/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/241011.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, October 11, 2024, Vol. 25, No. 205 Headlines B R A Z I L BANCO DE DESENVOLVIMENTO: Moody's Upgrades Issuer Rating to B1 BANCO MASTER: Fitch Affirms 'B+' LongTerm IDRs, Outlook Stable BANCO PAN: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable JBS SA: Posts US$19.3 Billion for 2nd Quarter of 2024 LOCALIZA RENT: Moody's Hikes CFR to Ba1 & Alters Outlook to Stable PRIO SA: To Acquire Stake in Campos Basin's Peregrino for $1.9B M E X I C O 397 CAP: S&P Withdraws 'B+' LongTerm Issuer Credit Rating P A N A M A EMPRESA DE TRANSMISION: Fitch Affirms 'BB+' IDRs, Outlook Stable P U E R T O R I C O HIJOLE FOODS: Seeks to Sell All Assets to IBH Corp. PUERTO RICO: Cobra Acquisitions Receives $150MM Initial Settlement PUERTO RICO: Cobra Acquisitions Secures $150M Payment From PREPA V E N E Z U E L A CITGO PETROLEUM: Venezuela Bondholders Pursue Parallel Claims - - - - - =========== B R A Z I L =========== BANCO DE DESENVOLVIMENTO: Moody's Upgrades Issuer Rating to B1 -------------------------------------------------------------- Moody's Ratings has upgraded Banco de Desenvolvimento de Minas Gerais S.A.'s (BDMG) long-term local currency issuer rating to B1, from B2, as well as its long-term local- and foreign-currency counterparty risk ratings to Ba3, from B1. Moody's also upgraded BDMG's baseline credit assessment (BCA) and adjusted BCA to b1 from b2, as well as its long-term counterparty risk assessment to Ba3(cr) from B1(cr). At the same time, the short-term issuer and local- and foreign-currency counterparty risk ratings were affirmed at NP and the short-term counterparty risk assessment was affirmed at NP(cr). The outlook on BDMG's long-term issuer rating remains positive. RATINGS RATIONALE The upgrade of BDMG's BCA to b1 reflects the steady improvement in its financial fundamentals in the past four years, supported by manageable asset risks, strong capitalization and adequate funding structure that shows good diversification of length and sources to support business growth. At the same time, this upgrade also follows the upgrade of the long-term issuer rating assigned to the State of Minas Gerais to B1, from B2, that was announced on October 2, 2024, following the upgrade of the Government of Brazil's sovereign debt rating to Ba1. Despite the bank's strong linkage with the state government of Minas Gerais and its exclusive role as financial development agent of the state that limits the operation geographically, BDMG's operations have been supported by a strong economic activity in its regional local market. BDMG's BCA at b1 acknowledges the bank's adequate level of problem loans in the past four years that stood at 1.6%, down from 2.1% in June 2023 and still below the industry average of 3.8% in July 2024. Moody's assessment also incorporates BDMG's high volume of renegotiated loans, which could suggest future asset quality weakening. The bank's asset risks are offset by high collateral levels and loan loss reserves that cover 5.7x problem loans. Despite its modest profitability metrics that reflects the bank's development banking mandate, BDMG's capitalization remains strong, with a tangible common equity to adjusted risk-weighted assets (TCE/RWA) ratio of 20.4% as of June 2024, providing a substantial buffer against loan losses and potential profitability volatility. The bank's strong capitalization also supports management's growth strategy, targeting BRL10 billion ($2 billion) in total loans over the next 3-4 years. BDMG's ratings outlook remains positive, reflecting the potential impact on its financial profile stemming from a continuing improving operating environment in Brazil and the strong economic activity in the state of Minas Gerais that will continue to support the bank's operations. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade of the BDMG's ratings and assessments would be considered if the bank continues to report consistent growth in loan volumes origination while maintaining manageable problem loan ratios, preserving funding diversification and adequate profitability. In addition, the bank's ratings could face upward pressure if the ratings of the State of Minas Gerais were to be upgraded. The bank's B1 issuer rating has a positive outlook, and therefore, downward pressures are less likely at this point. However, a sudden change to BDMG's financial fundamentals, including adverse selection that would build problem loans and/or unexpected capital reduction, could trigger the downgrade pressure to its standalone assessment currently at b1. The principal methodology used in these ratings was Banks Methodology published in March 2024. BANCO MASTER: Fitch Affirms 'B+' LongTerm IDRs, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Banco Master S.A.'s (Master) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B+'. The Rating Outlook is Stable. Fitch has also affirmed Master's Viability Rating (VR) at 'b+', Government Support Rating (GSR) at 'ns', and Short-Term Foreign and Local Currency IDRs at 'B'. In addition, Fitch has upgraded Master's Long-Term National Rating to 'A-(bra)' from 'BBB(bra)' and affirmed the Short-Term National Rating at 'F2(bra)'. The Outlook for the Long-Term National Ratings is Stable. The upgrade of Master's National Ratings reflects its strategic expansion and acquisitions, which support revenue growth and enhance its business profile. Timely equity injections and internal capital generation support these initiatives. The upgrade also considers the stabilization of its financial profile, consistent liquidity and profitability levels, reasonable asset quality, and stable capital levels compared to its peers. Key Rating Drivers Ratings Driven by VR: Master's VR benefits from its franchise and a more controlled risk profile after periods of growth. Effective balance sheet management has driven this improvement, creating a larger and better diversified revenue base with stable income sources (payroll and corporate