free cash flows.
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
Avianca has an ESG Relevance Score of '4' for Group Structure due
to the relatively new and larger airline operational group (Abra),
which has a negative impact on the credit profile, and is relevant
to the rating in conjunction with other factors.
Avianca has an ESG Relevance Score of '4' for Governance Structure
due to the relatively new operational group (Abra) that has lately
demonstrated aggressive financial policies, which has a negative
impact on the credit profile, and is relevant to the rating 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 Recovery
----------- ------ --------
LifeMiles Ltd.
senior secured LT B New Rating RR4
===============
H O N D U R A S
===============
INVERSIONES ATLANTIDA: S&P Alters Outlook on 'B' ICR to Negative
----------------------------------------------------------------
S&P Global Ratings revised the outlooks on its ratings on
Inversiones Atlantida and Banco Atlantida to negative from stable.
At the same time, S&P affirmed its 'B' long-term issuer credit
ratings and 'B' issue-level rating on Invatlan, as well as its
'BB-/B' issuer credit ratings on Banco Atlantida.
BICRA analysis for Honduras
If these factors further dampen investor sentiment and translate
into weaker economic growth prospects, this could lead to a
downgrade of Honduras in the next six to 12 months. The ratings on
Honduras still reflect its low per capita GDP and weak
institutions, as well as its very limited exchange-rate flexibility
(which constrains the effectiveness of monetary policy).
On the other hand, the country maintains moderate fiscal deficits
and debt levels, and most of the sovereign's debt comes from
official sources.
In S&P's view, limited exchange-rate flexibility and weak monetary
policy have weakened Honduras' external liquidity and dented
investor sentiment, while the country's weak rule of law, political
uncertainty, and higher perceived levels of corruption are likely
to continue constraining economic growth. These risk factors --
which drive the negative outlook on the sovereign ratings -- are
already captured in its economic risk assessment for the banking
sector.
Even though monetary rigidities could imply challenges in the
operating environment for the country's banks, S&P expects that
credit will continue to expand at an adequate pace: 9%-11% in
nominal terms in 2024-2025. This would still be higher than the
3.0% GDP growth that S&P expects in 2024 and the 3.6% growth that
it expects in 2025.
S&P also expects resilient asset quality metrics--past-due loans
and credit losses. For instance, the Honduran banking sector has a
conservative approach toward consumer lending, which translates to
healthier levels of nonperforming assets and lower credit losses
despite tough economic conditions. In this context, even though
S&P's expect Honduran banks' asset quality metrics in 2024-2025 to
remain above their cyclical lows--with NPAs at about 2.5%--S&P also
thinks they'll remain in line with those of regional peers with
similar economic and industry risks.
S&P said, "In our view, the Honduran banking sector maintains
characteristics that are consistent with an economic risk
assessment of '8'. We think there's still space before we would
revise our economic risk assessment to a weaker score ('9')--the
same score that we have for countries like El Salvador
(B-/Stable/B), Kenya (B-/Stable/B), Mongolia (B/Stable/B), and
Turkiye (B+/Positive/B). Therefore, our economic and industry risk
assessments remain unchanged at '8' and '7', respectively, and our
anchor for banks operating in Honduras remains 'bb-'. We continue
to see stable trends for economic and industry risk in Honduras.
However, we will closely follow how the economic risks evolve in
the next six to 12 months to determine if they are increasing and
are making banks more vulnerable."
Honduras has a small, low-income economy with limited
diversification and a large informal sector, which limits the
private sector's debt-bearing capacity. Additionally, the country
has a subpar legal framework, with a lack of predictability and
transparency in policymaking, compounding risks for lenders.
S&P said, "We will continue to see if monetary policy and limited
exchange-rate flexibility further weaken investor sentiment as well
as households' and companies' payment capacity. If one of these
risks worsens in the short term and translates into higher credit
losses or lower liquidity for banks, we could revise our view of
the economic risk trend in Honduras to negative from stable; this
would reflect weakening economic resilience and decreased room to
maneuver given the current economic risk score ('8')."
Inversiones Atlantida And Banco Atlantida
The 'B' rating on Invatlan incorporates its status as a
nonoperating holding company (NOHC). The rating on the NOHC is two
notches below the credit quality of the group's consolidated
operating subsidiaries (the group credit profile, or GCP, of 'bb-',
which is capped by the Honduras rating). Therefore, if S&P
downgrades Honduras by one notch, we would revise down the GCP in
tandem.
