/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/241113.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, November 13, 2024, Vol. 25, No. 228 Headlines B E R M U D A SEADRILL LIMITED: Fitch Affirms 'B+' LongTerm IDR, Outlook Stable C A Y M A N I S L A N D S GFH SSL: Fitch Rates $500MM 7.5% Certificates Due 2029 ‘B’ C O L O M B I A BANCOLOMBIA SA: Restructuring No Impact on Moody's Rating CITY OF MEDELLIN: Fitch Affirms 'BB+' LongTerm IDRs ECOPETROL SA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable GRAN TIERRA: Fitch Hikes LongTerm IDRs to 'B+' P A N A M A INVERSIONES CREDIQ: Fitch Affirms & Then Withdraws 'B' IDRs P A R A G U A Y PARAGUAY: IDB OKs $30M-Loan to Strengthen Tax Administration P U E R T O R I C O CARMEN FRATICELLI: Blue View Loses Bid to Dismiss Bankruptcy Case - - - - - ============= B E R M U D A ============= SEADRILL LIMITED: Fitch Affirms 'B+' LongTerm IDR, Outlook Stable ----------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of Seadrill Limited and Seadrill Finance Limited at 'B+'. Fitch has also affirmed Seadrill Limited's senior secured first-lien revolving credit facility (RCF) at 'BB+' with a Recovery Rating of 'RR1' and the senior secured second-lien note under Seadrill Finance Limited at 'BB-'/'RR3'. The Rating Outlook is Stable. Seadrill Limited's rating reflects its low leverage, strong liquidity profile and well-positioned ultra-deepwater fleet. The company has good visibility for 2025, given the strong contract coverage reflected in its $2.4 billion backlog as of June 30, 2024. These strengths are offset by the high volatility in utilization and day rates inherent in the offshore drilling market. The Stable Outlook is based on Fitch's expectation of broadly improving to stable day rates in 2024-2025, with gradual decreases thereafter. Fitch expects fleet utilization to remain strong through 2025 before reversing modestly thereafter, in line with Fitch's oil price assumptions. Key Rating Drivers Conservative Financial Policy: Fitch views Seadrill's conservative financial policy as a credit positive. The company targets net leverage at or below 2.0x through the cycle and less than 1.0x in the current market conditions. Seadrill completed the Aquadrill merger in 2023 which was 100% equity funded. Fitch anticipates future acquisitions to be completed in a similar manner. Since emergence from Chapter 11, Seadrill has used divestitures to reduce debt. In June 2024, it divested three Qatar jackup rigs and its 50% equity interest in the joint venture with Gulf Drilling International for cash proceeds of $338 million, which is expected to be used entirely for share repurchases. However, Fitch expects share repurchases to moderate going forward. The company has no near-term debt maturities and has targeted greater than 50% of FCF to shareholder returns over the forecast period. Fitch anticipates this will be executed in a manner that aligns with their financial policy. Backlog on Growth Trajectory: As of June 30, Seadrill's contract backlog totaled $2.4 billion. It expects to convert $1.1 billion of this backlog into revenue in 2025, $600 million in 2026 and $400 million thereafter. For 2025, approximately 67% of available days are already committed. If the offshore drilling market remains strong, Seadrill's 2025 revenue could significantly exceed Fitch's expectations. Revised Guidance: Fitch notes Management revised 2024 Revenue and EBITDA guidance down, (excluding the impact of the completion of the Gulfdrill sale), due to current expectations for contract start dates for West Auriga and West Polaris, which push EBITDA recognition to future periods, and the near-term outlook for uncommitted capacity on the Sevan Louisiana and the West Phoenix. Strong Offshore Ultra-Deepwater Drilling Fleet: Fitch views Seadrill's large and diverse fleet of drilling equipment as supportive of its credit. The company owns 12 floater rigs, including 10 drillships and two semi-submersible rigs, three harsh environment rigs and one jackup, and manages two rigs on behalf of Sonangol EP. Seadrill operates in all major offshore oil and gas basins, including the Gulf of Mexico, Brazil (BB/Stable), West Africa, the North Sea and Southeast Asia. Customer Concentration: The concentration of Seadrill's backlog with Petroleo Brasileiro S.A. (Petrobras; BB/Stable), ConocoPhillips (A/Stable) and Equinor ASA, which accounts for around 76%, is modestly positive. This is due to the credit strength of these counterparties. Petrobras, a state-owned Brazilian entity, has a long-standing relationship with Seadrill and is expected to drive rig demand in the short term. Seadrill aims to continue building ultra-deepwater opportunities in the Golden Triangle (Brazil, the Gulf of Mexico and West Africa) to achieve economies of scale from rig clustering in the region. Rebound in Floater Market: The recovery in floater day rates is a credit positive. As long-term forward oil prices started to increase in 2021, market day rates for floaters began growing at a fast pace and almost doubled since YE 2020. Seadrill's realized average day rate for contracted revenue increased by 9% in 6M24 to $295,000/day as market rates are gradually reflected in contracts. Fitch assumes a slight improvement in market day rates in 2025 given the current backlog, but expects rates to decline in 2026 based on Fitch's oil price deck. The number of contracted floaters has been largely stagnant worldwide between 2017 and 2023, with a slight drop year to date, although it remains at healthy levels. Seadrill's economic utilization stabilized around 94% in 6M24. Elevated Capex to Normalize: Elevated capex in 2024 due to a high number of Special Periodic Surveys (SPS) is manageable within cash flow. In line with the age of its vessels, Seadrill has some regulatorily required SPS work to do in 2024, with capex expected to be $450 million before declining to a normal run rate of around $200 million. Derivation Summary Seadrill is the smallest offshore company compared to peers Noble Corporation plc (BB-/Stable) and Valaris Ltd. (B+/Stable). In terms of revenue and EBITDA, Seadrill's onshore peers include Nabors Industries, Ltd. (B-/Stable) and Precision Drilling Corporation (BB-/Stable), which are more stable than the offshore segment. Fitch expects Seadrill to have similar margins to Valaris, but lower than Noble Corp. Nabors is larger than Seadrill and has higher margins, but is significantly more leveraged. Fitch expects Precision to generate similar revenue, margins and leverage compared to Seadrill over the forecast period. Key Assumptions - Brent oil price at $80/bbl in 2024, $70/bbl in 2025, $65/bbl in 2026-2027 and $60/bbl thereafter; - Revenue decline of 8% in 2024 with 2% growth in 2025, followed by declines thereafter; - EBITDA margins maintained in the mid- to high 20% range in 2024 and 2025; - Capex of $450 million in 2024 before returning to a normalized $200 million range; - No M&A or dividends; - Share repurchases moderating between $50 million and $100 million. Recovery Analysis KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes that Seadrill Limited would be reorganized as a going concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. Going Concern Approach Seadrill's GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the enterprise valuation. The GC EBITDA assumption for commodity price sensitive issuers at a cyclical peak reflects the industry's move from top of the cycle commodity prices to mid-cycle conditions and intensifying competitive dynamics. The GC EBITDA assumption of $125 million (previously $100 million) represents a point between a distress level EBITDA and a more mid-cycle level EBITDA. This represents an emergence from a prolonged commodity price decline. These prices could lead to a marked difference in the company's cash flow generation given the impact a period of prolonged oil prices could have for day rates and rig utilization. The GC EBITDA assumption reflects a loss of customers and lower margins than the near-term forecast as exploration and production companies cut costs. The EBITDA assumption also incorporates weak offshore drilling market fundamentals and overall high rig supply, but improving demand. The assumption reflects the material decrease in the company's liabilities and the material writedown in the value of the company's property, plant and equipment (PP&E) following the debt restructuring. Seadrill eliminated $5.0 billion of pre-petition debt from its balance sheet after exiting bankruptcy procedures in 2022. An enterprise value multiple of 5.5x EBITDA is applied to the GC EBITDA to calculate a post-reorganization enterprise value. The choice of this multiple considered the following factors: - The historical bankruptcy case study exit multiples for peer energy oilfield service companies have a wide range with a median of 6.5x. The oil field service subsector ranges from 2.2x to 17.0x due to the more volatile nature of EBITDA swings in a downturn. - Fitch used a multiple of 5.5x to estimate the enterprise value of Seadrill due to concerns about a downturn with a longer duration, a high exposure to offshore drilling rigs that can see meaningful volatility in demand and continued capital investment to reactivate rigs. Liquidation Approach The liquidation estimate reflects Fitch's view of the value of balance sheet assets that can be realized in sale or liquidation processes conducted during a bankruptcy or insolvency proceeding and distributed to creditors. Fitch assigns standard discounts to the liquidation value of the company's сash, accounts receivable, inventory and PP&E. Despite the material writedown on the company's PP&E, Fitch is still using a 15% liquidation value to the company's 2Q24 book value due to the high uncertainty of assets valuations during a downturn. The $225 million first-lien secured RCF is assumed to be fully drawn upon default and is the most senior in the waterfall. The allocation of value in the liability waterfall results in a recovery corresponding to 'BB+'/'RR1' for the secured credit facility, and a recovery rating of 'BB-'/'RR3' for the $575 million senior secured second-lien debt. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Sustainably stronger offshore drilling market fundamentals, including high day rates, longer contracts and growing backlog; - A track record of conservative financial policy that keeps gross debt in check; - Midcycle EBITDA leverage below 2.0x. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Deteriorating market fundamentals such as decreasing day rates and offshore rig utilization; - A significant increase in gross debt; - Weakening liquidity; - Midcycle EBITDA leverage above 3.0x. Liquidity and Debt Structure Ample Liquidity: Seadrill had $835 million of unrestricted cash at June 30, 2024 and the $225 million undrawn long-term committed revolving credit facility (RCF) expiring in 2028. Seadrill's outstanding debt consists of $50 million convertible notes due 2028 and $575 million second-lien notes due 2030. Fitch projects that Seadrill will generate negative FCF in 2024 due to elevated capital spending and shareholder distributions that can be covered by the cash balance. FCF is expected to turn positive in 2025. As long as Seadrill remains disciplined in regard to capital spending, acquisitions and stock buybacks, the company is expected to have ample liquidity. Issuer Profile Seadrill Limited is an ultra-deepwater offshore drilling contractor that owns and operates drillships, semi-submersible rigs and jackup rigs for operations in shallow-, mid-, deep- and ultra-deepwater areas, as well as in benign and harsh environments. It also manages another two rigs owned by Sonangol. 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 Seadrill has an ESG Relevance Score of '4' for Waste & Hazardous Materials Management; Ecological Impacts due to the risk that a possible offshore oil spill may affect the drilling company. This factor has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Seadrill Finance Limited LT IDR B+ Affirmed B+ senior secured LT BB+ Affirmed RR1 BB+ USD 225 mln Floating SOFR revolving credit facility 27-Jul-2028 LT BB+ Affirmed RR1 BB+ Senior Secured 2nd Lien LT BB- Affirmed RR3 BB- USD 575 mln 8.375% bond/note 01-Aug-2030 81172QAA2 LT BB- Affirmed RR3 BB- Seadrill Limited LT IDR B+ Affirmed B+ =========================== C A Y M A N I S L A N D S =========================== GFH SSL: Fitch Rates $500MM 7.5% Certificates Due 2029 ‘B’ -------------------------------------------------------------- Fitch Ratings has assigned GFH Financial Group BSC's (GFH) USD500 million 7.5% certificates due 2029, issued through GFH Senior Sukuk Limited (GFH SSL), a final rating of 'B' with a Recovery Rating of 'RR4'. The final rating is in line with the expected rating assigned on October 21, 2024. GFH SSL, the issuer and trustee, is a special purpose vehicle (SPV), incorporated in the Cayman Islands, as a trust for charitable purposes with share capital being held by Walkers Fiduciary Limited. GFH SSL was established solely to issue certificates (sukuk). The trustee has been incorporated solely for the purpose of participating in the transactions contemplated by the transaction documents. The proceeds received by GFH are being used to settle existing financings and for general corporate purposes. Fitch affirmed GFH's Long-Term IDR at 'B' with a Stable Outlook on June 4, 2024. Key Rating Drivers The US dollar certificates' rating is driven solely by GFH's 'B' Long-Term IDR, with which it is equalised. This reflects Fitch's view that default of these senior unsecured obligations would reflect a default of GFH in accordance with Fitch's rating definitions. The Recovery Rating of 'RR4' reflects Fitch's expectation of average recoveries in the event of a default. The issue size is the same as the USD500 million of certificates issued in 2020 by another SPV, GFH Sukuk Company Limited, of which USD266 million remained in issue at end-2023. These are due to mature in January 2025. The new issue will therefore increase both GFH's financial liabilities and its liquidity, but will not materially impact Fitch's overall view of its leverage or funding profile. Fitch has given no consideration to any underlying assets or any collateral provided, as Fitch believes that GFH SSL's ability to satisfy payments due on the certificates will ultimately depend on GFH satisfying its unsecured payment obligations to the issuer under the transaction documents described in the prospectus. In addition to GFH's propensity to ensure repayment of the sukuk, in Fitch's view, GFH would also be required to ensure full and timely repayment of GFH SSL's obligations due to the GFH's various roles and obligations under the sukuk structure and documentation, especially, but not limited to, the features explained below. - On each periodic distribution date, GFH as the servicing agent will apply amounts standing to the credit of a collection account, comprising a rental payment and an instalment payment of any profit amount, in payment which is intended to be sufficient to fund the periodic distribution amount. Fitch notes that GFH can take other measures to ensure that there is no shortfall and that funding of the principal and profit are paid in full and in a timely manner. - On the scheduled dissolution date, the aggregate amounts of the deferred sale price then outstanding, if any, will become immediately due and payable by GFH; and the trustee and the delegate will have the right under the purchase undertaking to require GFH (in its capacity as obligor) to purchase all of its rights, title, ownership interests, benefits and other entitlements, in, to and under the relevant lease assets for an amount equal to the exercise price. The exercise price, together with the aggregate amounts of the deferred sale price then outstanding, if any, are intended to fund the dissolution amount, which is the sum of the outstanding face amount of the trust certificates; and any due and unpaid periodic distribution amounts. - The payment obligations of GFH under the transaction documents will be direct, unconditional, unsubordinated and (subject to the negative pledge provisions) unsecured obligations of GFH and at all times rank at least pari passu with all other present and future unsecured and unsubordinated obligations of GFH, provided that GFH has no obligation to effect equal or rateable payments at any time with respect to any other obligations and, in particular, will have no obligation to pay other obligations at the same time or as a condition of paying sums due under the transaction documents to which it is a party and vice versa. The programme documents have a tangible asset ratio (defined as the ratio of the value of the lease assets to the aggregate of the value of the lease assets and, if applicable, the outstanding deferred sale price) of more than 50%. If the ratio falls below 33% (a tangibility event), the trust certificates will be delisted and each holder will have the right to require the redemption of all or any of its trust certificates. Fitch expects GFH to maintain the tangible asset ratio above 50% through the life of any trust certificates issued under the programme. The obligor has a material base of unencumbered tangible assets, including real estate in Bahrain, that will be initially earmarked for the programme, but other assets may also be deemed eligible later on, if necessary. GFH's asset base is sufficient to support the trust certificate programme. If a loss event has occurred (unless the lease assets have been replaced) and there is a shortfall from insurance proceeds, GFH as obligor will undertake to pay the loss shortfall amount. If the servicing agent is not in compliance with the obligation to insure the assets against a loss event, it will immediately deliver a written notice to the trustee of such non-compliance, and this will constitute a dissolution event. The documentation includes a negative pledge provision that is binding on GFH, as well as financial reporting obligations, covenants, including sharia-specific covenants, and a cross acceleration clause. The documentation does not contain a change-of-control clause. GFH, as the lessee, agrees to permit the lessor, GFH SSL, and any person authorised by the lessor at all reasonable times to enter upon the lease assets for the purpose of inspecting and examining the condition of the lease asset, subject to the lessor having given 15 days' notice in writing. The lessee also agrees to maintain actual or constructive possession, custody or control of all of the lease assets. If the lessee fails to comply, it would constitute a dissolution event. Additionally, if the lessee, GFH, fails to keep and maintain the security or optimum condition of the lease assets (other than fair wear and tear), the lessor GFH SSL will be entitled on giving 15 business days' notice to take possession of the lease assets for the purpose of taking all necessary steps or measures at the cost and expense of the lessee to ensure that the lease assets are in suitable condition for their current or intended use. Certain aspects of the transaction will be governed by English law while others will be governed by Bahraini law. Fitch does not express an opinion on whether the relevant transaction documents are enforceable under any applicable law. However, Fitch's rating on the certificates reflects the agency's belief that GFH would stand behind its obligations. When assigning ratings to the certificates to be issued, Fitch does not express an opinion on certificates' compliance with sharia principles. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The rating is principally sensitive to changes in GFH's IDR. The ratings may also be sensitive to changes to the roles and obligations of GFH under the sukuk's structure and documents. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The rating is principally sensitive to changes in GFH's IDR. The ratings may also be sensitive to changes to the roles and obligations of GFH under the sukuk's structure and documents. Date of Relevant Committee October 17, 2024 Public Ratings with Credit Linkage to other ratings GFH Senior Sukuk Limited's Issuance rating is principally sensitive to changes in GFH Financial Group BSC's IDR Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- GFH Senior Sukuk Limited senior unsecured LT B New Rating RR4 B(EXP) =============== C O L O M B I A =============== BANCOLOMBIA SA: Restructuring No Impact on Moody's Rating --------------------------------------------------------- Moody's Ratings stated that Bancolombia S.A.'s (Bancolombia, senior unsecured Baa2 negative) recent announcement of its plan to conduct a corporate restructuring has no immediate implications for the entity's ratings and outlook. At the same time, the proposed transaction would also not have immediate implications for its subsidiary Banistmo, S.A.'s (Banistmo, senior unsecured Ba1 stable) ratings and outlook. On October 30, 2024, Bancolombia announced that it intends to create a new holding company, Grupo Cibest, which will own Bancolombia. Under this new corporate structure, most of the subsidiaries currently owned and controlled by Bancolombia would be spun off and transferred to the newly created Grupo Cibest. At the end of the transaction, Grupo Cibest will be the parent of Bancolombia S.A., Banistmo, S.A. and most of the group's foreign subsidiaries in Central America, and also some of other smaller operations domiciled in Colombia, including Nequi S.A. Compañía de Financiamiento. As the main financial arm of the group in Colombia, Bancolombia will continue to own some of the group's non-bank subsidiaries in Colombia, such as Fiduciaria Bancolombia S.A., Banca de Inversión Bancolombia S.A and Valores Bancolombia S.A., as well as Bancolombia (Panama) S.A. Following this corporate restructuring, Bancolombia will have most of its operations domiciled in Colombia. The transaction is still subject to regulatory and shareholders' approvals, and the company expects to finalize the process in 2025. In the meantime, Moody's will continue to monitor and analyze the transaction's final details to assess potential ratings implications, if any. As proposed, the transaction would lead to a financial and business profile of Bancolombia that Moody's expect will remain commensurate with its current ratings level. In particular, Moody's currently assess the weighted average macro profile of Bancolombia as Moderate, while after the proposed transaction its macro profile would improve to Moderate+, reflecting Colombia's macro profile. Moody's expect the level of stage 3 loans in relation to gross loans for Bancolombia to decrease, mainly driven by the spinoff of Banistmo, S.A., which presents the highest loan delinquencies within the group. Also, asset quality would benefit from the spinoff of the bank's operations in El Salvador, as it would no longer have an exposure to riskier sovereign debt in the country. At the same time, this corporate restructuring will reduce the bank's capitalization from current levels. Moody's expect capital to decline by the reduction in the bank's RWAs and the elimination of most of its goodwill, currently generated by the Central American subsidiaries. However, this effect of the goodwill will not fully compensate the reduction on its tangible common equity. In terms of profitability, Moody's expects the bank to continue to maintain its strong earnings generation given its leading position in the Colombian banking sector, with a funding structure that has historically benefited from a high share of core deposits (25% deposit market share in June 2024). Moody's expect the funding and liquidity profile of the bank to remain broadly in line with Moody's current assessment, despite an expected reduction in liquid assets as a percentage of tangible assets. Some of the banks in Central America typically hold larger liquidity buffers. Under the announced transaction, Bancolombia and its subsidiaries will keep the outstanding issued debt on their respective balance sheets, which, despite the reduction in the asset size of Bancolombia, would not lead to a material increase in the bank's reliance on market funds in relation to its total assets. For Banistmo, the bank currently has a ba1 BCA and despite Moody's assessment of a high likelihood of Bancolombia providing support to the bank in case of need, the rating assigned to Banistmo does not benefit from any uplift, given that Bancolombia's BCA is currently at the same level of Banistmo's BCA. Therefore, with the materialization of the corporate restructuring where Banistmo will no longer be owned and controlled by Bancolombia, Moody's expect Banistmo's ratings not to be affected. CITY OF MEDELLIN: Fitch Affirms 'BB+' LongTerm IDRs --------------------------------------------------- Fitch Ratings has affirmed the city of Medellin's ratings as follows: - Long-Term Local and Foreign Currency Issuer Default Rating (IDR) at 'BB+'; Outlook Stable; - National Long-Term Rating (NLTR) at 'AAA(col)'; Outlook Stable; - NLTR of the senior unsecured notes for COP113,700 million issued in 2014 at 'AAA(col)'; - National Short-Term Rating (NSTR) Rating at 'F1+(col)'. Medellin's fiscal performance was positive in 2023, driven by positive growth in tax revenues and operating margin close to 21.5%. The dividends received from Empresas Publicas de Medellin E.S.P. (EPM) continued as the main capex's funding, which allowed Medellin to have a positive surplus before net financing. KEY RATING DRIVERS Risk Profile: 'Low Midrange' Medellin's risk profile assessment of 'Low Midrange' results from a combination of five key risk factors at 'Midrange' and one at 'Weaker'. The assessment reflects a moderately high risk relative to international peers that the issuer may see its ability to cover debt service with the operating balance weaken unexpectedly over the forecast horizon (2024-2028) either because of lower-than-expected revenue or expenditure overshooting expectations, or because of an unanticipated rise in liabilities or debt-service requirements. Revenue Robustness: 'Midrange' Revenue Robustness is assessed as Midrange. Although Fitch considers the city's tax revenues are moderately correlated with economic cycle, they are supported by a diversified economy, which service and tourism sectors have been gaining relevance over the last years. This is reflected in the increasing share of the gross receipts tax (Impuesto de industria y comercio; ICA) in the city's tax collection (2023: 42% up from 2019: 36%), while property tax has been reducing (36% and 41%, respectively). Medellin's operating revenues grew at average annual rate of 9.0%, and fiscal reliance on national transfers averaged 45.5% over 2019-2023. EPM dividends, main city's capital revenue, are stable and contribute materially to Medellin's funding, accounting for about 25% of total revenues. Fitch expect city's revenues growth will continue being positive and aligned to a moderate economic dynamism. In particular, tax base will not increase at a similar rate of that observed in 2023 given that ICA's tariffs will not be modified substantially. Property tax increase will be limited by low room of expansion in the city. Revenue Adjustability: 'Midrange' Medellin has a certain degree of discretionary leeway to increase tariffs within legal limits established by the national congress. The city's local rates are relatively close to the maximums. Fiscal room exists on property taxes, the rates for which are primarily set in accordance with the taxpayer's socioeconomic profile and land use. Thus, additional revenue increases from using the maximum property tax rate could eventually be enforced on properties with higher cadastral values. Tax collection increases may cover at least 50% of reasonably expected declines in revenue. Fitch considers as moderate the affordability of taxpayers to withstand marginal tax rate increases, despite political reluctance to do so. This is based on the city's diversified output as well as its socioeconomic profile, which is above average national peers. Expenditure Sustainability: 'Midrange' Health and education services are the principal responsibilities of Medellin, which are moderately countercyclical spending. The city's operating expenditure has grown in tandem with revenue, maintaining a positive and stable operating margin that averages 19.5% over 2019-2023. EPM's dividends, along with national transfers, are the main source of financing of Medellin's social services spending, which allows Medellin to have broad fiscal room on its own-revenue sources. In Fitch's rating scenario, Medellin's operating margins will continue being positive and close to historical tendency. However, operating balance will be influenced by a moderate inflationary context, with particularly pressure on subsidies, and salaries of health care and education sectors. Expenditure Adjustability: 'Midrange' Medellin has a compliance track record of subnational expenditure fiscal rule. Fitch estimates that the city's mandatory expenditure averages 57.5% of total expenditure, while capital expenditure accounts for 40.4% over 2019-2023. In addition, the current balance funded around 14.2% of total spending. This indicates Medellin's moderate capacity to curtail spending growth, particularly capital expenditure, if an economic downturn takes place. Fitch considers Medellin's affordability to reduce expenditure if need as moderate mainly based on the relevant portion of capital expenditure that has been funded with EPM dividends, in spite of the political repercussion it may trigger. Liabilities & Liquidity Robustness: 'Midrange' Medellin has extensive debt access from varied sources. The city operates under subnational regulatory borrowing limits and an evolving financial market. The city's long-term debt balance was COP1.72 trillion as of August 2024. The city has some appetite for risk since around 72% of its debt is linked to a floating interest rate. This creates some interest rate exposure, especially under the current tighter credit conditions. Foreign exchange risk also arises from Agence Française de Développement's loans, which roughly account for 28%. Medellin's direct debt includes an intergovernmental obligation with the national government for Medellin's metro infrastructure. Although the city's weighted average life of debt is fairly short at 3.2 years, Fitch does not envisage highly refinancing risk even though Medellin rescheduled the profile of part of its local debt (COP687.016 billion) by expanding grace period and tenor, and reducing credit spread. This benefit Medellin's cash flow but will put relatively pressure on the debt service coverage ratio (DSCR) in the end of the rating case horizon. Medellin redeemed one of its notes for COP134.8 billion in August 2024. Liabilities & Liquidity Flexibility: 'Weaker' Although Medellin has access to short- and long-term loans with local banks, liquidity flexibility assessment is limited by counterparty risk, which is below investment grade. The city's liquidity consists of unrestricted cash that stems from internal resources and EPM dividends. At end-2023, total cash balance totaled COP1.3 trillion, of which 0.8% was unrestricted cash. Historically, Medellin's liquidity availability has been relatively volatile as it is influenced by the political spending cycle, which also supports the 'weaker' assessment. Financial Profile: 'a category' In its rating case, Fitch expect Medellin's payback ratio will average 5.5x (score of aa), and its actual DSCR will be close to 1.5x (bbb), given some degree of concentration of debt repayment over the end of the forecast horizon (2024-2028) as a result of the recent Medellin's debt rescheduling. Medellin's financial profile assessment of 'a' considers an override of one category since its primary and secondary debt metrics differ in their score evaluation. Fitch calculates a supplementary debt ratio excluding intergovernmental obligation for the financing of the original infrastructure of the city's metro system, which informs an enhanced debt metrics. The enhanced payback ratio averaged 2.9x and the enhanced synthetic debt service coverage ratio reached 2.7x. These enhanced ratios would be an indication of potential improvement in the city's Standalone Credit Profile (SCP) if the debt ratios were negatively impacted, but the uplift would be limited by the lending government rating. Derivation Summary Medellin's IDRs are based on its SCP, which is assessed at 'bb+', reflecting a combination of a 'Low Midrange' risk profile and financial profile score assessed as 'a' under Fitch's rating case. Short-Term Ratings The NSTR is assessed at 'F1+(col)' and is derived from the NLTR. National Ratings Fitch has affirmed Medellin's National Long-term rating at 'AAA(col)'. This is based on the city's Long-Term IDR of 'BB+', which is at the same level as the sovereign and is compatible with the highest level of Fitch's national rating scale. In addition, Fitch views Medellin's risk profile and debt ratios as comparable to national peers rated 'AAA(col)', such as Santiago de Cali, Bogotá Distrito Capital, Manizales and Pereira. Key Assumptions Risk Profile: 'Low Midrange' Revenue Robustness: 'Midrange' Revenue Adjustability: 'Midrange' Expenditure Sustainability: 'Midrange' Expenditure Adjustability: 'Midrange' Liabilities and Liquidity Robustness: 'Midrange' Liabilities and Liquidity Flexibility: 'Weaker' Financial Profile: 'a' Asymmetric Risk: 'N/A' Support (Budget Loans): 'N/A' Support (Ad Hoc): 'N/A' Rating Cap (LT IDR): 'BB+' Rating Cap (LT LC IDR) 'BB+' Rating Floor: 'N/A' Quantitative assumptions - Issuer Specific Fitch's rating case is a "through-the-cycle" scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on 2019-2023 figures and 2024-2028 projected ratios. The key assumptions for the scenario include: - Tax revenue growth is close to national nominal GDP resulting in annual growth rate of 4.7%; - Current transfers received grow at average annual rate of 11.4%, following the Fitch-estimated historical four-year moving average of the national government's current revenues; - Operating revenue grows at an average rate of 7.9% per annum; - Operating expenditure grows at 9.6% annual average rate, which is based on operating revenue growth as well as inflationary pressures on staff spending mainly; - Net capital expenditure for COP1.3 trillion average per year; - Debt level considers Medellin's long-term debt plan and its potential indebtedness level in accordance with local regulatory borrowing limits; - Apparent cost of debt is a weighted average cost of Medellin's fixed- and floating-rate long-term debt at fiscal year-end 2023; - Fitch's adjusted debt includes an estimate of Medellin's obligations with the national government for the financing of the original infrastructure of the city's metro system; Liquidity and Debt Structure At YE 2023, the city's adjusted debt was made up of COP1.9 trillion long-term debt and approximately COP2.5 trillion intergovernmental debt from the metro system infrastructure. The net adjusted debt totaled COP4.5 trillion as a result of subtracting Medellin's COP9.658 billion of unrestricted cash balance. Fitch's rating case incorporated Medellin's debt plan, which consists of long-term loan up to COP1.97 trillion which will be disbursed between 2024-2027. Issuer Profile Medellin has a population close to 2.6 million and is Colombia's second-most important city, contributing to slightly more than 7.0% of national GDP. The city's unemployment rate has reduced and is positioned among the lowest of local capital cities. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - If the enhanced payback ratio is close to 9.0x, coupled with an enhanced synthetic DSCR below 1.5x, under Fitch's rating case, a negative rating action is possible. - A downgrade of Colombia's sovereign rating. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An upgrade to Colombia's sovereign rating would lead to a corresponding rating action on Medellin. National Ratings are at the highest level, so positive rating actions are not possible. 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. Discussion Note There was an appropriate quorum at the committee and the members confirmed that they were free from recusal. It was agreed that the data was sufficiently robust relative to its materiality. During the committee no material issues were raised that were not in the original committee package. The main rating factors under the relevant criteria were discussed by the committee members. The rating decision as discussed in this rating action commentary reflects the committee discussion. Entity/Debt Rating Prior ----------- ------ ----- City of Medellin LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(col)Affirmed AAA(col) Natl ST F1+(col)Affirmed F1+(col) senior unsecured Natl LT AAA(col)Affirmed AAA(col) ECOPETROL SA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable --------------------------------------------------------------- Fitch Ratings has affirmed Ecopetrol S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB+'. The Rating Outlook for the IDRs is Stable. Fitch has also affirmed the company's National Long- and Short-Term ratings at 'AAA(col)'/'F1+(col)'. The Outlook for the National Long-Term rating is Stable. Ecopetrol's ratings reflect its close linkage with the Republic of Colombia (Foreign and Local Currency IDRs, BB+/Stable) which owns 88.5% of the company. Ecopetrol's ratings also reflect the company's strategic importance for the country, as well as its ability to maintain a robust financial profile. The revision of the Standalone Credit Profile (SCP) to 'bbb-' from 'bbb' reflects weakened governance that could be impactful to long-term operational and financial performance. Key Rating Drivers Linkage to Sovereign: Ecopetrol's ratings reflect the strong linkage with the credit profile of the Republic of Colombia. The ratings also reflect the significant incentive of the Colombian government to support Ecopetrol in the event of financial distress, given the company's strategic importance to the country as a supplier of liquid fuel demand in Colombia and owner of 100% of the country's refining capacity. Ecopetrol's cash is affected by the timeliness of the receipt of funds from the Colombian government through its stabilization fund - Fondo de Estabilizacion de Precios de los Combustibles (FEPC) to offset the difference from selling gasoline and diesel in the local market at lower prices versus the export market. At August 2024, the amount accrued in the FEPC was COP13 trillion (USD3.2 billion). Fitch expects that the balance in the FEPC account will decrease with several price adjustments beings rolled out by the government. During 2022, the price of gasoline was adjusted by COP600/gallon and by an additional COP4,220/gallon in 2023. In June 2024, the government issued decree 0763 aiming at equalizing diesel prices for large-scale consumers in Colombia which is expected to enhance cash position and predictability for the company going forward. Price of diesel has since been increased by COP 400/gallon with the expectation on additional increase of COP 400/gallon in December of 2024. Weakened Governance: Recent developments around strategic acquisitions and board composition have brought focus to Ecopetrol's governance assessment. Despite still recognizing the robustness of governance and bylaws set in place to ensure independence from the majority shareholder, the latest decisions question the degree of independence of the board of director. The resignation of board members, and market reactions to managerial concerns evidence the noise around the soundness of governance frameworks. This could result in impacted operational performance in the future in terms of addition of reserves and production, and the ability to effectively and efficiently tap the bond market. Strong Financial Profile: Ecopetrol's 'bbb-' SCP reflects the company's strong financial profile. Fitch-calculated gross leverage as measured by total debt to EBITDA is expected to average 2.1x through the rating horizon, which is moderate for the industry as Brent prices continue supporting EBITDA generation. Fitch expects Ecopetrol's interest coverage as measured by EBITDA to interest expense coverage to exceed 7x consistently through the rating horizon. Fitch expects Ecopetrol's FCF to be positive going forward, subject to revisions to investment and dividends plans. Fitch's base case assumption includes the company having an average annual capex budget of approximately USD5.5 billion over the next three years and that it will pay 60% of previous year's net income in line with its 40% to 60% dividend policy. This, coupled with Fitch's price assumptions for Brent crude oil price of USD80/bbl in 2024, USD70/bbl in 2025 and USD60/bbl in the long term, would result in positive FCF over the next four years. Stable Operating Metrics: Fitch assumes total hydrocarbons production to be 745 thousand barrels of oil equivalent per day (boe/d) in 2024, exhibiting a trend of recovery expected to continue over the next three years. The company's proved reserve (1P) of 1,883 million boe gave the company a reserve life of 8.2 years as of YE 2023, and is expected to be 8.3 years by the end of 2024. Fitch assumes a 102% reserve replacement rate through the rating horizon. Fitch's calculated after-tax full cycle cost for Ecopetrol has remained relatively stable over the past four years at approximately USD45/boe on average. Ecopetrol S.A. has an ESG Relevance Score of '5' for Governance Structure due to uncertainty regarding the degree of independence of the Board of Directors in operational decisions that could be material for the maintenance of cash generation, production levels, and addition of reserves, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in a one-notch downgrade of the SCP. Derivation Summary Ecopetrol's rating linkage to the Colombian sovereign rating is in line with the linkage for most national oil and gas companies (NOCs) in the region, including Petroleos Mexicanos (PEMEX; B+/Stable), Petroleo Brasileiro S.A. (Petrobras; BB/Stable), YPF S.A. (CCC-) and Empresa Nacional del Petroleo (ENAP; A-/Stable). In most cases in the region NOCs are of significant strategic importance for energy supply to their countries, including in Mexico, Colombia and Brazil. NOCs can also serve as a proxy for federal government funding as is the case in Mexico, and have strong legal ties to governments through their majority ownership, strong control and governmental budgetary approvals. Ecopetrol's SCP is commensurate with a 'bbb-' rating, which is close to that of Petrobras at 'bbb' given Petrobras' recent significant debt reduction. Excluding IFRS16 leases, Ecopetrol's leverage at YE 2023 was 1.8x. Ecopetrol's credit profile is materially higher than that of Pemex's 'ccc-' SCP as a result of Ecopetrol's robust capital structure versus PEMEX's increasing leverage trajectory. Ecopetrol will continue to report stable production, which Fitch expects to stabilize around 770,000 boed. This production trajectory further supports the notching differential between the two companies' SCP. Key Assumptions - Ecopetrol remains majority owned by Colombia; - Brent average USD80/bbl in 2024 and USD70/bbl in 2025 before trending toward USD60/bbl in the long term; - 9.5% discount to Brent on average through rating horizon; - Stable production growth of 1.5% per annum through 2028; - 102% reserve replacement ratio per year; - Aggregate capex of approximately USD5.5 billion per year for the next three years; - Dividends of 60% of previous year's net income; - Progressive tax rate based on 2022 fiscal reform instating windfall taxes of 15%, 10%, 5%, 0% based on current crude prices. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Although not expected in the short to medium term, an upgrade of Colombia's sovereign ratings. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A downgrade of Colombia's sovereign ratings; - A significant weakening of the company's linkage with the government and a lower government incentive to support coupled with a deterioration of its SCP; - A decrease of 1P reserves below 1.5 billion boe could trigger a downgrade to the SCP of the company from 'bbb-'. Liquidity and Debt Structure Strong Liquidity: Ecopetrol's strong liquidity profile is supported by cash on hand, which amounted to USD3.3 billion at June 30, 2024, strong access to the capital markets and an adequate debt maturity profile. Based on market appetite, Fitch does not expect Ecopetrol will have difficulty refinancing, partially or in full, its 2025 and 2026 maturities. ISA Contribution: Fitch expects that the majority of Ecopetrol's consolidated EBITDA will continue to be generated from its oil and gas business. Fitch estimates that ISA's EBITDA of USD1.7 billion in 2023, adjusted to Ecopetrol's ownership, is expected to represent 12% of Fitch's projected Ecopetrol EBITDA for 2024. Gross leverage excluding ISA, defined as total debt to EBITDA, is expected to be 2.2x in 2024. Fitch forecasts gross leverage of 2.1x on average through 2027. Issuer Profile Ecopetrol is a leading integrated energy and infrastructure company in the Latin American and Central American region. The company is the largest in Colombia in relation to their Upstream, Midstream and Downstream business segments. Interconexión Eléctrica S.A. is 51% owned by Ecopetrol and is the largest energy transmission company in the region. Public Ratings with Credit Linkage to other ratings Ecopetrol S.A.'s Long-Term IDR is linked to the sovereign rating of Colombia. 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 Ecopetrol S.A. has an ESG Relevance Score of '4' for Management Strategy due to reduced visibility on execution of growth strategy which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Ecopetrol S.A. has an ESG Relevance Score of '4' for Exposure to Social Impacts due to multiple attacks to its pipelines, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Ecopetrol S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(col)Affirmed AAA(col) Natl ST F1+(col)Affirmed F1+(col) senior unsecured LT BB+ Affirmed BB+ senior unsecured Natl LT AAA(col)Affirmed AAA(col) senior unsecured Natl ST F1+(col)Affirmed F1+(col) GRAN TIERRA: Fitch Hikes LongTerm IDRs to 'B+' ---------------------------------------------- Fitch Ratings has removed the Rating Watch Positive (RWP) and upgraded Gran Tierra Energy Inc.'s (GTE) and Gran Tierra Energy International Holdings Ltd.'s (GTE International) Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) to 'B+' from 'B'. The Rating Outlook is Stable. Fitch has also removed the RWP and upgraded the rating of the 2027 USD300 million senior unsecured notes and the 2029 USD588 million senior secured notes issued by GTE to 'B+' with a Recovery Rating of 'RR4' from 'B'/'RR4'; and the 2025 USD300 million senior unsecured notes issued by GTE International to 'B+'/'RR4' from 'B'/'RR4'. The upgrade reflects GTE's greater scale and asset diversification and stronger financial metrics, after the company has completed the acquisition of 100% of the shares of i3 Energy North Sea and i3 Energy Canada Ltd. The transaction has more than double GTE's 1P reserves on a pro-forma basis. Fitch estimates production would increase towards 60,000 barrels of equivalent per day (boe/d) by 2026, in line with a 'B+' rating. Key Rating Drivers Higher Scale: GTE's PDP reserves will increase to 91 mmboe and 1P reserves to 183 mmboe on a pro forma basis, doubling the company's scale. The reserve life indices (RLI) will reach 6.9 and 14.8 years, respectively. Daily production is expected to be close to 60,000 boe/d based on Fitch's estimates for 2025. Fitch expects leverage, on a boe basis, to be at or below $8/boe for total debt to PDP and $4/boe for total debt to 1P, the lowest metrics among peers in the 'B' category. Improved Diversification: The acquisition adds 19,000 boe/d of pro forma production in Canada, enhancing GTE's geographic footprint and cash flow profile by operating in an investment-grade environment. The transaction also diversifies GTE's commodity mix, with natural gas comprising around 20% of production on a pro forma basis, thereby reducing GTE's 100% dependency on oil. Low-Cost Production Profile: GTE is well positioned compared with peers with half-cycle cost of production of USD25/boe in 2023, and Fitch expect it to remain at or below this level over the next three years. GTE's increased production profile will enhance the company's financial flexibility to absorb shocks in pricing, as lower cost of production has allowed it to sell at a deeper discount than peers. The rating case assumes GTE will sell at an average discount to Brent of USD12.0/bbl over the rated horizon. Adequate Capital Structure: Fitch projects that GTE's gross leverage will be 1.5x in 2024, and to remain at or below 2.0x over the rating horizon. Fitch also projects debt/1P will be at or below USD4/boe assuming 1P replacement of 106%. Fitch's base case assumes that the 2024-2027 capex plan will be close to USD900 million and will be funded with internal cash flows without additional debt. Annual FCF should average USD40 million in 2024 and 2025. Derivation Summary GTE's credit and business profiles are comparable to other small independent oil producers in Colombia. The ratings of SierraCol Energy Limited (B+/Stable) and Geopark Limited (B+/Stable) are constrained to the 'B' category or below, given the inherent operational risk associated with the small scale and low diversification of their oil and gas production. 