/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/241206.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, December 6, 2024, Vol. 25, No. 245 Headlines A R G E N T I N A GAUCHO GROUP: Seeks Court OK to Use Cash Collateral B E R M U D A AFINITI LTD: Gains Ch. 15 Recognition for Bermuda Restructuring B R A Z I L GLOBO COMUNICACAO: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable C O S T A R I C A BANCO DAVIVIENDA: Fitch Affirms 'BB+' LT IDR, Outlook Now Stable J A M A I C A DIGICEL GROUP: Under Scrutiny For Violations of US Corruption Law P A N A M A EMPRESA DE TRANSMISION: Fitch Lowers IDR to 'B', Outlook Stable P A R A G U A Y FRIGORIFICO CONCEPCION: Fitch Affirms 'B' IDR, Outlook Stable PARAGUAY: Gets USD154M IDB Loan for Ypacarai Watershed Sanitation P U E R T O R I C O LA ZAMORANA COCKTAIL: Hires Jimenez Vazquez & Associates - - - - - ================= A R G E N T I N A ================= GAUCHO GROUP: Seeks Court OK to Use Cash Collateral --------------------------------------------------- Gaucho Group Holdings, Inc. asked the U.S. Bankruptcy Court for the Southern District of Florida, Miami Division, for authority to use cash collateral. The company requires the use of cash collateral to fund necessary operating expenses in accordance with its projected budget, with a 10% variance. 3i, LP appears to hold a blanket lien on, among other personal property, the company's cash collateral. The principal balance due 3i on the petition date was $4 million. Gaucho has contested 3i's lien and claim in pre-bankruptcy litigation. Gaucho believes that 3i's substantial equity cushion of over $10 million, based upon the company's valuation of its assets of approximately $15.8 million, is enough to protect 3i's interest in the cash collateral. About Gaucho Group Holdings Gaucho Group Holdings, Inc. is a Delaware holding company headquartered in Miami, Fla., which owns certain subsidiaries including operating companies that own a winery, boutique hotel and real property in Argentina. Gaucho filed Chapter 11 petition (Bankr. S.D. Fla. Case No. 24-21852) on November 12, 2024, with $10 million to $50 million in both assets and liabilities. Nathan G. Mancuso, Esq., at Mancuso Law, P.A. is the Debtor's legal counsel. ============= B E R M U D A ============= AFINITI LTD: Gains Ch. 15 Recognition for Bermuda Restructuring --------------------------------------------------------------- Ben Zigterman of Law360 Bankruptcy Authority reports that a Delaware bankruptcy judge confirmed she would recognize the Bermuda insolvency proceedings of software company Afiniti Ltd. as it attempts to restructure more than $500 million in debt. About Afiniti Ltd. Afiniti Ltd. provides management consultancy services. Afiniti Ltd. sought relief under Chapter 15 of the U.S. Bankruptcy Code (Bankr. D. Del. Case No. 1:24-bk-12539) on Nov. 3, 2024, to seek U.S. recognition of the liquidation proceedings in Bermuda. The Debtor Young Conaway Stargatt & Taylor LLP as its U.S. counsel. =========== B R A Z I L =========== GLOBO COMUNICACAO: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Globo Comunicacao e Participacoes S.A.'s Long-Term Foreign Currency Issuer Default Rating (IDR) and USD unsecured notes at 'BB+'. In addition, Fitch has affirmed Globo's Long-Term Local Currency IDR at 'BB+' and National Scale rating at 'AAA(bra)'. The Rating Outlook is Stable. The affirmation reflects Globo's conservative financial policy, as shown by its net cash balance, improved performance in 2024, and highly competitive position within the Brazilian media sector. Globo has strong local content, including live events and shows, a market characterized by free-to-air TV as the dominant advertising platform, and a multiplatform and direct-to-consumer strategy. However, it still reports lower profitability compared with its investment-grade peers in the sector and is exposed to the challenging industry trend toward audience fragmentation across digital and linear distribution platforms, along with a declining pay-TV subscription base in Brazil. Key Rating Drivers Net Cash Position: Globo's rating benefits from its strong net cash position, which fully covers its total debt, providing significant financial flexibility. The company has one of the region's strongest financial structures, with Fitch's cash and equivalents of about BRL15.4 billion, substantially higher than its total debt of BRL5.7 billion as of 3Q24. Globo is expected to maintain a solid cash position over the rating horizon without incurring significant debt. The company is acquiring control of Eletromidia, where it currently holds a 27% equity interest. The acquisition involves an initial cash payment of BRL1.8 billion to acquire a 47% stake from Vesuvius FIP. Eletromidia is Brazil's largest out-of-home (OOH) media company with extensive operations in major cities. Robust Business Position: Globo's strong business position as Brazil's leading media company is a key factor in its ratings. The company commands a TV broadcasting audience share of approximately 34%, which rises to 37% during prime time. Globo also leverages multiple channels to distribute its content. Globoplay is expanding its subscriber base through investments in content, new production, partnerships and bundled offerings, all of which are expected to remain strategically important for Globo. Challenging Sector Environment: Globo faces intense competition from other platforms for viewers