One notch of this subordination reflects the NOHC's dependence on
dividends from Banco Atlantida and other subsidiaries, which it
needs to service debt and other financial obligations. S&P deducted
an additional notch to reflect Invatlan's rising double-leverage
ratio, which has, in recent years, remained consistently above 120%
-- its trigger for an additional notch of subordination.
Finally, the 'BB-/B' ratings on Banco Atlantida incorporate its
status as a core entity to Invatlan, as well as its expectation
that it will keep steadily expanding its loan portfolio and deposit
base, with rising profitability.
Based on these factors, Banco Atlantida's stand-alone credit
profile (SACP) is 'bb-', and S&P caps the issuer credit rating at
the sovereign credit rating on Honduras. This is because, despite
the credit strengths that allow us to assign an SACP that is above
the rating on Honduras, S&P rarely rates financial institutions
above the long-term sovereign rating; this, in turn, is because it
considers that banks are affected by many of the same economic
factors that cause sovereign stress.
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J A M A I C A
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JAMAICA: Suppliers Report Ackee Shortage in Country
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RJR News reports that suppliers of ackee from Jamaica, as well as
purchasers in the United States, indicated that there is a shortage
of the national fruit on the local market, resulting in its
unavailability overseas.
Canute Sadler, proprietor of Stanmark Processors Limited, one of
Jamaica's largest exporters of canned ackee, said the crop was
ready for reaping when Hurricane Beryl struck the island on July 3,
according to RJR News.
He said the crop, normally reaped in July and August, was wiped
out, the report notes.
Stanmark, which has processing factories in St Thomas, Clarendon,
Westmoreland, and St Elizabeth, added that the demand for ackee has
taken off locally, with much more being consumed in the hotels this
year, the report relays.
Chairman of GraceKennedy Group, Don Wehby, also confirmed that
Beryl significantly damaged the ackee crop, noting that the canned
product is not expected to return to the US market until November,
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 September 2024, S&P
affirmed 'BB-/B' sovereign ratings on Jamaica and revised outlook
to positive. In March 2022, Fitch Ratings affirmed Jamaica's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'.
The Rating Outlook is Stable.
=====================
P U E R T O R I C O
=====================
LUCENA DAIRY: Seeks Extension for Cash Collateral Use Until Oct. 31
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Lucena Dairy, Inc. and Luna Dairy, Inc., ask the U.S. Bankruptcy
Court for the District of Puerto Rico for authority for an
extension of the use of cash collateral until October 31, 2024,
allowing the Debtors to continue operating during their Chapter 11
bankruptcy process.
After filing their initial bankruptcy petitions, the Debtors
submitted Urgent Motions to use cash collateral which were met with
oppositions from Condado, the secured creditor. Condado opposed the
motions on September 20, 2023 which the Debtors responded on
September 22, 2023. Both parties eventually came to an agreement
regarding the continued use of the cash collateral through
September 30, 2024.
In their current motion, the parties confirm they have reached an
interim agreement to extend the use of cash collateral until
October 31, 2024. As part of this agreement, the Debtors will make
an additional payment of $20,000 to Condado by October 28. Both
parties reserve the right to assert any claims, defenses, or
arguments related to the Cash Collateral Contested Matter in the
future, signaling that the issue has not been fully resolved yet.
In return for agreeing to this extension, Condado seeks assurances
that the Debtors will adhere to the payment schedule and other
terms laid out in the interim agreement. They also ask the court to
hold a hearing on the contested cash collateral issue before
October 31, 2024.
About Lucena Dairy Inc.
Lucena Dairy Inc. is engaged in the production of cows' milk and
other dairy products and in raising dairy heifer replacements.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. P.R. Case No. 23-02835) on September 8,
2023. In the petition signed by Jorge Lucena Betancourt, president,
the Debtor disclosed $1,905,560 in assets and $11,464,130 in
liabilities.
Judge Edward A. Godoy oversees the case.
Carmen D. Conde Torres, Esq., at C. Conde & Associates, represents
the Debtor as legal counsel.
About Luna Dairy, Inc.
Luna Dairy Inc. is engaged in the production of cows' milk and
other dairy products and in raising dairy heifer replacements.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. P.R. Case No. 23-02837) on September 9,
2023. In the petition signed by Jorge Lucena Betancourt,
president,
the Debtor disclosed $4,102,639 in assets and $11,316,130 in
liabilities.
Judge Edward A. Godoy oversees the case.
Carmen D. Conde Torres, Esq., at C. Conde & Associates, represents
the Debtor as legal counsel.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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