/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/241211.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, December 11, 2024, Vol. 25, No. 248 Headlines A R G E N T I N A CITY OF BUENOS AIRES: Fitch Rates New Sr. Unsec. Notes 'B-(EXP)' GAUCHO GROUP: Seeks Approval to Hire CBIZ as Auditor B R A Z I L TUPY SA: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Deputies OK Draft Law for 2025 State Budget E C U A D O R REPUBLIC OF ECUADOR: Egan-Jones Retains BB- Sr. Unsecured Ratings G U Y A N A GUYANA: Hints at Trade Barriers Against Trinidad and Tobago J A M A I C A NCB FINANCIAL: Chairman Wants Workers Trained in Problem Solving P E R U COMPANIA DE MINAS: Fitch Hikes LongTerm IDR to 'BB', Outlook Stable P U E R T O R I C O PUERTO RICO: Bondholders Accuse Board of Delaying Bankruptcy Exit - - - - - ================= A R G E N T I N A ================= CITY OF BUENOS AIRES: Fitch Rates New Sr. Unsec. Notes 'B-(EXP)' ----------------------------------------------------------------- Fitch Ratings has assigned an expected Long-Term rating of 'B-(exp)' to the City of Buenos Aires's (CBA) proposed senior unsecured notes (series 13 notes) up to USD600 million under the city's USD2.3 billion Medium Term Note Programme (B-). These series 13 notes are denominated in USD and according to the preliminary documents will accrue a fixed interest rate to be determined at issuance. They will have a three annual payments amortization structure, interest will be payable semiannually, and the maturity will be up to 11 years. The notes will be Buenos Aires City's direct, unconditional, unsubordinated and unsecured general obligation and will rank pari passu in right of payment compared with its other unsecured obligations. The applicable law for the notes would be the England law. The final rating is contingent upon Fitch's receipt of all final documents conforming to information already received, as well as the final pricing and financial close on the proposed notes. The city has laws (6.504 and 6.734) that allow borrowing up to USD1.100 billion, which could be used for liability management operations if market windows arise. In this context, the purpose of the issuance of series 13 for up to USD600 million is the repurchase of series 12 for up to USD550 million, and if there is a remaining amount (up to USD50 million), the legal destination is specifically for the cancellation of financial liabilities. Therefore, the issuance does not imply additional debt and extends the average life of the debt. Key Rating Drivers The expected rating of the notes is at the same level of Buenos Aires City's Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) of 'B-', since it reflects by definition the timely payment of the entity's financial obligations in FC. On Sept. 12, Fitch affirmed Buenos Aires's ratings. For details, please review Fitch's latest Rating Action Commentary, "Fitch Affirms City of Buenos Aires at 'B-'; Outlook Stable,". CBA continues to meet Fitch's criteria requirements to be rated at 'B-', above Argentina's sovereign rating, by maintaining a strong budget, having no need to undertake external refinancing of debt, and having sufficient liquidity available. CBA's debt is mostly composed of issuances and multilateral loans in USD (95% of total stock in 2023). At YE 2023, direct debt totaled ARS1,336.8 billion, with an increase of around 267.1% relative to 2022 due to currency depreciation (352%). As of September 2024, the city has a strong liquidity position, coupled with positive operating balance and financial equilibrium, which clears up uncertainty regarding the entity's payment capacity over the next 24 months. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade A downgrade of Argentina's Country Ceiling would negatively affect CBA's ratings as well as any introduction of regulatory impediments for the Argentine provinces to access foreign exchange. The IDR could be downgraded if the ADSCR drops below 1.0x in tandem with a liquidity coverage ratio below 1.0x underpinned by lower operating balances and unrestricted cash, regardless of whether the payback ratio remains below 5x. Thus, CBA would not meet all the conditions to be rated above the sovereign. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade An upgrade of Argentina's Country Ceiling above 'B-' could positively benefit CBA's ratings, provided that their payback ratio remains below 5x. Date of Relevant Committee 10-Sep-2024 Public Ratings with Credit Linkage to other ratings Buenos Aires' IDR is capped by ARG's country ceiling. Entity/Debt Rating ----------- ------ Buenos Aires, City of senior secured LT B-(EXP) Expected Rating GAUCHO GROUP: Seeks Approval to Hire CBIZ as Auditor ---------------------------------------------------- Gaucho Group Holdings, Inc. seeks approval from the U.S. Bankruptcy Court for the Southern District of Florida to employ CBIZ, Inc. as its auditor. The firm will audit the Debtor's books, records and Securities and Exchange Commission filings. The firm will be paid at these hourly rates: Partners $500 - $850 Directors/Managers $370 - $665 Supervisors $230 - $430 Staff Auditors $165 - $285 The Debtor seeks approval to pay CBIZ an advance retainer of $25,000 by a non-debtor subsidiary, Gaucho Group Inc. Mitchell Watt, a managing director at CBIZ, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Mitchell Watt CBIZ, Inc. 201 East Kennedy Boulevard, Suite 1500 Tampa, FL 33602 About Gaucho Group Holdings Gaucho Group Holdings Inc operates as a holding company. The Company, through its subsidiaries, provides luxury real estate and consumer marketplace with collection of wine, hospitality, fashion brands, and real estate holdings. Gaucho Group Holdings serves customers in the United States and Argentina. Gaucho Group Holdings Inc. sought relief under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D. Fl. Case No. 24-21852) on November 12, 2024, listing up $50 million in both assets and liabilities. Mancuso Law, PA serves as the Debtor's counsel. =========== B R A Z I L =========== TUPY SA: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable --------------------------------------------------------- Fitch Ratings has affirmed Tupy S.A.'s (Tupy) Long-Term