and advertisers. The media landscape has been affected by increasing viewership fragmentation due to shifting consumer preferences for on-demand and over-the-top viewing, as well as the growing number of offerings from new media players. The Brazilian pay-TV market has contracted, falling to 10 million subscribers in 3Q24 from 19.5 million in 2014. To address these market changes and the decline of its traditional TV broadcasting business, Globo is investing in live events, local production, its digital strategy, and the Globoplay subscription video-on-demand service. EBITDA Margins: Globo's EBITDA margins are projected to remain in the single digits over the next two years due to the challenging sector environment and operating costs associated with scaling its streaming platform. Fitch's base case scenario estimates net revenue of BRL15.5 billion to about BRL17 billion in 2024-2025, with high single-digit EBITDA margins. Fitch expects EBITDA to rebound to approximately BRL1.6 billion in 2024, driven by advertising revenue growth and various cost initiatives. Derivation Summary Globo is well-positioned relative to its peers in terms of its financial profile. Compared with U.S.-based investment-grade media companies like The Walt Disney Corporation (A-/Stable) and Warner Bros. Discovery, Inc. (BBB-/Stable), Globo has lower profitability, lacks geographic diversification, and relies heavily on cyclical advertising revenue, especially with the declining pay-TV penetration. However, this lack of cash flow diversification is offset by Globo's significantly stronger capital structure and strong domestic market position. Key Assumptions - Revenue of BRL15.5 billion to BRL17 billion in 2024-2025; - High single-digit EBITDA margins in 2024 and 2025; - Average annual capex of around BRL300 million to BRL400 million in 2025; - Acquisition of Eletromidia; - Dividend of about BRL1.3 billion in 2024. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A downgrade of Brazil's Foreign Currency IDR would likely result in a negative rating action for Globo's Foreign Currency IDR and U.S. dollar-denominated notes; - A downgrade could occur with significant deterioration in the company's strong liquidity, resulting in positive net debt amount; - Persistent negative operating EBITDA margins. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An upgrade is unlikely, absent a significant improvement in EBITDA margins in line with investment-grade companies and sustained positive FCF excluding net interest expense; - Improvement in the industry fundamentals resulting in a stabilization of its pay-TV subscribers base. Liquidity and Debt Structure Strong Liquidity: Globo has a net cash position, with total debt of BRL5.7 billion and Fitch's cash and cash equivalents of BRL15.4 billion as of Sept. 30, 2024. Nearly all of the company's debt consists of four U.S. dollar-denominated senior unsecured notes due in 2025, 2027, 2030 and 2032. Approximately 85% of Globo's debt matures in 2030 and 2032. Globo hedges its operational and financial exposure to foreign currency considering a 24-month period ahead and has entered into a swap to the Brazilian interbank deposit interest rate for its notes due 2030 and 2032 notes to maturity. Issuer Profile Globo is the largest media group in Brazil, operating via the leading broadcast television and pay-TV networks. The company also owns and operates a streaming platform (Globoplay) focused on Brazilian users. Globo is owned by the Marinho family. 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 ----------- ------ ----- Globo Comunicacao e Participacoes S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(bra) Affirmed AAA(bra) senior unsecured LT BB+ Affirmed BB+ =================== C O S T A R I C A =================== BANCO DAVIVIENDA: Fitch Affirms 'BB+' LT IDR, Outlook Now Stable ----------------------------------------------------------------- Fitch Ratings has affirmed Banco Davivienda (Costa Rica), S.A.'s (Davivienda CR) Long- and Short-Term Local and Foreign Currency Issuer Default Ratings (IDRs) at 'BB+' and 'B', respectively, and its Shareholder Support Rating (SSR) at 'bb+'. Additionally, Fitch has affirmed Davivienda CR's National Long- and Short-Term ratings at 'AAA(cri)' and 'F1+(cri)' and the ratings of the local debt issue programs. The Rating Outlook for the Long-Term IDRs and National Rating has been revised to Stable from Negative. The Outlook revision on Davivienda CR's ratings reflect the same action taken on the Outlook of its Colombian parent Banco Davivienda S.A. (Davivienda; BB+/Stable). Davivienda CR's ratings are based on the potential support it could receive from its parent, and its IDRs are equalized with Davivienda at 'BB+'. For more information, please see "Fitch Revises Davivienda's Outlook to Stable; Affirms at 'BB+'". Key Rating Drivers Ratings Driven by Parent Support: Davivienda CR's IDRs and National scale ratings are underpinned by its 'bb+' Shareholder Support Rating (SSR), which reflects Fitch's assessment of the ability and propensity of its shareholder Davivienda to provide timely support if needed. Davivienda's ability to provide support is sustained by its 'BB+' IDR. The National Ratings reflect Davivienda's relative creditworthiness regarding the Costa Rican sovereign (BB/Stable) and other rated entities in Costa Rica, allowing Davivienda CR's National Ratings to be at the top of the national scale. The Stable Outlook for Davivienda CR's Long-Term IDRs and National Rating mirrors that of its parent. Reputational Risk with High Influence: In the propensity to support analysis, Fitch strongly weighs the relevant reputational risk that a potential default by Davivienda CR's could pose for Davivienda and its other subsidiaries. Due to the group's presence in Colombia and Central America and its shared brand, a default could significantly affect its franchise. Key Regional Role: Fitch believes Davivienda CR has a relevant role in the group's geographic diversification strategy, as part of the consolidated regional operations in Central America. This market is considered fundamental and generates operational synergies. Business and Risk Profiles: Davivienda CR's intrinsic performance captures its consolidated business profile, characterized by its consistent and diversified business model and well-established franchise. As the second-largest private bank in Costa Rica, it holds moderate market shares of around 6.5% in loans and 5.8% in deposits (August 2024). As of September 2024, total operating income reached USD118 million (2000-2023 average: USD148 million), showing a yoy growth of 18.2%. Davivienda CR's high percentage of USD-denominated balances makes its balance sheet and profits sensitive to exchange rate fluctuations, which is incorporated into its risk profile. As of 3Q24, USD denominated assets represented around 59% of of the bank's total assets, primarily comprised of loans. Appropriate Asset Quality and Recovering Profitability: The bank's financial performance is factored into Fitch's evaluation of Davivienda's propensity to provide support. This considers the relatively stable loan quality, with a non-performing loans (NPLs) metric of 1.9% as of September 2024 (2020-2023: 1.8%), and adequate reserve coverage for NPL of 134.2%. Fitch estimates loan quality ratios will remain at similar levels over the rating horizon. As of September 2024, profitability improved after metrics were affected in 2023 and 1Q24, mainly due to exchange rate volatility. As of 9M24, the operating profit to risk-weighted assets (RWA) metric was 1.0%, compared to 0.6% in 2023 (2020-2022 average: 1.6%). The agency expects the exchange rate to remain relatively stable, favoring Davivienda CR's profitability. Adequate Capitalization and Diversified Funding: Capitalization ratios continued their upward trend, benefiting from lower credit growth, along with the entity's strategies to protect its capital levels from exchange rate volatility. As of September 2024, the Fitch Core Capital (FCC) to RWA metric was 14.7% (2023: 13.2%). The bank's varied funding, made up of customer deposits (79.4% as of 3Q24), issuances in the local market, and financing with local and foreign financial institutions, together with the synergies created among the entities, also benefit Davivienda CR's funding profile. Fitch also considers the ordinary support the bank could receive from its owner in these factors. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Negative changes in Davivienda CR's IDRs and SSR would mirror a more than one notch negative movement in Costa Rica's sovereign ratings and Country Ceiling; - A downgrade in Davivienda's IDRs would trigger the same action on Davivienda CR's IDRs, SSR and national ratings; - Any perception by Fitch of the parent's significantly reduced propensity to support the subsidiary may trigger a downgrade of the IDRs, SSR and National Ratings. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Davivienda CR's IDRs and SSR could be upgraded one notch following a similar action on Davivienda's IDRs; - The National Ratings cannot be upgraded as they are already at the top of the rating scale. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS Local Senior Unsecured Debt: Davivienda CR's debt is rated at the same level as the issuer's National Long-Term Rating. Fitch believes the likelihood of default on the obligations is the same as that of the bank, given the debt lacks specific guarantees or subordination. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Senior unsecured debt national ratings would be downgraded in the case of negative rating actions on the bank's national ratings. Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - The debt issue programs national ratings cannot be upgraded as they are already at the top of the rating scale. Summary of Financial Adjustments Fitch reclassified prepaid expenses and other deferred assets as intangibles and deducted them from the total equity to reflect their lower loss absorption capacity. Public Ratings with Credit Linkage to other ratings Davivienda CR's ratings are based on the potential support that it would receive from its Colombian shareholder Davivienda, if needed. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Banco Davivienda (Costa Rica) S.A. LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B LC LT IDR BB+ Affirmed BB+ LC ST IDR B Affirmed B Natl LT AAA(cri) Affirmed AAA(cri) Natl ST F1+(cri) Affirmed F1+(cri) Shareholder Support bb+ Affirmed bb+ senior unsecured Natl LT AAA(cri) Affirmed AAA(cri) ============= J A M A I C A ============= DIGICEL GROUP: Under Scrutiny For Violations of US Corruption Law ----------------------------------------------------------------- Jamaica Observer reports that Digicel Group Holdings is currently cooperating with the United States Department of Justice (DOJ) on possible violations of the USA's Foreign Corrupt Practices Act (FCPA). This development was first reported by Bloomberg which sought a response from Digicel Group, whose spokesperson said, "We voluntarily disclosed to the US Department of Justice information related to possible violations of the US Foreign Corrupt Practices Act. We are cooperating fully with the DOJ and will continue to do so," according to Jamaica Observer. Digicel Group was reported to have been providing an update to its bondholders when it revealed that it had voluntarily reported itself to the US DOJ, an agency under the executive arm of the US Government, the report notes. The Bloomberg publication further noted, "The company declined to give any further details about the scope, geography or quantum of the scrutiny it is facing, and did not respond to questions during the private bondholder call. In a disclosure made to bondholders last week and seen by Bloomberg News, the company said that there were possible violations in a number of jurisdictions. Digicel also warned that the outcome of the investigations were unknown and could be material to the firm's financial condition." Digicel's spokesperson told the Jamaica Observer by email, "Digicel is committed to conducting business in adherence with laws and regulations of the jurisdictions in which we operate, supported by a rigorous ethics and compliance program. We take compliance very seriously and are continually assessing and enhancing our compliance policies and procedures to ensure we uphold the highest standards across the company," the report relays. However, the company noted that it would not be commenting further on the matter, the report discloses. it did confirm that Digicel still had US$3 billion in debt, operated in 25 markets across Central America and the Caribbean and EBITDA (earnings before interest, tax, depreciation and amortisation) was up five per cent year-on-year, the report notes. The FCPA is a US Federal law that prohibits any domestic or foreign individual or company that conducts business in the USA or through interstate commerce from bribing foreign government officials in order to obtain or retain business, the report relays. This law has two main provisions surrounding anti-bribery and accounting provisions, the report says. The accounting provisions require companies to keep accurate financial records which reflect all transactions and prevent the improper use of funds, the report discloses. Individuals convicted under the FCPA can be fined up to US$250,000 per violation, sentenced up to five years in prison or placed on probation, the report relays. Companies convicted under the FCPA can be fined up to US$2 million per violation and can be sanctioned by courts to forfeit profits gained through bribery, the report says. The announcement pushed Digicel Intermediate Holdings' bond price down US$3.375 below the par price of US$100, the report notes. This Digicel bond which is set to mature in May 2027 has a carrying amount of US$1.26 billion, the report relays. Digicel Midco's price was relatively unchanged on the news as the November 2028 bond retains its carrying value of US$454.77 million, the report discloses. Digicel Group underwent a strategic shift in January when PGIM, Inc and Contrarian Capital Management, L.L.C. , its largest creditors, became the new majority owners in the telecommunications giant, the report discloses. The reorganisation was set to make the reorganised Digicel owned by PGIM or its funds with a 48.4 per cent stake while Contrarian or its funds would own a 16.2 per cent stake, the report notes. PGIM and Contrarian would own their interests through Digicel Holdings (Bermuda) which would be the ultimate indirect parent of Digicel MidCo, the report relays. This reorganisation resulted in Digicel's debt load being cut by US$1.7 billion to about US$3 billion and reducing annual cash interest expense by US$120 million annually, the report notes. As a result, Digicel Founder and Chairman Dennis O'Brien became a non-executive director on the newly constituted nine-member board and saw his majority interest in Digicel cut to 10 per cent. PGIM was given the right to appoint up to four members of Digicel's new board and chose former Nokia CEO Rajeev Suri as the new board chairman, the report relays. Contrarian Capital was given the right to appoint two directors to the new board, the report says. Marcelo Cataldo was chosen by these creditors as the new Digicel Group CEO with the Paraguayan taking up duties on May 1. Digicel Limited, the parent company of several operating Digicel subsidiaries, reported revenue of US$1.77 billion in its March 2023 financial year, with the net loss rising 17 per cent to US$243.81 million, the report relays. Digicel completed the sale of its Pacific operations in July 2022 to Telstra Corporation, which would have been in the beginning of that reporting period, the report notes. Digicel's Jamaican operations grew revenue three per cent to US$325.37 million or $48.79 billion Jamaican dollars in 2023, with its segment result improving 11 per cent to US$143.67 million, the report adds. About Digicel Group Digicel Group is a mobile phone network provider operating in 33 markets across the Caribbean, Central America, and Oceania regions. The company is owned by the Irish billionaire Denis O'Brien, is incorporated in Bermuda, and based in Jamaica. As reported in the Troubled Company Reporter-Latin America in April 2020, Moody's Investors Service downgraded Digicel Group Limited's probability of default rating to Caa3-PD from Caa2-PD. At the same time, Moody's downgraded the senior secured rating of Digicel International Finance Limited to Caa1 from B3. All other ratings within the group remain unchanged. The outlook is negative. Also in April 2020, the TCR-LA reported that Fitch Ratings has downgraded Digicel Limited to 'C' from 'CCC', and its outstanding debt instruments, including the 2021 and 2023 notes to 'C'/'RR4' from 'CCC'/'RR4'. Fitch has also downgraded Digicel International Finance Limited to 'CCC+' from 'B-'/Negative, and its outstanding debt instruments, including the 2024 notes and the 2025 credit facility, to 'CCC+'/'RR4' from 'B-'/'RR4'. Fitch has removed the Negative Rating Outlook from DIFL. =========== P A N A M A =========== EMPRESA DE TRANSMISION: Fitch Lowers IDR to 'B', Outlook Stable --------------------------------------------------------------- Fitch Ratings has downgraded Empresa de Transmision Electrica S.A.'s (ETESA) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'B' from 'BB+' and National Long-Term Rating and national long-term senior unsecured rating to 'BB(pan)' from 'AAA(pan)'. The Outlook is Stable. Fitch has also downgraded ETESA's international long-term senior unsecured rating to 'B' from 'BB+' and assigned a Recovery Rating of 'RR4'. Fitch has lowered the company' Standalone Credit Profile (SCP) to 'b-' from 'bb' due to financial mismanagement. The downgrades follow ETESA's delayed USD12.8 million coupon payment on Nov. 2, 2024, which was resolved within the 30-day cure period. The delay was caused by administrative issues during a government transition and occurred despite the company's sufficient liquidity (USD68 million at 2H2024), reflecting weakened financial stewardship. The downgrades further reflect weak transparency given ETESA's failure to disclose the delay to Fitch, coupled with inadequate government support to facilitate the payment, which lowered the Government Related Entity (GRE) score to 15 from 50. ETESA's ratings are linked to Panama's sovereign rating (BB+/Stable). Key Rating Drivers Delayed Coupon Payment: The downgrade follows the company missing a semi-annual coupon payment of USD12.8 million, which was subsequently resolved during the cure period that expired Dec. 2, 2024. Fitch understands that ETESA missed the payment due to administrative processes between the company and the government, amid a government transition that has taken place since July 2024. Fitch estimates that the company had adequate liquidity of USD68 million at 2H24 to make the full payment, but that its financial flexibility has weakened, leading us to lower ETESA's SCP to 'b-', from 'bb'. The company failed to adequately communicate or transparently disclose the delayed payment to Fitch. Lower GRE Linkage: ETESA's ratings are linked with those of the Panama sovereign (BB+/Stable) under Fitch's GRE Rating Criteria. This is based on ETESA's full state ownership, a concentration of government officials on its board and a 25-year concession ending 2047. However, Fitch lowered ETESA's GRE score to 15 out of 60, from 50, after demoting government support to category E - 'Moderate' expectation of support - from category B - 'Virtually Certain' support - on a bottom-up +1 basis from its SCP. This yields a five-notch differential between the SCP and the sovereign rating. The GRE criteria incorporates four support factors. Fitch assesses decision making and oversight as 'Not Strong Enough', as the government's oversight was not sufficient to avoid the coupon non-payment. Fitch also assesses precedents of support as 'Strong', given the government's record of not collecting dividends, and preservation of public policy role as 'Strong', as ETESA provides an essential service as Panama's sole electricity transmission company. Contagion risk is 'Not Strong Enough', as ETESA can postpone coupon payments due to administrative and bureaucratic delays. ESG - Management Strategy and Financial Transparency: ETESA's failure to promptly make a routine interest payment highlights an inability to meet fundamental financial obligations and for the government to effectively manage its oversight. The delayed coupon payment to bondholders, three weeks overdue, and inadequate financial disclosure to the market reflects poorly on management. Derivation Summary ETESA's ratings reflect its ties with the government. The company is fully state owned and holds a legal monopoly on electricity transmission services within Panama. ETESA's SCP reflects managerial mismanagement of critical financial obligations amid an otherwise low business risk profile and stable cash flow, with the latter two factors being characteristic of electricity transmission companies. Fitch expects ETESA's total debt/operating EBITDA ratio at 7.7x in 2024, above that of Chilean peer, Transelec S.A. (BBB/Stable), at 6.3x, and Peruvian peer, Consorcio Transmantaro S.A. (CTM) (BBB/Stable), at 4.7x. Key Assumptions Fitch's key assumptions within the rating case for the issuer include: - 30-year treasury rate of 3.9% from 2024 to 2027 - Fourth transmission line to be built and operated by a third party and enter into service in 2025 - 30% annual tax rate - Debt issuances priced at interest rates of between 8.5% and 9.0% - Negative FCF in every forecast year - Year-end cash balance approximating USD100 million through 2027 - Service interruption payments stabilized at USD3 million a year - No dividends paid to government - Average annual capex of USD127 million Recovery Analysis The recovery analysis assumes that ETESA would be a going concern in bankruptcy and that it would be reorganized rather than liquidated. Going Concern Approach: - A 10% administrative claim. - Going concern EBITDA estimate of USD97 million, reflecting Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the valuation of ETESA. - Enterprise value multiple of 5.0x. With these assumptions, Fitch's waterfall generated recovery computation for the senior unsecured notes is in the 'RR2' band. However, according to Fitch's Country-Specific Treatment of Recovery Ratings Criteria, the Recovery Rating for corporate issuers in Panama is capped at 'RR4'. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Negative rating action on the sovereign Fitch could lower the SCP if ETESA fails to make a transparent commitment to honour debt as it falls due Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - A stronger GRE score, particularly pertaining to governmental oversight, decision making and contagion risk Fitch could raise the SCP if ETESA demonstrates greater financial transparency and discipline, while maintaining a liquidity position that prevents a default or default-like process. The SCP could also be raised if ETESA establishes strong mechanisms to avoid payment execution risk on financial obligations Liquidity and Debt Structure Adequate Liquidity: ETESA reported a cash balance of USD68 million in 2Q24. The company has a comfortable debt maturity profile, with its next major debt maturity of USD75 million due in 2026. Issuer Profile ETESA is a fully state-owned electricity transmission company with a monopoly on the transmission, dispatch, control and demand planning for electricity generation in Panama. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING Public Ratings with Credit Linkage to other ratings The issuer's rating is linked to the Panama sovereign rating. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in its credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. ESG Considerations ETESA has an ESG Relevance Score of '5' for Management Strategy, due to a failure to promptly make a routine interest payment, demonstrating an inability to meet fundamental financial obligations and the government's ineffective oversight. This has a negative impact on the credit profile and is highly relevant to the rating, resulting in downgrade. ETASA has an ESG Relevance Score of '5' for Financial Transparency, due to a failure to disclose the delayed coupon payment to relevant parties. This has a negative impact on the credit profile and is highly relevant to the rating, resulting in downgrade. ETESA has an ESG Relevance Score of '4' for Governance Structure, due to its nature as a majority state-owned entity and the inherent governance risk that arises with a dominant state shareholder. This 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 ----------- ------ -------- ----- Empresa de Transmision Electrica S.A. LT IDR B Downgrade BB+ LC LT IDR B Downgrade BB+ Natl LT BB(pan)Downgrade AAA(pan) senior unsecured LT B Downgrade RR4 BB+ senior unsecured Natl LT BB(pan)Downgrade AAA(pan) =============== P A R A G U A Y =============== FRIGORIFICO CONCEPCION: Fitch Affirms 'B' IDR, Outlook Stable ------------------------------------------------------------- Fitch Ratings has removed Frigorifico Concepcion S.A.'s (FriCon) ratings from Rating Watch Negative (RWN), and has affirmed its Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) at 'B' and senior secured bond rating of 'B' with a Recovery Rating of 'RR4'. The Rating Outlook is Stable. The removal from Negative Watch is based on FriCon's ability to roll over their short-term debt over the last six months. It also reflects its expectation that the company will be capable of doing so again over the next 12 months, given improving conditions for both the company and the sector. FriCon's ratings incorporate the risks of a midscale Latin American beef producer with limited financial flexibility compared to the largest players in the sector. The Stable Outlook reflects its projections that the company's business and financial profiles will not materially change over the next 18 months. Key Rating Drivers Neutral Outlook for LatAm Protein: Latin American beef producers are likely to benefit from exports driven by weaker local currencies and reduced supplies from other regions. However, domestic consumption and local prices are not expected to perform as well as exports, as local consumers will be more price-sensitive, generally opting for cheaper proteins and cuts when possible. Despite the abundant cattle supply in the region, rising cattle prices alongside beef prices are constraining meatpackers' profit margins. However, this trend is boosting farmers' profitability, which may benefit the industry by supporting the maintenance and renewal of cattle herds. Diversification Strategy: FriCon has expanded its operations to Paraguay and Bolivia while also focusing on increasing revenues in Brazil and investing in the pork industry. Geographic and protein diversification are important drivers for reducing risks in the long run for cyclical industries such as protein. Export Business Model: FriCon has developed an export platform that benefits from high international protein demand and low production costs. Currently, 50% of its revenue comes from exports, mainly to Asia, and the other 50% from domestic sales, mainly in Brazil. The company exports to China through its subsidiary in Bolivia, because meatpackers in Paraguay are not allowed to export to China, due to Paraguay's recognition of Taiwan as a sovereign. Brazilian operations will move toward the export market over time, though volumes are being sold in the domestic markets. Beef Sector Inherent Risks: FriCon is exposed to sanitary, environmental, deforestation and import or export restriction risks and quotas, similar to other issuers operating in the sector and region. The Latin American beef sector, particularly in Brazil, remains under scrutiny by investors and regulators due to concerns over Amazon deforestation, cattle traceability and carbon emissions. Diversifying operations across different countries and several plants reduces but does not eliminate these risks. Free Cash Flow in 2025: Fitch forecasts EBITDA of about USD200 million in 2024, in line with EBITDA of USD194 million in 2023. Overall EBITDA margins are projected at close to 12% in 2024, cash flow from operation (CFFO) should be negative due to higher working capital needs and interest expenses as per Fitch calculation methodology and free cash FCF should be negative USD 80 million. In its projections CFFO and FCF will start to become positive in 2025 going forward. Slight Net Leverage Increase: Fitch expects net debt/EBITDA to be about 3.2x in 2024, up slightly from 2.9x in 2023, mainly due to an increase in working capital needs from the company's expansion strategy. Deleveraging will accelerate after 2025 when the company reduces its capex to maintenance levels of about USD 10 million and starts to generate positive FCF. Derivation Summary FriCon's 'B'/Stable rating compares negatively with peers across the region. The company's scale is smaller, and it maintains less geographic and protein diversification, more leveraged capital structure, and tighter liquidity compared to peers. Although FriCon and Minerva S.A. both concentrate their operations mainly in beef and in assets in South America, Frigorifico Concepcion's rating is three notches below Minerva's (BB/Stable) due to its significantly lower scale. Minerva's positive FCF trends, stronger liquidity was also considered in the ratings. Key Assumptions - Revenue growth of 6% in 2024 and in 11% in 2025 due to increase of production; - Working capital needs of about USD150 million in 2024 and USD52 million in 2025; - Capex of about USD39 million in 2024 and of USD11 million in 2025; - No dividends for the next couple of years. Recovery Analysis The recovery analysis assumes FriCon would be reorganized as a going-concern (GC) in bankruptcy rather than be liquidated. Fitch has assumed a 10% administrative claim. The GC EBITDA assumption of about USD190 million. An enterprise value (EV) multiple of 5x EBITDA is applied to the GC EBITDA to calculate a post-reorganization EV. Fitch uses a multiple of 5x that reflects the sector dynamics and the company's business profile as mid-sized company with strong growth prospect and good operating margin. The above assumption result in a recovery rate assumption within the 'RR1' range for the new senior secured notes. Due to the 'RR4' cap for Brazil's and Paraguay corporates, Fitch limits the recovery for the senior secured bond at 'RR4' despite a higher projected recovery. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - The company not being able to rollover its short-term debt; - Negative FCF and weak liquidity; - Cash falling below USD40 million; - Debt/ EBITDA above 4.5x and Net debt/ EBITDA above 3.5x on a sustained basis. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Net Debt/EBITDA sustained below 3.0x; - Sustained positive FCF; - Improve Debt Maturity profile, materially extending short-term debt. Liquidity and Debt Structure Fitch views FriCon's liquidity as weak due to its low levels of cash and cash equivalents compared to short-term debt since 2022, when the company implemented its growth strategy and increased its working capital needs. The company's financial flexibility relies on local bank lines to refinance this short-term debt, which needs to be rolled over every year. As of September 2024, cash on hand was US81 million, and short-term debt totalled USD216 million. Total debt was USD770 million, comprised of USD284 million secured notes due in 2028, local notes and bank debt. Issuer Profile Frigorifico Concepcion S.A. is a family-owned entity founded in 1997 and is based in Concepcion, Paraguay. The company operates as a meatpacker in Paraguay, Bolivia and Brazil. 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 Frigorifico Concepcion has an ESG Relevance Score of '3' for Group Structure revised from '4', because the related parties' transactions are disclosed in their audited reports and were already included in the secured debtdocumentation with limitations and conditions. Frigorifico Concepcion has an ESG Relevance Score of '3' for Financial Transparency revised from '4', because the company released audited financials with unqualified opinion and the company has been reporting their quarterly financial information limited reviews and establish an external audit committee that reports to the board. Frigorifico Concepcion S.A. has an ESG Relevance Score of '4' for Waste & Hazardous Materials Management; Ecological Impacts due to ecological impacts due to land use & supply chain management as the company is exposed to cattle sourcing and need to monitor direct and indirect suppliers in South America and it is exposed as well the beef sector in general to export bans which has a negative impact on the credit profile, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Frigorifico Concepcion S.A. has an ESG Relevance Score of '4' for Governance Structure due to due to ownership concentration. The shareholder's strong influence upon management could result in decisions being made to the detriment of the company's creditors, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Frigorifico Concepcion S.A. LT IDR B Affirmed B LC LT IDR B Affirmed B senior secured LT B Affirmed RR4 B PARAGUAY: Gets USD154M IDB Loan for Ypacarai Watershed Sanitation ----------------------------------------------------------------- The Inter-American Development Bank (IDB) has approved a $154 million loan and $7.7 million grant from the IDB CLIMA program for a first round of construction under the Comprehensive Sanitation Plan for the Lake Ypacarai Watershed in Paraguay. This project will improve environmental conditions in the watershed and drive climate-resilient and low-carbon development. It will also accelerate access to green and thematic debt markets for the water and sanitation sector. The operation, which has been approved by the IDB Board of Executive Directors, is part of IDB CLIMA, a results-based pilot program that rewards countries for reaching targets related to protecting nature and combating climate change. The operation is also aligned with the IDBImpact+ objectives of ramping up the impact and scale of IDB operations, reducing poverty and inequality, addressing climate change and driving sustainable regional growth. The program will expand the coverage of sanitary sewerage and wastewater treatment in rural areas of the Lake Ypacarai watershed and help reclaim its environmentally degraded areas. It will also enhance the management of water and sanitation services in priority areas in the watershed and build the capacities of the Ministry of Public Works and Communications to better manage the watershed; design pro-climate or pro-nature investments; and perform climate and biodiversity monitoring, reporting, and verification within the water and sanitation sector. The operation will directly benefit 27,341 homes by giving them access to sewerage and wastewater treatment services in prioritized areas of Capiatá, Itauguá and Areguá. It will benefit an additional 1600 homes by improving the sanitation system in San Bernardino. Better environmental conditions in the lake will also benefit the 815,000 residents of the watershed through recreation, tourism and other opportunities. The operation will strengthen water and sanitation service providers and entities so they can take action on the climate and environment. An icon of Paraguay, Lake Ypacaraí is one of the country's main natural resources and tourist destinations. It is also the water source for the city of San Bernardino and a surrounding agricultural and industrial area. The program will also fund the construction of 370 kilometers of sewer lines, 48 kilometers of impulsion lines, pumping stations, connections for vulnerable households, and a wastewater treatment plant with nutrient removal, along with plans for industrial restructuring, regulation and control of diffuse pollution sources, and solid waste management. It will also support efforts to improve the performance of water and sanitation service providers and to strengthen institutional aspects of the Ministry of Public Works and Communications, Ministry of Environment and Sustainable Development, and Sanitary Services Regulatory Authority. The $154 million IDB loan has a 23-year repayment term, a 6.5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). ===================== P U E R T O R I C O ===================== LA ZAMORANA COCKTAIL: Hires Jimenez Vazquez & Associates -------------------------------------------------------- La Zamorana Cocktail Lounge, Corp., d/b/a La Bodega Vasca d/b/a La Zamorana Coctel Lounge, Corp., seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ Jose Victor Jimenez of Jimenez Vazquez & Associates, PSC. The firm will assist the Debtor's legal counsel with the filing of schedules; preparation of monthly operating reports and cash flow forecasts; drafting of reorganization payment plan; and other bankruptcy related activities. The firm will be paid at these rates: Jose Victor Jimenez Vazquez $185 per hour Senior Staff Consultant $85 per hour Staff Accountant $65 per hour The retainer is $4,000. As disclosed in court filings, Jimenez Vazquez & Associates does not represent interests adverse to the Debtor's estate. The firm can be reached through: Jose Victor Jimenez CPA, CVA Jimenez Vazquez & Associates, PSC P.O. Box 3774 Bayamon, PR 00958 Tel: (787) 447-0098 Fax: (939) 338-2362 Email: jvjimenez@jimenezvazquezcpa.com About La Zamorana Cocktail Lounge, Corp. La Zamorana Cocktail Lounge, Corp. d/b/a La Bodega Vasca d/b/a La Zamorana Coctel Lounge, Corp., filed a Chapter 11 bankruptcy petition (Bankr. D.P.R. Case No. 24-04892) on Nov. 13, 2024. The Debtor hired Gandia-Fabian Law Office as legal 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. 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