/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/241023.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 Wednesday, October 23, 2024, Vol. 25, No. 213 Headlines A R G E N T I N A ARGENTINA: Milei Officials Rage at Opponents as UK Court Rules ARGENTINA: To Adopt Flexible Exchange Rate After Lifting Controls B E R M U D A WEATHERFORD (BERMUDA): Fitch Hikes IDR to 'BB-', Outlook Stable B R A Z I L CIELO SA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Tax Reform Proposal Threatens Healthy Eating J A M A I C A JAMAICA: Businesses Urge Banks to Cut Lending Rates on BOJ Cuts P U E R T O R I C O JOSE SERRANO VIERA: Fails to Extend Disclosure Statement Deadline VHB FOODS: Seeks 30-Day Extension of Plan Filing Deadline X X X X X X X X LATAM: Roadmap for Caribbean to Escape 'Middle-Income Trap' - - - - - ================= A R G E N T I N A ================= ARGENTINA: Milei Officials Rage at Opponents as UK Court Rules -------------------------------------------------------------- Buenos Aires Times reports that Argentina is obliged to pay US$1.5 billion after the Supreme Court of the United Kingdom turned down an appeal in a case involving growth-linked bonds. In an order signed, the UK's top court refused to hear an appeal over payments to hedge funds including Palladian Partners LP, according to Buenos Aires Times. The holders of those notes argued the losses were a result of a change by a previous Argentine government in how it calculated gross domestic product, the report notes. The news was confirmed by President Javier Milei's government in Buenos Aires, which said it would be forced to pay up, the report says. In a post on social media, Cabinet Chief Guillermo Francos said the case stems from the "manipulation of data by [the] INDEC [national statistics bureau] during the government of Cristina [Fernández de] Kirchner (2007-15)," the report discloses. "There are no more prospects of appeal. The case has come to an end," added the official. In the case - known as "Coupon GDP" - Argentina is accused of modifying its formula for calculating its Gross Domestic Product (GDP) to avoid "making additional payments to bonds issued on the occasion of the debt swaps of 2005 and 2010," detailed Francos, the report notes. "The creative solutions of populism have carried negative economic consequences bringing the country into disrepute," he alleged, the report relays. The sentence was ruled by the High Court of London in April 2023, and later confirmed by an appeals court last June, the report says. Argentina appealed this decision and the British justice system made its decision in favour of the plaintiffs, who later said they are "satisfied" with this British court ruling in their favour obliging the Argentine government to pay them US$1.5 billion, the report discloses. "The plaintiffs have always trusted in their case and are satisfied with the decision of the Supreme Court of the United Kingdom to deny the appeal. Payment has been pending for almost 10 years and they hope that Argentina pays within the period of 45 days established by the court," said Aidan O'Rourke from the Quinn Emanuel law office representing the plaintiffs, the report relays. The case was pushed by high risk funds like Palladian Partners LP with the British Supreme Court giving Argentina 45 days to pay the bondholders, Bloomberg reported, the report notes. Argentina could lose a payment of US$334 million made in advance earlier this year in the event of non-compliance, said the outlet, the report notes. This adds another element to the economic crisis of Argentina, which last month had an annual inflation of 209 percent, one of the highest in the world, with 52.9 percent of the population below the poverty line in the first half of 2024, the report says. This news arrives while Argentina battles to obtain hard currency to replenish the Central Bank reserves needed to stabilise the exchange rate and meet debt commitments to creditors like the International Monetary Fund (IMF), to whom it owes US$44 billion, the report notes. The UK court established Argentina now has 45 days to pay the GDP bondholders, the report discloses. The Milei administration would be subject to enforcement action if it misses that deadline and it would also lose US$334 million already paid to UK authorities, the report relays. "During the course of this case, Argentina has repeatedly told the [Supreme] Court that if it makes a final decision in favour of the holders of the warrants, it will be necessary to find the money to pay its creditors. That moment has now arrived," said O'Rourke, the report notes. The case was lodged by four high risk funds: Palladian Partners LLP, HBK Master Fund LP, Hirsh Group LLC and Virtual Emerald International Limited, the report relates. "Nevertheless, the case is presented in the name of all bondholders because this sentence benefits them, regardless of whether they formed part of this trial or not. The court has ordered all bondholders to be paid," explained O'Rourke, the report adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Javier Milei is the current president of Argentina after winning the November 19, 2023 general election. He succeeded Alberto Angel Fernandez in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. In March 2022, the International Monetary Fund (IMF) approved a new 30-month arrangement under an Extended Fund Facility for Argentina in the amount of SDR 31.914 billion (equivalent to US$44 billion, or 1000 percent of quota). The IMF Executive Board's decision allowed the authories an immediate disbursement of an equivalent of US$9.65 billion in March 2022. Argentina's IMF-supported program seeks to improve public finances and start to reduce persistent high inflation through a multi-pronged strategy, involving a gradual elimination of monetary financing of the fiscal deficit and enhancements in the monetary policy framework. In June 2024, the IMF Board completed an eighth review of the Extended Arrangement under the Extended Fund Facility for Argentina. The IMF Board's decision enabled a disbursement of around US$800 million to support the authorities' efforts to entrench the disinflation process, rebuild fiscal and external buffers, and underpin the recovery. S&P, in March 2024, raised its local currency sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale rating to 'raB+' from 'SD'. S&P also raised its long-term foreign currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed its 'C' short-term foreign currency rating. The S&P ratings have been affirmed as of August 2024. S&P said the stable outlook on the long-term ratings balances the risks posed by pronounced economic imbalances and other uncertainties with recent progress in making fiscal adjustments, reducing inflation, and undertaking structural reforms to address long-standing microeconomic weaknesses that have contributed to poor economic performance for many years that it would likely consider to be distressed. In June 2023, Fitch ratings also upgraded Argentina's Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from 'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'. The upgrade of the FC IDR reflects that Fitch no longer deems a default-like process to have begun, as the authorities have not signaled a clear intention to follow through with an intra-public debt swap announced in March 2023. The new 'CC' rating signals a default event of some sort appears probable in the coming years. The affirmation of the LC IDR at 'CCC-' follows the peso debt swap in June that Fitch did not deem to be a "distressed debt exchange" (DDE). Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. ARGENTINA: To Adopt Flexible Exchange Rate After Lifting Controls ----------------------------------------------------------------- Buenos Aires Times reports President Javier Milei outlined fresh details of his currency strategy, a key and necessary first step before his government expects to return to capital markets in 2026. Milei said his government would adopt a "flexible" exchange rate on the peso after it lifts capital controls at an undetermined time, according to Buenos Aires Times. It's the first inkling that the libertarian intends to implement a more orthodox currency policy after dismantling the controls he inherited after taking office last December, the report notes. "If there's no excess supply of pesos, I can liberate controls, even when I don't have dollars, because I am going toward a flexible exchange rate," Milei said during his keynote speech at the close of Argentina's Central Bank's annual conference, the report relays. Argentina's president previously said he and his economic team hadn't decided whether to fix the exchange rate between the peso and the US dollar or move toward a free-floating currency, the report notes. Milei still did not set a timeline for the removal of capital controls, referred to locally as the 'cepo.' A lack of foreign reserves, which remain in the net negative territory, has long been an impediment to lifting controls over fear of capital flight, the report discloses. How Milei handles the peso after lifting controls will be critical to managing triple-digit inflation, welcoming foreign investment and forging ahead with a US$44-billion debt owed to the International Monetary Fund, the report says. Economy Minister Luis Caputo previously said Argentina would return to markets in early 2026, providing something of a timeframe to begin lifting capital controls, the report relays. Argentina had a free-floating exchange rate from late 2015 to 2019 before a run on the peso amid election volatility forced the government at the time to slap controls back in place, the report notes. Since then, Milei's predecessor, Alberto Fernandez, only piled on more controls and restrictions, the report says. Besides getting rid of the country's monetary overhang, the president said Argentina's inflation had to converge with what he calls induced inflation, the report relays. He has previously listed international inflation, the crawling peg currency devaluation of two percent and capital controls as driving factors of the phenomenon, the report adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Javier Milei is the current president of Argentina after winning the November 19, 2023 general election. He succeeded Alberto Angel Fernandez in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. In March 2022, the International Monetary Fund (IMF) approved a new 30-month arrangement under an Extended Fund Facility for Argentina in the amount of SDR 31.914 billion (equivalent to US$44 billion, or 1000 percent of quota). The IMF Executive Board's decision allowed the authories an immediate disbursement of an equivalent of US$9.65 billion in March 2022. Argentina's IMF-supported program seeks to improve public finances and start to reduce persistent high inflation through a multi-pronged strategy, involving a gradual elimination of monetary financing of the fiscal deficit and enhancements in the monetary policy framework. In June 2024, the IMF Board completed an eighth review of the Extended Arrangement under the Extended Fund Facility for Argentina. The IMF Board's decision enabled a disbursement of around US$800 million to support the authorities' efforts to entrench the disinflation process, rebuild fiscal and external buffers, and underpin the recovery. S&P, in March 2024, raised its local currency sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and its national scale rating to 'raB+' from 'SD'. S&P also raised its long-term foreign currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed its 'C' short-term foreign currency rating. The S&P ratings have been affirmed as of August 2024. S&P said the stable outlook on the long-term ratings balances the risks posed by pronounced economic imbalances and other uncertainties with recent progress in making fiscal adjustments, reducing inflation, and undertaking structural reforms to address long-standing microeconomic weaknesses that have contributed to poor economic performance for many years that it would likely consider to be distressed. In June 2023, Fitch ratings also upgraded Argentina's Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from 'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'. The upgrade of the FC IDR reflects that Fitch no longer deems a default-like process to have begun, as the authorities have not signaled a clear intention to follow through with an intra-public debt swap announced in March 2023. The new 'CC' rating signals a default event of some sort appears probable in the coming years. The affirmation of the LC IDR at 'CCC-' follows the peso debt swap in June that Fitch did not deem to be a "distressed debt exchange" (DDE). Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. ============= B E R M U D A ============= WEATHERFORD (BERMUDA): Fitch Hikes IDR to 'BB-', Outlook Stable --------------------------------------------------------------- Fitch Ratings has upgraded the IDRs of Weatherford International plc and Weatherford International Ltd. (Bermuda) to 'BB-' from 'B+'. The Rating Outlook is stable. Fitch has also affirmed the company's senior unsecured notes at 'BB-' and revised the Recovery rating from RR3 to RR4. Fitch has withdrawn the issue-level 'BB+'/'RR1' rating of the revolving credit facility. The upgrade reflects Weatherford's improved through-the-cycle margin profile, significant diversification, size and scale, enhanced liquidity, and a balanced capital allocation strategy. Key restraints on the credit profile include the company's reduced but material gross debt pile and the volatile nature of the oilfield services industry. The Stable Outlook reflects Fitch's expectation of balanced capital allocation moving forward relative to normalizing OFS industry conditions through the forecast period. The issue-level rating of the revolving credit facility is being withdrawn as it is no longer considered relevant to the agency's coverage. Key Rating Drivers Improving Margins: Weatherford has achieved consistent year-over-year EBITDA margin improvement post-bankruptcy. While this has occurred during a period of improving OFS market conditions, margin improvement has been realized even in years where peers have observed margin decline. Management has targeted organic synergies such as integrating back-office operations while divesting and exiting from lower margin businesses. The company has achieved average EBITDA margins of 17.8% from 2020-2023 compared to 9.9% pre-bankruptcy from 2016-2019. Fitch forecasts margins during cyclical troughs to remain materially above pre-bankruptcy levels in addition to seeing relative improvement to peers. Increased Financial Flexibility: Weatherford's redemption of its restrictive 2028 secured notes has reduced gross debt, improved financial flexibility and removed a key constraint on the company's credit profile. The 2028 secured notes included restrictive terms which inhibited the company's financial flexibility, and their redemption provides flexibility to management. Fitch expects leverage to remain below its sensitivities through the forecast but note the significant, though greatly reduced, gross debt burden may lead to a leverage spike during downturns. Diversified Operations: Weatherford's operations have significant size and are well diversified across the globe with 20% of revenue from North America and 80% from the rest of the world. The company operates in three segments across 75 countries with offerings including both products and services. The segments have similar margin profiles, with Drilling & Evaluation having the highest margins given its service focus. Contracts are generally long term and visible for the sector with the exception of the U.S., which is highly volatile. While the company's scale and diversification are significant, Fitch notes that Weatherford materially trails other industry peers in this regard. While 5%-7% of revenue is sourced in Russia, this business is declining and is being offset by growth in other regions. New Capital Allocation Strategy: Fitch views management's newly announced capital allocation framework as balanced between balance sheet management and shareholder returns. The strategy includes stated goals of $1 billion of liquidity and EBITDA leverage below 1.0x through-the-cycle as well as $0.25/share quarterly dividend and $500 million share repurchase authorization. Capex is targeted between 3% and 5% of revenue, and Fitch expects management to continue targeting capital toward gross debt reduction through the forecast period. Following the redemption of the 2028 senior secured notes, the company has gross debt outstanding of $1.6 billion. Fitch expects management will prioritize balance sheet health over shareholder returns in a stress scenario. Highly Cyclical Industry: The OFS industry remains highly cyclical with issuers often being the first in the energy space to feel the negative impacts of commodity price declines. This volatility remains a key credit constraint for Weatherford as it is for other issuers in the peer group. Weatherford's improving capital structure and sustainable margin improvement should better support the company through cyclical troughs and near-term industry dynamics appear relatively favorable, somewhat offsetting negative credit impacts. Derivation Summary Weatherford operates on a significantly larger scale than its similarly rated peers. The company's operations are more diversified than its peers both in terms of geography and service and product offerings. Weatherford's margins lag those of offshore focused Noble Corporation plc (BB-/Stable), Precision Drilling Corporation (BB-/Stable), Seadrill Limited (B+/Stable) and Nabors Industries LTD (B-/Stable), but are comparable or above those of Enerflex Ltd. (BB-/Stable), Helix Energy Solutions Group, Inc. (B+/Stable) and Valaris Limited (B+/Stable). Weatherford has a significant international presence, similar to Nabors, which allows for longer-term contracts than North American focused OFS companies like Precision Drilling. Weatherford's gross debt is materially higher than all of the above peers except Nabors, increasing exposure to elevated leverage relative to peers during cyclical downturns. Weatherford's refinancing risk is relatively limited, while Nabors is more elevated given material maturities within the forecast period and uncertain access to capital markets. Key Assumptions Base Case: - WTI of $75/bbl in 2024, $65/bbl in 2025, $60/bbl in 2026 and 2027, and $57/bbl thereafter; - Stable global rig count growth in the low to mid-single digits throughout forecast period; - Capex in line with management expectations in 2024 and then approaching 5% of revenue through the forecast; - Excess cash flow balanced between shareholder returns and debt reduction; - Minor acquisitions assumed through forecast period. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Further improvement in operating margin stability through-the-cycle relative to peers; - Sustained FCF generation targeted toward a reduction in gross debt levels; - Midcycle EBITDA leverage below 2.5x. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Deviation from a conservative financial policy particularly during declining industry conditions; - Declining margin profile relative to peers which indicates structural weakness of company business segments; - Midcycle EBITDA leverage above 3.5x. Liquidity and Debt Structure Improved Liquidity: Weatherford's $720 million revolving credit facility reflects a material improvement in the company's liquidity profile. The company has name plate borrowing capacity of $393 million with an additional $327 million in LC capacity. The company had $862 million in readily available cash and $58 million in restricted cash available at 2Q24. Manageable Maturity Schedule: The company's senior notes mature in 2030. The 2030 senior notes represent a significant maturity wall, but Weatherford has ample time to address the notes. Issuer Profile Weatherford International is an oilfield services company headquartered in Houston, TX with operations in 85 countries around the globe. Weatherford operates in three segments: Drilling and Evaluation (D&E), Well Construction and Completion (WCC), and Production and Intervention (P&I). 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 Weatherford International Public Limited Company has an ESG Relevance Score of '4' for Group Structure due to the companies diversified operations and localized cash and collateral requirements 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 Recovery Prior ----------- ------ -------- ----- Weatherford International Public Limited Company LT IDR BB- Upgrade B+ Weatherford International Ltd. (Bermuda) LT IDR BB- Upgrade B+ senior secured LT WD Withdrawn BB+ senior unsecured LT BB- Affirmed RR4 BB- =========== B R A Z I L =========== CIELO SA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Cielo S.A.'s Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) at 'BB+' and its Long-Term National Scale Rating at 'AAA(bra)'. Fitch has also affirmed Cielo's senior unsecured sixth debentures issued at 'AAA(bra)'. The Rating Outlook for the corporate ratings is Stable. Cielo's ratings reflect its strong position in the Brazilian card payment industry. It benefits from a competitive advantage due to its relationship with the distribution network of its shareholders, which are two important banks in the Brazilian banking system, Banco do Brasil S.A. (BB/Stable, AA(bra)/Stable) and Banco Bradesco S.A. (BB+/Negative, AAA(bra)/Stable). Cielo's ratings also incorporate Fitch's expectations for strong operating cash flow and maintenance of strong financial flexibility and net leverage below 2.5x. Key Rating Drivers Highly Competitive Environment: The market dynamics for the Brazilian payment industry will likely continue to change quickly, and Fitch expects competition to remain strong in the near term. The sector should continue to evolve rapidly, with technological innovations and new payment options, structurally changing the traditional business model. Cielo has the significant challenge of quickly adapting its business model and improving diversification in other products like financial solutions and software services. The conclusion of the tender offer for the acquisition of all of Cielo's common share should contribute to increase the company's competitive advantages and higher synergies with its shareholders. Strong Position in the Brazilian Market: Cielo is the second largest Brazilian merchant acquirer, with 20% market share as of June 2024 (22% in 2023); the leader has around 23%. Its strategy of focusing on profitability recovery over Total Payment Volume (TPV) resulted in the loss of market share since 2021, and Fitch expects market share to stabilize at current levels. The significant increase in competition in the past few years contributed to a less concentrated industry, with the two largest participants accounting for approximately 43% of the market. TPV Growth Expected only for 2025: Fitch projects Cielo's TPV to reduce in 2024 and to present growth in line with the industry from 2025 on. The base case scenario incorporates a TPV reduction of 0.5% in 2024 and growth of 6.3% in 2025. Cielo processed BRL399 billion in credit and debit transactions in 1H24, a 0.5% increase in relation to 1H23. Fitch projects that Brazilian market TPV is expected to grow around 6% in 2025 going forward. Stronger Operating Margins: Cielo improved its profitability, with greater penetration of small and medium merchants and of prepayment products, loss of less profitable clients, gradual improvement in product diversification, together with the greater stability of Cateno's (JV responsible for managing services related to Banco do Brasil's card business) results. Fitch expects Cielo to generate strong EBITDA of BRL5.1 billion in 2024, including income from anticipation to merchants, and BR4.8 billion in 2025, compared with BRL5.5 billion generated in 2023, as per Fitch's calculations. Fitch's base case considers an EBITDA margin between 50% and 42% in 2024-2026, compared with the average of 37% from 2020 to 2023. Higher volume of pre-payment products should contribute to this growth. Cateno's contribution to Cielo's EBITDA between 35% to 40% also adds more stability to the company's cash flow generation. Fitch expects positive FCF of BRL1.9 billion for 2024 and BRL980 million in 2025, as Cielo's working capital needs are directly linked to the company's strategy to finance the acquisition of receivables to merchants. Base case projections incorporate average annual investments of BRL529 million and dividends around BRL600 million per year. Low Risk of Credit Loss: Cielo has no direct credit exposure to cardholders, as the card-issuing bank guarantees cardholders' payments, while the company's exposure to merchants is limited. The company is, however, partially exposed to card-issuing bank defaults on a payment settlement for Visa and MasterCard transactions. The risk associated with Visa and MasterCard transactions is mitigated because more than 64% of the volume of transactions is concentrated in the five largest Brazilian banks, Banco do Brasil, Banco Bradesco, Banco Itau Unibanco S.A. (BB+/Stable), Caixa Economica Federal (BB/Stable), and Banco Santander Brasil S.A. (not rated). For some non-investment-grade banks, Cielo's risk management policy requires the card-issuing bank to pledge collateral and/or provide SBLC (Standby Letters of Credit). Strong Capital Structure: Cielo's net adjusted leverage, measured by the net debt to adjusted EBITDA ratio, including financial income derived from the acquisition of receivables from merchants, should be close to 2.3x in 2024 and to remain below 2.5x in the next three years. As of Dec. 31, 2023, net adjusted leverage was 2.5x. Derivation Summary Cielo is the second largest company in Brazil's merchant acquiring and payment processing industry, with an estimated 20% market share, after Redecard (not rated; controlled by Itau Unibanco Holding S.A.) with a 23% share. The third-largest is GetNet (not rated; controlled by Grupo Santander) with an estimated market-share of 15%. Compared with independent players, such as PagSeguro (12%) and Stone (11%), the three leaders have some competitive advantages due to their controlling shareholders' structure, as their relationship with leading commercial banks gives them access to a broad customer base to acquire merchant accounts. As is characteristic of the industry in Brazil, Cielo and its peers have no direct credit exposure to cardholders, as the card-issuing bank guarantees cardholders' payments. Key Assumptions - Revenues of Cielo Brasil of around BRL5.9 billion in 2024 and BRL6.0 billion in 2025; - Revenues of Cateno of around BRL4.3 billion in 2024 and BRL4.5 billion in 2025; - Annual investments of approximately BRL529 million; - Dividends of 35% of net income in 2024 and 2025. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - A sustained improvement in profitability and market-share gains. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - An increase in the volume of credit and debit transactions with banks rated 'BB-' and below without collateral being pledged by the card-issuing bank or not guaranteed by MasterCard; - Weakening credit profile of the main banks that operate with Cielo; - A significant loss due to fraud and chargebacks; - Tougher competition leading to a significant loss of market share and profitability; - Significant changes in regulatory risk; - A negative rating action on Brazil's sovereign ratings that leads to negative rating actions on Banco do Brasil, Bradesco, Caixa Economica Federal and Itau. Liquidity and Debt Structure Strong Financial Flexibility: Cielo has a strong financial flexibility. As of June 30, 2024, the company reported cash and marketable securities of BRL1.1 billion and total debt was BRL10.5 billion. Cielo has around BRL5.1 billion of debt maturing in the short term. It has strong financial flexibility to address upcoming maturities and good access to the bank and capital markets, including a sizable pool of receivables. Total debt was composed of public debentures (29%), FIDCs (44%) and others (27%). The company has no debt in Foreign Currency. Issuer Profile Cielo is a multi-brand acquirer that captures, transmits, processes and settles transactions between large to small merchants with consumers under international brands such as Mastercard, Visa, Amex and local brands. Cielo is a JV controlled by Banco Bradesco (50,7%) and Banco do Brasil (49,3%) with equal decision rights under their shareholder's agreement. 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 ----------- ------ ----- Cielo S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(bra)Affirmed AAA(bra) senior unsecured Natl LT AAA(bra)Affirmed AAA(bra) =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Tax Reform Proposal Threatens Healthy Eating ---------------------------------------------------------------- Dominican Today reports that the National Observatory for Consumer Protection (Onpeco) called on congressmen to study the tax reform proposal, Fiscal Modernization, in depth and oppose the imposition of new taxes on food products, especially those produced in the Dominican Republic. The consumer defense entity recalled that it had already warned about this situation when it was announced that reform was necessary to expand the tax base, according to Dominican Today. However, it was surprising that a reform proposal had been sent to Congress that taxes sweet potatoes and almost all agricultural products except for seven, which is an affront to the poorest in the country, the report notes. "The way in which the reform proposal is proposed means that all taxes will be paid by consumers, especially those with lower purchasing power, which adds a new step to social inequality," he says, the report relays. Onpeco points out that a product such as sweet potato should never be taxed due to its high nutritional value, as should other tubers such as yams, yautía, and potatoes, from which only cassava is spared, the report relates. The consumer rights organization questions those who drafted the proposal, describing them as insensitive. Bagging the poorest with the burden of the collections is not only unfair but also inequitable, the report discloses. The Observatory recalled that the consumer population is not only fed by bananas, rice, milk, chicken, eggs, and bread, the only products that will not pay ITBIS—or VAT, as they have renamed the consumption tax, the report notes. Except for the exempt products mentioned, everything else will pay taxes, including garlic, onions, chili peppers, vegetables, sour oranges and juice, sour lemons, grapefruits, and all fruits and vegetables, the report says. This distances the population from a healthy diet and, especially, from food security and sovereignty, the report relays. To justify the new taxes, the government has identified tax evasion as a failure of the administration, which has demonstrated its inability to prosecute evaders, the report notes. At the same time, the burden of the revenues required to meet government expenditures is transferred to consumers, the report discloses. There is no more unfair decision than that, the report relays. It should be noted that Onpeco is not opposed to tax reform, the report says. What he demands is that consumers are not harmed, as evidenced in the proposal, because he understands that tax reform must be based on equity, the report relays. "Onpeco regrets that all the public administrations we have had have become accomplices to tax evasion and now they blame that deficiency on consumers. Lawmakers, who represent society, should rethink this proposal and suggest mechanisms to reduce tax evasion as a way to collect