lending) and more fee revenues (insurance and foreign exchange). These factors have resulted in a more consistent overall credit profile. The rating also includes adequate improvements in funding and liquidity structures, adequate capitalization, and enhanced risk management controls. Business Profile Expansion: Fitch has revised its business profile assessment of Master to 'b+' from 'b'. The bank continues to expand its business verticals. As of June 2024, the bank's total operating income (TOI) increased 29% yoy, improving from an average of USD210 million during 2020 to 2023. The TOI is supported by payroll loan activities with Credicesta; investment banking for structured finance activities; corporate/SME loans; insurance and foreign exchange. Master actively pursues growth strategies and develops new business areas, both organically and through strategic acquisitions (such as Banco Voiter and Wiil CFI), to enhance its market position and boost operational profitability. Acquisitions-based growth inherently involves risks, but Master has a successful track record with previous integrations, demonstrating its ability to effectively manage these challenges. High Growth Influences Risk Profile: Master's risk profile score of 'b' reflects its strong asset growth in recent years, with increases of 29% in the first half of 2024, 24% in the second half of 2023, and 25% in the first half of 2023. This growth stemmed from loan portfolio expansion and company acquisitions. Master continues to update and implement risk controls and policies for its operations and new portfolios. It has hired new personnel to improve models and monitor portfolio evolution. Despite established market policies, Fitch view the bank's operating history as short, especially with new products. The bank's business and risk profile, as well as its organizational structure, is more complex than its peers. Reasonable Asset Quality: The ratios for the D-H credit portfolio increased in the first half of 2024 to 7.5% from 5.7% in 2023 and 2.2% in 2022. This increase reflects the portfolio's maturation over recent years, and Fitch expects it to remain at this higher level for the coming years (four-year average: 3.4%). Write-offs for losses were a low 1.1% and the coverage ratio of D-H was 52% as of June 2024. Improving Profitability Ratios: In 1H24, Master reported an increase of more than 6x in operating profit over the last three years, driven by higher scale gains and the maturation of its business profile. In 1H24, the operating profits to risk weighted assets (RWA) was 2.0%, compared to a four-year average from 2020 to 2023 of 2.9%. Despite recent volatility, the results show progress, aligning the RWA with the bank's strategy of carrying more credit risk asset on the balance sheet. Fitch sees structural improvements in the bank's profitability as Master has been deploying capital towards more recurrent sources of income. Fitch expects the bank to maintain a core ratio between 2.0-3.0% in 2024 and 2025. Stable Capital Levels: Fitch has revised its Leverage & Capitalization assessment of Master to 'bb-' from 'b+'. Master's capitalization ratios have been stable despite strong asset expansion, supported by the shareholders' constant capital contributions in recent years and internal capital generation. At June 2024, the bank's CET1 to RWA ratio was 10.9%, a level in line with its peers, from a four-year average of 10.7% The Basel Ratio becomes 12.3% when including the TIER 2 approved in July 2024. The bank may need to maintain internal capital generation to sustain growth in the medium term. Satisfactory Liquidity and Funding Structure: Fitch considers Master's funding structure satisfactory for its business model. Funding has gradually improved in recent years, reflecting the bank's strategy of expanding its funding products and channels, with the increase in the number of partners that distribute their funding products. Master's loans-to-deposits ratio averaged 59.6% from 2020 to 2023, and Fitch expects it to remain near this level in the medium term. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A substantial deterioration of the bank's asset quality that results in the reduction of its operating profit to risk weighted assets ratio consistently below 1.5% and a sustained reduction in the bank's capitalization, common equity Tier 1 (CET1) ratio below 10.0%. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Increased TOI and maintenance of current asset quality ratios, coupled with an increase in its profitability levels (operating profit/risk weighted assets ratio sustained above 2.5%); - Further diversification on its funding structure; - A CET1 to RWA ratio close to 12% on a sustained basis. The GSR of 'No Support' (NS) reflects Master's small market position within the Brazilian financial system due to its market share less than 1% of customer deposits at YE 2023). In Fitch's view, there is no reasonable assumption of support being forthcoming. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Factors That Could, Individually Or Collectively, Lead To Positive Rating Action/Upgrade Master's GSR could be upgraded by a material improvement of its system importance Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Master's GSR could be upgraded following a material increase in its systemic importance. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Master's GSR cannot be downgraded as it is at the lowest level of the scale. VR ADJUSTMENTS The Asset Quality score has been assigned below the implied score due to the following adjustment reason: Historical and Future Metrics (negative). The Earnings & Profitability score has been assigned below the implied score due to the following adjustment reason: Earnings Stability (negative). ESG Considerations Fitch has revised Master's ESG Relevance Score for Group Structure to '3' from '4' because its business model is not affected negatively by the complexity of its organization. Master' group structure is appropriate for its business strategy and does not differ from other Brazilian banks. It has limited impact on the bank's credit profile and is creditneutral. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Banco Master S.A. LT IDR B+ Affirmed B+ ST IDR B Affirmed B LC LT IDR B+ Affirmed B+ LC ST IDR B Affirmed B Natl LT A-(bra)Upgrade BBB(bra) Natl ST F2(bra)Affirmed F2(bra) Viability b+ Affirmed b+ Government Support ns Affirmed ns BANCO PAN: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Banco Pan S.A.'s (PAN) Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) at 'BB' and Long-Term National Rating at 'AAA(bra)'. The Rating Outlooks are Stable. Fitch has also affirmed PAN's Shareholder Support Rating (SSR) at 'bb' and Viability Rating (VR) at 'bb-'. Key Rating Drivers IDRs, SSR AND NATIONAL RATINGS Shareholder Support Drives IDRs: PAN's IDRs and National Ratings are driven by its 'bb' SSR and reflect a high probability of support from its shareholder Banco BTG Pactual S.A. (BTG; BB/Stable) if needed. PAN's ratings are on par with BTG's. Fitch believes BTG has strong incentives to support PAN because it is a strategic part of the group's consumer finance activities in Brazil. PAN falls within BTG's regulatory perimeter, enhancing funding and capital fungibility within the group. This reinforces Fitch's view that BTG would provide support to PAN if needed, strongly influencing Fitch's view of shareholder support. The progressive integration of the group over the past few years, in terms of funding costs, economies of scale and the transfer of management expertise, underpins the assessment due to resulting reputational risks. The Stable Outlook on PAN's IDRs and National Rating mirrors that of BTG. VR Consistent Business Profile Drives: Fitch upgraded PAN's business profile score to 'bb' from 'bb-' due to its well-established presence in the consumer banking sector, which supports solid total operating income (TOI) and resilient profitability despite the cyclicality of consumer finance. PAN's asset quality metrics are appropriate for a consumer lender, supported by a moderate level of secured lending. Fitch finds its funding profile adequate, benefiting from its association with the BTG group, despite a reliance on wholesale sources. The availability of funding from its parent and above-average standalone capital buffers also contribute positively. Relevant Mid-sized Consumer Bank: PAN ranks among the top three mid-sized banks in its core markets. Vehicle financing, payroll loans and secured FGTS loans account for around 94% of total loans. PAN's business profile has increasingly diversified in recent years due to its business plan, which included launching a digital banking platform and product diversification. These initiatives have boosted overall business volumes, resulting in a larger revenue base (TOI of USD 1.5 billion on the average of the last four years), higher share of fee-based revenues and improved customer relationships. Moderate Risk Profile: PAN's risk profile is moderate, balancing a loan portfolio skewed towards low-income households with a moderate proportion of well-performing FGTS and payroll loans. Fitch considers PAN's control framework sufficiently sophisticated for its complex business model. Key elements include appropriate loan-to-value ratios for vehicle loans, pricing expertise and extensive risk management tools. Stable Asset-Quality: Fitch has upgraded PAN's asset quality assessment to 'b+' from 'b'. This reflects an impaired loan ratio that, although above its peer rating average, is well-managed within a challenging operating environment over the last two years and aligns with PAN's consumer finance focus. The core asset-quality metric of 9.5% at end June 2024 aligns closely with its historical average of 9.1% over the last four years. Fitch expects the ratio to remain near current levels despite increasing unsecured loans and credit card activity in PAN's portfolio. Resilient Profitability: Fitch has upgraded PAN's earning and profitability score to 'bb' from 'bb-'. This reflects PAN's sound consumer banking franchise, which supports revenue stability and healthy pre-impairment profit generation, enabling the bank to cope with loan losses during economic cycles. Fitch expects operating profit to risk-weighted assets (RWA) to remain close to the bank's four-year average at around 3.0% in the medium term. Strategic growth in higher-yielding products and improved liquidity management as legacy funding costs are replaced should positively impact margins and earnings, although this could be offset by potentially higher LICs. Adequate Capitalization: PAN's financial statements are fully consolidated into BTG's financial statements, with all regulatory requirements, including capitalization, reported on a consolidated basis to Brazil's Central Bank. As of 2Q24, the group's consolidated CET1 was 12.3%. PAN's stand-alone CET1 ratio at 14.4%, provided on a managerial basis, remains above peer averages, supporting the assessment. Stable Funding, Liquidity: A moderate share of PAN's funding base is comprised of wholesale funding. However, it is more diversified than rating peers and supported by PAN's established access domestic wholesale funding. PAN's loan to deposits ratio has expanded in recent years, reflecting its pronounced growth strategy. As of June 2024, the metric was 251%, compared to 198% on average during 2020 to 2023. Nevertheless, Fitch's assessment of PAN's funding profile incorporates ordinary support and ample funding coming from its parent, with increasing volumes of intercompany lines. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Negative actions on PAN's IDRs, SSR and National Ratings could occur if BTG's IDRs were downgraded or if PAN becomes less strategic for the group or significantly less integrated; - PAN's IDRs are also sensitive to a downgrade of Brazil's sovereign rating; - Negative actions on PAN's VR could occur with a material deterioration business and financial profile with a significant decrease in its TOI levels and asset quality deterioration that results in an operating profit to RWA ratios consistently below 1% and capital metrics below 10%; - PAN's VR is also sensitive to Fitch's downward revision on the OE of the Brazilian banks. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Positive actions on PAN's IDRs and SSR could occur if BTG's IDRs are upgraded; - An upgrade on the VR could occur in the medium-term by a substantial strengthening of the bank's business profile marked by TOI higher levels while improving its capitalization metrics. This is only if the bank maintains an operating profit/RWAs of around 3% with a controlled risk profile; - A higher sovereign rating for Brazil, resulting in a better assessment of Brazil's operating environment score, could also positively impact the VR. VR ADJUSTMENTS The VR was assigned in line with the implied VR. The Funding & Liquidity score of 'bb-' has been assigned above the implied 'b' score due to the following adjustment reason: Liquidity Access and Ordinary Support (positive). Public Ratings with Credit Linkage to other ratings PAN's SSR is driven by BTG's ratings. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Banco PAN S.A. LT IDR BB Affirmed BB ST IDR B Affirmed B LC LT IDR BB Affirmed BB LC ST IDR B Affirmed B Natl LT AAA(bra)Affirmed AAA(bra) Natl ST F1+(bra)Affirmed F1+(bra) Viability bb- Affirmed bb- Shareholder Support bb Affirmed bb JBS SA: Posts US$19.3 Billion for 2nd Quarter of 2024 ----------------------------------------------------- GuruFocus News reports that JBS S.A. discloses second quarter 2024 report results. Net Revenue: USD19.3 billion for the second quarter of 2024. Consolidated EBITDA Margin: 9.8%, an increase of 5 percentage points compared to Q2 2023. Adjusted EBITDA: USD1.9 billion. Free Cash Flow: USD1.1 billion. Net Income: USD329 million. Adjusted Net Profit: USD470 million, after adding back non-recurring effects. US Pork Margin: Increased from 4.4% to 11.1% year over year. Pilgrim's Pride EBITDA: USD782.8 million, with a margin of 17.2%. Seara EBITDA Margin: 17.4%. CapEx Expenditure: Approximately USD346 million, 63% for maintenance. Net Debt: USD 14.8 billion, a reduction of USD1.1 billion from the previous quarter. Leverage Ratio: Decreased from 3.66 times to 2.77 times in the second quarter. Interim Dividends: USD0.37 per share announced. Seara Net Revenue Growth: 6.7% year over year. JBS Brazil Net Revenue Growth: 5% higher than Q2 2023. JBS USA Pork Net Revenue: 22% higher than Q2 2023. Pilgrim's Pride Net Revenue Growth: 6% increase compared to Q2 2023. A full text copy of the press release is available at: https://tinyurl.com/4aeday9x About JBS SA JBS S.A. is a Brazilian company that is a large meat processing enterprise, producing factory processed beef, chicken, salmon, pork, and also selling by-products from the processing of these meats. It is headquartered in Sao Paulo. It was founded in 1953 in Anapolis, Goias. As reported in the Troubled Company Reporter-Latin America in August 2021, S&P Global Ratings revised the global scale outlook on JBS S.A. (JBS) and its fully owned subsidiary JBS USA Lux S.A. (JBS USA) to positive from stable and affirmed its 'BB+' issuer credit rating. The recovery expectations remain unchanged, and S&P affirmed the 'BB+' ratings on the senior unsecured notes and the 'BBB' ratings on the secured term loans. LOCALIZA RENT: Moody's Hikes CFR to Ba1 & Alters Outlook to Stable ------------------------------------------------------------------ Moody's Ratings upgraded Localiza Rent a Car S.A.'s (Localiza) corporate family rating to Ba1 from Ba2. The outlook changed to stable from positive. The action on Localiza follows the upgrade of Government of Brazil to Ba1 from Ba2 and maintenance of the positive outlook. The change in outlook to stable represents Moody's view that the Ba1 rating reflects Localiza's fundamental credit quality. The action on Brazil's rating reflects the material credit improvements which Moody's expect to continue, including a more robust growth performance than previously assessed and a growing track record of economic and fiscal reforms that lend resilience to the credit profile, although the credibility of Brazil's fiscal framework is still moderate, as reflected in a relatively high cost of debt. RATINGS RATIONALE Localiza's rating is supported by the company's stable operating performance and cash flow, and flexible business model, which helps it weather economic and auto market slowdowns. Localiza's leading market shares in both the car and fleet rental segments in Brazil, and its large scale also support the rating. The company has historically maintained robust profitability as a result of low fleet maintenance requirements, high utilization rates, attractive discounts from automobile manufacturers and expertise in the used-car sales market. The rating also reflects the company's adequate corporate governance practices and strong liquidity. Conversely, Localiza's rating is constrained by the capital-intensive nature of the car rental business and its lack of a significant international footprint, with most of its revenue generated in Brazil. The stable outlook reflects Moody's expectation that Localiza will continue to grow while maintaining solid profitability, adequate liquidity, leverage and cash generation, prudently managing expansion capex through economic cycles. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The rating could be upgraded if Localiza improves its geographic diversification, while maintaining strong credit metrics on a sustained basis. The ratings could be upgraded if pre-tax income margin is expected to remain above 15% and gross leverage approaches 2.75x. The rating could be downgraded if liquidity deteriorates or the car rental utilization rate declines below 70% , with gross debt/EBITDA exceeding 3.5x and pre-tax income remaining below 10% without prospects of an improvement; if Brazil's sovereign rating is downgraded. Founded in 1973 and headquartered in Belo Horizonte, Minas Gerais, Brazil, Localiza operates car rental and fleet rental businesses, and has a used-car sales business that facilitates renewal its fleet in Brazil. The company also franchises rental car operations in Brazil and in five countries in South America. As of June 2024, the company had a total fleet of 631,639 cars in Brazil and four other countries. The company is the market leader in Brazil in terms of car rental, with the largest number of car rental locations and presence in all main Brazilian airports. In the 12 months that ended June 2024, the company reported net revenue of BRL33.0 billion ($6.6 billion) and Moody's-adjusted EBITDA of BRL12.7 billion. The principal methodology used in this rating was Equipment and Transportation Rental published in February 2022. PRIO SA: To Acquire Stake in Campos Basin's Peregrino for $1.9B --------------------------------------------------------------- Rocky Teodoro at rigzone.com reports that Brazil's PRIO SA is acquiring Sinochem Petroleum Netherlands Cooperatief U.A., which indirectly holds a 40% interest in the Peregrino and Pitangola Fields, known as Peregrino, in the Campos Basin offshore Brazil. The sale and purchase agreement was signed with SPEP Energy Hong Kong Limited and Sinochem International Oil (Hong Kong) Company Limited, PRIO said in a news release, according to rigzone.com. The acquisition value is $1.92 billion, with $191.5 million paid upon signing the contract, plus $1.72 billion to be paid on closing, in addition to the net working capital and other usual price adjustments for this type of transaction, the report notes. Peregrino will now be owned by a consortium of PRIO and Equinor ASA, the operator of the asset with a 60 percent interest, the report relays. The transaction's completion is subject to the usual conditions precedent for this type of transaction, such as CADE approval and the waiver or lapse of Equinor's pre-emption rights within 30 days, according to the release, the report says. According to the reserve certification report by DeGolyer and MacNaughton, the Peregrino Field is estimated to have economically recoverable reserves and resources (1P+1C) of close to 338 million barrels from January 1, 2024, with a net volume of 135 million barrels for PRIO, with an abandonment date forecast for after 2037, the company said, the report notes. The report considers a long-term oil price of $62 per barrel, rigzone.com discloses. Upon closing of the acquisition, PRIO's production will increase by approximately 35 thousand barrels per day, rigzone.com says. Additionally, PRIO said it sees synergies in marketing the field's oil, as each offtake from Peregrino of approximately 650 thousand barrels can be combined with cargo loads from other fields operated by the company to optimize logistics, rigzone.com relays. All payments will be made using resources already available in PRIO's cash accounts, it said, rigzone.com notes. Discovered in 1994, the Peregrino Field had its first oil in 2011, the report recalls. Peregrino is located 52.8 miles (85 kilometers) off the coast, in the Campos Basin, within blocks BM-C-7 and BM-C-47, and 17.4 miles (28 kilometers) from the Polvo and Tubarão Martelo Cluster. The field's production is carried out through the FPSO Peregrino, which has an oil processing capacity of 110,000 barrels per day (bpd) and 300,000 bpd of water, the report notes. Additionally, it has three fixed platforms (Peregrino A, B, and C) where wells are connected and completed, and which have rigs that drill and intervene in the wells, the report discloses. Peregrino is currently in its second development phase, which includes the installation of the fixed platform Peregrino C and the drilling of new wells connected to platforms A and C, the report relays. Currently, it produces approximately 88,000 bpd through its 26 producing wells and six injection wells, according to the release, the report adds. As recently in the Troubled Company Reporter-Latin America, Moody's Ratings has affirmed PRIO S.A.'s ("PRIO") Ba3 corporate family rating and the Ba3 rating on Petrorio Luxembourg Trading S.a.r.l. ("PetroLux") $600 million backed senior secured notes due 2026. Simultaneously, Moody's changed the outlook on the issuers to positive from stable, following the announcement of the acquisition of a 40% stake in Peregrino, an oil and gas producing field in Brazil that will materially increase PRIO's production and reserves size, upon closing of the transaction. =========== M E X I C O =========== 397 CAP: S&P Withdraws 'B+' LongTerm Issuer Credit Rating --------------------------------------------------------- S&P Global Ratings withdrew its 'B+' long-term issuer credit rating on 397 CAP S.A. de C.V. SOFOM E.N.R. at the company's request. At the time of the withdrawal, the outlook was stable. =========== P A N A M A =========== EMPRESA DE TRANSMISION: Fitch Affirms 'BB+' IDRs, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Empresa de Transmision Electrica, S.A.'s (ETESA) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB+'. The Rating Outlook is Stable. Fitch has also affirmed ETESA's international long-term senior unsecured rating at 'BB+', national long-term rating at 'AAA(pan)'/Stable, and national long-term senior unsecured rating at 'AAA(pan)'. The ratings reflect ETESA's strong linkage with Panama's sovereign rating (BB+/Stable), due to the government's 100% ownership in the company and history of financial support. Fitch has lowered the Standalone Credit Profile (SCP) to 'bb' from 'bb+' due to the company's persistently elevated leverage profile (exceeding 8x at YE 2024) and financial structure, both of which are weaker than regional peers. However, ETESA maintains very low business risk as a natural monopoly with 100% ownership of electricity transmission in a transparent regulatory environment. Key Rating Drivers Government-Related Entity: Per its Government-Related Entities (GRE) Rating Criteria, Fitch views Panama's responsibility to support ETESA through its high level of decision making and oversight as well as precedents of support as very strong. The government's incentive to support the company to preserve a key public service is very strong and to avoid contagion risk is strong. These factors result in a GRE assessment score of 50, indicating that ETESA's rating is capped by and equalized with that of the sovereign and, in Fitch's view, that it is virtually certain that the sovereign would support the company during a period of stress. A change in the company's SCP within four notches of the sovereign rating would still result in an equalized rating with the sovereign. Predictable Cash Flows from Tariff: ETESA's revenue and cash flow generation is highly predictable and characteristic of transmission companies that do not experience volume or price risk. Maximum revenue is set every four years by regulators to provide a constant 7.3% rate of return based on the size of ETESA's asset base and level of annual capital expenditures (capex) as well as various inflators for operations and maintenance, administrative and depreciation costs, and a built-in profit margin. The transmission tariff is currently being reviewed for final approval, and will likely include higher maximum revenues based on increased capex and an increased rate of return to 8%. Cashflows are further stabilized by the fact that if an off-taking distribution company or generator fails to pay ETESA, payments are redistributed among remaining industry participants. Elevated Leverage: The company's gross leverage (total debt/EBITDA) profile has sustained around 6.5x historically but with some year-on-year variation depending on the company's maximum allowed revenue each year amid a stable debt profile. YE2024 leverage will increase to above 8x on account of a lower maximum allowed revenue planned this year and USD50 million in new debt, per the company's tariff schedule and level of planned investments, and Fitch expects it to decline to the 6.5x average range thereafter while adding incrementally new debt each year for high capex spending. Leverage of this magnitude is not uncommon for electricity transmission companies in the region given their stable and highly regulated cash flows. However, ETESA's leverage is higher than that of regional peers and should sustain at similar levels given the company's mostly long-dated maturities of 2032 (USD175 million) and 2049 (USD500 million). Through 2027 the company's EBITDA interest coverage is expected to average a solid 3.1x and the EBITDA margin will average a robust 80%, in line with regional peers. Negative Cash Flow Expected: Fitch expects FCF to be negative over the rating horizon, as has been the case historically, based on the company's elevated capex to address energy grid expansion and routine maintenance. Capex averaging USD127 million per year through 2027 will be funded with a combination of internally generated cash flows but primarily up to USD255 million new debt issued in separate tranches. Derivation Summary ETESA's ratings reflect its strong ties with the Panamanian government and linkage to the sovereign's rating. The company is 100% owned by the government and has a legal monopoly on electricity transmission services within the country. The government demonstrates its financial commitment to the company with its history of cash contribution to fund capex and supportive tariff settings and generally does not require ETESA to pay dividends. ETESA's 'bb' SCP reflects the company's low business risk profile and stable cash flows, both of which are characteristic of electricity transmission companies. ETESA's total debt to operating EBITDA ratio is expected to be 8.2x in 2024, higher than that of Chilean company Transelec S.A. (BBB/Stable) at 6.3x and Peruvian company Consorcio Transmantaro S.A. (CTM; BBB/Stable) at 4.7x. Key Assumptions Fitch's Key Assumptions Within Its Rating Case for the Issuer Include - 30-year Treasury rate will be 3.9% from 2024-2027; - Fourth transmission line will be built and operated by a third party and enter into service in 2025; - 30% annual tax rate; - Debt issuances priced at interest rates of between 8.5% and 9.0%; - Negative free cash flow in every forecast year; - Year-end cash balances averaging USD 63 million annually; - Service interruption payments (Generacion Obligada) stabilized at USD3 million per year; - No dividends paid to government through the rating horizon; - Average annual capex of USD127 million through the rating horizon. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Due to the company's close relationship with the Panamanian government, a positive sovereign rating action could result in a positive action for the company's rating; - An upgrade of ETESA's SCP could result if the company's structural EBITDA leverage sustains at 5.5x or below. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Due to the company's close relationship with the Panamanian government, a negative sovereign rating action could put downward pressure on the company's rating; - A downgrade of ETESA's SCP could result if the company's structural EBITDA leverage sustains at 7.5x or above. Liquidity and Debt Structure Adequate Liquidity: ETESA reported 2Q24 cash balance of USD68 million. The company has a comfortable debt maturity profile, with its next major debt maturity of USD75 million due in 2026. Issuer Profile Empresa de Transmision Electrica, S.A. (ETESA) is a 100% state-owned electricity transmission company with a monopoly on the transmission, dispatch, control and demand planning for electricity generation in Panama. Public Ratings with Credit Linkage to other ratings ETESA's rating is linked to the Panamanian sovereign rating. 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 Empresa de Transmision Electrica S.A. has an ESG Relevance Score of '4' for Governance Structure due to its nature as a majority government-owned entity and the inherent governance risk that arises with a dominant state shareholder, which has a negative 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 Prior ----------- ------ ----- Empresa de Transmision Electrica S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(pan)Affirmed AAA(pan) senior unsecured LT BB+ Affirmed BB+ senior unsecured Natl LT AAA(pan)Affirmed AAA(pan) ===================== P U E R T O R I C O ===================== HIJOLE FOODS: Seeks to Sell All Assets to IBH Corp. --------------------------------------------------- Hijole Foods Bistro Corp. asks the U.S. Bankruptcy Court for the District of Puerto Rico to grant its request to sell its property, free and clear of any interests, liens, claims and encumbrances. The Debtor says the assets up for sale has a liquidation value of less than $11,500 and include coffee machine with the value of $500, perishable food, and beverage with the value of $3,500. IBH Corporation is offering $20,000 for the Debtor's assets and for the right to continue using the name Hijole and assume the lease contract. The Debtor says the "Hijole" name is not part of its assets. After the sale is completed, the Debtor will cease to continue or operate any future businesses and will surrender the remaining balance to McKenzie Capital LLC, the Debtor's only secured creditor and owner of all cash collateral, after paying administrative expenses and U.S. Trustee's fees. In the event that the case will be converted into a Chapter 7 liquidation, only Mckenzie Capital will collect any of the Debtor's proceeds based on their registered cash collateral agreement. About Hijole Foods Bistro, Corp. Hijole Foods Bistro, Corp. sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 24-0015) on Jan. 19, 2024, listing $100,001 to $500,000 in assets and $500,001 to $1 million in liabilities. Juan C. Bigas Valedon, Esq., at Juan C. Bigas Law Office, represents the Debtor as counsel. PUERTO RICO: Cobra Acquisitions Receives $150MM Initial Settlement ------------------------------------------------------------------ Cobra Acquisitions LLC, a wholly owned subsidiary of Mammoth Energy Services, Inc. announced on Oct. 1, 2024, the receipt of $150 million from the Commonwealth of Puerto Rico in accordance with the Settlement Agreement with the Puerto Rico Electric Power Authority. Arty Straehla, Chief Executive Officer, commented, "We are happy to have received the initial $150 million in settlement proceeds. With this first installment, we intend to extinguish all outstanding obligations under our term credit facility on or before October 16, 2024 and we expect the remaining amount of approximately $98.8 million, along with the $38.4 million still owed to us through the remaining installments, will have a transformative impact on our business going forward. We now maintain a significant cash position on our balance sheet, and we will take a meticulous and strategic approach when deploying this capital. We intend to pursue accretive, value-enhancing opportunities as we strive to strengthen Mammoth for the future." Under the terms of the Settlement Agreement, which was approved by Judge Laura Taylor Swain, Cobra will receive total settlement proceeds of $188.4 million. Of the $38.4 million still owed to Cobra, $18.4 million relates to funds PREPA has received from the Federal Emergency Management Agency ("FEMA") but are currently withholding. These funds are to be paid out according to the terms of the Settlement Agreement, which can be found below. Settlement Agreement Terms The proceeds of the Settlement Agreement will be paid to Cobra through three installments: (i) $150 million on the later of (A) ten business days following approval of the Settlement Agreement by the Title III Court and (B) August 31, 2024; (ii) $20 million within seven days following the effective date of PREPA's plan of adjustment; and (iii) $18.4 million in the Withheld FEMA Funds within either (A) ten business days after the deadline for appealing the entry of the settlement order by the Title III Court under the applicable bankruptcy rules of procedure if no such appeal is filed, or (B) if the provisions of the settlement order allowing PREPA to release the Withheld FEMA Funds to Cobra without retaining any liability to the Specified Municipalities are appealed by the Specified Municipalities, within ten business days of the filing of the notice of such appeal. About Mammoth Energy Services, Inc. Mammoth is an integrated, growth-oriented energy services company focused on the providing products and services to enable the exploration and development of North American onshore unconventional oil and natural gas reserves as well as the construction and repair of the electric grid for private utilities, public investor-owned utilities and co-operative utilities through its infrastructure services businesses. Mammoth's suite of services and products include: well completion services, infrastructure services, natural sand and proppant services, drilling services and other energy services. For more information, please visit www.mammothenergy.com. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States. The chief of state is the President of the United States of America. The head of government is an elected Governor. There are two legislative chambers: the House of Representatives, 51 seats, and the Senate, 27 seats. In 2016, the U.S. Congress passed PROMESA, which, among other things, created the Financial Oversight and Management Board and imposed an automatic stay on creditor lawsuits against the government, which expired May 1, 2017. The members of the oversight board are: (i) Andrew G. Biggs, (ii) Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J. Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii) David A. Skeel Jr. On May 3, 2017, the Commonwealth of Puerto Rico filed a petition for relief under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). The case is pending in the United States District Court for the District of Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's PROMESA petition is available at http://bankrupt.com/misc/17-01578-00001.pdf On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation (COFINA) commenced a case under Title III of PROMESA (D.P.R. Case No. 17-01599). Joint administration has been sought for the Title III cases. On May 21, 2017, two more agencies -- Employees Retirement System of the Government of the Commonwealth of Puerto Rico and Puerto Rico Highways and Transportation Authority (Case Nos. 17-01685 and 17-01686) -- commenced Title III cases. U.S. Chief Justice John Roberts named U.S. District Judge Laura Taylor Swain to preside over the Title III cases. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq., at O'Neill & Borges LLC are onboard as attorneys. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains the case Website https://cases.primeclerk.com/puertorico Jones Day is serving as counsel to certain ERS bondholders. Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General Obligation Bondholders. PUERTO RICO: Cobra Acquisitions Secures $150M Payment From PREPA ---------------------------------------------------------------- Sebastian Tong of Bloomberg News reports that Mammoth Energy unit Cobra Acquisitions has received $150 million from Puerto Rico as part of a settlement agreement with the Puerto Rico Electric Power Authority. Mammoth to extinguish all outstanding obligations under its term credit facility on or before October 16, 2024. The Company expects remaining $98.8 million, along with the $38.4 million still owed to it through the remaining installments to have a transformative impact on its business. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States. The chief of state is the President of the United States of America. The head of government is an elected Governor. There are two legislative chambers: the House of Representatives, 51 seats, and the Senate, 27 seats. In 2016, the U.S. Congress passed PROMESA, which, among other things, created the Financial Oversight and Management Board and imposed an automatic stay on creditor lawsuits against the government, which expired May 1, 2017. The members of the oversight board are: (i) Andrew G. Biggs, (ii) Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J. Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii) David A. Skeel Jr. On May 3, 2017, the Commonwealth of Puerto Rico filed a petition for relief under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). The case is pending in the United States District Court for the District of Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's PROMESA petition is available at http://bankrupt.com/misc/17-01578-00001.pdf On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation (COFINA) commenced a case under Title III of PROMESA (D.P.R. Case No. 17-01599). Joint administration has been sought for the Title III cases. On May 21, 2017, two more agencies -- Employees Retirement System of the Government of the Commonwealth of Puerto Rico and Puerto Rico Highways and Transportation Authority (Case Nos. 17-01685 and 17-01686) -- commenced Title III cases. U.S. Chief Justice John Roberts named U.S. District Judge Laura Taylor Swain to preside over the Title III cases. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq., at O'Neill & Borges LLC are onboard as attorneys. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains the case Website https://cases.primeclerk.com/puertorico Jones Day is serving as counsel to certain ERS bondholders. Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General Obligation Bondholders. ================= V E N E Z U E L A ================= CITGO PETROLEUM: Venezuela Bondholders Pursue Parallel Claims ------------------------------------------------------------- Marianna Parraga at Reuters reports that holders of billions of dollars in Venezuelan bonds and notes have emerged as last-minute protagonists in a U.S. court case set to decide the ownership of oil refiner Citgo Petroleum, threatening to derail an auction to compensate more than a dozen companies for unpaid debts and expropriations by the country. At least two groups of holders have resorted to other U.S. courts to enforce their claims, pursuing the same Citgo assets that industrial conglomerates, mining and oil firms have been pursuing for years, according to Reuters. The court cases, designed to circumvent the court's priority in payouts, have added new delays to a 7-year-long case and increased uncertainty over which company best positioned to take over the seventh-largest U.S. refiner, the report notes. The new lawsuits last month motivated Elliott Investment Management affiliate Amber Energy to impose conditions to its $7.3 billion offer for Citgo's parent, PDV Holding, making it a highly uncertain bid, the report relays. PDV Holding's only asset is Citgo's 807,000-barrel-per-day refining network and linked facilities, the report says. If the Delaware court handling the auction cannot block the rival claims, the Elliott affiliate's offer can be withdrawn in days, throwing the auction into chaos, the report notes. Who Is First? Holders led by Gramercy Distressed Opportunity Fund want to have the Delaware court prioritize their payments, which would cut the potential proceeds from the share auction available to other creditors, leaving a large number of them empty-handed, the report discloses. Creditors including oil giant ConocoPhillips (COP.N), Gold Reserve (GRZ.V), and miner Crystallex, which brought the original case that found Citgo's parent liable for Venezuela's debts, have opposed allowing the bondholders to jump the line, the report says. If the Gramercy claims are not barred, they could dash the court's carefully constructed 'first come, first serve' priority order that begins with Crystallex, Tidewater (TDW.N), ConocoPhillips, O-I Glass (OI.N), and Huntington Ingalls (HII.N), the report adds. As recently in the Troubled Company Reporter-Latin America, Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of CITGO Petroleum Corp. (CITGO, or Opco) at 'B' with a Stable Outlook and the IDR of CITGO Holding, Inc. (Holdco) at 'CCC+'. Fitch also affirmed Opco's existing senior secured notes and industrial revenue bonds at 'BB'/'RR1'. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *