/raid1/www/Hosts/bankrupt/TCRLA_Public/241031.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 31, 2024, Vol. 25, No. 219
Headlines
A R G E N T I N A
ARGENTINA: Quest For More IMF Money Stalls On Currency Controls
ARGENTINA: To Auction Off More Than 400 State Properties
B E R M U D A
NABORS INDUSTRIES: State Street Holds 4.4% Stake as of Sept. 30
B R A Z I L
GERDAU SA: Faces Ownership Changes
C H I L E
VTR FINANCE: Fitch Hikes LongTerm IDRs to 'CCC'
C O L O M B I A
COLOMBIA: Home-Building Woes Spur Insolvencies Toward Decade High
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Bonds Decline Following Tax Reform Withdrawal
P A R A G U A Y
FRIGORIFICO CONCEPCION: Moody's Cuts CFR to B2, On Further Review
P U E R T O R I C O
VICTOR G GARCIA LOPEZ: IRS Loses Bid to Reopen Bankruptcy Case
X X X X X X X X
LATAM: Four Countries to Boost Nature-Based Solutions
- - - - -
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A R G E N T I N A
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ARGENTINA: Quest For More IMF Money Stalls On Currency Controls
---------------------------------------------------------------
Manuela Tobias & Jorgelina do Rosario at Bloomberg News reports
that in public, the International Monetary Fund (IMF) sings nothing
but praises for the austerity campaign Javier Milei has waged since
winning Argentina's presidency. Behind closed doors, however, the
libertarian leader is still struggling to obtain more money from
the IMF, according to Bloomberg News.
Just three months ago, Milei said his government would "certainly"
have a new programme with the IMF by year-end-replacing and
potentially expanding the current US$44-billion deal that's already
the largest ever granted by the Fund, Bloomberg News relays. But
after another round of talks underscored concerns about capital and
foreign exchange controls, it became clear that Milei has more work
to do before seeking fresh funds from the Washington-based lender,
Bloomberg News notes.
It's certainly a frustrating outcome for the libertarian economist
turned president, Bloomberg News discloses. In less than one year
in office, he's implemented more austerity measures than the Fund
requested, revving his chainsaw deep into public spending to cut
the equivalent of five percent of gross domestic product in
investment, pensions and public wages, Bloomberg News says.
Equally importantly, he's been able to do so without unleashing the
type of social unrest his opponents or even his team feared,
Bloomberg News relays. In fact, recent polls show he's retained
most of his popularity so far, even as the economy falls into its
sixth recession in a decade, Bloomberg News says.
At the heart of Milei's success is a war against inflation that has
limited the increase of consumer prices to less than four percent a
month, compared with more than 25 percent in December. Yet it's the
same obsession with prices that's getting in the way of a new
agreement with the IMF.
Even as Managing Director Kristalina Georgieva says her priorities
for Argentina are aligned with Milei's, negotiations for a new
programme continue to stall, Bloomberg News notes. The obstacle is
Argentina's edifice of capital and currency controls, known locally
as the 'cepo,' which the country needs to dismantle to return to
capital markets and obtain much-needed investment to grow again,
Bloomberg News discloses.
Asked about the talks that have taken place with Argentina, Luis
Cubeddu, the IMF's lead Argentina negotiator, said the Fund has
stressed the progress in reducing inflation and establishing a
strong fiscal anchor, while also emphasizing remaining challenges,
Bloomberg News discloses.
"We discussed the need to gradually unwind some of the existing FX
restrictions and controls," he told reporters, Bloomberg News
relays. "The discussions have deepened in an effort to better
understand their plans. Authorities are exploring the options for
them to move to a new program," he added.
Asked to comment on the story, a government official downplayed any
differences with the IMF and said that a new program can't happen
overnight, Bloomberg News notes.
The tension boils down to this: Argentina wants a fresh injection
of money to lift controls without worrying about a currency
sell-off that would send inflation spiralling and Milei's
popularity plummeting, Bloomberg News relays. But the IMF doesn't
want its resources used to artificially prop up a currency like
Argentina has done so many times before, Bloomberg News says.
"It seems that the Fund needs clarity on Argentina's FX strategy
before a new agreement," said Ernesto Revilla, head of Latin
America economics at Citigroup. "There's a lot of uncertainty in
the market about when this might happen, with many who don't
believe there will be big changes before midterm elections."
Argentina's legislative elections next October will give Milei a
chance to increase his base of support in Congress, Bloomberg News
discloses. But they're also likely to bring market and political
volatility that would discourage any major policy change, including
the removal of capital controls, Bloomberg News notes.
With or Without Money
With negotiations with the Fund wearing on, Milei and his team have
adapted their rhetoric accordingly, Bloomberg News says. In
interviews, officials went from saying in April that they wanted
fresh funds to lift capital controls to affirming earlier this
month that they're not necessary, Bloomberg News relays.
"The opening up of the cepo to the dollar is a lot closer than you
can imagine," Milei assured in a radio interview, Bloomberg News
discloses. "There's an opening with and without funds. If you give
me funds, I open it up today," he added.
Behind closed doors, Caputo still says Argentina would like to
receive an injection of reserves that would allow the government to
lift controls more easily, according to people who attended
meetings with the minister, Bloomberg News says. He also says that
Argentina could lift controls without the IMF as the parallel and
official foreign exchange rates converge and the bank rebuilds
reserves, but it would take longer, the people said, Bloomberg News
notes.
The size of a possible new program matters less than how much of
the total the IMF would agree to frontload, giving immediate
ammunition to Milei, Bloomberg News relays.
Frustrated and Angry
Milei's frustration with the IMF has been in full display,
Bloomberg News notes. In an August radio interview, the Argentine
president called Rodrigo Valdes, the IMF's top Argentina negotiator
at the time, "truly irresponsible" for allowing problematic
policies like unfettered money-printing in the former left-wing
government, Bloomberg News says.
Valdes, who had been appointed by Georgieva herself, was pulled
from negotiations with Argentina in September, Bloomberg News
discloses.
Argentina has had strict currency controls in place for nine of the
past 13 years, Bloomberg News notes. They include a tightly
managed exchange rate that is on average 20 percent stronger than
the market rate, Bloomberg News relays. The government also limits
the purchase of foreign currency for savings to US$200 a month per
individual, charges taxes on overseas travellers and curtails US
dollars for importers, Bloomberg News notes. Exporters, on the
other hand, have to sell their dollars for pesos, Bloomberg News
adds.
Milei has been sacrificing the country's precious dollars to keep
the peso overvalued because it's key to maintaining inflation under
control, Bloomberg News relays. Net international reserves now
stand about US$5.5 billion in the red, according to Buenos
Aires-based consultancy Eco Go, Bloomberg News says. That's still
an improvement from the US$11-billion deficit inherited from the
previous government. Caputo has told investors that low reserves
are the weakest part of the program, according to people familiar,
Bloomberg News discloses.
A new loan would be Argentina's 23rd agreement with the IMF, making
it the most frequent borrower the Fund has ever had. Its
US$44-billion program was given to former pro-market president
Mauricio Macri and renegotiated under Milei's left-wing
predecessor, Bloomberg News notes. Most of its programmes have
ended badly, notably the 2001 crisis when a collapsed IMF program
triggered deep recession and social unrest, Bloomberg News says.
"The IMF has tried and failed to fix Argentina's dysfunctional
economy 22 times," said Benjamin Gedan, director of the Wilson
Center's Latin America Program in Washington, DC, Bloomberg News
relays. "Milei's budget cuts do inspire confidence, but perhaps
not enough for the Fund to open the purse strings. At least not
yet," he added.
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 Auction Off More Than 400 State Properties
--------------------------------------------------------
Buenos Aires Times reports that President Javier Milei's government
will auction off more than 400 state buildings across Argentina,
hoping to raise US$800 million in the process.
Argentina's property management agency "is going to auction more
than 400 properties and put another 800 properties up for sale,
with the sole objective of reducing unnecessary expenses,"
Presidential Spokesman Manuel Adorni announced at a press
conference, according to Buenos Aires Times .
"It is estimated that these properties have a total estimated value
of US$800 million," he added.
Adorni said that one of the buildings for sale will be the former
headquarters of the former Women, Gender & Diversity Ministry,
which Milei downgraded soon after taking office, the report notes.
Located in the San Telmo neighbourhood of the capital, it is valued
at some US$12.5 million, the report relates.
Arguing that today the building is useless, Adorni repeated how
Milei got rid of the portfolio, introduced by former president
Alberto Fernández in 2019, upon taking office, the report says.
The La Libertad Avanza leader, who said that he closed the
ministry, in fact turned it into a sub-secretariat of the Justice
Ministry and renamed it, the report notes
Adorni also announced that a government decree banning "hereditary
positions" in the civil service will be published soon, the report
discloses.
The practice in some state agencies, which is included in some
collective-bargaining agreements, is to give preference when
recruiting new staff, under certain conditions, to the immediate
family members of a deceased employee, the report relays.
This was the case, for example, at the Central Bank, where
preference was sometimes given to the spouse or child of a deceased
employee, the report notes.
This rule was repealed in 2018 by a decree issued by then-president
Mauricio Macri, but the board of the Central Bank reinstated and
defended it in 2022 during the Fernandez government, the report
says.
"These hangovers of blood privileges, these mediaeval hangovers …
persist in strata of the Argentine public sector," said
Deregulation & State Transformation Minister Federico Sturzenegger
at the same press conference, the report discloses.
Sturzenegger first entered government as a secretary at the Economy
Ministry in 2001 and later served as a national deputy and the
heads of both the Central Bank and Banco Ciudad, the report notes.
Milei appointed him earlier this year as deregulation czar, tasked
with cutting bureaucracy and red tape, the report says.
The Milei administration did not give an estimate of how many
"hereditary" jobs currently exist in the civil service, 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.
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B E R M U D A
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NABORS INDUSTRIES: State Street Holds 4.4% Stake as of Sept. 30
---------------------------------------------------------------
State Street Corporation disclosed in Schedule 13G/A Report filed
with the U.S. Securities and Exchange Commission that as of
September 30, 2024, it beneficially owned 415,573 shares of Nabors
Industries Ltd.'s common stock, representing 4.4% of the shares
outstanding.
A full-text copy of State Street's SEC Report is available at:
https://tinyurl.com/29easfj3
About Nabors
Bermuda-based Nabors Industries Ltd. (NYSE: NBR) owns and operates
land-based drilling rig fleets and provides offshore platform rigs
in the United States and several international markets. Nabors also
provides directional drilling services, tubular services,
performance software, and innovative technologies for its own rig
fleet and those of third parties.
Nabors Industries reported a net loss of $11.8 million for the year
ended December 31, 2023, a net loss of $307.22 million in 2022, a
net loss $543.69 million in 2021, a net loss of $762.85 million in
2020, a net loss of $680.51 million in 2019, a net loss of $612.73
million in 2018, and a net loss of $540.63 million in 2017. As of
March 31, 2024, the Company had $4.64 billion in total assets,
$3.37 billion in total liabilities, and $522.82 million in total
stockholders' equity.
* * *
In August 2024, Fitch Ratings has assigned a 'CCC'/'RR6′ rating
to Nabors Industries, Inc.'s proposed senior guaranteed notes (PGN)
due 2031. Nabors plans to utilize the proceeds from these notes to
refinance the 7.25% PGN due 2026 held at Nabors Industries, Ltd.
(Bermuda) and for general corporate purposes. The proposed notes
will rank pari passu with Bermuda's existing PGN due 2026 and PGN
due 2028.
Nabors' existing 'B-' Long-Term Issuer Default Rating and Stable
Outlook reflect the softening U.S. drilling environment since the
beginning of 2023, alongside a steadily growing international
segment. Fitch's credit profile assessment is supported by the
expectation that free cash flow (FCF) will be directed toward gross
debt reduction, as well as the company's proactive management of
its maturity profile and its adequate liquidity.
However, these positive factors are partially offset by the
company's large note maturities starting in 2027, which Fitch
anticipates will likely require partial refinancing through capital
markets. Additionally, potential declines in rig activity and day
rates could negatively impact cash flow and restrict FCF and
near-term gross debt reduction. The company's complex capital
structure, combined with the current high-interest rate
environment, could also limit refinancing options and increase
interest expenses.
In March 2024, S&P Global Ratings revised its outlook to stable
from positive and affirmed its 'B-' issuer credit rating on Nabors
Industries Ltd. At the same time, S&P affirmed its 'B-' issue-level
rating on the company's senior priority guaranteed notes, with a
recovery rating of '3,' and a 'CCC' issue-level rating on the
company's priority guaranteed notes, with a recovery rating of '6.'
The stable outlook reflects S&P's expectation for the company's
operating performance, industry fundamentals, near-term debt
maturity profile, and credit metrics to remain appropriate for the
'B-' issuer credit rating. The outlook revision reflects S&P's
expectation of reduced free cash flow generation and lower than
anticipated debt reduction.
In July 2024, S&P Global Ratings assigned its 'CCC' issue-level
rating and '6′ recovery rating to Nabors Industries Ltd.'s
proposed $550 million senior guaranteed notes due 2031. The
company's subsidiary, Nabors Industries Inc., will issue the notes.
The '6′ recovery rating indicates S&P's expectation of negligible
(0%-10%; rounded estimate: 0%) recovery of principal by creditors
in the event of a payment default.
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B R A Z I L
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GERDAU SA: Faces Ownership Changes
----------------------------------
Rio Times Online reports that Capital International Investors (CII)
recently reduced its stake in Gerdau (GGBR4) to 68,851,521 shares,
representing 4.96% ownership. This adjustment reflects broader
changes in the steel manufacturer's market dynamics and investor
sentiment, according to Rio Times Online.
Gerdau demonstrated strong financial results with net revenue
reaching R$68.91 billion ($12.3 billion) and net profit of R$7.53
billion ($1.34 billion), the report notes. The company's EBITDA
reached R$12.75 billion ($2.27 billion), maintaining an impressive
18.5% margin despite market challenges, the report relays.
The company plans total strategic capital expenditure of R$9.2
billion ($1.64 billion), with R$3.4 billion ($607 million) already
invested, the report discloses. Gerdau expects these investments
to generate annual EBITDA returns of R$2.8 billion ($500 million)
after full implementation, the report notes.
Bank of America adjusted Gerdau's price target to R$24, while
maintaining a buy recommendation. The bank projects trading at 3.6x
EV/EBITDA by 2025, suggesting an 8% free cash flow return, the
report says.
Gerdau maintains a solid asset base valued at R$74.88 billion
($13.37 billion), the report relays. The company manages its debt
effectively, with gross debt at R$10.89 billion ($1.94 billion) and
net debt at R$5.54 billion ($989 million), the report notes.
The company's North American division shows particular strength,
contributing over half of operational results, the report says.
This success stems from robust demand and strategic positioning in
the U.S. market, supported by government initiatives and
infrastructure spending, the report relays.
Gerdau advances its environmental commitments through strategic
investments like the Arinos Solar Complex acquisition, the report
notes. This project will provide 7% of Gerdau's annual energy
needs in Brazil, reducing carbon emissions by 22,000 tons annually,
the report discloses.
The company's balanced approach to market challenges, strategic
investments, and sustainability initiatives positions it well for
future growth despite current market uncertainties, the report
adds.
About Gerdau S.A.
As reported in the Troubled Company Reporter-Latin America in 2020,
Moody's Investors Service affirmed Gerdau S.A.'s Ba1 corporate
family rating and the Ba1 ratings of the debt issues of Gerdau
Trade Inc. (guaranteed by Gerdau S.A. and its operating
subsidiaries in Brazil) and of GTL Trade Finance Inc. (guaranteed
by Gerdau S.A. and its operating subsidiaries in Brazil), as well
as the solid waste disposal bonds issued by St. Paul Port
Authority, MN (guaranteed by Gerdau S.A.). The outlook for the
ratings was changed to stable from positive.
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C H I L E
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VTR FINANCE: Fitch Hikes LongTerm IDRs to 'CCC'
-----------------------------------------------
Fitch Ratings has upgraded the Long-Term Local Currency and Foreign
Currency Issuer Default Ratings (IDRs) of VTR Finance N.V. (VTR) to
'CCC' from 'CCC-'. Fitch has also upgraded VTR's senior USD483
million notes due in 2028 to 'CC'/'RR6' from 'C'/'RR6' and VTR
Comunicaciones SpA's senior secured notes of USD474 million (2028)
and senior secured notes for USD391 million (2029) to 'CCC-'/'RR5'
from 'CC'/'RR5'.
The ratings upgrades are based on the upcoming consolidation of
around 91% of ownership of Claro/VTR joint Venture (Claro Chile
SpA) and consequently of VTR Finance by America Movil S.A B. de
C.V. (AMX). This follows the conversion of around CLP900 billion of
convertible loans into equity in Claro Chile SpA. Fitch applies its
"Parent and Subsidiary Linkage Rating Criteria" to the ultimate
parent AMX, following a stronger parent path between AMX and VTR.
Medium strategic linkage, offset by low legal and operational
linkage, leads to a one-notch uplift from VTR's Standalone Credit
Profile.
The ratings consider VTR's negative FCF generation and high
leverage as of June 2024 due to the highly competitive environment
in Chile. Fitch expects the company will begin to modestly grow its
customer base by 2025.
Key Rating Drivers
AMX to Consolidate Claro Chile Spa: VTR's ratings incorporate AMX's
upcoming assumption of control of Claro Chile. The Antitrust
Authority (FNE) approved the change of control of Claro Chile, the
direct owner of VTR Finance, with AMX controlling approximately 91%
of its ownership. This decision was consistent with the FNE's
previous approval of the joint venture between both groups for
mobile and fixed development in the Chilean market. The FNE
approved the transaction considering that it does not materially
reduce competition in the analyzed markets. AMX expects to start
the consolidation of Claro Chile on Nov. 1, 2024, when it will
convert intercompany loans to around CLP900 billion of equity.
PSL Linkage with AMX: In light of the upcoming consolidation of VTR
Finance within AMX, Fitch applies its "Parent and Subsidiary
Linkage Rating Criteria" through the stronger parent path,
considering AMX as the ultimate parent with a stronger credit
profile, higher diversification, and a solid business model.
Despite the low legal incentive due to the absence of guarantees on
VTR's debt from AMX, Fitch considers strategic incentive as medium.
This assumption is based on the strong financial support provided
to Claro Chile SpA and indirectly to VTR to sustain their business
model and a capex plan focused on fiber subscriber expansion and 5G
network development.
Fitch views operational incentives as low because the consolidation
process with AMX is still in the early stages. Other factors
include the independent management of Claro Chile, the absence of a
unified brand, and the limited EBITDA contribution of VTR to AMX.
High Leverage and Sustained Negative FCF: Fitch expects VTR's
leverage to remain elevated during 2024-2025 due to negative FCF.
Fitch assumes that AMX will maintain its financial support of Claro
Chile and, subsequently, VTR. Leverage ratios reached 24x in LTM
June 2024 and 21x excluding the Claro Chile intercompany loans of
CLP155 billion. Fitch estimates leverage to remain elevated in
2024-2025 period, with an annual negative FCF of approximately
CLP150 billion during 2024-2025 followed by a slight recovery of
operational performance. Fitch expects capex to be elevated at
around 30% in 2024, before moderating to 25% in the medium term.
This capex is focused on the transformation and improvements in
fixed network.
Pressured EBITDA: Fitch expects the EBITDA margin to remain under
pressure and does not expect a significant EBITDA recovery in 2024.
VTR's EBITDA margin declined to 12% for the LTM June 2024 from 40%
in 2019, while its EBITDA decreased to CLP52 billion from CLP264
billion in 2019. As of June 2024, VTR has been unable to increase
RGUs due to fierce price competition and lower average monthly
revenue per user (ARPU). Broadband subscribers have declined to
fewer than 1.08 million from 1.3 million since the start of the
pandemic, pressuring earnings.
ESG - Limited Transparency: VTR's disclosure of its financial
policy, commercial strategy and future capital structure has been
limited following its combination with Claro Chile in October 2022.
The lack of information surrounding these key credit considerations
has occurred despite high leverage and significant pressure on
credit metrics. Fitch expects that the consolidation of the
combined business (mobile and fixed) into AMX could improve
information disclosure in the medium term.
Derivation Summary
VTR's performance is exposed to competitive pressures in the
Chilean broadband market. It is uncertain whether VTR's credit
profile will benefit from its combination with Claro Chile under
AMX due to the lack of transparency about the combined operations.
VTR's financial profile is one of the most levered in the region.
VTR has a similar fixed-line operating profile as Telefonica Chile,
and the combined business with Claro Chile should reach a similar
scale and diversification as Telefonica Moviles Chile (TMCH,
BBB-/Negative) on a consolidated basis. However, TMCH benefits from
better financial metrics, with strong liquidity and net leverage of
around 4.5x (LTM as of June 2024).
Compared with WOM Mobile S.A. (WOM; D), VTR/Claro's combined
operation should have higher diversification and scale and a lower
EBITDA margin. WOM's rating reflects its Chapter 11 filing due to
refinancing challenges, despite its solid operational performance
in Chile where it competes with much larger companies.
When compared with Millicom International Cellular S.A.'s
(BB+/Stable) subsidiaries, Comcel (CT Trust; BB+/Stable) and
Telefonica Celular del Paraguay (Telecel; BB+/Stable), VTR operates
in a more competitive market but in a stronger operating
environment. Comcel and Telecel have more dominant market positions
and significantly lower net leverage at around 2x and 3x,
respectively. Comcel's and Telecel's ratings reflect a strong
linkage with their parent Millicom, which heavily relies on the two
wholly owned subsidiaries' dividends to service its debt.
Key Assumptions
- Fixed business revenue (VTR standalone) contracts approximately
3% in 2024 recovers slightly in 2025, due to the low single digits
growth of subscribers and ARPU;
- An EBITDA margin reduction to 10% in 2024 and a slight recovery
to 13% in the medium term, considering the synergies and a
conservative recovery of ARPU;
- Additional resources required to finance the operations and
investments coming from the AMX support, as Intercompany loans with
Claro Chile S.p.A;
- Capex of 30% over revenues in the near term, decreasing to around
25% in the medium term;
- No dividend distributions.
Recovery Analysis
Going Concern Recovery Approach
Fitch's criteria consider a bespoke recovery analysis for issuers
with IDRs of 'B-' and below. The bespoke recovery analysis assumes
VTR would be considered a going concern in bankruptcy and the
company would be reorganized rather than liquidated. VTR's CLP45
billion going concern EBITDA is based on Fitch's expectation of
sustainable, post-reorganization EBITDA, reflecting the intense
competition in the Chilean market. The enterprise value/EBITDA
multiple applied is 4.0x; this reflects VTR's deteriorating
operating performance and financial profile, despite the strong
market position.
Fitch applies a waterfall analysis to the post-default enterprise
value based on the relative claims of the debt in the capital
structure. Fitch debt waterfall assumptions reflect the company's
total debt as of June 30, 2024. These assumptions result in a
Recovery Rating (RR) for VTR Comunicaciones secured bonds of 'RR5'
range, which, per Fitch's criteria, leads to a one-notch reduction
of the IDR to 'CCC-'. For structural subordination, the result of
recovery analysis of VTR's USD483 million senior secured debt is
'RR6', which is two notches below the IDR and results in a 'CC'
rating. Fitch applied concession allocation payments to VTR's
debts.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Rapid turnaround of operational performance related to the
subscriber base, ARPU, and EBITDA margin, and the ability to
significantly improve EBITDA margin through synergies from the
VTR/Claro combination;
- Clear evidence of further integration with AMX, such as a unified
brand, shared management, and the guarantee of a significant part
of VTR's debt.
- Material improvements in leverage and liquidity position;
- Consistent and improved depth of disclosure surrounding strategy
and other credit considerations.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Reduction or absence of AMX's financial and operational support,
disinvestment or a change in Claro Chile ownership's structure
(after the consolidation of around 91% of the Claro Chile
ownership);
- Lack of clarity about a strategy for the combined operation to
improve VTR's financial flexibility and capital structure;
- Continued operational performance deterioration.
Liquidity and Debt Structure
Liquidity Supported by AMX: VTR has weak liquidity, and Fitch
expects it to generate negative FCF in the medium term, due to the
restructuring and integration process between its fixed and mobile
businesses. The company will likely need to add debt to its capital
structure to fund at least part of the shortfall and capex plan.
Its cash was CLP11.8 billion as of June 2024, which represents
around 15% of the short- term debt for CLP183 billion), mainly
composed by CLP155 billion of Claro Chile intercompany loans. The
next relevant maturity is the 2028 bond of VTR Comunicaciones
(USD474 million). This represented a deterioration from 2022 and
2021 cash levels of CLP34 billion and CLP121 billion,
respectively.
VTR received shareholder support of CLP155 billion as an
intercompany loan from Claro Chile. It used the loan to finance
interest payments and investments, replacing the vendor financing
lines and the RCF, which closed in December 2023. This debt has no
interest rate and matures in less than 12 months. Fitch expects
this intercompany loan will be maintained and for VTR to receive
additional financial support from Claro Chile in the medium term,
considering the strong capex plan in network development.
Issuer Profile
VTR is the second largest provider of fixed broad band (FBB) in
Chile and the largest provider of Pay TV services. The combined
business with Claro Chile's, reach the leadership position in FBB,
and the third place of mobile voice and data service.
Public Ratings with Credit Linkage to other ratings
VTR ratings are linked to America Movil S.A.B de C.V, through
Fitch's "Parent and Subsidiary Linkage Rating Criteria".
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
VTR has an ESG Relevance Score of '5' for Financial Transparency as
a result of the very limited disclosure surrounding Claro/VTR
combined group structure, business model and its financial
strategy. This has a negative impact on the credit profile and is
highly relevant to the rating, resulting in an implicitly lower
rating.
VTR has an ESG Relevance Score of '4' for Management Strategy due
to its inability to reverse deterioration of operational
performance and, consequently, its financial profile. This has a
negative impact on the credit profile and is relevant to the rating
in conjunction with other factors
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
VTR Comunicaciones SpA
senior secured LT CCC- Upgrade RR5 CC
VTR Finance N.V. LT IDR CCC Upgrade CCC-
LC LT IDR CCC Upgrade CCC-
senior secured LT CC Upgrade RR6 C
===============
C O L O M B I A
===============
COLOMBIA: Home-Building Woes Spur Insolvencies Toward Decade High
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globalinsolvency.com, citing Bloomberg News, reports that the
number of companies in Colombia filing for insolvency this year is
on track to reach its highest level in a decade, heaping pressure
on President Gustavo Petro to pull the country out of its economic
doldrums.
The surge in financially distressed firms is being driven by a
sharp contraction in the construction industry, one of the nation's
biggest employers, that's partly a result of a housing subsidy
overhaul by Petro's own government, according to
globalinsolvency.com.
Economists worry that ripple effects from businesses shutting down
will hold back growth in the broader economy, the report notes.
As reported in the Troubled Company Reporter in August 2024, Fitch
Ratings has affirmed Colombia's Long-Term Foreign Currency Issuer
Default Rating (IDR) at 'BB+' with a Stable Rating Outlook.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Bonds Decline Following Tax Reform Withdrawal
-----------------------------------------------------------------
Dominican Today reports that Bloomberg reported that the withdrawal
of the tax reform bill, which aimed to restructure the tax system
and boost revenue collection, led to a decline in Dominican bonds.
President Luis Abinader had predicted that this drop would be
temporary, according to Dominican Today.
According to Bloomberg, "Dollar notes accelerated emerging market
losses, with those maturing in 2060 losing up to 2.6 cents on the
dollar, trading below 90 cents," Dominican Today notes. The reform
aimed to raise revenue by 1.5% of GDP by increasing taxes on
income, businesses, and property while reducing incentives for the
film and tourism industries, Dominican Today relays.
Credit rating agencies have also reacted. Fitch Ratings and Moody's
have rated the Dominican Republic three points below investment
grade, while S&P Global rates it one level higher at BB, Dominican
Today discloses. Seaport Global highlighted to clients that the
withdrawal is a significant setback for the country's goal of
achieving investment-grade status during Abinader's administration,
Dominican Today says. Uncertainty remains about how fiscal
consolidation will be achieved, despite limits on real-term primary
spending, Dominican Today 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.
===============
P A R A G U A Y
===============
FRIGORIFICO CONCEPCION: Moody's Cuts CFR to B2, On Further Review
-----------------------------------------------------------------
Moody's Ratings has downgraded Frigorifico Concepcion S.A.'s
corporate family rating to B2 from B1. The rating is under review
for further downgrade. Previously, the outlook was stable.
