/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/241105.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, November 5, 2024, Vol. 25, No. 222 Headlines A R G E N T I N A PETROQUIMICA COMODORO: Fitch Affirms 'B-' LT IDRs, Outlook Stable RAGHSA SA: Moody's Affirms 'Caa2' CFR, Outlook Remains Stable B A H A M A S FTX GROUP: Reaches $228MM Deal with Bybit to Resolve Lawsuit B E R M U D A IRIS FINANCIAL: Moody's Affirms 'B2' CFR & Alters Outlook to Stable B R A Z I L AZUL SA: Fitch Lowers LongTerm IDRs to 'CC' on Refinancing Deals GOL LINHAS: Wants to Raise Cash to Use in Chapter 11 Exit LIGHT SA: Taps White & Case as Attorneys in Ch. 15 Restructuring C A Y M A N I S L A N D S SPI INVESTMENT: Chapter 15 Case Summary C O L O M B I A COLOMBIA: Cuts Key Rate to 9.75% as Fiscal Risks Spook Market D O M I N I C A N R E P U B L I C [*] DOMINICAN REPUBLIC: Labor Reform Proposal Stalls in Congress G U A T E M A L A INSTITUTO DE FOMENTO: Fitch Gives 'BB' Insurer Fin. Strength Rating M E X I C O GRUPO AEROMEXICO: Sells $1.1 Billion of Bonds to Refinance Debt PETROLEOS MEXICANOS: Losses Deepen in Negative Sign for New CEO P A N A M A [*] Fitch Affirms 'BB+' IDR on 4 Panamanian Banks, Outlook Stable P E R U UNACEM CORP: S&P Lowers ICR to 'BB-', Outlook Negative V E N E Z U E L A VENEZUELA: Oil Exports Hit 4-Year Peak on Higher Output, Sales - - - - - ================= A R G E N T I N A ================= PETROQUIMICA COMODORO: Fitch Affirms 'B-' LT IDRs, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Petroquimica Comodoro Rivadavia S.A.'s (PCR) Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'B-'. The Rating Outlook is Stable. PCR's ratings reflect its limited oil production size, concentrated cement business in Argentina's Patagonia region and exposure to Argentine electric industry regulatory risk. PCR's risk from operating in Argentina is partially offset by its Ecuadorian oil operations, which cover its hard-currency consolidated interest expense. Fitch estimates that PCR's ex-Argentine EBITDA will cover this expense over the rated horizon, mitigating the impact of capital controls. Key Rating Drivers Small Production Profile: PCR's ratings reflect its small and concentrated production profile of below 20,000 barrels of oil equivalent per day (boed), aligning with the low end of the 'B' rating category. The company holds exploration and production interest in nine blocks in Argentina and six in Ecuador. Its proven reserves (1P) and production are concentrated in Argentina at 69% and 53%, and Ecuador at 31% and 47%, respectively. PCR has 1P reserves of 17 million boe and a reserve life of 2.7 years. With new operations, Fitch expects PCR to achieve around 18,000 boed in production and 25 million boe in 1P reserves. The next rating category requires production above 45,000 and a reserve life exceeding seven years. Diversified Business Profile: PCR has a diversified business profile across three operating segments. In 2025, PCR's EBITDA is estimated to reach USD222 million, with Oil & Gas accounting for 54%, Renewables 40%, and Cement 6%. The Renewables segment has moderate exposure to Compania Administradora del Mercado Mayorista Electrico Sociedad Anonima (CAMMESA), which accounts for 58% of its revenues. Oil & Gas and Renewables will lead growth, following increased drilling in Argentina and Ecuador and COD of three wind farms in Argentina. Fitch projects the Renewables segment EBITDA will maintain around 40% of total EBITDA, up from 35% over the last three years. Adequate Leverage: Fitch expects PCR's gross leverage, defined as total debt to EBITDA, will decrease to approximately 2.9x at YE 2025, compared with 4.1x in 2023. Fitch estimates PCR's consolidated debt will be approximately USD533 million at YE 2024. Fitch expects gross leverage will be at or below 3.0x in 2024-2026. EBITDA to interest expense is estimated to be above 5.0x throughout the rating horizon. Strengthening Geographic Diversification: Fitch forecasts EBITDA from Ecuador to cover hard-currency debt service by at least 2.5x over the rating horizon, an improvement from Fitch's previous expectations. The company has increased activity within Ecuador the addition of Saywa and VRH-Este exploratory blocks. O&G Production in Ecuador has become nearly on par with that of Argentina at 47% as of 3Q24, compared to 40% at YE23. The Ecuadorian operation could become a more significant driver should they propel production and reserves above thresholds for the rating category. Derivation Summary PCR's closest peer is Capex S.A., which is also rated 'B-'/Stable. Both companies derive a majority of their revenues from energy and electricity, while PCR benefits from its Cement sector. Production is expected to remain relatively flat for both companies, with PCR averaging 18,000 boe/d compared to Capex's 17,500. Pampa, an integrated energy company in Argentina, averages 100,000 boed in oil & gas. PCR, Capex and Pampa's electricity revenues are all exposed to CAMMESA. However, PCR's Ecuadorian cash flow, oil exports from Argentina and cash held abroad, cover their hard currency interest expense by 2.5x for the next four years. This mitigates risk from Argentina's challenging economic environment. Additionally, PCR's electricity revenues with CAMMESA as the offtaker are contracted through the RenovAr program, which has a guarantee from FODER (Argentina Renewable Fund Guarantee). In some cases, they have an additional guarantee from the World Bank, which applies to the Mataco/San Jorge plant, for up to 21.5 million. PCR's gross leverage is expected to average 2.7x during the rating horizon compared to Capex's 2.8x. Pampa is expected to have the lowest leverage ratio amongst Argentine generation companies, averaging 1.6x over the rating horizon. Key Assumptions - Fitch's end-of-period and average foreign exchange rate for Argentine pesos to U.S. dollars; - Average working interest production of 18,000boed in 2024-2026; - Fitch's price deck for Brent crude oil per barrel of USD75 in 2024, USD65 in 2025 and USD65 in 2026 and 2027; - Cement sales growth linked to Fitch's real GDP growth expectations for Argentina; - Capex of USD493 million in 2024-2026, with an annual average of USD164 million; - Average dividends of USD10 million paid each year in 2024-2027; - Installed capacity of 527MW throughout the rating horizon; - Renewables have 98% availability and a 50% capacity factor at a monomic price of USD53/MWh in 2024; - CAMMESA/FODER payments are made on time. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Net production of 45,000 boed while maintaining 1P reserve life of at least seven years; - Sustain total debt to EBITDA of 3.0x over the rating horizon. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - There is a downgrade to the country ceiling of Ecuador; - Ecuadorian EBITDA plus Offshore Cash plus Export EBITDA does not cover Hard Currency interest expense; - Material delay in CAMMESA/FODER payments that materially affect working capital; - A sustained deterioration of credit metrics to total debt/EBITDA of 4.0x or more; - Weakening of liquidity. Liquidity and Debt Structure Adequate Liquidity: PCR reported a cash balance around USD170 million as of 2Q24, with more than 85% held outside of Argentina. Fitch believes with a strong cash balance and cash flow from operations, the company will adequately cover its interest expense and upcoming maturities. Additionally, Fitch believes the company's maturity profile is manageable and that it has strong access to local banks in the event it needs additional liquidity. Issuer Profile PCR is an Argentine independent energy company focused on three main activities: the exploration and production of hydrocarbons, the production and distribution of cement and construction materials, and renewable power generation. 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 ----------- ------ ----- Petroquimica Comodoro Rivadavia S.A. LT IDR B- Affirmed B- LC LT IDR B- Affirmed B- RAGHSA SA: Moody's Affirms 'Caa2' CFR, Outlook Remains Stable ------------------------------------------------------------- Moody's Ratings has affirmed Raghsa S.A.'s Caa2 corporate family rating and senior unsecured ratings. The outlook remains stable. RATINGS RATIONALE Raghsa S.A.'s Caa2 ratings are mainly supported by its high-quality assets, mainly comprised of over 95 thousand square meters of premium offices in the City of Buenos Aires and a 16.1 thousand square meters luxury residential building in the city of New York; with high occupancy rates; a healthy tenant base. The ratings reflect Raghsa's low leverage for the rating category compared with its high-quality assets, which are mostly unencumbered and support its liquidity sources. Raghsa's rating is constrained by its smaller size than peers and the concentration of its portfolio in three office buildings in the City of Buenos Aires (Buenos Aires, Caa3 stable). The rating also reflects Moody's view that the creditworthiness of the company cannot be completely de-linked from the credit quality of the Government of Argentina (Argentina, Ca stable), and, therefore, the rating closely reflects the risk that the company shares with the sovereign. Raghsa's credit profile benefits from strong liquidity. The company funds itself with internally generated cash, bank loans, property sales, and note issuances. By August 2024, Raghsa held ARS103 billion ($111.8 million) in cash and marketable securities, including $90 million held abroad (mainly US Treasury bonds), with no significant maturities until 2027. Foreign currency bonds include those due in 2026 ($10 million), 2027 ($58.3 million), and 2030 ($56.8 million). There's also a 30-year mortgage loan related to One Union Square South ($113.2 million). As of August 2024, the company's cash and marketable securities represented 626% of $18 million in short term debt. Like many Argentine companies, Raghsa has no committed credit facilities. Raghsa's credit profile also benefits from overall solid credit metrics for the rating category, and Moody's expect Raghsa will be able maintain low leverage and strong cash flow from operations in the next 12-18 months supported by significant demand for the company's high quality assets. As of the last twelve months ended in August 2024, total debt to gross assets was 21.9%, down from 25.4% as of fiscal-year end February 2024, mainly because total debt lowered during the period to around $259 million, from $276 million as of February 2024. The company's loan-to-vale (LTV) of 31% for Raghsa's Argentine investment properties as of August 2024—which are 100% unencumbered— and the LTV of its New York City residential building at 43%, are very solid and healthy for the rating category. Raghsa's stable rating outlook reflects Moody's view that the creditworthiness of the company will be supported by steady revenue and cash flow generation from the broad base of tenants, high occupancy rates and multiple-year lease contracts. Raghsa's creditworthiness cannot be completely de-linked from the credit quality of Argentina, where it generates the bulk of its revenue, and, therefore, the company's rating and outlook also incorporate the risks that it shares with the sovereign. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade of Raghsa would depend on an upgrade of the Government of Argentina's rating, currently at Ca with a stable outlook. Also, an upgrade could also be supported by growth and diversification of operations outside Argentina. The ratings could be downgraded (1) if the government of Argentina's Ca rating is downgraded; (2) reduced liquidity, coupled with a deterioration in the company's credit metrics. The principal methodology used in these ratings was REITs and Other Commercial Real Estate Firms published in February 2024. Founded in 1969, Raghsa S.A. (Raghsa) is a family-owned, fully integrated developer in Argentina. The company is engaged in the construction, development, ownership and leasing of premium office, commercial and residential buildings. Raghsa owns three office buildings in the City of Buenos Aires, accounting for around 95,672 square meters (sqm) of leasable area as of August 2024. In addition, Raghsa owns a luxury residential building in New York City, as well as some land bank in Buenos Aires and a property in New York City. As of August 31, 2024, Raghsa reported total assets of ARS 1,150 billion (around $1.2 billion). ============= B A H A M A S ============= FTX GROUP: Reaches $228MM Deal with Bybit to Resolve Lawsuit ------------------------------------------------------------ Aislinn Keely at Law360 reports that the FTX bankruptcy estate reached a deal worth about $228 million to resolve its lawsuit against cryptocurrency exchange Bybit and the firm's investment arm, Mirana Corp., that alleged they unfairly jumped the line to withdraw funds during FTX's meltdown in late 2022 and held the estate's own funds hostage. FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests, Law360 relates. Faced with liquidity issues, FTX on Nov. 9, 2022, struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations, Law360 recounts. SBF agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO, Law360 discloses. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 billion in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10, 2022, showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent, maintaining the page https://cases.ra.kroll.com/FTX/Home-Index The Official Committee of Unsecured Creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the Committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. ============= B E R M U D A ============= IRIS FINANCIAL: Moody's Affirms 'B2' CFR & Alters Outlook to Stable ------------------------------------------------------------------- Moody's Ratings has affirmed the B2 Corporate Family Rating of Bermuda-based Iris Financial Services Limited. The outlook was changed to stable from negative. As a holding company, Iris' consumer lending franchise and insurance businesses are conducted through its operating subsidiaries, mainly ExcelCredit S.A.S (ExcelCredit, domiciled in Colombia), Golden Tree Reinsurance Limited (Golden Tree, domiciled in Bermuda) and Kanguro Holdings Inc (Kanguro, domiciled in the United States). RATINGS RATIONALE The affirmation of Iris' B2 Corporate Family Rating (CFR) reflects the company's relatively contained asset risks given its focus on secured payroll lending in Colombia and its adequate capitalization. These strengths are counterbalanced by the company's reliance on short-term wholesale funding and limited cash coverage of short-term maturities, which continue to constrain its credit profile. However, the company has maintained access to diversified funding sources, in times of still challenging credit conditions in Colombia that have negatively pressured margins in 2023 and throughout 2024. The secured nature of the payroll lending market in Colombia, benefiting from the payroll deductions, acts as a significant mitigating factor against asset risks. In June 2024, the company's problem loans measured as 90-day past due loans stood at 2.6%, broadly flat compared to levels reported in 2023 and slightly above the 2.2% at the end of 2022. Despite the low level of loan loss reserve coverage, which reflects the secured nature of the loans and the high level of guarantees supporting the risk structure, Iris also has a long-track record of maintaining adequate capitalization, which bolsters its capacity for loss absorption. In June 2024, tangible common equity was close to 29% of tangible managed assets. The high interest rates and sustained inflationary pressures in Colombia, coupled with a significant slowdown in economic activity, have adversely affected Iris' cost of funding and overall business and financial performance. This situation has notably impacted the company's interest margins and overall profitability. However, as interest rates have started to decrease in Colombia, Iris consolidated net interest margins bottomed in 2023 and have started to gradually recover in the first half of 2024. At the same time, the consolidated net income declined to close to 2.8% of tangible managed assets in the first half of 2024 from 3.6% in 2023. Over the past 12 months, and even as funding and liquidity remains a challenge for Iris' credit profile, the company was able to extend the average maturities of its liabilities and lessened the dependence on secured funding. This, coupled with the relatively stable asset quality and still adequate profitability despite negative margin pressures, has driven the change in outlook to stable from negative. Iris' consolidated debt maturity coverage ratio stood at a modest 23%, unchanged from 2023 and decreasing from 26% at the end of 2022 and 42% in 2021. The proportion of secured funding sources to tangible assets was approximately 35% in June 2024. This represents a limitation to the company's financial flexibility, though it shows an improvement from levels above 40% in 2022 and 2023. As the company focuses on the transition of ExcelCredit into a regulated deposit-taking finance company, Moody's expect it to broaden and enhance its funding base through deposits, which will likely add more stability of resources and benefit its future earnings generation with lower cost funds. However, Moody's acknowledge that the company will face implementation risks as it establishes its market position as a deposit-taking entity and adjust to a regulated framework, which could require it to increase loan loss provisions and operational costs. Moody's anticipate that realizing the full benefits of this transition will take time, and therefore it does not yet benefit the company's rating. While the company currently does not have outstanding rated debt instruments, in Moody's view, a rating on senior unsecured debt would incorporate the B2 CFR and Iris' capital structure, where high levels of secured financing would likely lead senior unsecured ratings to be below the CFR. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Iris' B2 CFR could be downgraded if its liquidity position worsens from current level, leading to continuously low coverage of short-term obligations and an overall weaker funding profile. Iris' rating would also face negative pressure if its margins and overall profits deteriorated, or if its capitalization fell from current levels. Iris' rating could be upgraded if the company improves its funding structure and liquidity profile through access to unsecured resources, that could enhance its financial flexibility. Positive rating pressure would also arise if Iris were able to successfully implement its current growth strategy and conversion to a regulated entity while maintaining strong earnings, asset quality and capital adequacy. The principal methodology used in this rating was Finance Companies published in July 2024. =========== B R A Z I L =========== AZUL SA: Fitch Lowers LongTerm IDRs to 'CC' on Refinancing Deals ---------------------------------------------------------------- Fitch Ratings has downgraded Azul S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'CC' from 'CCC', and National Scale Rating to 'CC(bra)' from 'CCC(bra)'. Fitch has also downgraded Azul Secured Finance LLP's senior secured notes to 'CC'/ Recovery Rating 'RR4' from 'CCC'/'RR4' and Azul Investments LLP's unsecured notes to 'C'/'RR6' from 'CC'/'RR6'. The downgrades follow Azul's broader refinancing agreements, which include its main creditors and suppliers, and is likely to result in an exchange offer and consent solicitations for its existing 2028, 2029 and 2030 notes. Per its criteria, Fitch views this as a distressed debt exchange (DDE). The deal is assessed to avoid a default. Despite no immediate debt haircut or maturity extension, bondholders who do not accept the deal may face worse terms due to the larger secured debt profile and likely lower return from the equitization of part of the 2029 and 2030 notes. Key Rating Drivers New Agreement with Bondholders: Azul has negotiated an agreement with its existing bondholders for up to USD500 million in superpriority new funding, with USD150 million to be provided until Nov.01 2024, USD250 million expected before year end, with the potential to unlock a further USD100 million thereafter. The raise of the new money is key to support Azul's cash burn and support further conditions from the agreement with lessors and OEMs. Lessors &OEM Agreement: Azul has reached commercial agreements with lessors and OEMs covering about 98% of its equity issuance obligations. This deal eliminates their pro-rata share of the BRL3.1 billion in exchange for up to 100 million new preferred shares of Azul in a one-time issuance. These agreements include a financing condition tied to ongoing negotiations with bondholders and the ability to raise new debt. According to Azul, this agreement will improve cash flow by approximately USD150 million by reducing certain lessors and OEMs obligations over the next 18 months Cash Flow Burn: Azul faces negative headwinds including BRL devaluation, an approximately 10% revenue loss due to Rio Grande do Sul flooding, and delays in receiving new aircraft, all of which will pressure its operating cash flow generation during 2024. These challenges, combined with high interest and rental payments and capex, result in negative free cash flow generation. Fitch estimates EBITDA for the second half of the year to be around BRL3.3 billion to BRL3.6 billion, while lease rental, interest and capex should total BRL4.1 billion. Derivation Summary Azul's 'CC' rating reflects the company's announced broader refinancing agreement, which will likely include an exchange offer, which Fitch considers a DDE. This announcement occurs in the context of high refinancing risks and cash flow burns. The company has a solid market position in the Brazilian airlines domestic market, and is the sole airline for 80% of its routes. Azul has a weaker business and financial position compared to LATAM Airlines Group S.A (BB-/Positive Outlook), which has a more diversified business model, significant regional market position, strong capital structure and robust liquidity position. Azul's rating is also weaker than Avianca Group International Limited (B/Stable), mostly reflecting relatively higher leverage ratios and refinancing risks. Recovery Analysis KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that AZUL would be considered a going concern in bankruptcy and that the company would be reorganized rather than liquidated. Fitch has assumed a 10% administrative claim. Going-Concern Approach: AZUL's going concern EBITDA is BRL2.5 billion which incorporates the low-end expectations of Azul's EBITDA post-pandemic, adjusted by lease expenses, plus a discount of 20%. The going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level, upon which Fitch bases the valuation of the company. The enterprise value (EV)/EBITDA multiple applied is 5.5x, reflecting AZUL's strong market position in the Brazil. Fitch applies a waterfall analysis to the post-default EV based on the relative claims of the debt in the capital structure. The debt waterfall assumptions consider the company's total debt as of June 30, 2024. These assumptions result in a recovery rate for the first-lien secured bonds within the 'RR1' range, but due to the soft cap of Brazil, this is kept at 'RR4', and second-lien secured notes fall within 'RR4' range. Azul's senior secured are rated at 'CC'/'RR4'. For the unsecured notes, the recovery is within the RR6 range, therefore results in two notches downgrade from the IDR, being rated at 'C'/'RR6' RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Completion of the proposed exchange offer will lead to a downgrade of the Long-Term IDRs to 'RD' and then subsequently to an upgrade to a rating level that reflects the post-DDE credit profile. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Announcement that the Threshold Consent has been reached will lead to a downgrade of the Long Term IDRs to 'C'; - An uncured payment default on any material financial obligation would lead to a downgrade of the IDRs to 'RD'. Liquidity and Debt Structure High Refinancing Risks: Azul's short-term maturities totaled BRL6.0 billion (BRL1.5 billion of financial debt and BRL4.5 billion of leasing obligations) as of June 30, 2024. Azul's readily available cash, per Fitch's criteria, declined to BRL1.5 billion from BRL1.9 billion at end of December 2023. As per agency's estimates, Azul would not be able to generate enough cash flow nor has sufficient liquidity to fulfil those obligations, without new money. Total long-term debt was BRL31.5 billion, and primarily consists of BRL14.3 billion of leasing obligations, BRL382 million of cross-border senior unsecured notes due 2024, BRL176 million due 2026, and BRL9.9 billion of secured issuances due 2028, 2029 and 2030, BRL2.1 billion of other loans and financing, BRL3.6 billion of lessors equity/note and BRL1 billion of convertible debentures. Issuer Profile Azul is one of Brazil's largest local airlines, with significant presence in the regional market and being the sole player on 82% of its routes. During 2023, 93% of its revenues were derived from passengers and 7% from cargo and others. 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 Recovery Prior ----------- ------ -------- ----- AZUL Investments LLP senior unsecured LT C Downgrade RR6 CC Azul S.A. LT IDR CC Downgrade CCC LC LT IDR CC Downgrade CCC Natl LT CC(bra)Downgrade CCC(bra) Azul Secured Finance LLP senior secured LT CC Downgrade RR4 CCC Senior Secured 2nd Lien LT CC Downgrade RR4 CCC GOL LINHAS: Wants to Raise Cash to Use in Chapter 11 Exit --------------------------------------------------------- Jonathan Randles of Bloomberg News reports that Gol Linhas Aéreas Inteligentes SA announced that it is nearing a resolution of significant issues related to its bankruptcy with major creditors. In the upcoming months, the Brazilian budget airline plans to secure exit capital to facilitate its emergence from Chapter 11. In a court filing in New York on Monday, October 21, 2024, the company stated its intention to finalize negotiations on the restructuring plan and raise exit financing, either through debt or equity. Gol is requesting that the bankruptcy judge overseeing its restructuring extend its exclusive right to file a Chapter 11 plan until March 20 to ensure a smooth process. About Gol Linhas GOL Linhas Aereas Inteligentes S.A. provides scheduled and non-scheduled air transportation services for passengers and cargo; and maintenance services for aircraft and components in Brazil and internationally. The company offers Smiles, a frequent-flyer program to approximately 20.5 million members, allowing clients to accumulate and redeem miles. It operates a fleet of 146 Boeing 737 aircraft with 674 daily flights. The company was founded in 2000 and is headquartered in Sao Paulo, Brazil. GOL Linhas Aereas Inteligentes S.A. and its affiliates and its subsidiaries voluntarily filed for Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 24-10118) on Jan. 25, 2024. GOL Linhas estimated $1 billion to $10 billion in assets as of the bankruptcy filing. The Debtors tapped Milbank Llp as counsel, Seabury Securities Llc as restructuring advisor, financial advisor and investment banker, Alixpartners, LLP, as financial advisor, and Hughes Hubbard & Reed LLP as aviation related counsel. Kroll Restructuring Administration LLC is the claims agent. LIGHT SA: Taps White & Case as Attorneys in Ch. 15 Restructuring ---------------------------------------------------------------- Emlyn Cameron at Law360 reports that the foreign representative for Light SA, parent to a major Brazilian electrical utility, has hired attorneys from White & Case LLP to help him obtain U.S. recognition of the company's Brazilian restructuring. About Light SA Light SA is an integrated company of the energy sector in Brazil, active in power generation, transmission, distribution and trading. Light SA sought relief under Chapter 15 of the U.S. Bankruptcy Code (Bankr. S.D. Tex. Case No. 24-90531) on Oct. 15, 2024, to seek U.S. recognition of its proceedings in the 3rd Business Court of Rio de Janeiro. White & Case LLP, led by Charles R. Koster, is the U.S. counsel. =========================== C A Y M A N I S L A N D S =========================== SPI INVESTMENT: Chapter 15 Case Summary --------------------------------------- Three affiliates that concurrently filed voluntary petitions for relief under Chapter 15 of the Bankruptcy Code: Debtor Case No. ------ -------- SPI Investment Fund SPC (Lead Case) 24-21184 (In Official Liquidation) FTI Consulting Suite 3206 53 Market Set Camana Bay PO Box 30613 Grand Cayman KY1-1203 Cayman Islands International Portfolio Allocation Ltd. 24-21190 (In Official Liquidation) International Capital Allocation Ltd. 24-21187 (In Official Liquidation) Chapter 15 Petition Date: October 28, 2024 Court: United States Bankruptcy Court Southern District of Florida Judge: Hon. Peter D Russin Foreign Proceeding: Grand Court of the Cayman Islands, Cause No. FSD 393 (2023) Foreign Representatives: Andrew Morrison, David Griffin, and Iain Gow FTI Consulting Suite 3206 53 Market St Camana Bay, PO Box 30613 Grand Cayman KY1-1203 Cayman Islands Foreign Representatives' Counsel: Joaquin J. Alemany, Esq. Alex M. Englander, Esq. HOLLAND & KNIGHT LLP 701 Brickell Ave, Suite 3300 Miami, Florida 33131 Tel: (305) 789-7763 Email: joaquin.alemany@hklaw.com alex.englander@hklaw.com Estimated Assets: Unknown Estimated Debt: Unknown A full-text copy of the Lead Debtor's Chapter 15 petition is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/CXEOQ2Y/SPI_Investment_Fund_SPC_in_Official__flsbke-24-21184__0001.0.pdf?mcid=tGE4TAMA =============== C O L O M B I A =============== COLOMBIA: Cuts Key Rate to 9.75% as Fiscal Risks Spook Market ------------------------------------------------------------- Bloomberg News reports that Colombia's central bank ignored pressure to accelerate the pace of interest rate cuts as policymakers weigh fiscal risks that sent the peso to its weakest level in more than a year. Bloomberg relates that the seven-member board voted 4-3 to lower the benchmark rate by half a percentage point to 9.75%, Governor Leonardo Villar told reporters in Bogota on Oct. 31. The minority voted for a bigger reduction, to 9.5%. "Today's interest rate cut continues to support economic growth and maintains the necessary prudence given the inflation risks that remain," Mr. Villar said, reading the bank's statement. Twenty-one of 28 economists surveyed by Bloomberg predicted the move, while the rest expected a larger cut of three quarters of a percentage point. The bank also lifted its economic growth forecast for this year to 1.9%, from 1.8%. In 2025, output will expand 2.9%, from a previous estimate of 2.7%, the bank said. According to Bloomberg, President Gustavo Petro, Finance Minister Ricardo Bonilla, and private bankers have repeatedly called for faster easing to revive economic growth. But the majority of the bank's board has so far refused, due to their concern that inflation might not return to its target fast enough. A constitutional reform bill in congress that would increase transfers from the treasury to regional governments spooked investors, exacerbating fears over the already-wide fiscal deficit, Bloomberg relates. The bill's approval in the senate contributed to 4.9% fall in the currency this month, to its weakest level in 17 months. In its statement, the bank said that this law "could compromise the stability of public finances", and said that dispelling these doubts was indispensible to calm markets, Bloomberg relays. While annual inflation has slowed to 5.8% from last year's peak of 13%, it still exceeds the central bank's 3% target. Economists surveyed by the central bank forecast price rises will slow to 3.8% by the end of next year. Elsewhere in the region, central banks in Mexico, Chile and Peru have cut interest rates at recent meetings, while a rebound in inflation led Brazil to lift borrowing costs, Bloomberg notes. As reported in the Troubled Company Reporter in August 2024, Fitch Ratings 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: Labor Reform Proposal Stalls in Congress ---------------------------------------------------------------- Dominican Today reports that with the recent withdrawal of the tax reform project and the adoption of a new Constitution, the Dominican Congress now shifts its attention to labor reform -- the last major proposal on President Luis Abinader's legislative agenda. However, despite its introduction over two weeks ago, the proposal has seen no progress, Dominican Today relates. Labor Minister Luis Miguel De Camps formally presented the labor reform proposal to Senate President Ricardo de los Santos on October 10, and the Senate immediately assigned it to a special committee led by Senator Rafael Baron Duluc, Dominican Today recounts. Nevertheless, the committee has yet to hold a single session, with no meetings scheduled or updates provided, Dominican Today notes. According to Dominican Today, the labor reform bill, involving issues like severance pay and remote work regulations, aims to modernize the Dominican labor framework. It proposes establishing a specialized labor tribunal, recognizing domestic work regulations, adding an extra vacation day for workers, and adapting the code to account for telecommuting, Dominican Today statse. When questioned about the delay, Senate President Ricardo de los Santos, as cited by Diario Libre, said that the bill is in committee and will be addressed once it is reviewed and recommendations are ready for the full Senate to consider. "The Senate is the house of democracy," he remarked, assuring that senators would seek consensus on key issues to ensure all stakeholders support the final version. ================= G U A T E M A L A ================= INSTITUTO DE FOMENTO: Fitch Gives 'BB' Insurer Fin. Strength Rating ------------------------------------------------------------------- Fitch Ratings has assigned Instituto de Fomento de Hipotecas Aseguradas (FHA) a first-time Insurer Financial Strength (IFS) rating of 'BB' with a Stable Outlook. FHA's rating reflects the State of Guatemala's ability and willingness to provide the company with support to meet its obligations, if necessary. The state's sovereign rating of 'BB' with a Stable Outlook demonstrates its capacity to provide support, and its controlling interest in the company incentivizes it do so. The rating also incorporates FHA's crucial role in promoting the housing finance market in Guatemala. FHA is empowered by law to issue bonds with an unlimited state guarantee, further reinforcing its strategic importance. Key Rating Drivers Government Support: FHA's rating is based on Guatemala's (BB/Stable) ability and willingness, as its sole owner, to provide support if necessary. Fitch views financial guarantors as important