3R Petroleum Oleo e Gas S.A.'s (BB-/Stable) gas focus business and robust reserves makes are key differentiation factors in comparison to the independent producers in Colombia. Fitch expects GTE's production will average 60,000boed by YE2026 while maintaining its PDP reserve life will at four years and 1P reserve life close to nine years. This compares well to SierraCol's PDP reserve life of 4.5 years and 1P reserve life of 7.0 years and Geopark's five years and eight years, respectively. GTE's half-cycle production was USD25/boe in 2023 and the full-cycle cost was USD40/boe. This is in line with SierraCol's half-cycle production cost of USD26/boe in 2023 but lower than its full-cycle cost of USD44/boe. Geopark is the lowest cost producer in the region at USD15/bbl and estimated USD26/bbl. GTE, SierraCol and Geopark have low leverage. Fitch expects GTE's 2024 leverage to be 1.5x, its total debt to PDP to be USD8/boe and total debt to 1P to be USD4/boe in FY2024. Key Assumptions - Fitch's price deck of USD80/bbl in 2024, USD70/bbl in 2025, USD65/bbl in 2026 and 2027; - Average daily gross production of 39,000boed in 2024; 61,000boed in 2025; and 68,000boed in 2026; - Average USD12/bbl discount to Brent over 2024-2027; - Royalties of USD16/bbl in 2024 and an average of USD10/bbl from 2025-2027; - Operating expenses at USD16/boe in 2024, an average of USD11/boe between 2025-2027; - Transportation cost of USD1/boe over the rating horizon; - SG&A cost of USD3/boe over the rating horizon; - Capex of USD260 million in 2024; - No dividends over the rating horizon; - 1P Reserve Replacement of 106%. Recovery Analysis The recovery analysis assumes that GTE would be a going concern (GC) in bankruptcy and that it would be reorganized rather than liquidated. GC Approach: - A 10% administrative claim. - The GC EBITDA is estimated at USD380 million. The GC EBITDA estimate, excluding the acquisition, reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the valuation of GTE. - EV multiple of 4.0x. With these assumptions, Fitch's waterfall generated recovery computation (WGRC) for the senior secured notes is in the 'RR1' band and the senior unsecured notes are in the 'RR3' band. However, according to Fitch's Country-Specific Treatment of Recovery Ratings Criteria, the Recovery Rating for corporate issuers in Colombia is capped at 'RR4'. RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Net production rising consistently to 75,000boed on a sustained basis while maintaining 1P reserves reserve life of at least 10 years, consistently; - Maintenance of a conservative financial profile with gross leverage of 2.5x or below; - Diversification of operations and improvements in realized oil and gas differentials. Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Sustainable production size declines to below 45,000boed; - 1P reserve life declines to below seven years on a sustained basis; - A significant deterioration of credit metrics to total debt/EBITDA of 3.0x or more; - A persistently weak oil and gas pricing environment that impairs the longer-term value of its reserve base; - Sustained deterioration in liquidity and operating profile, particularly in conjunction with more aggressive dividend distributions than previously anticipated. Liquidity and Debt Structure Adequate Liquidity: GTE reported USD278 million in cash and equivalents as of 3Q24 and USD25 million of debt maturing in the short term. The rating case assumes GTE's FCF will be positive between 2024 and 2027. During the 3Q24, GTE issued additional USD150 million of 9.50% senior notes due in 2029. Of the total amount of proceeds received, USD100 million has been used for financing the purchase price and transaction costs related to the i3 Energy acquisition with the remainder to be used for general corporate purposes. As of 3Q24, the outstanding amount of the 2025 and 2027 senior notes was USD25 million and USD24 million, respectively. Issuer Profile Gran Tierra is an independent energy company with an average oil production of approximately 32,000boed onshore in Colombia. GTE's blocks are located in the Middle Magdalena, Llanos and Putumayo basins. The company had 90MMboe of 1P reserve and 7.6-year reserve life as of FY23. 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 Gran Tierra Energy Inc. and Gran Tierra Energy International Holdings Ltd have an ESG Relevance Score of '4' for GHG Emissions & Air Quality due to the growing importance of policies designed to limit the greenhouse gas (GHG) emissions from the production of oil and gas and potentially lessening demand, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Gran Tierra Energy Inc. LT IDR B+ Upgrade B LC LT IDR B+ Upgrade B senior unsecured LT B+ Upgrade RR4 B senior secured LT B+ Upgrade RR4 B Gran Tierra Energy International Holdings Ltd. LT IDR B+ Upgrade B LC LT IDR B+ Upgrade B senior unsecured LT B+ Upgrade RR4 B =========== P A N A M A =========== INVERSIONES CREDIQ: Fitch Affirms & Then Withdraws 'B' IDRs ----------------------------------------------------------- Fitch Ratings has affirmed Inversiones CrediQ Business S.A.'s (ICQB) Long- and Short-Term Issuer Default Ratings (IDRs) at 'B'. The Outlook is Stable. Fitch has withdrawn ICQB's ratings for commercial reasons. From this date onward, Fitch will cease to monitor the entity's ratings. Key Rating Drivers Prior to the withdrawal, ICQB's rating was strongly correlated to that of its largest subsidiary, CrediQ Inversiones C.R., S.A, which represented around 45% of ICQB's consolidated earning assets as of 2Q24. ICQB is a non-bank holding company under GrupoQ that consolidates the financial business of the group in the Central American region. As of 2Q24, ICQB's consolidated liquidity was low, with liquid assets at 0.1x short-term funding, but it had USD200 million in available credit lines. The company's ratings are moderately affected by its ability to upstream capital and liquidity, with steady dividend flows and low double leverage at 102%. ICQB's financial performance was good, with 1.6% impaired loans, pre-tax income to average assets at almost 3%, a debt to tangible equity ratio of 4.8x, and 48.3% of financing being unsecured debt as of June 2024. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade Rating Sensitivities are not applicable as the ratings have been withdrawn. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Rating Sensitivities are not applicable as the ratings have been withdrawn. Summary of Financial Adjustments Prepaid expenses were reclassified as intangibles and deducted from equity to reflect their lower loss absorption capacity. Public Ratings with Credit Linkage to other ratings ICQB's ratings are linked to the ratings of its Costa Rican subsidiary CrediQ Inversiones C.R. ESG Considerations Following the withdrawal of ratings for Inversiones CrediQ Business, Fitch will no longer be providing the associated ESG Relevance Scores. Entity/Debt Rating Prior ----------- ------ ----- Inversiones CrediQ Business S.A. LT IDR B Affirmed B LT IDR WD Withdrawn ST IDR B Affirmed B ST IDR WD Withdrawn =============== P A R A G U A Y =============== PARAGUAY: IDB OKs $30M-Loan to Strengthen Tax Administration ------------------------------------------------------------ Paraguay will promote the digital transformation of its tax and customs administration with a $30 million loan from the Inter-American Development Bank (IDB). The program will support the National Tax Revenue Directorate (DNIT, for its Spanish acronym) to enhance the efficiency of domestic tax and customs revenue collection and improve the quality of tax and trade facilitation services. The DNT was established in 2023 to efficiently and effectively manage the internal tax and customs systems, as well as promote formalization and social inclusion. The project will enhance processes and coordination between both areas by merging their taxpayer databases and improving tax and customs risk management. For tax administration, it will expand online taxpayer services, offer prefilled value-added tax returns for large and medium-scale taxpayers, and promote electronic invoices in foreign trade operations. In customs administration, the IDB loan will support revamping customs processes and operations, updating the country's Customs Code and adopting digital technologies to improve operations. This initiative will also fund the deployment of a stronger technological architecture and enhance cybersecurity, data storage, and processing capabilities. This will pave the way for implementing a robust analytics platform to improve tax compliance and reduce evasion. It also will support the implementation of a comprehensive human talent management model and strengthen planning and management capabilities. Additionally, it will enhance employee training programs and will strengthen the Institute of Fiscal Studies (ISEF, for its Spanish acronym). The project will benefit the government of Paraguay, its institutions, and its population, as the expected increase in revenue will enhance the availability of resources to finance public policies aimed at accelerating growth and reducing poverty and inequality. Additionally, taxpayers and businesses will benefit from improved tax and customs facilitation services. This is the first loan signed by DNIT with the IDB. As reported in the Troubled Company Reporter-Latin America on Oct. 28, 2024, Fitch Ratings has affirmed Paraguay's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a Stable Outlook. ===================== P U E R T O R I C O ===================== CARMEN FRATICELLI: Blue View Loses Bid to Dismiss Bankruptcy Case ----------------------------------------------------------------- Judge Maria de los Angeles Gonzalez of the United States Bankruptcy Court for the District of Puerto Rico denied Blue View Capital LLC's motion to dismiss the subchapter V bankruptcy case of Carmen Maria Mercado Fraticelli and request for a four-year bar to refile. This case came before the court on October 15, 2024 for a hearing to consider the confirmation of the subchapter V plan filed by Carmen Maria Mercado Fraticelli and the motion to dismiss with a four-year bar to refile filed by secured creditor Blue View Capital LLC. At the hearing to consider the foregoing matters, the court denied the confirmation of the Debtor's subchapter V plan and took Blue View's motion to dismiss with the bar to refile under advisement. On May 31, 2024, the Debtor filed a voluntary chapter 11 petition as a subchapter V case. The Debtor listed a lot of two-floor concrete residential property located at Urb. Santa Teresita AX-8, Ponce, Puerto Rico as her only real estate property in schedule A/B with a value of $125,000. The Debtor listed Blue View in schedule D as having a secured claim over the Property in the amount of $123,154.15. On August 5, 2024, Blue View filed proof of claim number 1 in the amount of $283,593.07 for a loan secured by the Property. The Debtor has not objected to this claim. On August 30, 2024, the Debtor filed her subchapter V plan, proposing payment to Blue View's secured portion of the claim in the amount of $125,000 in 120 installments of $1,515.63 with 8% interest. The court set the hearing on confirmation for October 17, 2024. On September 17, 2024, Blue View filed a motion to dismiss the case with a four-year bar to re-file. On September 26, the Debtor opposed Blue View's dismissal request. The court scheduled the hearing on the motion to dismiss also for October 17. On October 3, 2024, Blue View filed an objection to the confirmation of the plan. The Debtor did not file a response to Blue View's objection before the October 17 confirmation hearing. Upon the Debtor's request and Blue View's consent, the court rescheduled the hearing on the confirmation of the plan and the motion to dismiss for October 15, 2024. On October 22, 2024, the Debtor filed an amended subchapter V plan, a memorandum of law against dismissal, and a motion requesting a valuation hearing to establish the value of the Property. On even date, Blue View moved the court to strike all three documents. The Debtor's amended plan proposes payment on Blue View's secured portion of the claim in the amount of $125,000 in 180 installments of $1,194.57 with 8% interest for a total payout of $215,055. The amended plan also proposed payment on Blue View's unsecured portion of the claim in the amount of $482.50 for 60 months for a total payout of $28,950.00. On October 28, 2024, the Debtor opposed Blue View's motion to strike. On October 30, 2024, the court granted Blue View's motion to strike as to the Debtor's memorandum of law against dismissal because the motion to dismiss had already been submitted and taken under advisement at the Hearing and denied as to the amended plan and the request for valuation hearing. At the Hearing, Blue View requested the dismissal of this case with a four-year bar to refile arguing that the totality of circumstances test for bad faith has been met and that cause for dismissal has been established. It argued that: (i) This is the Debtor's second bankruptcy filing on the eve of foreclosure which establishes a pattern of bad faith; (ii) The Debtor is circumventing the bar to refile entered in the prior bankruptcy case number 21-0991; (iii) This is a two-party dispute that should have been resolved in the foreclosure case in state court; (iv) Only Blue View has filed a claim in this case and the Debtor's unsecured claims amount to nominal amounts; (v) There is no equity for unsecured creditors; (vi) While attempting to cram down Blue View's claim, the Debtor has failed to establish the value of the Property; (vii) The Debtor has failed to move her case expeditiously as required by subchapter V; and (viii) The Debtor intends to further delay the case by proposing to amend her subchapter V at the confirmation hearing stage. The Debtor opposed dismissal at the Hearing arguing that her petition was not filed in bad faith. The Debtor asserted that: (i) The bar to refile in the prior case does not apply to her; (ii) Blue View's claim is partially secured because the Property is worth less ($125,000) than the total amount of the debt ($258,593.07); (iii) Her unsecured debts amount to $164,593.07 considering the unsecured portion of Blue View's claim; (iv) The Debtor has enough income to present a feasible plan; and (v) Unlike chapter 13, subchapter V provides the mechanism for her to modify Blue View's commercial loan claim secured with the Property, which is not only her residence but also the place where she conducts business. The Debtor said that she would submit an appraisal of the Property to establish that the Property is worth $125,000 and that she intends to amend her plan to modify the proposed treatment to Blue View. The court is cognizant that the Debtor failed to present a confirmable plan at the Hearing and in fact the confirmation of the plan was denied at such time. But nothing in subchapter V requires her to confirm the plan within a deadline upon its filing or limits her ability to further amend the plan to achieve confirmation. Moreover, the court notes that the Debtor moved expeditiously to cure the deficiencies of the plan that prompted the court to deny confirmation at the Hearing. Judge Gonzalez says the amended plan provides for adequate protection payments to Blue View commencing on November 1, 2024, until confirmation, increases the proposed total payout to Blue View in both secured and unsecured portions of its claim, and also includes appropriate remedies in favor of Blue View in the event of a default with the terms of the plan in compliance with the cramdown provision of 11 U.S.C. Sec. 1191(b). The amended plan contains the elements required for a confirmable subchapter V plan. Without passing judgment on the feasibility of the Debtor's amended plan at this time, the court finds that the Debtor's subchapter V petition has a valid reorganizational purpose. As such, the court determines that the Debtor's subchapter V petition was not filed in bad faith and dismissal is not warranted. A copy of the Court's decision dated October 30, 2024, is available at https://urlcurt.com/u?l=UNZyta Carmen Maria Mercado Fraticelli filed for Chapter 11 bankruptcy protection (Bankr. D.P.R. Case No. 24-02341) on May 31, 2024, listing under $1 million in both assets and liabilities. The Debtor is represented by Juan Carlos Bigas Valedon, Esq. ********* 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. 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