RATINGS RATIONALE
The downgrade of Frigorifico Concepcion S.A.'s (FriCon) rating to
B2 from B1 reflects higher refinancing and liquidity risk stemming
from the company's increased reliability on short term debt to fund
its growth-related negative free cash flow, with limited access to
long-term financing to extend the maturity of its obligations.
Additionally, to preserve cash, the company will likely need to
continue to slow growth of its slaughtering activity at least
through 2025, which in turn will keep leverage metrics higher for
longer, until the company is able to gradually decrease debt levels
and increase internally generated cash flow.
The rating is under review for further downgrade as Moody's assess
the risk of additional liquidity drains, the refinancing risk
associated with short-term debt, and the potential for bond
repurchasing at distressed levels. During this review, Moody's will
examine whether the company can substantially reduce its cash burn,
demonstrating strong operational performance and access to local
financial institutions and domestic capital markets.
FriCon's reliance on short-term financing has raised its
refinancing risk and heightened its financial strategy's inherent
risk. As of June 30, 2024, FriCon had $49.3 million in cash and
$210 million in short-term debt, mostly from bank credit lines for
working capital ($58 million as of September 2024 according to its
operational update in October 2024). FriCon generated $240 million
in negative free cash flow as of LTM June 2024, mainly because of
$253 million working capital requirements which resulted in $187
million in negative cash from operations, which was largely funded
by a $161 million long term facility granted by Bank of America
(BofA). During Moody's review, Moody's will assess the company's
ability to improve operating cash flow that in turn would lower
liquidity pressures. In this regard, the company's ability to
deliver higher EBITDA from operations will be key for reducing cash
burn, as well as a gradual reduction in working capital
requirements.
The temporary qualified opinion given by its new external auditor,
PricewaterhouseCoopers (PwC), for the fiscal year 2023 financial
statements – which was subsequently replaced with an unqualified
opinion on May 28th, 2024 – harmed investors' perception of the
company. The rating action reflects Moody's view that this will
likely limit the company's ability to access long-term cross-border
capital markets until they regain the markets' confidence.
It's worth noting that during 2024 FriCon has successfully
refinanced its short-term debt obligations by using local capital
markets and financial institutions. The company issued three local
bonds in Bolivia totaling $65 million with 3-year terms and
6.2%-6.6% coupons. Additionally, it increased its term loan
facility with BofA by $81 million, reaching a total of $161 million
with an interest rate of SOFR + 5.5%. To boost liquidity, FriCon
reduced its slaughtering activity in mid-2024, particularly in
Brazil.
FriCon has enhanced its financial transparency by successfully
completing its 2023 PwC and forming a new independent audit
committee to improve corporate governance starting mid-2024.
Additionally, the company has been providing interim quarterly
financial reviewed by PwC for 2024. The Audit Committee, composed
of independent members, will report to the Board and work with
auditors and management to oversee financial reporting, internal
controls and auditing. The committee will ensure financial
accuracy, risk management, and regulatory compliance. These changes
underscore the importance of gradually introducing governance
measures that build investor trust.
The rating of FriCon continues to be supported by its leading
position in the production and sale of fresh beef and pork, with
regional diversification of production through facilities located
in Paraguay, Bolivia and Brazil, which in turn supports the
company's access to a diversified pool of export markets. The
rating also incorporates the company's ability to significantly
increase revenues through expansion of processing capacity and
strategic acquisitions since 2020, while at the same time
maintaining strong profitability aided by a good operating
environment in Latin America, particularly in Paraguay, where the
company benefits from a lower tax burden relative to regional
peers.
FriCon's ratings are mainly constrained by its small scale relative
to LatAm based peers with global operations. This risk is partially
offset by the diversification provided by the company's export
revenue. In this regard, FriCon's credit profile would benefit from
a longer track-record as it continues to ramp up new beef and pork
operations in Brazil and Bolivia in 2025-2026. Also constraining
the rating is the company's exposure to the cyclical nature of the
protein industry and overall volatility of protein prices,
particularly because of the concentration in beef, which is the
company's main protein in terms of revenue, because EBITDA and
working capital requirements may suffer significantly in response
to a sudden rise in cattle costs.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The rating is unlikely to be upgraded given the review for
downgrade process. The rating would be confirmed if FriCon is able
to deliver a substantial reduction its cash burn, demonstrating
strong operational performance and access to local financial
institutions and domestic capital markets to refinance debt
maturities and lower liquidity risk.
The rating could be downgraded if the rating review process
determines there is an increase in the risk of liquidity drains and
refinancing risk associated with short-term debt, and the potential
for bond repurchasing at distressed levels. The rating could be
downgraded if FriCon's liquidity worsens, such as facing
refinancing restrictions on short-term debt.
The principal methodology used in this rating was Protein and
Agriculture published in August 2024.
Founded in 1997 and headquartered in Asunción, Paraguay, FriCon
has a leading position in the production and sale of fresh beef and
pork in Paraguay, Bolivia and Brazil, with a diversified portfolio
of clients around the world. Since 2017, FriCon has also
incorporated industrialized product lines such as burgers, premium
burgers, meatballs and sausages. As of LTM Jun-24, around 52% of
revenues were derived from exports to 37 countries through its
plants in Paraguay, Bolivia and Brazil, and the remaining balance
were sales to the local markets.
=====================
P U E R T O R I C O
=====================
VICTOR G GARCIA LOPEZ: IRS Loses Bid to Reopen Bankruptcy Case
--------------------------------------------------------------
Judge Mildred Caban Flores of the United States Bankruptcy Court
for the District of Puerto Rico denied the motion filed by the
Internal Revenue Service to reopen the Chapter 11 bankruptcy case
of Victor G. Garcia Lopez for failure to pay post-petition taxes.
In its motion, the IRS requests that the instant case be reopened
asserting that the Debtor has failed to pay it the required
post-petition self-employment taxes (Form 1040SS) for the tax years
2020, 2021 and 2022. The IRS further asserts that the Debtor's
failure to timely pay his post-petition tax obligations triggers
Section 1112(b)(4)(I) of the Bankruptcy Code, which allow for
conversion to Chapter 7 or dismissal of the case.
The Debtor opposes the motion to reopen the case asserting that the
IRS:
(i) does not allege a default under the terms of the confirmed
plan;
(ii) does not allege any ill-conduct by the Debtor during the
term the bankruptcy case was open; and
(iii) does not cite any provision of the confirmed plan with
jurisdiction related to post-confirmation, post-final
decree alleged grievances.
The final decree in the present case was entered on July 6, 2018.
The Court says the post-petition taxes that the Debtor allegedly
failed to pay are post-final decree taxes. Furthermore, the IRS
delayed the request to reopen the case until after the Debtor
allegedly failed to pay self-employment taxes for three years, the
Court notes.
The Court finds that the case should not be reopened given the
five-year period between the estate's closing and the motion to
reopen and the delay of three years in requesting the reopening.
A copy of the Court's decision dated October 10, 2024, is
available
at https://urlcurt.com/u?l=POS84X
Victor G. Garcia Lopez filed for Chapter 11 bankruptcy protection
(Bankr. D.P.R. Case No. 14-07306) on September 3, 2014, listing
under $1 million in both assets and liabilities.
===============
X X X X X X X X
===============
LATAM: Four Countries to Boost Nature-Based Solutions
-----------------------------------------------------
The Inter-American Development Bank (IDB), with the support of
Global Affairs Canada (GAC), will provide resources and technical
assistance to Brazil, Colombia, Guatemala, and Mexico in
implementing policy instruments aimed at attracting private
investments in Nature-based solutions. The announcement occurred
during the United Nations Conference on Biodiversity, COP16.
Nature-based Solutions, or NbS refers to the strategic restoration,
protection, or management of ecosystems to achieve development
outcomes to address societal challenges by reinforcing the services
provided by nature. NbS are important for climate change
adaptation, biodiversity conservation, and ecosystem services
improvement.
The pilot projects in each selected country will include NbS in
sectors such as transportation, integrated landscape management,
water and sanitation, urban planning, and watershed management. For
example, Guatemala will integrate sustainable forest management
with road infrastructure development to mitigate environmental
impact and enhance climate resilience.
The policy instruments to be developed include governance
frameworks and evidence-based contributions, which facilitate the
private sector investments critical to closing the biodiversity
financing gap.
The development of these NbS incorporates a gender-responsive
approach, acknowledging that climate change impacts can exacerbate
existing gender inequalities and that women are important
decision-makers in the use of natural resources.
This effort is part of the program "Promoting improved climate
change governance through the implementation of Nature-Based
Solutions in Latin America and the Caribbean" funded by GAC,
Canada's foreign ministry.
The program, approved in 2023, entered its implementation phase in
2024 and will continue until July 2027. Its aim is to achieve
several key outcomes such as development of at least four business
cases; integration of gender-responsive NbS approaches into
relevant policies, and enhancement of policymakers' capacities in
the pilot countries.
The IDB has been leveraging NbS as a cornerstone to drive
nature-positive investments, actively managing funds to integrate
them into public policies and investment strategies across
countries in Latin America and the Caribbean. Between 2015 and
2020, the IDB invested over $800 million in projects with
Nature-based Solution components.
Latin America and the Caribbean at COP16
The countries of Latin America and the Caribbean are a nature
powerhouse and a critical part of the solution to biodiversity
loss. In its three pavilions, the IDB is hosting more than 50
events with international leaders and experts to showcase
initiatives on nature and biodiversity, and innovative approaches
to nature-positive investments aiming to restore and conserve
biodiversity. Journalists covering CO16 on site are welcome to
visit the pavilions, with no registration required.
*********
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
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The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
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