vehicles to carry out development agendas and believes owners have a high propensity to provide financial support. The law under which FHA was founded allows it to issue bonds with an unlimited state guarantee to settle its obligations related to mortgage insurance. Strategic Importance to Guatemala: FHA's strategic importance to Guatemala's government is strong due to its significant role in social inclusion as outlined in the FHA Creation Act. The act aims to promote housing construction and ensure that most Guatemalans can obtain housing. FHA accomplishes this by providing mortgage insurance on the collateral that supports financing from financial institutions. FHA also issues credit life insurance, which allows homeowners to retain their financing during certain events. Earnings Retention Benefits Capitalization: Fitch believes that FHA's capitalization position is robust, which is one of its main financial strengths. Due to its nature, the institution is not a source of tax revenue, which translates into a constant growth of its equity from the continuous reinvestment of profits, as stipulated by law. At the end of 1H24, FHA had good capitalization levels and adequate par/capital leverage levels despite the risks of the Guatemala-based guarantee portfolio and no financial leverage. Steady and Robust Profitability: Over the past five years, FHA has maintained a steady rate of premium growth, driven by its ability to continue insuring new housing projects that meet its eligibility requirements. At the end of 1H24, its performance continued to benefit from a limited net loss ratio of 8.3% (YE 2023 was 10.5%). Combined with the contribution of revenues from the sale of mortgaged properties and financial returns, this has allowed FHA to maintain good levels of profitability, with the return on equity ratio at the end of 1H24 standing at 16.5%. Financial performance is robust but typically has less relevance to Financial Guarantors' ratings due to the prioritization of social development goals over profitability. Highly Liquid Investment Portfolio: FHA's liquidity position is supported by the significant proportion of highly liquid assets on its balance sheet, including bank deposits, which accounted for 86% of total assets at the end of 1H24. The investment strategy is mainly focused on short-term deposits in local financial institutions, which allow them to meet claims settlements. High Investment Risk: Despite the conservative investment policy with a concentration in highly liquid fixed income securities focused on capital preservation, the investment portfolio is largely made up of bank deposits from local institutions in Guatemala. The exposure to non-investment grade securities puts pressure on the Risky Asset Ratio. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - FHA's rating benefits from the support of the Government of Guatemala, and it is therefore sensitive to a downgrade of the sovereign rating. - FHA's rating could also be downgraded if there is a change in Fitch's view regarding the strategic importance of the issuer to the Government of Guatemala. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - FHA's rating benefits from the support of the Government of Guatemala, and it is therefore sensitive to an upgrade of the sovereign rating. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in its credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. Entity/Debt Rating ----------- ------ Instituto de Fomento de Hipotecas Aseguradas LT IFS BB New Rating =========== M E X I C O =========== GRUPO AEROMEXICO: Sells $1.1 Billion of Bonds to Refinance Debt --------------------------------------------------------------- Michael O'Boyle, Gowri Gurumurthy and Michael Gambale at Bloomberg News report that Grupo Aeromexico SAB sold $1.1 billion of bonds via international markets on Oct. 28 that the air carrier will use to refinance debt due in the coming years. Aeromexico issued $500 million of five-year notes and $610 million of seven-year securities, according to data compiled by Bloomberg. Proceeds will be used in part to pay down $663 million in senior secured notes due in 2027, the company said in a statement. About Grupo Aeromexico Grupo Aeromexico, S.A.B. de C.V. (BMV: AEROMEX) -- https://www.aeromexico.com/ -- is a holding company whose subsidiaries are engaged in commercial aviation in Mexico and the promotion of passenger loyalty programs. Aeromexico, Mexico's global airline, has its main hub at Terminal 2 at the Mexico City International Airport. Its destinations network features the United States, Canada, Central America, South America, Asia and Europe. Grupo Aeromexico and three of its subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11563) on June 30, 2020. In the petitions signed by CFO Ricardo Javier Sanchez Baker, the Debtors reported consolidated assets and liabilities of $1 billion to $10 billion. The Debtors tapped Davis Polk and Wardell LLP as their bankruptcy counsel, KPMG Cardenas Dosal S.C. as auditor, and Rothschild & Co US Inc. and Rothschild & Co Mexico S.A. de C.V. as financial advisor and investment banker. White & Case LLP, Cervantes Sainz S.C. and De la Vega & Martinez Rojas, S.C., serve as the Debtors' special counsel. Epiq Corporate Restructuring, LLC, is the claims and administrative agent. The U.S. Trustee for Region 2 appointed a committee to represent unsecured creditors on July 13, 2020. The committee is represented by Willkie Farr & Gallagher, LLP and Morrison & Foerster, LLP. PETROLEOS MEXICANOS: Losses Deepen in Negative Sign for New CEO --------------------------------------------------------------- Bloomberg News reports that Petroleos Mexicanos' loss doubled in the third quarter amid slumping sales, currency fluctuations and other factors, a negative sign for Mexican President Claudia Sheinbaum's hand-picked executive leadership team. Pemex's loss widened to MXN161.3 billion ($8.1 billion) from 79.1 billion a year earlier, the company reported on Oct. 29, Bloomberg relates. The explorer's crude and condensate output fell by almost 5% compared with a year earlier and has been dropping since the start of 2024. Net debt stood at $97.3 billion, the company said. According to Bloomberg, the results are the first under the leadership of Chief Executive Officer Victor Rodriguez, a former academic appointed by Sheinbaum to rescue the world's most-indebted major oil producer. Aside from nearly $100 billion in debt, the company's woes include abysmal safety and environmental records, a bloated workforce, inefficient offshore platforms and refineries that bleed cash. Earlier last month, Mexico's Senate approved a bill that reclassifies state-controlled energy giants as "public companies," giving the government more control and no longer requiring them to turn profits, Bloomberg recalls. That may be key in helping Sheinbaum deliver on promises to fix Pemex's finances and help shore up one of the crown jewels of the Mexican economy. "Pemex's reclassification as a public company won't limit partnerships with the private sector," Bloomberg quotes Mr. Rodriguez as saying during a conference with analysts on Oct. 29. "Private investment will be particularly welcomed, especially in co-generation and clean energy projects." Pemex is currently working with Mexico's Finance and Energy ministries on a solution to its debt burden, Chief Financial Officer Juan Carlos Carpio said during the call, Bloomberg relays. Details of a liability-management plan will be released after Sheinbaum's administration publishes its 2025 budget, and the company expects the government next year to extend financial support similar to 2024's amount, according to Mr. Carpio. The driller isn't currently considering any new debt issuance, he noted. Pemex's woes extend well beyond its balance sheet, Bloomberg notes. Production has slid to about half the peak of two decades ago, and the company's aging refineries - most of which were built in the 1920s and 1930s - are money losers. Despite Former President Andres Manuel Lopez Obrador's repeated promises that Mexico would produce all the fuel it consumes by the end of his term, it still imports more than half its gasoline supply. Dos Bocas, the company's flagship refinery in Tabasco state, only processed crude at 25 percent of capacity in August, processed zero barrels in the first half of October because of technical issues, and went offline entirely in mid-week, according to Bloomberg. Lopez Obrador dumped up to $80 billion into the company via capital injections and tax breaks over his six-year term. But little, if anything, improved, underscoring just how much of a drag Pemex's inefficiency has become on the nation's bottom line, Bloomberg says. There's also been a raft of oil spills, methane leaks, and safety problems in recent years, including an incident earlier this month at a Texas refinery in which two people died. The company had nine worker fatalities in 2022, according to the most recent data available to Bloomberg. That has sparked many investors to call for change, leading the company to publish its first ever environmental, social and governance plan earlier this year. About Pemex Petroleos Mexicanos operates as an oil and gas exploration and production services. The Company offers pipeline carriage, petrochemical distriutor and shipping centers, logistics, and fuel commercialization services. Petroleos Mexicanos serves customers in Mexico. As reported in the Troubled Company Reporter-Latin America in late December 2023, Fitch Ratings has affirmed Petroleos Mexicanos' (Pemex) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B+'. Fitch has also removed the ratings from Rating Watch Negative (RWN), and assigned a Stable Rating Outlook. Additionally, Fitch has affirmed the rating of approximately USD80 billion of Pemex's international notes outstanding at 'B+'/'RR4'. =========== P A N A M A =========== [*] Fitch Affirms 'BB+' IDR on 4 Panamanian Banks, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has conducted a portfolio review of six Panamanian banks following Fitch's Outlook revision to stable from negative of its assessment of Panama's banking system operating environment (OE) and affirmation of the score at 'bb+'. Fitch outlook revision of the OE score reflects that despite the economic slowdown and high interest rate environment, the banking system's credit growth, asset quality, and profitability metrics are performing better than expected. Additionally, GDP growth is projected to reach around 4.0% in 2025, following an upward revision to 2.8% for 2024 from 1.5%. This suggests Fitch's core metrics for the OE assessment, the Operational Risk Index (ORI) and GDP per capita to remain stable and pressures on business conditions for banks will be lower than in 2024. The latest ORI data available for 2024 was 41.3% compared to 41.6% in 2023, while the GDP per capita was USD18,710 compared to USD18,593 in 2023. Key Rating Drivers State-Owned Banks Banco Nacional de Panama and Caja de Ahorros Fitch affirmed Banco Nacional de Panama's (Banconal) and Caja de Ahorros' Long-Term and Short-Term Issuer Default Ratings (IDRs) and Government Support Ratings (GSR) at 'BB+', 'B' and 'bb+'. The Rating Outlook is Stable. Banconal's and Caja de Ahorros's IDRs and GSRs are aligned with Panama's Long-Term IDR, reflecting the government's explicit guarantee for all of their liabilities established under their inception laws. Fitch views the propensity of support from the Panamanian government as high due to Banconal's and Caja de Ahorros' policy roles. Fitch affirmed Banconal's Viability Rating (VR) at 'bb+', which reflects the bank's business, risk and financial profiles with strong linkage to the sovereign rating and Fitch's view of the OE. Banconal acts as Panama's financial agent by managing Federal government reserves and other public entities resources. These political responsibilities benefit the bank's business profile and financial performance, mainly the liquidity and profitability profiles. As of 1H24, the operating profit to risk-weighted assets (RWA) ratio was 5.4%, higher than the average of 3% for 2020 to 2023. As of the same date, the loan to deposit ratio was 65.3%, one of the best among the Panamanian banks. The average from 2020 to 2023 was 45.5%. Fitch affirmed Caja de Ahorros' VR at 'bb-', which reflects its consolidated business profile, underpinned by its strong market position in the Panamanian mortgage lending segment and by its relevant development bank role for the Panamanian state, as part of the social mandate incorporated in its Organic Law. Caja de Ahorro's VR also considers its lower-than-peers asset quality metrics, its modest profitability, alongside its sound funding profile and narrow capitalization, being these underpinned by the support from the Panamanian government. Private Banks Banco General Fitch affirmed Banco General, S.A.'s (BG) Long-Term IDR at 'BBB-', Short-Term IDR at 'F3' and VR at 'bbb-'. The Rating Outlook is Stable. The IDR and VR are one notch above the sovereign rating, driven by its superior loss-absorption capacity, stable funding and low sovereign exposure. BG's strong business profile supports profitability even during the economic slowdown and high-interest rates. As of 1H24, operating profit over RWA improved to 6.4% from 5.9% at YE23. Credit loss risk has decreased, with stage 3 loans declining to 2.1% of gross loans at 1H24 from 2.2% at YE23. High loss absorption is shown by loan loss allowances coverage of 151.8% and CET1 over RWA of 20.9%. Fitch affirmed BG's GSR at 'no support' (ns) and reflects that external support, while possible, cannot be relied upon, given Fitch's view of Panama's limited ability to support the banking system and D-SIBs primarily due to its large size related to the economy and the lack of a lender of last resort. Banistmo Fitch affirmed Banistmo, S.A.'s (Banistmo) Long-Term IDR at 'BB+', Short-Term IDR at 'B', and Shareholder Support Rating (SSR) at 'bb+'. The Rating Outlook is Stable. The IDRs are driven by its SSR and reflect the ability and willingness of its parent, Bancolombia, S.A. (Bancolombia; BB+/Stable), to provide timely support to the bank, if needed. The Stable Outlook on Banistmo's long-term rating mirrors the Outlook of the shareholder. Fitch affirmed Banistmo's VR at 'bb', reflecting its robust business profile and established presence in the Panama's banking market, where it holds the position of the second-largest private bank. The bank's franchise is supported by a strong corporate and retail banking business and significant benefits from being part of a large regional banking group, which strengthens the bank's loan and deposit base. Banistmo's asset quality and profitability remain pressured but relatively stable. The bank's stage 3 loan ratio increased to 9.0%% at June 2024 from 8.8% at YE23 while its operating profit to RWA ratio reached 1% at June 2024, still impacted by consistent loan impairment charges. Banco La Hipotecaria Fitch affirmed Banco La Hipotecaria, S.A.'s (BLH) Long-Term IDR at 'BBB-', Short-Term IDR at 'F3' and SSR at 'bbb-'. The Rating Outlook is Stable. The IDRs are driven by its SSR and reflect the ability and willingness of its parent, Grupo ASSA, S.A. (Grupo ASSA; BBB-/Stable), to provide timely support to the bank, if needed. Fitch believes the group's commitment to its subsidiary is sufficiently strong, leading to BLH's IDR and SSR being equalized with its parent's IDR. Fitch also affirmed BLH's VR at 'bb-', reflecting its specialized franchise focused on the housing finance segment, operating in different countries, with a four-year average total operating income of USD24 million. This has translated in an NPL ratio (stage 3) that has stabilized around 3.2% as of June 2024, while profitability reached an operating profit to RWA metric of 1% as of 1H24 (2023: 0.6%), although it could still come under pressure. The bank's reasonable capitalization with a CET1 to RWA of 11.9% as of June 2024, along with its diversified funding and stable liquidity also sustain its VR. Fitch would expect BLH's inherent performance to remain consistent with its current VR of 'bb-' over the rating horizon. Multibank Fitch affirmed Multibank Inc's (Multibank) Long-Term IDR at 'BB+', Short-Term IDR at 'B' and the SSR at 'bb+'. The Rating Outlook is Stable. The IDRs are driven by its SSR and reflect the ability and willingness of its parent, Banco de Bogota, S.A. (Bogota; BB+/Stable), to provide timely support to the bank, if needed. The Stable Outlook on the Multibank's long-term rating mirrors the Outlook of the shareholder. Fitch affirmed Multibank's VR at 'bb-', reflecting its business profile with low but stable profitability and asset quality ratios. As of June 2024, the bank's core metric of operating profit to risk-weighted assets (RWA) ratio was 0.5% (2020-2023 average: 0.2%), lagging that of its peers. In addition, the bank has a high stage 3 loans ratio (June 2024: 7.7%) and lower reserve coverage levels (23.1%) compared to other banks in the 'bb' category. However, the credit portfolio risk is partially offset by the bank's collateral structure. Multibank also benefits from being part of Grupo Aval. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Banconal - Banconal's IDR, GSR and VR would be downgraded following a downgrade of the sovereign. - Banconal's VR could be negatively affected in a material increase in NPLs and a consistent decline in profitability (operating profit to RWAs consistently below 2%) and/or a decline in capitalization (CET1 consistently below 12%). Caja de Ahorros - Caja de Ahorros' IDR and GSR would be downgraded following a downgrade of the sovereign. - Caja de Ahorros' VR could be negatively affected in case of ineffective credit controls for maintaining controlled impairment levels along with a consistent decline in profitability (operating profit to RWAs consistently below 0.5%) and sustained decline in capitalization (CET1 and regulatory dynamic reserves continuously below 9% of its RWAs). Banco General - The IDR and VR could be downgraded due to a downgrade of Panama's sovereign rating. According to Fitch criteria, the current uplift from the sovereign rating is unlikely to widen more than one notch due to the high correlation between sovereign and bank credit profiles. - BG's ratings could be negatively affected by a sustained and material deterioration of asset quality that could pressure its financial performance reflected in an operating profit to RWA consistently below 2.0% or a decline in CET1 ratio consistently below 12%. - There is no downside potential for GSR because it is at the lowest level on the scale. Banistmo - Any negative action on Bancolombia's IDRs would lead to a similar action on Banistmo's SSR. In addition, IDRs and SSR could be downgraded if Fitch's assessment of its parent's propensity and ability to provide support to the bank diminishes; - A further deterioration in asset quality that denotes a weakening in the bank's risk profile could put pressure on Banistmo's VR. Fitch could also downgrade its VR as a result of a sustained deterioration of profitability and asset quality ratios that undermine the bank's financial performance, driving a decline in its CET1 ratio consistently below 10% and/or its operating profitability/RWA metric consistently below 0.5%. BHL - BLH's IDRs and SSR would be downgraded if Grupo ASSA's IDRs are downgraded, or if Fitch perceives a decrease in its parent's willingness to support its subsidiary. However, this is not expected at present; - A deterioration in the bank's OE that impacts the expected profitability prospects, leading to a four-year average operating profit to RWA ratio consistently below 0.5%, could result in a downgrade of the VR; - BLH's VR could also be downgraded in the event of a sustained deterioration in loan quality to higher than expected levels, and if the CET1-to-RWA metric is affected, remaining steadily below 10%. Multibank - A downgrade of Multibank's IDR and SSR could result from a downgrade of Banco de Bogota's IDR or from a reduced propensity of Banco de Bogota to support its subsidiary, both of which are unlikely; - Multibank's VR could be downgraded as a result of a sustained asset quality deterioration that further undermines the bank's financial performance and business profile. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Banconal and Caja de Ahorros - Banconal's and Caja de Ahorros' IDR and GSR, and Banconal's VR, have limited upside potential and would come from a similar action of the sovereign. - Caja de Ahorros' VR has also limited upside potential given the challenges of the bank in terms of profitability, asset quality and capitalization. Banco General - BG's VR and IDRs could be upgraded by the confluence of an improvement of the OE and the sovereign rating, while the bank maintains a very strong financial profile that allows it to remain rated one notch above the sovereign. - As Panama is a dollarized country with no lender of last resort, an upgrade of the GSR is unlikely. Banistmo - A positive rating action on Bancolombia's IDRs could trigger similar rating action on Banistmo's IDRs and SSR; - Over the medium-to-long term, an upgrade on Banistmo's VR would require its CET1, including CCB, to be strengthened and maintained at 16% of RWAs or higher, accompanied by a consistent and substantial strengthening of its core profitability ratio to levels closer to 2%, and a significant improvement in asset quality (with a stage 3 ratio at levels closer to 5%). BLH - BLH's IDRs and SSR could be upgraded if the parent's IDR is upgraded; - BLH's VR could be upgraded over the medium term from a sustained strengthening of the bank's overall business and risk profiles reflected in better asset quality metrics; - In addition, an improvement in profitability and capitalization, reflected in an operating profit-to-RWA ratio consistently above 1.5% and a CET1-to-RWA ratio of at least 15%, could result in an upgrade of the bank's VR. Multibank - Positive rating actions on Multibank's IDRs, senior unsecured debt rating and SSR could be driven by positive rating actions on Banco de Bogota's IDR; - Positive rating actions on Multibank's VR could be driven by the sustained strengthening of the Business Profile reflected in profitability ratios consistently around 2% and a CET1 ratio including (counter cyclical buffer) CCyB of at least 13%. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS Banco General BG's senior unsecured notes due in August 2027 are rated at the same level as the bank's Long-Term IDR because Fitch views its likelihood of default as the same as the likelihood of default of the bank. Banconal Senior unsecured debt is rated at the same level as Banconal's Long-Term IDR. Fitch views the default risk of the senior notes and the bank as equivalent and believes the senior obligations have average recovery prospects. The subsidiary guarantee enforceable under Panamanian law is not a direct guarantee of the notes, which are governed by the laws of the state of New York. Banistmo Banistmo's senior unsecured debt is rated at the same level of the bank's ratings in the international scale, as Fitch considers the likelihood of default of its debt as the same as that of the issuer, since the senior obligations have average recovery prospects. Multibank Multibank's outstanding long-term senior unsecured debt is rated at the same level as its IDR because the likelihood of default on the obligations is the same as that of Multibank. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Banco General, Banconal, Banistmo and Multibank - Senior unsecured debt would be downgraded if the bank's Long-Term IDR is downgraded. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Banco General, Banconal, Banistmo and Multibank - Senior unsecured debt would be upgraded if the bank's Long-Term IDR is upgraded VR ADJUSTMENTS Banconal, Caja, BG, Banistmo and Multibank The Operating Environment Score of 'bb+' has been assigned below the 'bbb' category implied score due to the following adjustment reason: Sovereign Rating (negative). Caja de Ahorros The Business Profile score of 'bb' has been assigned above the 'b' category implied score due to the following adjustment reason(s): Market Position (positive), Group Benefits and Risks (positive). The Capitalization & Leverage score of 'bb-' has been assigned above the 'b' category implied score due to the following adjustment reason(s): Capital Flexibility and Ordinary Support (positive). Banco General The Business Profile Score of 'bbb-' has been assigned above the 'bb' category implied score due to the following adjustment reason: Market Position (positive). The Earnings & Profitability Score of 'bbb-' has been assigned above the 'bb' category implied score due to the following adjustment reason: Historical and Future Metrics (positive). The Capitalization & Leverage Score of 'bbb-' has been assigned above the 'bb' category implied score due to the following adjustment reasons: Regulatory Capitalization (positive). The Funding & Liquidity Score of 'bbb-' has been assigned above the 'bb' category implied score due to the following adjustment reasons: Deposit Structure (positive). Banistmo The Asset Quality score of 'bb-' has been assigned above the implied score of 'b and below' due to the following adjustment reason(s): Collateral and Reserves (positive). BLH The Operating Environment score of 'bb+' has been assigned below the implied score of 'bbb' due to the following adjustment reason: International Operations (negative); The Funding & Liquidity score of 'bb-' has been assigned above the implied score of 'b & below' due to the following adjustment reason: Non-Deposit Funding (positive). Multibank The Business Profile score has been assigned at 'bb', above the implied score of 'b' due to the following adjustment reasons: Group Benefits and Risks (positive); The Asset Quality score has been assigned at 'bb-', above the implied score of 'b' due to the following adjustment reasons: Loan Classification Policies (positive); The Capitalization & Leverage score has been assigned at 'bb-', above the implied score of 'b' due to the following adjustment reasons: Capital Flexibility and Ordinary Support (positive). Public Ratings with Credit Linkage to other ratings Banconal's and Caja de Ahorros' ratings are driven by the potential support it would receive from the Republic of Panama (BB+/Stable). Banistmo's ratings are driven by the potential support it would receive from Bancolombia (BB+/Stable). BLH's ratings are driven by the potential support it would receive from Grupo ASSA (BBB-/Stable). Multibank's ratings are driven by the potential support it would receive from Banco de Bogota (BB+/Stable). ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Banco General S.A. LT IDR BBB- Affirmed BBB- ST IDR F3 Affirmed F3 Viability bbb- Affirmed bbb- Government Support ns Affirmed ns senior unsecured LT BBB- Affirmed BBB- Multibank, lnc. LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B Viability bb- Affirmed bb- Shareholder Support bb+ Affirmed bb+ senior unsecured LT BB+ Affirmed BB+ Banco La Hipotecaria, S.A. LT IDR BBB- Affirmed BBB- ST IDR F3 Affirmed F3 Viability bb- Affirmed bb- Shareholder Support bbb- Affirmed bbb- Caja de Ahorros LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B Viability bb- Affirmed bb- Government Support bb+ Affirmed bb+ Banco Nacional de Panama LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B Viability bb+ Affirmed bb+ Government Support bb+ Affirmed bb+ senior unsecured LT BB+ Affirmed BB+ Banistmo S.A. LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B Viability bb Affirmed bb Shareholder Support bb+ Affirmed bb+ senior unsecured LT BB+ Affirmed BB+ ======= P E R U ======= UNACEM CORP: S&P Lowers ICR to 'BB-', Outlook Negative ------------------------------------------------------ S&P Global Ratings lowered its global scale long-term issuer credit rating on Peru-based building materials company UNACEM Corp. S.A.A. to 'BB-' from 'BB'. The negative outlook indicates a potential downgrade in the next 12 months if the company's liquidity position remains under pressure or if its credit metrics deviate from our expectations. UNACEM's operating and financial performance has been weaker than expected stemming from lower sale volumes across Peru, Ecuador, and Chile in the first half of the year. In addition, the acquisitions of Termochilca (May 2023) and Tehachapi (November 2023) have resulted in higher-than-expected administrative expenses. The greater use of debt, as a result of acquisitions and weaker cash flow, caused the company's key credit metrics to erode. S&P now expects UNACEM to post adjusted net debt to EBITDA of about 3.2x, free operating cash flow (FOCF) to debt of about 5%, and discretionary cash flow (DCF) to debt of about 1% by the end of 2024, sharply deviating from our previous expectations of 2.4x, 15%, and 12%, respectively. S&P said, "In Peru, one of the company's core markets (about 65% of revenue), we continue to expect the economy to grow about 2.7% in 2024 and in 2025, primarily fueled by the upturn in the fishing, agriculture, and construction sectors. This should help UNACEM's sale volumes to start recovering in the next 12 months and improve its profitability and cash flow. Therefore, for 2025, we forecast the company's net debt to EBITDA to slip just below 3.0x and FOCF to debt to rise close to 8%, compared with our previous expectations of close to 2.0x and 15%, respectively. Given deviations in credit metrics for 2024 and 2025, we revised our view of the financial risk profile to significant from intermediate, triggering the downgrade. "The company's increasing reliance on short-term debt, mainly for working capital needs, over the last few quarters has tightened its liquidity position, in our view. We expect this to be temporary as UNACEM refinances its debt in the local market. We believe the company maintains good access to capital markets and has sound relationships with several banks, as reflected in several refinancings even during periods of economic stress. "Moreover, we expect Peru's central bank to keep cutting the policy interest rate in the next 12 months, which could improve financing conditions in the country. We will continue to monitor the company's actions to ease liquidity pressures in the next few months. This will become more important, as the bank loan of about $345 million, which was taken out to acquire Tehachapi's assets, approaches its October 2026 maturity. If the loan is not refinanced on a timely basis, it could further weaken the company's credit quality. "For the next 12 months, we expect UNACEM to continue benefiting from easing input costs and from operating efficiencies, particularly fuel consumption in Peru. Moreover, we expect the company's U.S. operations (about 20% of revenue) to increase profitability in line with our expectation of higher utilization rates and a gradual normalization of administrative expenses. These factors, together with average price increases in UNACEM's building materials business (about 90% of revenue), should help raise adjusted EBITDA margin above 25% in the next 12 months." ================= V E N E Z U E L A ================= VENEZUELA: Oil Exports Hit 4-Year Peak on Higher Output, Sales -------------------------------------------------------------- Reuters reports that Venezuela's oil exports rose to a four-year high, approaching 950,000 barrels per day in October, boosted by growing crude output and more sales to India and the United States, according to shipping data and documents from state firm PDVSA. According to Reuters, the increase happened despite a large storage terminal fire last month, tighter U.S. sanctions since June and the arrest of the country's former oil minister, Pedro Tellechea, and former PDVSA executives over corruption allegations. A bounce in crude production, mainly due to the stabilization of processing operations at Venezuela's largest oil region, the Orinoco Belt, has allowed the recovery of heavy crude inventories, the PDVSA documents, as cited by Reuters, showed. In total, PDVSA and its joint ventures exported an average of 947,387 bpd of crude and fuel, 21% over the previous month and the highest monthly figure since early 2020, according to the data, based on tanker movements. Reuters says the South American country, which has remained under U.S. sanctions since 2019, also exported 314,500 metric tons of oil byproducts and petrochemicals, slightly more than the 267,000 tons of September. Crude shipments by Chevron to the United States reached a peak of 280,000 bpd, the highest since the U.S. producer resumed exports of Venezuela's heavy grades early last year. Spanish producer Repsol also exported Venezuelan oil cargoes to the U.S. and Spain last month, Reuters states. PDVSA increased exports to India, which used to be a top market before the sanctions, sending three cargoes, or about 141,000 bpd, last month, the data showed. Reuters notes that crude deliveries to the U.S., Europe and India are authorized under U.S. licenses to some PDVSA's joint venture partners and customers, including Chevron, Repsol, Eni, Maurel & and Reliance Industries. However, China remained the main destination of Venezuela's oil exports in October with 385,300 bpd shipped to the world's top oil importer directly and indirectly. Exports to China had been higher in September, when they averaged some 451,500 bpd, Reuters adds. About Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and a large number of small islands and islets in the Caribbean sea. The capital is the city of Caracas. Hugo Chavez was president to Venezuela from 1999 to 2013. The Chavez presidency was plagued with challenges, which included a 2002 coup d'etat, a 2002 national strike and a 2004 recall referendum. Nicolas Maduro was elected president in 2013 after the death of Chavez. Maduro won a second term at the May 2018 Venezuela elections, but this result has been challenged by countries including Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States who deemed it fraudulent and moved to recognize Juan Guaido as president. The presidencies of Chavez and Maduro have challenged Venezuela with a socioeconomic and political crisis. It is marked by hyperinflation, climbing hunger, poverty, disease, crime and death rates, social unrest, corruption and emigration from the country. Moody's has withdrawn 'C' local currency and foreign currency ceilings for Venezuela in September 2022. Standard & Poors has also withdrawn its 'SD/D' foreign currency sovereign credit ratings and 'CCC-/C' local currency ratings on Venezuela in September 2021 due to lack of sufficient information. Fitch withdrew its own 'RD/C' Issuer Default Ratings on Venezuela in June 2019 due to the imposition of U.S. sanctions on the country's government. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2024. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *