/raid1/www/Hosts/bankrupt/TCRLA_Public/241017.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, October 17, 2024, Vol. 25, No. 209
Headlines
A R G E N T I N A
ARGENTINA: Isn't Ready to Lift Currency Controls, Says Milei
ARGENTINA: Pimco, Barings Ask How Soon Country Can Sell Bonds
BANCO DE LA NACION: Wants to Sell Debt After 30-Year Hiatus
NABORS: Oil Workers Strike After Death in Drilling Field
B R A Z I L
BANRISUL: Fitch Affirms 'BB-' LongTerm IDR, Off Watch Negative
BRAZIL: Inflation Speeds Up After Electricity Prices Surge
CEMIG: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Tax Reform Could Do Harm, Asonahores Warns
DOMINICAN REPUBLIC: Vicente Dismisses Concerns on Tax Reform Impact
EGE HAINA: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Positive
J A M A I C A
STOCKS AND SECURITIES: Creditors' Meeting Set For October 25
P U E R T O R I C O
AMERICA-CV: Court Dismisses Clawback Suit Against Mediaset
PUERTO RICO: Judge Extends PREPA's Litigation Stay in Bankruptcy
S U R I N A M E
SURINAME: IDB Okays US$135 CCLIP for Indigenous Communities Access
SURINAME: IDB Okays US$40MM to Improve Social Protection System
T R I N I D A D A N D T O B A G O
CABLE & WIRELESS: $1BB Upsized Notes No Impact on Moody's Ba3 CFR
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Isn't Ready to Lift Currency Controls, Says Milei
------------------------------------------------------------
Buenos Aires Times reports that President Javier Milei says
Argentina isn't ready to lift its strict currency controls and that
there is no set date for their removal.
The head of state made the remarks during an interview with the
Financial Times. He said imposing a schedule would be to act as a
"central planner," which goes against his ideology, according to
Buenos Aires Times.
"We are not communists, we are libertarians," Milei told the FT.
"There is a philosophical question behind this, which is that I
cannot set dates because I don't think like a central planner. We
think in terms of a regime of freedom," he added.
Milei, 53, indicated that inflation would have to fall and other
economic indicators would have to improve first, Buenos Aires Times
relays.
He also made it clear that the lifting to foreign exchange controls
- known locally as the 'cepo' - were not contingent on negotiations
with the International Monetary Fund (IMF), with which Argentina
has a US$44-billion loan program, Buenos Aires Times notes.
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: Pimco, Barings Ask How Soon Country Can Sell Bonds
-------------------------------------------------------------
Kevin Simauchi at Bloomberg News reports that Argentina's Economy
Minister Luis Caputo told investors during a presentation in
JPMorgan Chase & Co's New York offices last month that the
government expects to sell bonds abroad again by January 2026.
For asset managers at Pacific Investment Management Co and Barings,
the country's plan to sell bonds is a long shot, according to
Bloomberg News.
Asset managers say that Argentina as a serial defaulter needs to
clear significant hurdles before it can even entertain the idea of
a return to the market, Bloomberg News relays. Among those are a
deal with the International Monetary Fund (IMF) that includes fresh
cash, a steep slowdown in inflation and a sustainable, balanced
budget, Bloomberg News notes. For now, interest rates are far too
high to consider a sale, Bloomberg News says.
"It's impossible to make that projection with yields close to 20
percent," said Yacov Arnopolin, senior emerging-markets portfolio
manager at Pimco, Bloomberg News discloses. Some Argentine
securities yield around 20 percent or more when measuring
yield-to-worst, a metric that assumes several scenarios but not a
default, according to data compiled by Bloomberg.
"We've seen very few cases of countries accessing capital markets
with yields north of 10 percent. They would need to deliver
everything: fiscal, inflation, IMF deal," Arnopolin said in an
interview with Bloomberg News.
Investors demand about 1,204 basis points of extra yield to hold
Argentine sovereign bonds over comparable US Treasuries, according
to a JPMorgan index that's a common indicator for country risk,
Bloomberg News relays. That gauge, while at its lowest level since
April, remains far above its regional peers, Bloomberg News says.
"A lot will need to happen between now and then," said Ricardo
Adrogue, head of global sovereign debt and currencies at Barings,
referring to a return to capital markets in 2026, Bloomberg News
discloses. "But there are things that can be done and the core of
it is the government continuing to meet the zero deficit goal," he
added.
One of the first things President Javier Milei needs to do is
secure a sizeable loan from the IMF, to which Argentina already
owes US$44 billion, Bloomberg News says. The Washington-based
lender is currently reviewing whether Argentine officials are
compliant with their end-of-September fiscal and reserve targets, a
spokesperson said, Bloomberg News relays.
Building a buffer of foreign reserves is necessary for the country
to lift capital controls, something that Milei had said he would
abolish, but has so far refused to do — and which Baring's
Adrogue says he should continue to do, Bloomberg News notes.
As Milei's shock therapy ripples through the economy, Argentina's
hard-currency debt handed investors some 58 percent in returns
since the start of the year, Bloomberg News notes. Bonds are at
their all-time highs, according to pricing data compiled by
Bloomberg. But the rally has cooled after its big start, Bloomberg
News relays. And firms like Morgan Stanley see an opening to buy
up more debt, Bloomberg News says.
The Wall Street giant said in a note that despite missing out on
the latest climb in bond prices, it was moving Argentina back into
its basket of preferred credits, citing expectations that officials
there unify FX markets before year-end, stamp out inflation and
keep posting budget surpluses, Bloomberg News notes.
But the optimism isn't universal, Bloomberg News relays. Money
managers like Pimco's Arnopolin still see a tough path ahead for
the notes, Bloomberg News notes.
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 DE LA NACION: Wants to Sell Debt After 30-Year Hiatus
-----------------------------------------------------------
Buenos Aires Times reports that the new head of Argentina's largest
bank is embarking on a Javier Milei-style overhaul of the
institution and planning its return to international capital
markets for the first time in 30 years.
Longtime banking executive Daniel Tillard was appointed by Milei
last December to transform Banco de la Nacion, the state-run bank
that has two-and-a-half times the assets of its next competitor in
Argentina, Banco Galicia, according to Buenos Aires Times. They're
wasting no time so far, the report notes.
In the first year, Tillard is cutting 1,000 jobs, or six percent of
the bank's total workforce, a part of Milei's broader spending
cuts, the report relays.
While Tillard's team is cleaning up a balance sheet laden with bad
loans, the Executive is considering adopting a public-private
banking model like Banco do Brasil, in which the federal government
there owns half the institution, the report notes.
These are all steps toward a return to markets - and a microcosm of
Argentina's own bid to attract international investment after a
sovereign debt restructuring in 2020, the report discloses.
"We are going to do what is possible under the circumstances.
First, a debt issuance in the local capital market; and then, an
international one," Tillard, 67, told Bloomberg News, declining to
detail when or how much debt he would seek to sell or at what
interest rate, the report notes. "Our aspiration is to imitate the
Banco do Brasil model," he added.
Tillard and Milei had to pare back some ambitions earlier this year
when opposition lawmakers forced the administration to remove Banco
Nacion from a list of state-run companies that would be privatised
as part of a larger package of reforms, the report relays.
Now, the government no longer speaks explicitly of privatisation,
private equity or an initial public offering, but of seeking
financing through debt issuance, the report notes.
Nevertheless, the bank is still an active pawn on Milei's
chessboard. Economy Minister Luis Caputo announced that the
government was closing Banco Nacion branches in municipalities that
imposed "unjustified" taxes, adding that Tillard would carry out
the order, the report says.
Banco Nacion last issued bonds in international markets in early
1993, the report recalls. The issuance was for US$150 million over
three years with a coupon of nine percent per annum, the report
says.
Founded in 1891, the bank is part of Argentina's fabric and
volatile identity: Its titanic headquarters sit right across from
the Casa Rosada presidential palace in Buenos Aires - an ode to the
country's ambitions a century ago.
The solvency of the state-owned bank has been threatened throughout
its 133 years by the mismanagement of military, populist and
conservative governments, the report notes. The most recent blow
was from agricultural company Vicentin, which defaulted on more
than US$300 million in debt with Banco Nacion in 2019, the report
recalls.
Tillard boasts of having implemented a similar transformation in
his eight years as president of BanCor, the state-run bank of
Cordoba Province, the report says. On his watch, BanCor reduced
its number of employees to 2,000 from 2,700, and tripled the number
of savings accounts, according to cCentral Bank data, the report
relays. The return on assets increased to 2.7 percent from 1.9
percent in this period, the report says.
Banco Nacion invests half as much as its competitors in technology
development, and Tillard wants it to be better prepared as credit
lending is growing at a double-digit pace, the report relays.
Domestic banks started offering home mortgages in recent months for
the first time in six years, the report relays.
"We have to go to the capital market for additional financing to
deepen our lending" and close the technology gap with competitors,
Tillard said, the report relates.
Tillard says his IPO hopes aren't done for good, the report notes.
"It is feasible to do it, but it depends on congressional approval.
If it needs to be done, it will be done at some point," he added.
He tapped Argentine law firm Liendo & Asociados seven months ago to
revamp Banco Nacion and convert it into a limited partnership, a
type of organisation that limits shareholders' liability to the
capital they contributed, the report discloses. The new project
seeks to modify the company's bylaws, improve the organisation's
deficiencies and avoid mistakes in the loans it grants, among other
things, the report says.
Still, Tillard's ultimate goal looks like its Brazilian
counterpart, the report notes. Banco do Brasil is a
privately-owned, publicly-traded corporation that's controlled by
the federal government, which holds approximately 50 percent of the
shares. It's Latin America's second-largest bank, with 3,980
branches in its country and nearly 20 subsidiaries in 15
countries.
NABORS: Oil Workers Strike After Death in Drilling Field
--------------------------------------------------------
Buenos Aires Times reports that unionised oil workers in the south
of Argentina have announced a "total stoppage of activities" for 24
hours following the death of an employee.
The strike will affect drilling rigs across Vaca Muerta site, the
massive oil and gas field in northern Patagonia, according to
Buenos Aires Times.
Driller Vista Energy said in a statement that Miguel Fernandez, 40,
had died after an accident that took place while he was carrying
out routine tasks at the F19 drilling rig in Bajada del Palo Oeste
field in Neuquen, the report relays.
The company explained that emergency protocols were immediately
activated and that Fernandez, an employee with oil and gas driller
Nabors, was taken to a health centre 80 kilometres away in the town
of Catriel, Rio Negro, where he later died, the report notes.
An autopsy is expected to be carried out in the next few hours to
determine the cause of death, the report discloses.
"According to provisional information, the Vista company informed
the 13th police station in El Chanar that at 7.30pm, a worker on
duty had an accident: a large pipe fell on him, causing fractures
in his legs," said a statement issued by the Public Prosecutor's
Office in Neuquen, the report discloses.
"At that moment it was indicated that the injured was conscious,
onboard an ambulance to Catriel," the nearest available site for
medical care," it concluded, the report says.
Vista said it had initiated an internal investigation into the
accident involving Fernandez, who lived in Rincon de los Sauces,
the report relays.
"The company expresses its condolences to his co-workers and,
especially, to his family," the firm said in a statement obtained
by the news agency.
Minutes after the news broke, workers grouped under the Sindicato
de Petroleo y Gas Privado de Rio Negro, Neuquen y La Pampa
("Private Oil and Gas Union of Rio Negro, Neuquen and La Pampa")
banner announced a "total stoppage of activities," the report
discloses.
Noting that this was the fourth death so far this year, the union
called for "no more deaths in the oil industry, the report says.
The group criticised the "lack of investment in safety" at rigs,
the report notes.
"There are a lot of injured and mutilated comrades," said Marcelo
Rucci, the union's secretary general, the report relays.
"We are not prepared to give up our lives for production. We know
how these investigations always end. The workers are always blamed
when we have evidence that there is a lack of safety," he told
local media, the report notes.
There will be no activity at the site, though the union may seek to
extend the strike, the report says.
The Vaca Muerta formation, a huge sweep of Patagonian wilderness
that traverses two provinces, sits on the world's second-largest
reserve of shale gas and its fourth-largest oil reserves, the
report adds.
===========
B R A Z I L
===========
BANRISUL: Fitch Affirms 'BB-' LongTerm IDR, Off Watch Negative
--------------------------------------------------------------
Fitch Ratings has removed the Rating Watch Negative (RWN) for all
ratings of Banco do Estado do Rio Grande do Sul S.A. (Banrisul)
placed on May 13, 2024. Fitch has simultaneously affirmed
Banrisul's Long-Term (LT) Foreign Currency and Local Currency
Issuer Default Ratings (IDRs) at 'BB- ' and LT National Rating at
'AA+(bra)'. The Rating Outlook on the LT IDRs and National Rating
is Stable.
Fitch has in addition affirmed Banrisul's Viability Rating (VR) at
'bb- and Shareholder Support Rating (SSR) at 'bb-'. ' and
Banrisul´s Short-Term (ST) Foreign Currency and Local Currency
IDRs at 'B' and ST National Ratings at 'F1+(bra)'.
The removal of the RWN and affirmation of Banrisul's ratings
reflect improved visibility of the bank's financial profile
following the challenges posed by the natural disaster in much of
Rio Grande do Sul at the beginning of May 2024. Fitch believes the
impacts are limited and will not substantially affect the bank's
asset quality, profitability, capitalization, funding, and
liquidity ratios over the next rating cycle.
As of June 2024, roughly 11% of Banrisul's total credit portfolio
was in municipalities that have declared a state of public calamity
or emergency. Of this, 32% is in agribusiness, most of which is
eligible for government renegotiation/extension plans, and 34% is
in payroll-deductible loans and real estate credits with strong
collateral and guarantees. The remainder of the portfolio is
focused on individuals and SMEs. Fitch believes that even in a
stressed scenario, the potential negative impact would be
manageable without affecting the bank's ratings.
Fitch also notes that the extensive federal government support for
Rio Grande do Sul enhances the visibility of potential subnational
support for the bank. Fitch believes that the subnational would
have a high propensity, although limited capacity, to support the
bank if necessary. Banrisul is strategically important for Rio
Grande do Sul, as demonstrated during the flood events, where it
played a crucial social and developmental role by offering
state-subsidized credit lines to help SMEs during this challenging
period.
Key Rating Drivers
VR and SSR aligned: Banrisul's IDRs are driven by its intrinsic
strength, even though its VR and SSR are aligned. The VR reflects
the stability of the bank's business profile and its moderate risk
appetite, with risk controls comparable to major banks. Banrisul
operates as a commercial bank, serving both companies and
individuals, and maintains an adequate financial profile. As a
subnational government-owned entity, Banrisul focuses on providing
financial services and credit offerings to state and municipal
workers, as well as supporting companies investing in the State of
Rio Grande do Sul. The National Ratings follow Fitch's assessment
of the credit quality of the State of Rio Grande do Sul.
ESG - Exposure to Environmental Impacts: Banrisul has exposure to
impact of extreme weather events on assets and/or operations and
corresponding risk appetite & management; catastrophe risk; credit
concentrations which, in combination with other factors, impacts
the rating. Banrisul has a resilient and stable business profile.
However, there is regional concentration, with over 90% of its
credit originating in the south, mainly from the state of Rio
Grande do Sul. The ratings also reflect adequate management quality
and stable strategies.
High Influenced by Business Profile: Banrisul`s VR has been
affirmed at 'bb-', now above the implied 'b+'. This reflects
Fitch's belief that Banrisul's business profile should, over the
medium to long-term, have a positive on the bank's financial
metrics beyond that currently captured in the financial scores.
