/raid1/www/Hosts/bankrupt/TCRLA_Public/241129.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
Friday, November 29, 2024, Vol. 25, No. 240
Headlines
A R G E N T I N A
BANCO SANTANDER ARGENTINA: Fitch Hikes LongTerm IDR to 'CCC'
B R A Z I L
BRAZIL: Inflation Surges as Lula Readies Public Spending Cuts
COMPANHIA ENERGETICA: S&P Affirms 'BB-' ICR, Alters Outlook to Pos.
JBS SA: Expands Global Reach and Sustainability Initiatives
JBS SA: Resumes Beef Sales to Carrefour After Public Apology
UNIGEL PARTICIPACOES: Chapter 15 Case Summary
E L S A L V A D O R
GRUPO UNICOMER: Fitch Affirms 'BB-' LongTerm IDR, Outlook Stable
M E X I C O
AXTEL SAB: Fitch Affirms 'BB-' LT IDRs, Outlook Stable
P E R U
RUTAS DE LIMA: S&P Lowers Debt Rating to 'CCC', Outlook Negative
P U E R T O R I C O
ORENGO AIR: Unsecureds Will Get 18% of Claims over 60 Months
- - - - -
=================
A R G E N T I N A
=================
BANCO SANTANDER ARGENTINA: Fitch Hikes LongTerm IDR to 'CCC'
------------------------------------------------------------
Fitch Ratings has taken the following rating actions on four
Argentine banks and two Uruguayan branches of Argentine banks:
Banco Santander Argentina S.A., Banco BBVA Argentina, Banco Macro
S.A., Banco Supervielle S.A.
- Long-Term Foreign and Local Currency Issuer Default Ratings
(IDRs) upgraded to 'CCC' from 'CCC-'.
- Short-Term Foreign and Local Currency IDRs affirmed at 'C' and
Government Support Ratings (GSRs) at 'ns'.
- Viability Ratings (VRs) upgraded by one notch to 'ccc' from
'ccc-'.
Fitch typically does not assign Outlooks to ratings in the 'CCC+'
categories or below.
Banco de la Nacion Argentina - Sucursal Uruguay (BNAUY) and
Provincia Casa Financiera:
- Long-Term Foreign and Local Currency IDRs upgraded to 'CCC' from
'CCC-'. Both entities are full branches of their respective
parents, Banco de la Nacion Argentina (BNA) and Banco de la
Provincia de Buenos Aires (BAPRO), and part of the same legal
entities. As a result, their IDRs reflect Fitch's view of BNA's and
BAPRO's Stand-alone Credit Profile (SCP) without country risk
constraint.
This review follows the upgrade of the banks' operating environment
(OE) scores to 'ccc' from 'ccc-' and revision of the OE's outlook
to stable from negative. The OE upgrades follow Fitch's sovereign
rating actions. For additional details see "Fitch Upgrades
Argentina to CCC," dated Nov. 15, 2024.
Key Rating Drivers
IDRs and Viability Ratings (VRs)
Santander Argentina / BBVA Argentina / Macro / Supervielle
In Fitch's view, regardless of the banks' overall adequate
financial condition, their ratings are constrained by Argentina's
IDRs and the agency's assessment of the OE. The Long-Term IDRs of
Santander Argentina, BBVA Argentina, Macro, and Supervielle are
driven by their Viability Ratings (VRs), upgraded one notch to
'ccc' from 'ccc-'. These banks' VRs are below the implied VRs due
to the sovereign rating and OE constraint. Fitch believes that
regardless of these banks overall adequate financial profile,
strong market position, or established niche franchise, the VRs are
highly influenced by the 'ccc' OE score.
Fitch's assessment of the OE directly impacts these banks' ratings.
Although the OE remains challenging, Fitch expects real credit
growth to improve in 2025 due to economic recovery. Fitch projects
a 3.6% contraction in 2024 and 3.9% rebound in 2025. Fitch also
anticipates improved demand for private credit, while the banking
system reduces its exposure to the public sector and begins lending
to the private sector again. Additionally, Fitch expects real
interest rates to turn positive as money demand recovers, given the
government's tightening of monetary policy, a gradual reduction in
inflation, and gradual removal of exchange controls.
Banco de la Nacion Argentina (Sucursal Uruguay) - BNAUY
BNAUY is a full branch of Banco de la Nacion Argentina (BNA), which
has a leading franchise and systemic importance in Argentina. BNAUY
is the same legal entity as BNA. Therefore, its IDRs reflect
Fitch's opinion of BNA's SCP without country risk constraints. BNA
is fully owned by the Argentine state and its liabilities,
including branches abroad, are guaranteed by the sovereign. Fitch
believes BNA's creditworthiness is highly influenced by Argentina's
volatile OE.
The committee's outcome remains the same whether applying the
methodology registered in Uruguay (from Sept. 28, 2023) or Fitch's
new "Bank Rating Methodology," published on March 15, 2024.
Provincia Casa Financiera
Provincia is a branch of Banco de la Provincia de Buenos Aires
(BAPRO) and part of the same legal entity. Provincia's IDRs reflect
Fitch's opinion on BAPRO's SCP without country risk constraints.
BAPRO's credit profile reflect its leading franchise and systemic
importance in Argentina and the Province of Buenos Aires. The bank
is the second largest entity in terms of deposits and the third in
terms of assets as of December 2023. Despite the bank's ample
liquidity, Fitch also considers BAPRO's very weak OE in Argentina,
as well as its low capital base, weaker asset quality relative to
domestic peers and high exposure to the Argentine public sector.