more, without burdening the poorest with the revenue needed by the government," the statement concludes, 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. ============= J A M A I C A ============= JAMAICA: Businesses Urge Banks to Cut Lending Rates on BOJ Cuts --------------------------------------------------------------- RJR News reports that business leaders in Jamaica are appealing for commercial banks to reduce their lending rates in line with the central bank's recent reduction in interest rates. This, they say, will drive more investments and faster economic growth, according to RJR News. Their responses were captured in the third quarter Business and Consumer Confidence Survey conducted by Market Research Services, the report notes. Some 125 businesses were interviewed, the report relays. The assets and liabilities of the country's commercial banks, which were published by the Bank of Jamaica under section 64(F) of the Banking Act, jumped to $2.52 trillion or 77 per cent of nominal GDP as at the end of June this year, the report discloses. Nominal GDP, or GDP before adjustment for consumer and producer price inflation, was projected at $3.3 trillion this fiscal year, the report says. Businesses on Borrowing Meanwhile, 58 per cent of the businesses interviewed say they are in need of more capital but only 4 per cent say they will seek funding from the JSE equities market, the report says. Some 49 per cent say they prefer traditional commercial bank financing, but approximately 51 per cent of those interviewed stressed that this kind of financing is too expensive and they prefer to rely on their own cash flows, the report relays. Don Anderson, head of Market Research Services, said businesses reported no major hurdle in accessing loans from financial institutions, the report notes. "Amongst businesses currently without a loan, a quarter have never tried or considered acquiring a loan. So they don't look like they're risk-inclined. So they aren't prepared to go and find money to invest in their businesses. But those that have accessed, feel that it's not really difficult. Fifty-seven per cent say they've been able to access funding without a lot of challenges," Mr. Anderson reported, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. In October 2023, Moody's upgraded the Government of Jamaica's long-term issuer and senior unsecured ratings to B1 from B2, and senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has been changed to positive from stable. In September 2023, S&P Global Ratings raised its long-term foreign and local currency sovereign credit ratings on Jamaica to 'BB-' from 'B+', and affirmed its short-term foreign and local currency sovereign credit ratings at 'B', with a stable outlook. In September 2024, S&P affirmed 'BB-/B' sovereign ratings on Jamaica and revised outlook to positive. In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. ===================== P U E R T O R I C O ===================== JOSE SERRANO VIERA: Fails to Extend Disclosure Statement Deadline ----------------------------------------------------------------- Judge Enrique Lamoutte of the United States Bankruptcy Court for the District of Puerto Rico denied Jose Manuel Serrano Viera's Motion for Reconsideration Under Rule 9023, Rule 60 and Opposition to Motion to Dismiss with Bar to Refile on two interrelated matters: (i) reconsideration of the order denying Debtor's fourth request for an extension of time to file a disclosure statement and plan, and (ii) abeyance of the Motion to Dismiss with a Bar to Refile of Three Years filed by the United States Trustee. On September 6, 2023, the Debtor filed his fourth request for an extension of time, which was denied on September 9, 2024. In its order denying the Debtor's fourth motion for an extension of time, the court stated that the request "for an extension of time to file a disclosure statement and Chapter 11 plan, and the reasons given, in light of the history of serial filings, do not establish reasonable cause to further extend the period within the debtor may file a disclosure statement and plan". On September 9, 2024, the United States Trustee filed the Motion to Dismiss with a 3-year bar to refile, which details the history of Debtor's 10 bankruptcy filings, the documents he has failed to submit to the United States Trustee, his failure to amend schedules and statement of financial affairs to accurately disclose his financial condition and pay the quarterly fees to the United States Trustee, and argues that the filed monthly reports of operation do not show that the Debtor is able to make payments to fund a plan of reorganization. Thus, the United States Trustee prays "that the instant case should be dismissed under: (1) 11 U.S.C. Sec. 1112(b)(4)(A), due to continuing losses suffered by the estate and the absence of a reasonable likelihood of rehabilitation; (2) 11 U.S.C. Sec. 1112(b)(4)(C), for Debtor's failure to maintain adequate insurance; (3) 11 U.S.C. Sec. 1112(b)(4)(E) and (J), for failure to comply with the Court's order at docket no. 140, which set September 9, 2024, as the deadline to file the Disclosure Statement and Plan; (4) 11 U.S.C. Sec. 1112(b)(4)(H), for Debtor's failure to timely provide the information reasonably requested by the United States Trustee; (5) 11 U.S.C. Sec. 1112(b)(4)(F), for Debtor's failure to timely file operating reports with the Court; and (6) 11 U.S.C. Sec. 1112(b)(4)(K), for Debtor's failure to pay quarterly fees" . The United States Trustee supports its request for dismissal and 3-year bar to refile with an in-depth legal analysis of the applicability of 11 U.S.C. Sec. 1112(b) to the facts of this case. In contrast, the Motion for Reconsideration is grounded on conclusory allegations that do not contradict the factual allegations and conclusions of law presented by the United States Trustee in the Motion to Dismiss, the Court notes. The Court finds the Motion for Reconsideration includes a plethora of conclusory and unsupported allegations as to the reasons which caused the history of Debtor's bankruptcy filings and delays in prosecuting this case. However, the allegations and legal analysis do not plead, support, or otherwise meet the requirements for relief under either Fed. R. Civ. P. 59(e) or 60(b). Therefore, the Motion for Reconsideration is hereby denied, the Court holds. In evaluating both the Motion to Dismiss and the Debtor's request to hold the same in abeyance, the Court notes that this is Debtor's tenth bankruptcy filing since 1999, and that Debtor's previous nine (9) bankruptcies were dismissed on fault of the Debtor. In addition, the uncontested facts show that the Debtor failed to file a disclosure statement and plan within the time ordered by the Court. Therefore, "cause" exists, and the court must dismiss the case pursuant to 11 U.S.C. Sec. 1112(b)(4)(J). In view of the foregoing reasons, the case is dismissed. Although the facts and the applicable law compel the dismissal of this case, the Court must still determine if the dismissal should include a bar to refile for a period of three years, as requested by the United States Trustee in the Motion to Dismiss. The court emphasizes the mandate as it finds that the Motion to Dismiss filed by the United States Trustee makes a prima facie case in support of its request for a 3-year bar to refile. As such, it behooves the Debtor to submit and present specific evidence, not speculations and unsupported conclusions, in support of its opposition to the bar to re-file. A copy of the Court's decision dated October 8, 2024, is available at https://urlcurt.com/u?l=9AGmKS Jose Manuel Serrano Viera, filed for Chapter 11 bankruptcy protection (Bankr. D.P.R. Case No. 23-03101) on September 28, 2023, listing under $1 million in both assets and liabilities. The Debtor is represented by Myrna Ruiz Olmo, Esq. VHB FOODS: Seeks 30-Day Extension of Plan Filing Deadline --------------------------------------------------------- VHB Foods Corp. asked the U.S. Bankruptcy Court for the District of Puerto Rico to extend its period to file a plan and disclosure statement for 30 days. The Court previously granted the Debtor an extension of time to file Disclosure Statement and Plan on July 31, 2024. The Debtor claims that it is still actively pursuing settlement agreements with various of the creditors in the present case. The Debtor explains that it is in the final stage of negotiations, reason why the company is requesting additional 30 days to present a confirmable plan and disclosure statement. VHB Foods Corp. is represented by: Juan Carlos Bigas Valedon, Esq. Juan C. Bigas Law Office 515 Ferrocarril Urb. Santa Maria Ponce, PR 00717 Phone: (787) 259-1000 Email: cortequiebra@yahoo.com citas@preguntalegalpr.com About VHB Foods, Corp. VHB Foods Corp. filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 24-00875) on March 5, 2024, listing $100,001 to $500,000 in assets and $1,000,001 to $10 million in liabilities. Juan Carlos Bigas Valedon, Esq., at Juan C Bigas Law Office represents the Debtor as counsel. =============== X X X X X X X X =============== LATAM: Roadmap for Caribbean to Escape 'Middle-Income Trap' ----------------------------------------------------------- RJR News reports that middle-income countries are in a race against time to raise their income levels. While several have a goal of reaching high-income status, since the 1990s, only 34 of 108 had succeeded at the end of 2023, according to RJR News. Five of them - Antigua and Barbuda, Barbados, Guyana, St. Kitts and Nevis, and Trinidad and Tobago - are in the Caribbean, the report notes. A new World Bank study, provides the first comprehensive roadmap to enable developing countries to escape the "middle-income trap," the report relays. Drawing on lessons of the past 50 years, the World Development Report 2024: The Middle-Income Trap finds that as countries grow wealthier, they usually hit a "trap" at about 10% of annual U.S. GDP per person—the equivalent of $8,000 today, the report says. That's in the middle of the range of what the World Bank classifies as "middle-income" countries, the report notes. Countries still classified as middle-income at the end of 2023 face far bigger challenges than their predecessors in escaping the middle-income trap: rapidly aging populations, rising protectionism in advanced economies, and the need to speed up the energy transition. In the Caribbean, middle-income challenges are further compounded by countries' vulnerability to shocks, including climate change, the report adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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