Recent adjustments in the financial profile, the downgrade of
asset-quality to 'b' from 'b+', underline ongoing sensitivities
related to the impact of the May event and highlight downside risks
to this base case.
At the same time, the business profile assessment gained importance
in the overall VR to highlight the bank's regional strength as a
critical factor supporting its current rating and mitigating the
potential impact of asset quality challenges. The Outlooks for
Capitalization & Leverage and Funding & Liquidity were revised to
Stable from Negative. The Outlook for Earnings & Profitability were
remained Negative.
Fitch considers Banrisul's strong regional franchise and
diversified business model to be solid. In the first half of 2024,
the bank's total operating income (TOI) increased by 10.0% compared
to the previous year. The average for 2023-2020 was USD 1.231
million. Banrisul is the 13th largest in assets within the national
financial system, with a market share of about 20% in credit and
42% in time deposits in Rio Grande do Sul, demonstrating a strong
regional franchise.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A sustained decline in the operating profits/risk-weighted assets
ratio average below 1.5% and increase in the four-year average of
the impaired loan ratio above 10.0%;
- A sustained deterioration in the bank's common equity Tier 1
(CET1) ratio below 12%;
- Any negative change in Fitch's view of the credit of the State of
Rio Grande do Sul's operating and economic situation, given the
bank's strong presence and concentration in this state;
- A downgrade of the Sovereign Rating of Brazil would result in a
similar action on the bank's Long-Term IDRs;
- If the VR were to be downgraded from the current level, then the
downside on the IDRs would be limited to the level indicated by the
bank's Shareholder Support Ratings (SSR), currently at 'bb-' given
the potential support from the state of Rio Grande do Sul.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Although not likely given the sovereign's Stable Outlook and
current fiscal and economic issues, an increase in the SSR above
the bank's VR could lead to a positive rating action;
- Given Banrisul's current credit profile, the bank's VR is
unlikely to be upgraded if the sovereign's ratings are upgraded.
However, over the medium-term, an improvement in the operating
environment combined with a sustained reduction in the bank's
impaired loan ratio below 4.5% and increase in the bank's CET1
ratio above 16%, could be positive for creditworthiness.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Subordinated Debt
Fitch affirmed the rating on Banrisul's subordinated notes, which
are eligible as Tier 2 capital and due in 2031, at 'B'. These
subordinated notes are rated two notches below its VR of 'bb-'. The
notching is driven by the notes' high expected loss severity. No
notching for non-performance is applied because coupons are not
deferrable and the write-off trigger is close to the point of
non-viability. As a result, Fitch believes that the incremental
non-performance risk is not material from a rating perspective.
SSR
Banrisul's 'bb-' SSR reflects a moderate likelihood of support from
its controlling shareholder based on its view of the state of Rio
Grande do Sul's credit profile. Fitch believes that the state would
have a high propensity but limited capacity to support the bank if
needed. Banrisul is strategically important for Rio Grande do Sul,
acting as its main tax collection agent, making transfers to
municipalities and providing cash management services. In addition,
public entities, to which the bank provides services and grants
credit to suppliers, as well as payroll deductible credits to
public employees, make up an important portion of Banrisul's
business.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The subordinated debt rating will be downgraded if Banrisul's VR
is downgraded;
- The SSR and National Ratings is potentially sensitive to any
negative change in Fitch's view of the State of Rio Grande do Sul's
propensity or ability to provide support to the bank should the
need arises.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The subordinated debt rating will be upgraded if Banrisul's VR is
upgraded;
- The SSR and National Ratings is potentially sensitive to any
positive change in Fitch's view of the State of Rio Grande do Sul's
propensity or ability to provide support to the bank should the
need arise.
VR ADJUSTMENTS
The VR of 'bb-' has been assigned above the 'b+' implied VR due to
the following adjustment reasons: Business Profile (positive);
The Earnings and Profitability score of 'b+' has been assigned
below the 'bb' category implied score due to the following
adjustment reason: Earnings Stability (negative).
Public Ratings with Credit Linkage to other ratings
Banrisul's SSR and National Ratings are driven by a Credit
Assessment of Estado do Rio Grande do Sul.
ESG Considerations
Banco do Estado do Rio Grande do Sul S.A. has an ESG Relevance
Score of '4' (which was revised from '5') for Exposure to
Environmental Impacts due to Banrisul's exposure to the state of
Rio Grande do Sul, which recently has been sensitive to
catastrophic risks from flooding, 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 Recovery Prior
----------- ------ -------- -----
Banco do Estado
do Rio Grande
do Sul 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 AA+(bra)Affirmed AA+(bra)
Natl ST F1+(bra)Affirmed F1+(bra)
Viability bb- Affirmed bb-
Shareholder Support bb- Affirmed bb-
Subordinated LT B Affirmed B
BRAZIL: Inflation Speeds Up After Electricity Prices Surge
----------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that Brazil's
annual inflation sped up roughly in line with estimates in
September as a historic drought pressured electricity and food
prices in Latin America's largest economy.
Official data released showed prices rose 4.42% from a year
earlier, just below the 4.44% median estimate of economists
surveyed Bloomberg, according to globalinsolvency.com.
On the month, they increased 0.44%, the report notes. Policymakers
are raising interest rates as price pressures build and investors
grow uneasy about the stewardship of Brazil's economy, the report
relays.
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.
CEMIG: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
------------------------------------------------------
Fitch Ratings has affirmed Companhia Energetica de Minas Gerais'
(Cemig) and its subsidiaries Cemig Distribuicao S.A.'s (Cemig D)
and Cemig Geracao e Transmissao S.A.'s (Cemig GT) Local Currency
and Foreign Currency Issuer Default Ratings (IDRs) at 'BB'. Fitch
has at the same time upgraded the National Scale Ratings for the
three entities to 'AAA(bra)' from 'AA+(bra)'. The Rating Outlook is
Stable.
Cemig's ratings reflect the group's solid and diversified asset
base, with positive operating performance and robust operational
cash generation in the Brazilian power sector. The upgrade of the
national scale ratings reflects Fitch's view that Cemig has
strengthened its credit profile within its 'BB' IDR level. The
group benefited from stronger EBITDA coming from the power
distribution segment and asset sales to improve liquidity to pay
the Eurobonds maturing in December 2024 and to prepare its capital
structure to support a high capex program.
The group's current low leverage metrics should peak only in 2027
and the proved ample access to funding supports capex and
refinancing needs. Fitch equalizes Cemig and its subsidiaries' IDRs
mainly due to strong legal ties.
Key Rating Drivers
Robust Business Profile: Cemig group's IDRs benefit from its
diversified and robust asset base and operation in different
segments within the power sector, which dilute business and
regulatory risks. The group is one of Brazil's largest integrated
electric utilities, distributing electricity to 9.3 million users
and operating 4.5GW of generation installed capacity and 5,060km of
transmission lines. Cemig's distribution segment should represent
52% of consolidated EBITDA in 2024, with generation and
transmission corresponding to 36% and natural gas distribution to
13%.
Positive Performance in Distribution: Cemig D has been able to
drive strong performance despite an unfavorable trend in energy
volumes distributed in its concession area - a lower growth of 2.4%
compared to the national growth of 4.2% in 2023. Company's cash
generation benefited from the tariff review concluded in May 2023,
which increased regulatory EBITDA by 12% (+BRL349 million) to
BRL3.2 billion.
Fitch's base case scenario incorporates punctual higher demand
increase of 3.2% in 2024, benefited by strong temperature in the
country during the 1H24 and modest average annual growth of 1.5%
during 2025-2028 period. The company should generate EBITDA of
BRL3.6 billion in 2024 and BRL3.9 billion in 2025, remaining above
the regulatory level.
Favorable Generation Segment: Performance in generation and
transmission segment at Cemig GT benefits its consolidated credit
profile from the high revenues' predictability. In energy
generation, Cemig GT is fully contracted until 2026 (average prices
of BRL222/MWh) and in energy transmission revenues are based on
asset availability rather than volume transported. Fitch projects
average annual EBITDA of BRL2.4 billion in 2024-2026. Fitch's base
case scenario already incorporates that two generation concessions
representing 51% of its contracted energy will expire in 2027 and
the group will lose some cash generation.
Prepared Capital Structure: Cemig's consolidated adjusted net
leverage should moderately increase over the next four years, and
peak at 3.8x in 2027, considering its robust capex plan that will
partially be financed with debt. The ratio is expected to remain
consistent with the IDR 'BB', benefited by the current conservative
level of 1.4x in LTM ended in June 2024. Fitch forecasts adjusted
net leverage to increase to 1.6x in 2024, 2.2x in 2025 and 3.2x in
2026, returning to 3.0x level and below from 2028 on.
Consolidated net leverage, excluding off-balance-sheet from
guarantees to nonconsolidated investments, should remain below 3.5x
during the investment cycle. Fitch's adjusted debt for Cemig
includes guarantees of BRL3.3 billion to nonconsolidated companies
in June 2024, and adjusted EBITDA includes dividends received that
amounted BRL601 million in the LTM.
Capex Plan to Pressure FCF: Fitch estimates that Cemig will be
consistently FCF negative in the next four years, as it executes
its aggressive capex plan of BRL31.5 billion for 2025-2028 period,
after BRL5.3 billion in 2024. The capex plan is mainly concentrated
at Cemig D to reinforce its asset base, which will be incorporated
in the next tariff review in 2028.
The base case scenario for the rating estimates negative
consolidated FCFs of BRL3.8 billion in 2024 and BRL3.7 billion in
2025, incorporating a dividend payment of 50% of net income and the
extraordinary dividends distribution of BRL1.4 billion in 2024.
Fitch forecasts EBITDA around BRL7.0 billion in 2024 and 2025 and
cash flow from operations (CFO) of BRL5.2 billion and BRL4.9
billion, respectively.
Ratings Equalization: As per as Fitch's Parent and Subsidiary
Linkage Rating Criteria, Fitch equalizes the ratings of Cemig,
Cemig D and Cemig GT. This mainly reflects the holding company's
high legal incentives to support the subsidiaries in a stress
scenario. Cemig consolidates the subsidiaries and guarantees a
significant portion of their debt.
There are also cross-default clauses in the majority of the group's
debt instruments. Debt financial covenants are measured on a
consolidated basis, with centralized strategy and cash management.
Fitch also views the subsidiaries as the core business of Cemig.
Cemig's ratings are not capped by the credit profile of its
controlling shareholder, the State of Minas Gerais.
Derivation Summary
Compared with Brazilian peers in the power sector, Cemig's credit
profile is weaker than Engie Brasil S.A. (Engie Brasil) and
Transmissora Alianca de Energia Eletrica S.A. (Taesa), companies
rated with Local Currency IDRs 'BBB-' and 'BB+', respectively.
Cemig presents higher business risk coming from its distribution
segment and typically worse operational performance as a
state-owned company.
Taesa operates in the highly predictable transmission segment
(14,400km of transmission lines across the country, compared with
5,060km for Cemig), while Engie Brasil is the second largest player
in the generation segment (installed capacity of 9.1GW, compared
with 4.5GW for Cemig). Cemig's financial profile also presents more
negative FCF and expected higher leverage than the two peers.
Key Assumptions
- Cemig D's energy distribution increase in its concession area of
3.2% in 2024 and average annual growth of 1.5% in 2025-2027;
- Cemig D's non-manageable costs fully passed through tariffs;
- Cemig GT's average sales price of BRL223/MWh in 2024-2025, with
annual energy sales of 5.0GWh per year;
- Average annual consolidated capex of BRL7.8 billion during
2024-2027;
- Dividend payout of 50% of net income.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Neutral to positive FCF;
- Consolidated net adjusted leverage below 3.0x on a sustainable
basis;
- EBITDA interest coverage above 4.5x on a sustainable basis.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Consolidated net adjusted leverage higher than 4.0x on a
sustainable basis;
- EBITDA interest coverage below 3.0x on a sustainable basis;
- Short-term debt exceeds cash;
- Significant operational issues in its main subsidiaries Cemig D
and Cemig GT;
- Loss or costly renewal of generation concessions, depending on
the financial structure.
Liquidity and Debt Structure
Sound Liquidity: Cemig group should continue with broad access to
financing sources and gradually reduce its debt maturity
concentration. The group should length its debt schedule profile,
which currently presents average tenure of 3.4 years with BRL7.4
billion maturing until 2026. Consolidated cash and equivalents were
BRL2.9 billion at June 30, 2024, compared with short-term debt of
BRL4.2 billion - mainly concentrated in the USD381 million (BRL2.1
billion) of Cemig GT Eurobond due in December 2024.
Liquidity strengthened in 3Q24, benefiting from Cemig D's debenture
issuance of BRL2.5 billion due after 2030. Cash inflow from a
BRL2.7 billion asset sale, concluded in August 2024, at Cemig GT
level, also reinforced the group's liquidity. Cemig group's total
adjusted debt at June 30, 2024 was BRL14.5 billion, including
off-balance-sheet debt of BRL3.3 billion, debentures of BRL9.5
billion and Cemig GT's Eurobonds of BRL2.1 billion.
Issuer Profile
Cemig holds one of the largest integrated power utility groups in
Brazil. The group operates in the distribution segment through
Cemig D, in generation and transmission mainly through Cemig GT and
in natural gas distribution through Gasmig. Cemig is controlled by
State of Minas Gerais.
Summary of Financial Adjustments
Revenues and EBITDA do not incorporate construction revenues and
construction costs.
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
Companhia Energetica de Minas Gerais (CEMIG) has an ESG Relevance
Score of '4' for Governance Structure due to the inherent
governance risks that arise with a dominant state shareholder,
which has a negative impact on the credit profile, and is relevant
to the rating[s] 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
----------- ------ -----
Cemig Geracao e
Transmissao S.A. LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AAA(bra) Upgrade AA+(bra)
senior
unsecured LT BB Affirmed BB
senior
unsecured Natl LT AAA(bra) Upgrade AA+(bra)
Cemig
Distribuicao S.A. LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AAA(bra) Upgrade AA+(bra)
senior
unsecured Natl LT AAA(bra) Upgrade AA+(bra)
Companhia
Energetica de
Minas Gerais
(CEMIG) LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AAA(bra) Upgrade AA+(bra)
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Tax Reform Could Do Harm, Asonahores Warns
--------------------------------------------------------------
Dominican Today reports that the National Association of Hotels and
Tourism (Asonahores) has expressed serious concerns about the
Dominican Republic government's proposed tax reform, arguing it
could adversely affect the tourism sector and the broader economy.
Asonahores president David Llibre emphasized the need for a
competitive tax regime to attract foreign investment and develop
new hotels, according to Dominican Today. While supporting
improvements to the Law for the Promotion of Tourism Development
(Confotur), he warned that the current reform could deter hotel
chains from operating in the Dominican Republic, leading to a
decline in tourism, the report notes.
Llibre highlighted the crucial role of Confotur in attracting major
hotel chains and stressed that stagnation in the tourism sector
would ultimately reduce long-term government revenue, the report
relays. He pointed out that the tourism industry contributes
significantly to the economy, generating substantial foreign
currency and creating hundreds of thousands of jobs, the report
says.
Asonahores argues that a cost-benefit analysis should take into
account the sector's contribution to tax revenue compared to its
tax expenditures, the report notes. The proposed reform includes
the elimination of various incentives for the tourism sector,
industries, and free trade zones, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic was raised
to 'BB' in December 2022 with stable outlook. Moody's credit
rating for Dominican Republic was last set at Ba3 in August 2023
with the outlook changed to positive. Fitch, in December 2023,
affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the outlook to positive.
DOMINICAN REPUBLIC: Vicente Dismisses Concerns on Tax Reform Impact
-------------------------------------------------------------------
Dominican Today reports that Dominican Republic Finance Minister
Jochi Vicente assured that the Fiscal Modernization Law, which
includes a tax reform that eliminates incentives for the tourism
sector, will not negatively impact the tourism industry in the
Dominican Republic.
Presenting the bill to the National Congress, Vicente emphasized
that the country's tourism and hotel sectors are strong and
competitive, positioning the Dominican Republic ahead of regional
rivals like Mexico and Jamaica, according to Dominican Today. He
dismissed fears of the industry's collapse, citing its maturity and
robust growth, the report notes.
However, the Association of Hotels and Tourism (ASONAHORES) voiced
concerns that the proposed tax changes could harm the sector's
economic contributions, the report relays. The organization argued
that the removal of tax benefits would deter foreign investment and
hinder the development of new hotel projects, the report notes.
David Llibre, president of ASONAHORES, suggested revising the law
to encourage investments while ensuring the state benefits from
improved tax collection, the report says.
Llibre warned that if the reform is not adjusted, the Dominican
Republic could lose its competitive edge, prompting hotel chains to
relocate to other countries in the region, the report discloses.
He called for a balanced approach that safeguards the tourism
sector's growth and maintains its status as a leading destination,
the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic was raised
to 'BB' in December 2022 with stable outlook. Moody's credit
rating for Dominican Republic was last set at Ba3 in August 2023
with the outlook changed to positive. Fitch, in December 2023,
affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the outlook to positive.
EGE HAINA: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Positive
--------------------------------------------------------------
Fitch Ratings has affirmed Empresa Generadora de Electricidad
Haina, S.A.'s (EGE Haina) Foreign and Local Currency Long-Term
Issuer Default Ratings at 'BB-'. The Rating Outlook is Positive.
Fitch has also affirmed EGE Haina's USD300 million senior unsecured
notes at 'BB-'.
The Positive Outlook is tied to the Dominican Republic's sovereign
rating (BB-/Positive) due to its reliance on payments from
state-owned distribution companies supported by government
transfers to compensate for high energy losses, low collection
rates, and substantial structural subsidies. The ratings also
consider EGE Haina's diversified asset base and high gross leverage
(total debt/EBIDA) expected to average 5x through 2025 and decrease
to around 4x in 2026. These factors align with a standalone 'bb'
credit profile.
EGE Haina's 50% shareholder, Fondo de Inversion Cerrado de
Desarrollo de Infraestructuras Energeticas (FICDIE I), a power
infrastructure investment fund, manages the company through a
parent-subsidiary relationship. However, Fitch rates EGE Haina on a
standalone basis, not assuming parental support. The remaining
shares are owned 49.993% by the Dominican Republic's Fondo
Patrimonial de las Empresas Reformadas (FONPER) and 0.007% by
minority shareholders.
Key Rating Drivers
Heightened Counterparty Exposure: EGE Haina contracts over half of
its revenue from the country's three state-owned distribution
companies (discos), each which have chronically high physical
energy losses (38% as of June 2024), low collection rates and
charge electricity tariffs that do not account for true energy
costs. The central government makes structural transfers to the
discos to pay the generators for energy received, which for EGE
Haina have equated to an average 30% of historical operating
revenue at or above 100% of annual EBITDA.
Payments channeled through the discos were regularly delayed,
driving much of the company's historically high negative free cash
flow (FCF) balances and pressuring EGE Haina's (and other
generation companies') working capital. Recent government reform
has reduced the payment timing from over 100 days to around 60
days. EGE Haina has mitigated payment delays by maintaining
liquidity exceeding USD60 million over time, and by maintaining
available credit lines that cover six months of electricity sales.
Fitch nonetheless expects government support to remain a
structural, albeit indirect, component of EGE Haina's operating
profile.
Diversified Asset Base: EGE Haina's credit profile benefits from a
diversified portfolio of power generation assets using different
sources of energy including natural gas, fuel oil and coal, as well
as a growing capacity of wind and solar. Thermal sources accounted
for 65.6% of the company's installed capacity as of YE2023 and will
remain the dominant resource in the near term, becoming more
efficient with the increased use of combined cycle natural gas
generation. Material investment into wind and solar will shift the
company's resource base toward roughly 50% of renewable energy
installed generation by 2027.
Expansion Affecting Credit Metrics: EGE Haina is investing USD300
million through 2026 to construct more than 300MW of pre-contracted
renewable generation capacity and to finish the Siba Energy
combined cycle unit, which will support growing demand and the
country's renewable energy mandate. Fitch expects additional debt
funding of USD350 million to drive average leverage of 5x and for
annual FCF to average negative USD40 million.
YE 2023 leverage exceeded 5x due to higher debt and weaker EBITDA
from higher commodity prices, but should reduce to the 4x range
starting in 2026 with EBITDA growth from operational solar plants
and a fully completed Siba Energy power plant. FCF will remain
volatile to negative based on the structural inefficiencies of the
country's distribution companies and the sector's reliance on
oft-delayed government support, but cash will be buffered through
the new issuances, EBITDA growth and a more moderate dividend
schedule. Credit metrics nonetheless align with the weaker end of
Fitch's BB-category medians for generation companies, which reflect
4.8x leverage and structurally moderately negative FCF across the
investment cycle.
Long-Term PPAs Stabilize Cash Flow: More than 80% of EGE Haina's
revenue is contracted through the company's long-term purchased
power agreements (PPAs) that contain adequate cost pass-through
provisions and material government support. The company's
contracted position will remain stable through at least 2030 based
on long-dated PPAs, primarily with state-owned discos but also with
nonregulated, free clients. Fitch projects EBITDA of around USD162
million for YE 2024 and incremental year-on-year improvements
thereafter.
Derivation Summary
EGE Haina's rating is the same as AES España (BB-/Positive), the
Dominican Republic's other primary electricity generator. Both AES
España and EGE Haina's ratings are restricted by counterparty
exposure from the state-owned distribution companies, which are
their main off-takers, and thus both company's ratings are linked
to the sovereign rating. The Dominican electricity sector is
dependent on government transfers due to high energy losses, low
collection levels and material subsidies.
EGE Haina's credit profile benefits from its asset base in
operation with over 1 GW capacity, larger than the combined
capacity of AES España and its related company Dominican Power
Partners at 677MW. EGE Haina has a diversified energy matrix that
uses different sources of energy (natural gas, fuel oil, wind, coal
and solar) while AES España's generation units are mainly
dependent on natural gas and fuel oil. In addition, AES España has
an integrated operation with a natural gas port, regasification,
storage and gas pipeline facilities.
EGE Haina's leverage should remain at an average 5x through 2025 to
finance the construction of a natural gas plant through its new
subsidiary Siba Energy Corporation and its expansion in solar
projects. Fitch projects that gross leverage will decline after
2025. AES España's leverage is expected to average closer to 3.5x
during this time, and its medium-term strategy includes expanding
its natural gas transportation network.
Key Assumptions
- Government transfers to discos remain structural components of
company revenue;
- Installed capacity in operation of 1,229MW in 2024, 1,289MW in
2025 and 1,399MW in 2026;
- Siba Energy commences closed cycle operations by 2025;
- Energy generation averages yoy 3% growth through 2027;
- Account receivables of 80 days with no material delays in
government payments;
- Average annual capex of USD106 million between 2024 and 2027;
- Dividends payments of USD20 million for 2024-2027.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade of the Dominican Republic's sovereign ratings;
- Operational cash flow improvement leading to a sustained leverage
of less than 4x.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of the Dominican Republic's sovereign rating;
- Operational cash flow deterioration that leads to sustained
leverage of more than 4.5x;
- Sustained EBITDA/interest coverage below 2.5x;
- Structurally materially negative FCF outside of the expansion
period;
- Year-on-year sustained cash position below USD50 million.
Liquidity and Debt Structure
Adequate Liquidity: EGE Haina maintains adequate liquidity
supported by its available cash balance, predictable revenue and
debt maturity terms. As of June of 2024, the company had USD102
million in cash and an expected USD90 million in cash from
operations for YE 2024, with short-term obligations of USD7 million
(following the pending refinancing of EGE Haina's short-term debt
into long-term debt).
At YE2023 the company had USD369 million in available credit lines
with USD191 million drawn, providing liquidity support in order to
face volatility in the collection profile of its accounts
receivable, if needed. The company is currently executing a
long-term debt takeout of several short-term tranches of debt for
Siba Energy financing, thus pushing materially significant debt
payments off until 2028.
Issuer Profile
EGE Haina is one of the Dominican Republic's main electricity
generation companies. It is 50% controlled by power infrastructure
investment fund FICDIE I, 49.99% controlled by FONPER, a holding
company fully owned by the government of the Dominican Republic,
and 0.007% controlled by minority shareholders.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Empresa Generadora
de Electricidad
Haina, S.A. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
senior unsecured LT BB- Affirmed BB-
=============
J A M A I C A
=============
STOCKS AND SECURITIES: Creditors' Meeting Set For October 25
------------------------------------------------------------
Jamaica Observer reports that Caydion Campbell, trustee of Stocks
and Securities Limited (SSL), has set October 25 as the first
meeting of creditors and claimants to hammer out the way forward
for the fraud-hit company.
The meeting will allow for SSL creditors and claimants, including
SSL clients, to learn the details of Campbell's report to the
Supreme Court and three additional applications made by the trustee
to the court, according to Jamaica Observer. One of those
applications is for a fee between five to 10 per cent to be applied
to client accounts to cover the costs incurred by the Financial
Services Commission's (FSC) temporary management between January
2023 to May 2024, the report notes.
Five classes of creditors and claimants have been identified in the
winding up of the SSL estate, which include unsecured creditors,
unaffected trust claimants (SSL clients not affected by fraud),
affected trust claimants (contingent creditors), temporary
management claimants, and equity claimants, the report relays. The
meeting will be held by Summit (formerly Knutsford Court Hotel) at
10 a.m. and on a dedicated streaming platform. Persons that want
to attend the meeting have to make contact with Campbell to gain
access, the report notes. In order to vote at this meeting, a
proof of claim form would have had to be submitted prior to it
being kept. Proxies can be appointed for the meeting, the report
says.
Campbell regained control of SSL at the end of May when Justice
David Batts ruled against the FSC's stance and ended its temporary
management of the firm, the report discloses. The FSC has since
appealed that ruling to the Court of Appeal, the report notes.
Since then, Campbell has begun disbursing the proceeds of the
international securities portfolio which totalled more than US$30
million, the report relays. However, those proceeds have been
subject to a 5-10 per cent fee which results in a range of US$1.5
million to US$3 million retained by SSL, the report notes.
At the September 26 court hearing, the FSC requested Justice Batts
seal the trustee report due to the contents contained in it, the
report discloses. The report was submitted a day before the
hearing which gave the FSC limited time to review the contents,
Jamaica Observer notes. However, whatever it saw before the court
session was enough for the regulator to ask that it not be released
to the public, the report relates.
Justice Batts indicated that he would entertain the FSC's
application to seal the report at the hearing, Jamaica Observer
relays. He also requested that both parties to limit their public
commentary on SSL matters until the hearing, the report notes.
The SSL saga, which was revealed in January 2023, has taken several
twists and turns with the Financial Investigations Division (FID)
noting that other fraudulent schemes were uncovered at SSL during
the course of their investigation, Jamaica Observer says. Over 200
SSL client accounts have been affected by fraudulent events at the
firm which exceeds US$30 million or $4.7 billion, Jamaica Observer
notes.
One notably affected client is WellJen Limited, a holding company
connected to Usain Bolt, whose account was reported to have been
defrauded by more than US$12 million, but investigations revealed
only US$6.1 million being identified as entering the firm with no
subsequent discoveries of investments being made, Jamaica Observer
discloses.
Bolt, through his attorney Linton Gordon, made an impassionate plea
through a Jamaica Gleaner story for an update on the SSL matter,
Jamaica Observer notes. WellJen and Jean Elizabeth Forde brought
claims against SSL and other SSL principals in the Supreme Court,
but that case is stalled due to a ruling by Justice Batts, the
report relays. As a result, Bolt had no knowledge as to new
developments taking place to bring justice to him and other SSL
clients, the report notes.
"I have been informed that, since that time, the FID and ODPP have
met on several occasions, including within the last month in
regards to the review of the comprehensive and voluminous SSL
investigative file. Among other things, the ODPP has recommended
that the FID collects three further statements, the process of
which has already commenced," said the Minister of Finance Dr Nigel
Clarke in a release in response to the Bolt story, the report
discloses.
One of the former SSL principals is reported to be residing in
Canada at the moment while other former SSL executives are
continuing to operate as normal, the report relays.
"I understand the frustration and the desire for tangible results.
I share these feelings too.
"However, I ask the public to reflect on the fact that there can be
no better demonstration of transparency in this matter than our
decision to procure the services of an international forensics
audit firm to support an independent and thorough investigation as
we have done. I appeal with the public to continue to exercise
patience as the independent constitutional authority carries out a
diligent and meticulous review of the SSL investigative file so
that culpable persons may be held to account," Dr. Clarke
concluded, he added.
=====================
P U E R T O R I C O
=====================
AMERICA-CV: Court Dismisses Clawback Suit Against Mediaset
----------------------------------------------------------
Judge Laurel M. Isicoff of the United States Bankruptcy Court for
the Southern District of Florida ruled that Mediaset Espana
Communicacion S.A., is entitled to judgment in its favor as to all
three counts of the adversary complaint captioned as OMAR ROMAY,
Liquidating Trustee, for the Liquidating Trust of America-CV
Station Group Inc., Plaintiff, v. MEDIASET ESPANA COMMUNICACION
S.A., Defendant, Adv. Pro. Case No. 21-01059-LMI (Bankr. S.D.
Fla.). The court held that the Plaintiff has failed to show
certain transfer to Mediaset was avoidable, and the Plaintiff
cannot recover the Transfer from Mediaset.
The Liquidating Trustee filed the Complaint to Avoid Transfer and
to Recover Property against the Defendants. Before the bankruptcy
cases were filed, the Romay Parties on the one hand and America
CVSG and the Affiliated Debtors on the other were involved in
extensive litigation including the First Romay State Court
Litigation and the Second Romay State Court Litigation. Based upon
the Second Romay State Court Litigation, the Romay Parties filed
joint and several claims in the amount of $12,919,740.88 against
each of America CVSG and the Affiliated Debtors in each of the
bankruptcy cases. During the chapter 11 cases, the Debtor and its
affiliates and the Romay Parties settled the Second Romay State
Court Litigation and the settlement became a part of the Debtor's
chapter 11 plan. The Plan provided that the Romay Claim would be
satisfied, in part, by assignment to a Liquidating Trust of a
fraudulent conveyance action to recover payment of a $10 million
pre-petition payment to Mediaset. The Romay Parties also received a
lump sum cash distribution of $1.5 million pursuant to the Plan.
On February 24, 2021, the Plaintiff filed this adversary
proceeding. Various issues were resolved by pre-trial and mid-trial
motions. The remaining issues are the subject of this ruling.
The Adversary Complaint has three counts:
(i) Count I seeks relief under 11 U.S.C. Sec. 548(a)(1)(B) --
constructive fraud;
(ii) Count II seeks relief under 11 U.S.C. Sec. 548(a)(1)(A) --
actual fraud; and
(iii) Count III seeks relief under 11 U.S.C. Sec. 550 -- recovery
of the funds transferred.
The Plaintiff bears "the burden of proving all elements of a
fraudulent transfer claim by a preponderance of the evidence."
Mediaset argues that America CVSG received reasonably equivalent
value in exchange for the Transfer by virtue of a book entry in
America CVSG's general ledger describing the Transfer to Mediaset
as a loan to Pegaso. However, that is all there was -- a book
entry, and only on America CVSG's books, according to the Court.
There was no promissory note evidencing an obligation from Pegaso
to America CVSG. None of Pegaso's books or records, or tax returns,
ever listed an obligation from Pegaso to America CVSG, the Court
notes.
Based on the evidence, and absence thereof, the Court finds that at
the time of the Transfer, there was no loan or any intent to create
a loan; the journal entry had no legally cognizable value. The
Court therefore holds that America CVSG did not receive reasonably
equivalent value or, in fact, any value, in exchange for the
Transfer.
The Adversary Complaint alleges that the Transfer caused America
CVSG to become insolvent, left America CVSG with inadequate
capital, and caused America CVSG to be unable to pay its debts as
they came due. The issue then is whether the fair value of a
debtor's debts exceeds the fair value of the debtor's assets. This
is also referred to as the "balance sheet test" of insolvency.
With respect to the insolvency analysis in this case, the value of
two assets, or asset groups, are at issue, while the calculation of
one debt is at issue. The two asset values at issue are first, the
value of the $10,000,000 "loan" to Pegaso; and second, the value of
the broadcast licenses that America CVSG continued to own at the
time of the Transfer. The debt at issue is the value of the then
contingent liability owed to the Romay Parties in connection with
the Second Romay State Court Litigation.
The other asset valuation at issue is the value of the broadcast
licenses at the time of the Transfer. At the time of the Transfer,
and after the Auction, America CVSG continued to own at least five
broadcast licenses, however for purposes of the insolvency analysis
the parties focused on the value of three broadcast licenses - two
in Puerto Rico, WJPX and WJWN13, and one in Miami -- WJAN. The
Court finds that as of the Transfer Date the value of WJAN was
$2,063,000 and the value of the Puerto Rico stations was
$4,314,000.
The last issue of contention related to balance sheet insolvency is
how the contingent liability of the Second Romay State Court
Litigation should have been valued. While both sides agree that the
Romay Contingency was, in fact, a contingent liability at the time
of the Transfer, the two experts had widely different views on its
value at that time. The expert for the Plaintiff, Mr. Kapila,
testified that the Romay Contingency should be valued at
$9,320,609.00, which is the highest range of the amount set forth
in an April 2019 non-final order entered by the state court a year
after the Transfer. The expert for Mediaset, Mr. Feltman,
testified that the Romay Contingency should be valued at a range
between $3.15 million and $4.05 million.
The Court finds that Mr. Feltman's expert opinion is the more
persuasive. Therefore, the Court holds that the appropriate value
of the Romay Contingency on the Transfer Date was $3,600,000.
The Court concludes that as of the Transfer Date, the total value
of America CVSG's assets at issue in this case was at least
$6,377,000 and the total value of liabilities at issue (the Romay
Contingency) was $3,600,000. The parties agree that as of the
Transfer Date, America CVSG also had $2.9 million in cash.
Therefore, America CVSG was solvent with assets exceeding
liabilities by at least $5.7 million as of the Transfer Date.
The Plaintiff argues that at the time of the Transfer, America CVSG
was engaged in a business or transaction for which it was left with
unreasonably small capital pursuant to 11 U.S.C. section
548(a)(1)(B)(i)(II).
The Court finds that America CVSG was not left with unreasonably
small capital but remained viable for a full year after the
Transfer Date. Judge Isicoff explains, "America CVSG was a holding
company, not an operating company. Its function was to hold the
broadcast licenses and receive payment for their use. America CVSG
had more than sufficient capital and cash to engage in its normal
business operations. America CVSG had no debt owed to unaffiliated,
unrelated entities. It had no lines of credit, no mortgage loans,
and no business loans to be paid. Its normal 'operating' expenses
were minimal, and it carried sufficient cash to actually pay all
expenses as they became due, and it did so. There was no evidence
at Trial of any debts that were unpaid, during the year after the
Transfer Date. Where a company, like America CVSG, survives for an
extended period of time after the subject transaction, courts will
not find that the company had unreasonably low capital."
The Plaintiff argues that even if America CVSG was not actually
insolvent or rendered insolvent as a result of the Transfer, it was
equitably insolvent for fraudulent transfer purposes pursuant to
section 548(a)(1)(B)(i)(III).
The Court finds there was no evidence of any intent or belief that
America CVSG would incur debts beyond its ability to repay. Judge
Isicoff says, "America CVSG did not take on any new debt as part of
the Transfer and did not purposely intend to take on new debt.
America CVSG had no debt and no plan nor need for debt to carry on
its business as a license holding company, as part of the overall
Broadcast Businesses."
The Court concludes that while America CVSG did not receive
reasonably equivalent value for the Transfer, because America CVSG
was solvent, was not left with unreasonably small capital, and was
not unable to pay debts as they became due as of the Transfer Date,
the Plaintiff failed to meet his burden to prove by a preponderance
of the evidence that the Transfer was constructively fraudulent.
Notwithstanding that America CVSG is solvent, the Plaintiff also
argues that the Transfer is recoverable because he has established
all the elements of his claim that the Transfer was made with
actual fraudulent intent, that is, that the Transfer was made with
actual intent to hinder, delay, or defraud creditors.
The Court finds that the Plaintiff has not satisfied his burden of
proof to demonstrate there was an actual intent to defraud
creditors at the time of the Transfer. Moreover, the evidence
(letters, billing entries, and emails) is, at best, ambiguous with
respect to whether the Transfer was the focus of the discussions or
emails, or was just one of several possible sources of Chapter V
recoveries considered with counsel, the Court notes.
The Court says the evidence does not support a finding of actual
intent to hinder, delay or defraud a creditor.
A copy of the Court's decision is available at
https://urlcurt.com/u?l=CLXW6n
About America-CV Station Group
America-CV Station Group, Inc. is a privately held company
primarily in the television station ownership and program
production business. It provides broadcasting services.
America-CV and affiliate Caribevision Holdings, Inc. sought
protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.
Fla. Case Nos. 19-16355 and 19-16359) on May 14, 2019. On May 28,
2019, America-CV Network, LLC and Caribevision TV Network, LLC also
filed Chapter 11 petitions (Bankr. S.D. Fla. Case Nos. 19-16976 and
19-16977). The cases are jointly administered under Case No.
19-16355). At the time of the filing, each of the Debtors disclosed
assets of $10 million to $50 million and liabilities of $1 million
to $10 million.
Judge Jay A. Cristol oversees the cases.
The Debtors tapped Genovese Joblove & Battista, P.A., as their
bankruptcy counsel, and Fletcher, Heald & Hildreth, P.L.C., as
Genovese's co-counsel.
PUERTO RICO: Judge Extends PREPA's Litigation Stay in Bankruptcy
----------------------------------------------------------------
Michelle Kaske of Bloomberg News reports that the judge overseeing
the bankruptcy of Puerto Rico's electric utility, PREPA extended
the halt on litigation connected to the case as the government-run
power company negotiates with bondholders over how to cut its
debts.
US District Court Judge Laura Taylor Swain kept the stay in place
through November 13, 2024 and again directed the parties, including
principal members, to participate in restructuring negotiations,
according to a court filing Monday, October 7, 2024. This is the
second time that Swain has granted the mediation team's request to
postpone lifting the stay.
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.
===============
S U R I N A M E
===============
SURINAME: IDB Okays US$135 CCLIP for Indigenous Communities Access
------------------------------------------------------------------
The Inter-American Development Bank (IDB) has approved a
Conditional Credit Line for Investment Projects (CCLIP) of US$135
million in two tranches to boost socioeconomic development by
promoting clean and sustainable services within the framework of a
just energy transition.
The credit line was approved by the IDB's Executive Board, with the
first tranche comprising of an individual operation of US$45
million in the form of a Global Multiple Works Operation and a
non-reimbursable financing of US$1.5 million from the Low Emission
Energy Fund for People and the Planet.
The first individual operation will finance a bioeconomic
empowerment program in indigenous communities through access to
water, energy, and telecommunications. Its objective is to promote
the socioeconomic development of villages in rural areas.
It is expected to directly benefit 1,200 households, 25 health
centers, 30 schools, and 50 commercial activities in the Amazon
region, particularly local farmers, small business owners,
indigenous peoples, women, and afro-descendants. It will also
benefit 400 women with jobs in bioeconomic activities. The Ministry
of Natural Resources and the local electric company EBS will
benefit from institutional strengthening.
The lack of reliable and sustainable infrastructure in the
electricity, water, and telecommunications sectors in rural areas
is reflected in coverage rates. The national electricity access
rate is 98.2%. However, in rural areas, especially in villages, it
is below 90%, leaving about 20,000 households without access or
dependent on small diesel generators.
Similarly, water supply is limited—less than 60% of the rural
population has access—and telecommunications infrastructure is
deficient or non-existent in the interior, where only 27% have
internet access.
To address these challenges, the program will finance investments
in electricity, water, and telecommunications infrastructure and
services, as well as their productive and sustainable use
("bioeconomy") in rural Amazonian areas.
In this regard, it plans to finance the supply, installation, and
commissioning of disaster-resilient solar mini-grids, including the
improvement of the existing distribution network to provide
permanent electricity in these areas.
It will also support the installation of water collection,
treatment, and distribution systems to provide clean and reliable
water to villages, and finance the improvement and development of
telecommunications distribution and access infrastructure
(telephony, internet, and broadcasting).
Additionally, the program will support the formulation and
execution of projects for the productive and sustainable use of
electricity, water, and telecommunications services, with an
emphasis on the bioeconomy, and strengthen the institutional
capacity of the Ministry of Natural Resources and EBS to plan,
design, and supervise rural electrification and water supply
projects.
The first individual loan of US$45 million under the CCLIP has a
repayment term of 23.5 years, a grace period of seven years, and an
interest rate based on SOFR.
SURINAME: IDB Okays US$40MM to Improve Social Protection System
---------------------------------------------------------------
The Board of Directors of the Inter-American Development Bank (IDB)
approved a US$40 million project to expand the capacity of
Suriname's social protection system to strengthen human capital
among vulnerable households.
The project will improve Suriname's social protection system and
efficiency to better safeguard vulnerable populations, with a
special focus on female-led poor households, persons with
disabilities, and households in poverty with children.
The operation will finance existing cash transfers provided to
impoverished households and people with disabilities. The project
will also finance the expansion of Suriname's safety net by
enrolling an additional 5,000 beneficiaries of the Financial
Support to Poor Households and the Financial Support to Persons
with Disabilities programs. The cash transfer programs will be
complemented with a family support program to facilitate access
to education, health, and other social services among vulnerable
households.
The project will bolster the expansion with quality of Suriname's
early childhood development (ECD) services through the design and
implementation of a home-visiting ECD program among 2,000
vulnerable children under four years old, including the development
of learning materials as well as training of community
facilitators and supervisors. Evidence demonstrates that
high-quality ECD programs for disadvantaged children can mitigate
the effects of poverty on child development and improve children's
long-term educational outcomes, productivity, and income.
The project will benefit more than 20,000 persons with disabilities
and their families, more than 16,000 households who receive family
support, and 2,000 children under four years old and their families
who receive the family-based ECD program.
The US$40 million IDB loan has a disbursement period of 5 years and
a grace period of 5.5 years.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
CABLE & WIRELESS: $1BB Upsized Notes No Impact on Moody's Ba3 CFR
-----------------------------------------------------------------
Moody's Ratings comments that Cable & Wireless Communications
Limited (C&W) Ba3 corporate family rating, Sable International
Finance Limited (SIFL)'s Ba3 backed senior secured ratings and
negative outlook remain unchanged following the company's
announcement that it has upsized its 7.125% backed senior secured
notes due 2032 to $1 billion from $500 million.
The transaction will have no material effect on C&W's leverage, as
proceeds will be used for liability management, further improving
the company's maturity profile. The additional sources will be used
to fully redeem SIFL's $495 million senior secured notes due 2027,
partially redeem C&W Senior Finance Limited's $1,220 Backed Senior
Notes due 2027 and pay transaction-related premium, fees and
expenses. The new notes will rank pari passu with all other senior
secured and unsubordinated debt obligations of SIFL and ahead the
remaining $735 million in senior unsecured notes due 2027 issued by
C&W Senior Finance Limited, rated B2.
The B2 rating on the senior unsecured notes continues reflecting
their positioning in the waterfall behind the $3.1 billion in
secured debt, including Coral-US Co-Borrower LLC's backed senior
secured term loans B-5, B-6, and the senior secured notes at SIFL,
all of them rated Ba3. The senior secured debt under Coral-US
Co-Borrower LLC, benefits from the guarantees of C&W Senior Secured
Parent Limited, Sable Holding Limited, CWIGroup Limited, Cable &
Wireless (West Indies) Limited, Coral-US Co-Borrower LLC and
Columbus International Inc, and share pledges of all the guarantors
and issuer as collateral and security interests over shareholder
loans; while the unsecured debt benefits from a collateral that
comprises the capital stock of the notes' issuer.
C&W's Ba3 corporate family rating (CFR) reflects its integrated
business model and leading market positions throughout the
Caribbean and Panama, which drive strong profitability. The
company's strong liquidity also supports the CFR. Conversely, the
rating is constrained by the company's large exposure to emerging
economies and its tolerance to high leverage.
Moody's expect C&W's liquidity to be solid, supported by about $466
million in cash as of June 2024 and positive cash generation before
dividends. Furthermore, the company has access to $636 million in
revolving credit facilities. C&W does not face any large debt
maturity before 2027, which upon this transaction has been reduced
to $0.7 billion from $1.7 billion.
The negative outlook reflects C&W's persistently high
Moody's-adjusted leverage at 4.7x for the 12 months that ended June
2024 and Moody's view that it will remain above 4x in the next
12-18 months.
A rating upgrade could be considered if leverage (Moody's-adjusted
debt/EBITDA) is comfortably sustained below 3.5x on a consolidated
basis; Moody's-adjusted EBITDA margin of at least 40%; and sound
positive free cash flow generation (FCF), all on a sustained
basis.
Quantitatively, a downgrade could occur if Moody's-adjusted
leverage is sustained above 4.5x by FYE 2024 or above 4.0x by 2025,
its EBITDA margin declines toward 35% on a sustained basis. C&W's
rating could be downgraded if its liquidity position weakens
significantly due to a large cash distribution to its parent
company in a way that it jeopardizes the company's liquidity or
requires additional debt.
C&W is a subsidiary of Liberty Latin America Ltd (LLA). The company
is an integrated telecommunications provider offering mobile,
broadband, video, fixed-line, business, IT and wholesale services
in Panama, Jamaica, the Bahamas, Trinidad and Tobago, Barbados and
other markets in the Caribbean and Central America. For the 12
months that ended June 31, 2024, the company generated revenue of
$2.6 billion. As of the same date, C&W served 2.4 million revenue
generating units (RGUs) through its fixed network, which passes 2.7
million homes. The company also serves 3.9 million mobile
subscribers.
*********
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
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Information contained herein is obtained from sources believed to
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of the same firm for the term of the initial subscription or
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contact Peter A. Chapman at 215-945-7000.
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