The committee's outcome remains the same whether applying the
methodology registered in Uruguay (from Sept. 28, 2023) or Fitch's
new "Bank Rating Methodology," published on March 15, 2024.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Santander Argentina / BBVA Argentina / Macro / Supervielle:
- The IDRs and VRs would be pressured by a downgrade of Argentina's
sovereign rating or a deterioration in the local OE beyond current
expectations that leads to a significant deterioration in its
financial profile;
- Any policy announcements that would be detrimental to the bank's
ability to service its obligations would be negative for
creditworthiness.
BNAUY / Provincia Casa Financiera
- The IDRs would be pressured by a downgrade of Argentina's
sovereign rating or a significant deterioration in BNA and BAPRO's
financial profiles caused by a deterioration in the Argentine's
OE;
- Any policy announcement in Argentina that would be detrimental to
either BNA or BNAUY's and BAPRO or Provincia's ability to service
their obligations would be negative for their creditworthiness.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Santander Argentina / BBVA Argentina / Macro / Supervielle:
- The IDRs and VRs would benefit from an upgrade of Argentina's
sovereign rating.
BNAUY / Provincia Casa Financiera
- The IDRs of BNAUY and Provincia reflect Fitch's opinion of BNA
and BAPRO stand-alone credit profiles, respectively.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Subordinated Debt
Macro's subordinated debt was upgraded to 'CC'/'RR6' from
'C'/'RR6', and is two notches below the bank's viability rating of
'ccc', reflecting Fitch's base case notching for loss severity.
These securities are plain vanilla subordinated liabilities,
without any deferral feature on coupons and/or principal. The 'RR6'
for subordinated debt reflects poor recovery prospects due to a low
priority position relative to Macro's senior unsecured debt.
Government Support Rating
Santander Argentina / BBVA Argentina / Macro: GSR of 'no support'
(ns) reflects Fitch's view that despite the bank's systemic
importance, government support cannot be relied upon because of
constraints on the government's ability to provide support.
Supervielle: GSR of 'no support' reflects Fitch's view that despite
the bank's moderate franchise, government support cannot be relied
upon given constraints on the government's ability to provide
support.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Subordinated Debt: Any change, either positive or negative to
Macro's VR could result in a similar change to the subordinated
debt rating.
Government Support Rating: Changes in the GSR are unlikely in the
medium term given the low sovereign rating of Argentina.
VR ADJUSTMENTS
Santander Argentina:
- The VR of 'ccc' has been assigned below the 'ccc+' implied VR due
to the following adjustment reasons: OE/Sovereign Rating Constraint
(negative);
- The OE score of 'ccc' has been assigned below the 'bb' implied
score due to the following adjustments reasons: Sovereign Rating
(negative) and Macroeconomic Stability (negative).
- The Business Profile score of 'b-' has been assigned below the
'bb' implied score due to the following adjustment reason: Business
Model (negative).
- The Earnings and Profitability score of 'b-' has been assigned
below the 'bb' implied score due to the following adjustment
reason: Historical and Future Metrics (negative).
BBVA Argentina:
- The VR of 'ccc' has been assigned below the 'ccc+' implied VR due
to the following adjustment reasons: OE/Sovereign Rating Constraint
(negative);
- The OE score of 'ccc' has been assigned below the 'bb' implied
score due to the following adjustment reasons: Sovereign Rating
(negative) and Macroeconomic Stability (negative).
- The Business Profile score of 'b-' has been assigned below the
'bb' implied score due to the following adjustment reason: Business
Model (negative).
- The Earnings and Profitability score of 'ccc+' has been assigned
below the 'bb' implied score due to the following adjustment
reason: Historical and Future Metrics (negative).
- The Capitalization and Leverage score of 'ccc+' has been assigned
below the 'bb' implied score due to the following adjustment
reason: Leverage and Risk-Weight Calculation (negative).
Macro:
- The VR of 'ccc' has been assigned below the 'ccc+' implied VR due
to the following adjustment reasons: OE/Sovereign Rating Constraint
(negative);
- The OE score of 'ccc' has been assigned below the 'bb' implied
score due to the following adjustment reasons: Sovereign Rating
(negative) and Macroeconomic Stability (negative).
- The Business Profile score of 'b-' has been assigned below the
implied score of 'bb' due to the following adjustment reason:
Business Model (negative);
- The Asset Quality score of 'ccc+' has been assigned below the
implied score of 'bb' due to the following adjustment reason:
Historical and Future Metrics (negative);
- The Earnings and Profitability score of 'ccc' has been assigned
below the implied score of 'bb' due to the following adjustment
reason: Historical and Future Metrics (negative);
- The Capitalization and Leverage score of 'b-' has been assigned
below the implied score of 'bb' due to the following adjustment
reason: Leverage and risk weight calculation (negative).
Supervielle:
- The VR of 'ccc' has been assigned below the 'ccc+' implied VR due
to the following adjustment reasons: OE/Sovereign Rating Constraint
(negative);
- The OE score of 'ccc' has been assigned below the 'bb' implied
score due to the following adjustment reasons: Sovereign Rating
(negative) and Macroeconomic Stability (negative).
Public Ratings with Credit Linkage to other ratings
The IDRs of BNAUY and Provincia reflect Fitch's opinion of BNA and
BAPRO stand-alone credit profiles, respectively.
ESG Considerations
Santander Argentina / BBVA Argentina / Macro / Supervielle:
ESG Relevance Score of '4' for Management Strategy due to the high
level of government intervention in the Argentine banking sector.
The enforcement of interest rate caps can lead to inadequate loan
pricing applies significant pressure on banks' net interest
margins. In addition, restrictions on fee levels can negatively
affect performance ratios. This challenges the bank's ability to
define and execute its own strategy, which has a negative impact on
the credit profile, and is relevant to the rating in conjunction
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Banco de la
Nacion Argentina
(Sucursal
Uruguay) LT IDR CCC Upgrade CCC-
LC LT IDR CCC Upgrade CCC-
Banco Santander
Argentina S.A. LT IDR CCC Upgrade CCC-
ST IDR C Affirmed C
LC LT IDR CCC Upgrade CCC-
LC ST IDR C Affirmed C
Viability ccc Upgrade ccc-
Government Support ns Affirmed ns
Banco Macro
S.A. LT IDR CCC Upgrade CCC-
ST IDR C Affirmed C
LC LT IDR CCC Upgrade CCC-
LC ST IDR C Affirmed C
Viability ccc Upgrade ccc-
Government Support ns Affirmed ns
Subordinated LT CC Upgrade RR6 C
Banco
Supervielle S.A. LT IDR CCC Upgrade CCC-
ST IDR C Affirmed C
LC LT IDR CCC Upgrade CCC-
LC ST IDR C Affirmed C
Viability ccc Upgrade ccc-
Government Support ns Affirmed ns
Banco BBVA
Argentina S.A. LT IDR CCC Upgrade CCC-
ST IDR C Affirmed C
LC LT IDR CCC Upgrade CCC-
LC ST IDR C Affirmed C
Viability ccc Upgrade ccc-
Government Support ns Affirmed ns
Provincia Casa
Financiera LT IDR CCC Upgrade CCC-
LC LT IDR CCC Upgrade CCC-
===========
B R A Z I L
===========
BRAZIL: Inflation Surges as Lula Readies Public Spending Cuts
-------------------------------------------------------------
Bloomberg News reports that Brazil's inflation picked up much more
than expected in early November, adding urgency to government plans
to cut swelling public spending that is pushing cost-of-living
increases above target.
Official data released Tuesday, Nov. 26, showed consumer prices
rose 4.77% from a year earlier, above all forecasts in a Bloomberg
survey of economists that had a 4.64% median estimate. On the
month, they increased 0.62%, the report notes.
Price pressures are building in Latin America's largest economy,
stoked by a historic drought and investor anxiety over growing
government spending, the report adds. The central bank has been
hiking interest rates since September to pull the annual inflation
rate back down to its 3% goal -- and warned it will continue to do
so if the outlook does not improve. So far, a hot job market and
strong consumer demand have dulled the effects of double-digit
borrowing costs. At the same time, food and energy have been
further impacted by Brazil's worst-ever drought that's withered
crops and caused regulators to increase utility prices, Notes
Bloomberg News.
According to the report, investors are anxiously waiting for
President Luiz Inacio Lula da Silva to unveil his plans to curb
government outlays, which they describe as increasingly
unsustainable. An announcement is expected this week.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Moody's credit rating for Brazil was last set at Ba2 with positive
outlook as of May 2024. S&P Global Ratings raised on Dec. 19,
2023, its long-term global scale ratings on Brazil to 'BB' from
'BB-'. Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable
Outlook. DBRS' credit rating for Brazil was last reported at BB
with stable outlook at July 2023.
COMPANHIA ENERGETICA: S&P Affirms 'BB-' ICR, Alters Outlook to Pos.
-------------------------------------------------------------------
S&P Global Ratings revised the outlook on Companhia Energetica de
Minas Gerais -- CEMIG and its operating subsidiaries, Cemig
Distribuicao S.A. (CEMIG-D) and Cemig Geracao e Transmissao S.A.
(CEMIG-GT), to positive from stable. S&P affirmed the 'BB-' global
scale and 'brAA+' national scale issuer credit rating on CEMIG (or
the group), as well as 'BB-' rating on CEMIG-GT's senior unsecured
notes and the 'brAA+' rating on CEMIG-D's debentures.
The positive outlook reflects S&P's view that its could upgrade
CEMIG and its subsidiaries in the next 12-24 months if the group's
sizable investments boost cash generation and credit metrics, with
debt to EBITDA of less than 3.5x and FFO to debt more than 20% in
the medium term, despite consistently negative FOCF.
S&P said, "We could upgrade CEMIG if it improves cash generation
while maintaining comfortable credit metrics. For 2024-2028, CEMIG
plans to invest roughly R$35.6 billion in its core
businesses--especially distribution, but also generation, and
transmission of energy--located mainly in the state of Minas
Gerais. The annual capex averaging R$6.2 billion in the next five
years (up from R$3.4 billion in 2022 and R$4.9 billion in 2023)
should lead to an annual shortfall in FOCF of R$1.5 billion –
R$2.7 billion in 2025-2027. Absent additional asset sales, the
company would need to raise additional debt, which we expect to
double from about R$12 billion in 2024 to roughly R$24 billion in
2027.
"In our view, this poses execution risks, especially in 2026 when
we expect investments to peak at R$7 billion and negative FOCF of
about R$2.7 billion. Nevertheless, as long as the group sustains
its favorable operating performance and as revenue from its
investments materializes, we believe that CEMIG could lower its
cash needs, allowing it to maintain its comfortable credit metrics.
In this sense, the positive outlook on CEMIG reflects our view that
we could upgrade it on the global and national scale to 'BB' and
'brAAA' if it reports only moderately negative FOCF in the next few
years, while maintaining adjusted net debt to EBITDA at 3.0x-3.5x
and FFO to debt above 20%."
Operating performance is gradually improving. CEMIG has been
reporting stronger-than-expected credit metrics in the past two
years, with debt to EBITDA of 2.5x-3.0x and FFO to debt averaging
30%, thanks to improved operating performance because of favorable
tariff adjustments at its distribution business and high energy
spreads at CEMIG-GT. The latter stems from power purchase agreement
(PPA) prices that were negotiated at higher levels during the 2021
drought, and low energy purchase prices as a result of favorable
hydrology. In 2024, the group received tariff adjustments above
inflation (Brazil's Consumer Price Index as of October 2024 was
4.76%) for CEMIG-D and the transmission lines of CEMIG-GT of 7.32%
and 5.2%, respectively, boosting S&P's expectation of cash flow.
In addition, CEMIG completed in 2024 the sale of its 45% stake in
Alianca Energia S.A. to Vale S.A. for R$2.7 billion. The proceeds
will support the group's deleveraging, as it won't need to access
capital markets in the very short term to fully amortize CEMIG-GT's
$381 million outstanding international notes due December 2024. As
a result, S&P expects CEMIG's adjusted net debt to EBITDA of about
2.5x and FFO to debt of 30% in 2024, and about 3.0x and 20%,
respectively, in 2025 and 2026, considering that energy spreads
will gradually normalize because of currently lower energy sales
prices, basic interest rates are increasing again in Brazil, and
because of CEMIG's sizable investments.
The concession's expiration could pressure metrics in the medium
term. S&P said, "We expect CEMIG's debt to EBITDA and FFO to debt
to deteriorate in 2027 and 2028 to 3.5x and 15%-20% (from 3.0x and
20%) because the concession for 1,780 megawatts (MW) of CEMIG-GT's
installed capacity will expire in 2027 (for the Emborcacao, Nova
Ponte, and Sá Carvalho hydro plants). While CEMIG intends to renew
it, the process also depends on the granting authority. If CEMIG is
unable to renew the concession, which would also require renewal
fees, EBITDA would shrink by about R$900 million, and the group
would have to buy additional energy in the market to honor its
PPAs. This could increase the group's exposure to electricity
prices in the long term, in our view."
The privatization process is still uncertain. On Nov. 14, 2024, the
state of Minas Gerais notified CEMIG that it proposed a bill for
its privatization. Unless a proposed change to the state
constitution is accepted, the privatization would require approval
from a popular referendum, which is unlikely given the public's low
acceptance of the matter. Finally, it would also depend on
legislative approval, which is uncertain. S&P'll monitor any new
development and reassess the implications for CEMIG, especially in
terms of governance in case it is privatized.
JBS SA: Expands Global Reach and Sustainability Initiatives
-----------------------------------------------------------
tipranks.com reports that JBS SA continues to diversify its
portfolio and expand its operations with significant investments in
plant-based proteins and sustainable practices.
The company is enhancing its production capabilities with new
facilities across Brazil, Australia, and Saudi Arabia, while
boosting sustainability efforts by converting animal waste into
aviation fuel, according to tipranks.com.
These strategic initiatives aim to strengthen JBS’s market
presence and improve operational efficiency, offering potential
growth opportunities for investors interested in dynamic food
industry advancements, the report notes.
About JBS SA
JBS S.A. is a Brazilian company that is a large meat processing
enterprise, producing factory processed beef, chicken, salmon,
pork, and also selling by-products from the processing of these
meats. It is headquartered in Sao Paulo. It was founded in 1953
in Anapolis, Goias.
As reported in the Troubled Company Reporter-Latin America in
August 2021, S&P Global Ratings revised the global scale outlook
on JBS S.A. (JBS) and its fully owned subsidiary JBS USA Lux S.A.
(JBS USA) to positive from stable and affirmed its 'BB+' issuer
credit rating. The recovery expectations remain unchanged, and S&P
affirmed the 'BB+' ratings on the senior unsecured notes and the
'BBB' ratings on the secured term loans.
JBS SA: Resumes Beef Sales to Carrefour After Public Apology
------------------------------------------------------------
Clarice Couto at Bloomberg News reports that meatpackers JBS SA and
Minerva SA are resuming beef sales to Carrefour SA in Brazil after
a spat that halted supplies to stores in the South American nation,
according to people familiar with the matter.
The return to normal sales came after the French retailer issued a
public apology to Brazil's government and farmers, said the people
who asked not to be identified because the information is yet to be
made public, according to Bloomberg News.
Carrefour Chief Executive Officer Alexandre Bompard had said that
the retailer was committed to not marketing any meat in France that
was produced by the Mercosur trade bloc, recounts Bloomberg News.
The move drew ire from Brazilian officials and companies, which
suspended beef sales in retaliation, recalls the report.
About JBS SA
JBS S.A. is a Brazilian company that is a large meat processing
enterprise, producing factory processed beef, chicken, salmon,
pork, and also selling by-products from the processing of these
meats. It is headquartered in Sao Paulo. It was founded in 1953
in Anapolis, Goias.
As reported in the Troubled Company Reporter-Latin America in
August 2021, S&P Global Ratings revised the global scale outlook
on JBS S.A. (JBS) and its fully owned subsidiary JBS USA Lux S.A.
(JBS USA) to positive from stable and affirmed its 'BB+' issuer
credit rating. The recovery expectations remain unchanged, and S&P
affirmed the 'BB+' ratings on the senior unsecured notes and the
'BBB' ratings on the secured term loans.
UNIGEL PARTICIPACOES: Chapter 15 Case Summary
---------------------------------------------
Four affiliates that concurrently filed voluntary petitions for
relief under Chapter 15 of the Bankruptcy Code:
Debtor Case No.
------ --------
Unigel Participacoes S.A. (Lead Case) 24-11982
105 Avenida Engenheiro Luis Carlos Berrini
11 Andar, Sala Unigel, Cidade Moncoes
Sao Paulo, SP CEP 04571-010
Brasil
Companhia Brasileira De Estireno 24-11983
Proquigel Quimica S.A 24-11984
Unigel Luxembourg S.A. 24-11985
Business Description: The Debtors, together with their non-debtor
affiliates, are a Brazilian corporate group
that is engaged in the production of a
diverse portfolio of petrochemicals for the
global market. The Unigel Group is
headquartered in Brazil, with operations and
economic activities concentrated in Brazil,
where it has been operating for more than
half a century. The group was founded in
1966 in Sao Paulo by Henri Armand Slezynger.
At its founding, the Unigel Group produced
thermoplastic resins using a proprietary
process, and has since expanded its
business.
Chapter 15 Petition Date: November 15, 2024
Court: United States Bankruptcy Court
Southern District of New York
Judge: Hon. John P Mastando III
Foreign Representative: Andre Luis da Costa Gaia
105 Avenida Engenheiro Luis Carlos
Berrini
11 Andar, Sala Unigel, Cidade Moncoes
Sao Paulo, SP CEP 04571-010
Brasil
Foreign Proceeding: Recuperacao extrajudicial proceeding
under Federal Law No. 11,101 of
February 9, 2005 of the laws of the
Federative Republic of Brazil before
the 2nd Court of Judicial
Reorganization and Bankruptcy of Sao
Paulo
Foreign
Representative's
Counsel: Kelly DiBlasi, Esq.
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Tel: (212) 310-8000
Fax: (212) 310-8007
Email: kelly.diblasi@weil.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/OMYDBWI/Unigel_Participacoes_SA_and_Andre__nysbke-24-11982__0001.0.pdf?mcid=tGE4TAMA
=====================
E L S A L V A D O R
=====================
GRUPO UNICOMER: Fitch Affirms 'BB-' LongTerm IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Grupo Unicomer Corp.'s (Unicomer)
Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs)
at 'BB-'. The Rating Outlook is Stable.
Unicomer's ratings incorporate its leading business position in
most of its operations and the solid financial position of its
shareholders. The ratings also consider Unicomer's diversification,
which has contributed to solid operating cash flow generation
throughout several economic cycles. The company has shown the
ability to quickly respond to different consumer environments
through the combination of its retail and financial businesses.
Fitch expects profitability to gradually recover during the next
12-18 months due to a number of ongoing initiatives. Fitch
forecasts Unicomer's net adjusted leverage metric to be close to
5.5x by FY 2025 and trend to 4.5x afterward, in line with its
current rating level. A failure or delay in improving profitability
margins and leverage within 12 months may result in negative rating
actions.
Key Rating Drivers
Strategic Initiatives Under Execution: The company is executing
several initiatives to improve margins, which include focusing on
profitable product categories and credit services, as well as
redesigning the organization's structure, among others. Fitch
believes this plan should drive margin recovery during the next two
years. Nonetheless, there are risks associated with the
implementation and execution of these initiatives and Fitch will
consider negative rating actions should margin improvement trends
fail to materialize.
Current Performance Impacts Credit Metrics: Unicomer's profit
margins are currently lower than expected, which, together with
higher debt levels, results in weak credit metrics that are likely
to persist by FY ending March 2025 (FY2025). Fitch expects
Unicomer's EBITDAR margin to sustainably recover over the next
couple of years, with consolidated net adjusted debt/EBITDAR likely
to trend below 5.0x by FY2026, from the current 5.7x. Fitch
believes current higher debt levels reduce Unicomer's flexibility
to navigate market fluctuations and face competitive pressures.
Solid Business Position: Unicomer operates in 21 countries across
Central America, South America and the Caribbean, with over 23
years in consumer durables sales. This has enabled it to develop
long-term relationships with suppliers. These relationships provide
competitive advantages in terms of store locations within small
countries, where prime retailing points of sale are very limited.
The company maintains a leading business position in the retailing
of consumer durable goods, supported by proprietary financing
services and economies of scale in terms of purchasing power and
logistics.
Expected Improvements in Cash Generation: Fitch expects the
company's cash from operations (CFO) and FCF to be positive by
FY2025. Unicomer managed to reduce inventory levels during the
year. During the last three years, the company's CFO was affected
by higher working capital requirements related to resumption of
portfolio growth and higher inventory levels to mitigate supply
disruptions. Medium-term CFO is estimated to be over USD80 million.
Capex levels should be around USD38 million per year in the medium
term, excluding potential acquisitions, and FCF is projected to be
above USD30 million per year.
Attractive Portfolio Net Yield: The company's consumer finance
strategy includes sufficient spreads to cover credit risks in the
portfolio. During the past 10 years, the portfolio yield after
expenses and write-offs has been nearly 35% on average. As of June
30, 2024, Unicomer's credit portfolio had NPLs (past due accounts
for 90 days or more) of 8.7%, similar to that of a year ago and
still higher than the 7.5% level presented pre-pandemic. The
company has provisions equivalent to 118% of those NPLs. The level
of overdue accounts is offset by the company's efficient collection
program and portfolio yield.
Geographic and Format Diversification: Geographic diversification
allows Unicomer to have a broad revenue base and mitigates country
risk from any individual market. Costa Rica, Jamaica, Bermuda,
Honduras and Guyana are among the most important cash flow
contributors, which gives Unicomer some strength and stability to
its operating cash flows. Despite this, most of the sovereign
ratings of countries where Unicomer operates are in the 'B' or 'BB'
rating category. The company has several store formats and brands
across operations that cover different socioeconomic segments of
the population.
Strong Shareholders: Grupo Unicomer's ratings are viewed on a
standalone basis; however, the ratings consider the sound financial
position of Unicomer shareholders Milady Group and El Puerto de
Liverpool, S.A.B. de C.V. (BBB+/Stable), each of which owns 50% of
the company. Liverpool has a proven track record in retail since
1847 in Mexico. In Fitch's view, the shareholders' solid credit
profiles give flexibility to Grupo Unicomer, as the shareholders'
financial positions do not rely on Unicomer's dividend payments.
Derivation Summary
Unicomer has about the same scale in number of stores as Grupo
Elektra, S.A.B. de C.V. (BB-/Stable) and more than El Puerto de
Liverpool, S.A.B. de C.V. (BBB+/Stable). Unicomer's credit
portfolio of USD1.2 billion is smaller in size than Elektra's and
Liverpool's, with credit portfolios of around USD9.7 billion and
USD2.9 billion, respectively. Unicomer is more geographically
diversified than Elektra and Liverpool, whose operations are
concentrated mainly in one market. Unicomer's broad geographic
diversification mitigates the operating risk of any individual
market.
From a financial profile view, the company has profitability
margins of close to 13% on average, similar to those of Elektra,
and slightly lower than Liverpool's average of 17%. Fitch expects
Unicomer's gross adjusted leverage to trend below 5.0x, while for
Elektra it should be below 3.0x. Per Fitch's criteria, Unicomer's
applicable Country Ceiling is 'BBB-'. At the current rating level,
the operating environments (OE) of the countries where the company
has operations do not constrain the ratings.
Key Assumptions
- Consolidated annual revenue growth of 4.5% on average for FY 2025
to FY 2027;
- Credit portfolio growth of 5% on average per year for FY 2025 to
FY 2027;
- An EBITDAR margin of 13% on average for FY 2025 to FY 2027;
- Annual capex close to USD38 million on average for FY 2025 to
FY2027;
- Dividend payment of USD11 million on average for FY 2025 and
FY2027.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Sustained deterioration in overdue accounts from the consumer
finance business;
- A significant reduction in cash flow generation that results in
sustained negative FCF margin;
- A consolidated net adjusted debt/EBITDAR consistently above
5.0x;
- Retail-only net adjusted leverage above 4.5x on a sustained
basis;
- Deterioration of liquidity compared with short-term debt;
- Sustained deterioration in the OE of countries where the company
operates.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Diversification of operating subsidiaries in countries with lower
sovereign risk;
- Consolidated adjusted net leverage close to 4.0x on a sustained
basis;
- Retail-only adjusted net leverage close to 3.5x on a sustained
basis;
- Improved portfolio credit quality and a significant reduction in
its current maturities, resulting in a consistent ratio of cash
plus CFFO/short-term debt of 1.0x.
Liquidity and Debt Structure
Unicomer reported total financial debt (excluding leases) of USD927
million as of June 30, 2024, of which USD248 million was short
term. This level of short-term debt compares with USD115 million of
cash and marketable securities and a short-term credit receivables
portfolio of USD639 million.
Fitch believes Unicomer's liquidity cushion of cash on hand and
operating cash flow coupled with its portfolio of receivables is
sufficient to cover short-term debt. The liquidity ratio, measured
as cash and marketable securities over short-term debt, was 0.5x as
of June 30, 2024. When including short-term account receivables in
the calculation, the ratio increases to 3.0x.
Issuer Profile
Grupo Unicomer Corp. is a leading retailer of durable consumer
goods with operations in 21 countries across Central America, South
America and the Caribbean. It operates 1,262 points of sale and
399,000 square meters of retail space under various brands.
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
----------- ------ -----
Grupo Unicomer Corp. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
===========
M E X I C O
===========
AXTEL SAB: Fitch Affirms 'BB-' LT IDRs, Outlook Stable
------------------------------------------------------
Fitch Ratings has affirmed Axtel, S.A.B de C.V.'s Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) at 'BB-'. Fitch
has also affirmed Axtel's National Long-Term Rating at 'A-(mex)'.
The Rating Outlook is Stable.
The affirmation of Axtel, S.A.B. de C.V.'s rating and Stable
Outlook reflect the company's stable operating performance, growing
EBITDA, and strong cash flow generation. The ratings also
incorporate Fitch's expectation that net leverage will below 3.0x
throughout the rating horizon.
The solid growth in Axtel's services segment also benefits the
rating, as the company continues to gain market share in cloud and
cybersecurity solutions, offsetting a decline in voice and low
single-digit growth in infrastructure. The ratings are tempered by
Axtel's relatively small operating scale.
Key Rating Drivers
Solid Operations with Improving EBITDA: Fitch forecasts margins
will stabilize around 27%-28% through the rating horizon, up from
26% in 2023. Although legacy voice services continue to decline,
cloud and cybersecurity solutions are growing rapidly. The company
is able to meet growing secular demand for these solutions with a
broad array of services amid a competitive industry. Axtel's new
opportunities and cross-selling strategy support future revenue
growth. EBITDA is expected to grow, and lower net debt should
improve net leverage. Net debt/EBITDA is forecast to reach 2.8x in
2024, down from 3.2x in 2023, and approach 2.0x by 2026.
FCF Returning to Historical Levels: Axtel ended 2023 with FCF of
MXN -130 million, down from MXN 750 million in 2022, due to higher
cash interest paid following the company's refinancing, working
capital effects and MXN 388 million reorganization expense incurred
in 2023. Historically, Axtel has generated positive FCF due to B2B
stability and capex flexibility. As of LTM 3Q24, Axtel generated
positive FCF of MXN 511 million. Fitch expects Axtel's FCF to
recover to historical levels through the rating horizon, driven by
EBITDA improvements and working capital normalization. No
shareholder distributions are anticipated until net leverage
declines below 2.0x.
Infrastructure Weak but Stabilizing: Fitch expects infrastructure
revenue to stabilize through the rating horizon. Revenue from
Axtel's Axnet infrastructure unit fell 8% yoy in peso terms in
9M24, driven mainly by nonrecurring impacts in 2024. Growth
opportunities from 5G-related fiber-to-the-tower and
fiber-to-the-data center have been slower than expected. Weak
revenue in Axtel's profitable infrastructure business has weighed
on overall margins. Growth in 5G and demands for neutral network
infrastructure providers could present opportunities for the
business in the long term, but near-term growth will be limited.
Small Scale in Competitive Market: Axtel operates in a competitive
landscape that will constrain its ratings to the 'BB' category. In
fixed enterprise telecom services, Axtel is Mexico's second-largest
participant, competing with Telefonos de Mexico S.A.B. de C.V.
(Telmex; A-/Positive), which has maintained a dominant market
position in the Mexican market. Axtel's market share is smaller in
IT services, but the competitive position is more balanced, given
the fragmented nature of that segment.
Derivation Summary
Axtel has less service and geographical diversification than Cable
& Wireless Communications Limited (CWC; BB-/ Stable). CWC also has
greater scale and a stronger market position, operating primarily
in a series of duopoly markets, which supports stronger EBITDA
margins than Axtel's. However, CWC has a weaker financial profile.
Axtel's business profile is similar to Empresa de
Telecomunicaciones de Bogota's (ETB; BB+/Negative), as they are
small scale, undiversified fixed-line providers. ETB benefits from
lower net leverage.
Axtel's business position is comparable to VTR Finance N.V. (CCC),
given their scale, fixed-line telecom focus and lack of geographic,
product and service diversification. Although VTR has a stronger
competitive position in the Chilean broadband and pay-TV market,
Axtel benefits from lower leverage and a stronger overall financial
position. Axtel's ratings are not influenced by Mexico's Country
Ceiling (BBB+).
Key Assumptions
- Revenues of MXN11.1 billion in 2024, growing about 4% in 2025 and
3% thereafter, due to growth in cloud and cybersecurity solutions
offsetting decline in legacy voice services;
- EBITDA margins stabilizing around 27%-28% supported by the
company's stable and growing business lines in B2B;
- Repayment of MXN700m debt in 2024, partial refinancing from
2025-2026;
- Moderate working capital adjustment in 2024, which will normalize
in 2025;
- Capital intensity of 12% in 2024, 13% thereafter;
- No shareholder distributions anticipated over the rating
horizon.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Total debt/EBITDA sustained above 4.0x or net debt/EBITDA
sustained above 3.5x;
- Prolonged deterioration in revenue and EBITDA from macroeconomic
headwinds and competitive pressures;
- Large shareholder distributions that prevent continued
deleveraging.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Total debt/EBITDA sustained below 3.0x or net debt/EBITDA
sustained below 2.5x;
- Sustained improving performance, with stable and growing EBITDA
margins and cash flow.
Liquidity and Debt Structure
Axtel had readily available cash and equivalents of MXN1.4 billion
at Sept. 30, 2024, against short-term debt of MXN329 million which
consists mainly of payments to the syndicated loan. The company
also has USD50 million available of committed credit lines. Axtel's
liquidity is supported by a manageable amortization schedule,
strong banking relationships and positive FCF.
Issuer Profile
Axtel S.A.B. de C.V. (BB-/Stable) is a Mexican provider of
telecommunications and information technology (IT) services to
corporate and government clients. Axtel is unique among Fitch-rated
telecoms companies in Latin America, which tend to derive most of
their revenue from retail consumers.
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
----------- ------ -----
Axtel, S.A.B. de C.V. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
Natl LT A-(mex) Affirmed A-(mex)
=======
P E R U
=======
RUTAS DE LIMA: S&P Lowers Debt Rating to 'CCC', Outlook Negative
----------------------------------------------------------------
S&P Global Ratings lowered its issue rating on Peruvian toll road
operator Rutas de Lima S.A.C. (RdL or the project) to 'CCC' from
'CCC+'.
S&P said, "The negative outlook reflects the chance of a downgrade
if we see a more pronounced deterioration of the project's cash
flow and liquidity that could increase the risk of default in the
short term. We could also downgrade RdL if we believe that
incentives for noteholders to accelerate the notes payment
increase, or if the Court of Arbitration issues a final judgment
against the project on the concession termination dispute."
S&P said, "The rating action reflects S&P Global Ratings'
expectation that lower cash flows available for debt service
(CFADS) coupled with higher interest rates would lead RdL to
default ahead of our expectations. Between January and October
2024, traffic at PS remained flat compared with the same period
last year due to the reopening of a bypass near Villa El Salvador
toll plaza that allows transits without toll rate payments.
According to the concession contract, the MML is responsible for
controlling and eliminating traffic leaks. However, we don't expect
the latter to occur in this context, so we removed traffic growth
from our base-case scenario for RdL and kept current volumes flat.
This is below our previous projection of 1.5% traffic growth in
2025 and 3%-3.5% annually afterward.
"In addition, we incorporated higher litigation costs due to the
recent flood of legal claims to suspend toll collections at PS and
the MML's intervention in RP's expansion in October 2024. We also
revised up our major maintenance expenses assumption because of the
traffic jump seen at PN after the toll suspension in February 2024.
Our base-case scenario now assumes an operating
expenditure-to-revenue ratio of about 85% in 2024 and 2025,
compared with our previous assumption of close to 75%. The
combination of all these factors lowered our CFADS projection for
2024 and 2025 to Peruvian nuevo sol (PEN) 30 million-PEN40 million
from PEN60 million-PEN70 million previously.
"Moreover, we now forecast annual debt service of about PEN140
million in 2024 and PEN150 million in 2025. The reason for this is,
according to the indenture supplements of series A and B, upon the
incurrence of an event of default (such as the one in March 2024,
when the Constitutional Court of Peru suspended toll collections at
PN), the interest rate for the notes will be 2% higher. Considering
the lower CFADS and increased debt service, we believe RdL would
exhaust its reserve accounts earlier (in 2027) than previously
assumed (2030). This could occur even earlier (in 2025), depending
on RdL's ability to continue collecting tolls at PS, which is
currently the subject of legal actions seeking its suspension."
As of Oct. 31, 2024, RdL's liquidity balance was PEN401 million,
which included:
-- A debt service reserve account of PEN75 million;
-- An additional reserve account of PEN134 million;
-- An O&M reserve account of PEN59 million;
-- A major maintenance reserve account of PEN23 million (of which
only 25% can be used to fulfill any shortfall); and
-- Accessible cash and accounts of PEN110 million.
=====================
P U E R T O R I C O
=====================
ORENGO AIR: Unsecureds Will Get 18% of Claims over 60 Months
------------------------------------------------------------
Orengo Air Corporation filed with the U.S. Bankruptcy Court for the
District of Puerto Rico a Disclosure Statement for Plan of
Reorganization dated October 15, 2024.
The Debtors filed this petition in their corporate capacity.
Debtors operate a Distribution company of air conditioning and an
installation division of the air conditioning. The sale gross
income is approximately $400,000.00 per month. The debtor's
expense is estimated at $340,000.00 monthly.
The Debtor's only assets and liabilities are related to the
Operation Air conditioning distribution business. The Debtor does
not own any Real Properties.
This Plan consists of 3 classes of creditors and Interests. The
purpose of this Plan is to: (a) reorganize and pay the
administrative claims (b) reorganize and pay the priority claims,
and (c) reorganize and pay the unsecured claims.
A Disposable Income Analysis shows that Debtor's monthly disposable
income, projected over 60 months pursuant to Section 1129(a) (15)
of the Bankruptcy Code, would result in a distribution to unsecured
creditors. Under the Plan, however, creditors with General Allowed
Unsecured Claims are projected to receive a distribution in the
amount of $989,957.03 which is 18% on their Allowed Claims.
Class 2 consists of Allowed General Unsecured Claims. The Class 2
Claims will be Satisfied via monthly payments starting the
Effective Date of the Plan. Total Class 2 Claims is estimated at
$5,499,761.26. The Distribution of class 2 claims is estimated at
18.00%. The distribution of this class will be monthly starting on
the effective date of the plan until the month 60. This Class is
impaired.
Class 4 consists of Equity Security Holders. The Class 3 Claims
will receive no distribution under the plan. This Class is impaired
will not vote on the plan.
The Plan will be funded from the Reorganized Debtor's cash flow
generated by the Debtor. It generally consists of the by the
operating of the business. The Debtor will contribute her cash flow
to fund the Plan commencing on the Effective Date of the Plan and
continue to contribute through the date that Holders of Allowed
Class 1, 2 and 3, Claims receive the payments specified for in the
Plan.
A full-text copy of the Disclosure Statement dated October 15, 2024
is available at https://urlcurt.com/u?l=f3Fycx from
PacerMonitor.com at no charge.
Counsel to the Debtor:
Jose M Prieto Carballo, Esq.
JPC LAW OFFICE
P.O. Box 363565
San Juan, PR 00936-3565
Telephone: (787) 607-2066
E-mail: jpc@jpclawpr.com
About Orengo Air Corporation
Orengo Air Corporation operates a distribution company of air
conditioning and an installation division of the air conditioning.
The filed its voluntary petition for relief under Chapter 11 of the
Bankruptcy Code (Bankr. D.P.R. Case No. 24-01434) on April 9, 2024,
listing $2,366,403 in assets and $5,312,448 in liabilities. The
petition was signed by Luis D. Torres Orengo as president. Jose M
Prieto Carballo, Esq. at JPC LAW OFFICES represents the Debtor as
counsel.
*********
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 * * *