Foreign and Local Currency Issuer Default Ratings at 'BB+'. Fitch has also affirmed the Long-Term National Scale Rating at 'AAA(bra)'. Fitch has in addition affirmed Tupy Overseas S.A.'s USD375 million senior unsecured notes due 2031 at 'BB+'. The Rating Outlook for the corporate ratings is Stable. The ratings reflect Tupy's strong market position as a Tier-1 supplier. This includes the production of high-value-added cast iron structural components (such as engine blocks and cylinder heads), its long-term relationships with original equipment manufacturers, and the significant utilization of its products in transportation, infrastructure and agricultural machinery. The ratings also consider its relatively stable credit metrics and improving business profile. Tupy's ratings remain constrained by its relatively small scale and moderate geographic diversification compared with other global auto parts companies. The company has been addressing these limitations through the acquisitions of Teksid in 2021 and MWM in 2022 which have increased capacity and increased diversification avenues. The high cyclicality and competitive environment of the auto industry also limits the ratings. Fitch's analysis also incorporates Tupy's capacity to maintain adequate operating margins during adverse economic environments. It considers Tupy's flexibility to rapidly adjust production, manage costs, and management commitment to maintaining a conservative capital structure and healthy liquidity. Key Rating Drivers Gradual Operational Growth: Fitch believes the benefits from Tupy's acquisition of MWM and Teksid will occur more gradually than expected as the company continues to navigate a challenging growth environment, particularly in Europe and North America. This however can be mitigated by the ramping up of new contracts, growth in its Energy and Decarbonization division, and better performance in the domestic market. Fitch projects revenue will finish just under BRL11 billion in 2024 and low single-digit percentage growth in 2025. Overall, sales volumes are expected to remain relatively weak in 2025, particularly outside of Brazil, with a gradual improvement as Fitch approaches 2026. Revenues will trend towards BRL12 billion over the ratings horizon, but it will likely take longer than that to materialize. The company has been able to achieve some synergies from its most recent acquisitions that together with other cost cutting initiatives resulting in an EBITDA margin improvement of up to 1% of revenues as per Fitch's estimates. Fitch forecasts Tupy should be able to maintain EBITDA margins of over 11% going forward. The threat of U.S. tariffs remains a risk for all companies in the sector and could change the operational dynamics for companies like Tupy as more than 40% of its revenues derive from North America. Exposure to Cyclical Industry and Competition: Tupy is exposed to the highly cyclical and competitive auto industry, which is affected by macroeconomic cycles; volatility in raw material prices, particularly scrap and steel; and by technological shifts, fuel alternatives and stringent legislation on CO2 emissions. As inherent to a Tier 1 supplier, Tupy's two largest customers accounted for approximately 25% of sales as of 3Q24 and contracts have no minimum volume, despite their long-term nature. Positively, Tupy supplies a variety of structural components to each customer in different countries, making shifting costs considerable. Capital intensity is high in the industry, particularly for manufacturers of high-added-value products such as Tupy, which results in high barriers to entry. Conservative Capital Structure: Fitch expects Tupy to maintain a conservative capital structure consistent with the company's financial policies. Fitch forecasts net leverage to remain under 2.0x through 2026. The company is expected to gradually delever to around 3x gross leverage as EBITDA rises over the ratings horizon. Fitch projects the company should be able to support healthy liquidity and positive FCF over the rating period. Tupy also has a comfortable debt maturity profile. Threats from Electric Vehicles: Fitch believes risks associated with demand for lowering carbon emissions globally are manageable for Tupy. Around 90% of its revenue derives from commercial vehicles, including heavy commercial and heavy machinery, which demand power, strength and autonomy. In Fitch's view, traditional electric powertrains that run on batteries are less suitable for such vehicles. Fitch believes that there will be several fuel alternatives potentially more efficient than electricity for heavy machinery, including biofuels and hydrogen fuel-cell technology. MWM's energy and decarbonization products and solutions are expected to allow Tupy to access opportunities in alternative energy sources, in particular in the biofuels sector. More stringent environmental policies in large economies can temporarily disrupt production volumes and affect market share dynamics over time. However, near-term credit implications for Tier 1 auto suppliers should be more limited and in line with the industry as a whole. Mexican Country Ceiling: Tupy's ratings are not constrained by Brazil's 'BB+' Country Ceiling, given the company's operating cash flows from assets in Mexico, and that exports and offshore hard currency deposits are sufficient to service its hard currency debt. Hence, Mexico's 'BBB+' Country Ceiling is applicable to Tupy's ratings. However, Tupy's rating currently remains within Brazil's Country Ceiling. Derivation Summary Ratings of auto parts companies are usually constrained by the sector's volatility and capital and labor intensity characteristics, along with natural client concentration. Tupy's low leverage and strong liquidity compares well with its peers'. The 'BB+' rating reflects its small scale and moderate diversification, as well as its high exposure to original equipment manufacturers. Tupy's ratings are comparable to Dana Incorporated's (BB/Stable). Dana's net leverage metrics are considerably higher than Tupy's, but it is a leading global supplier of driveline components for light, commercial and off-road vehicles, with significantly larger scale and diversification. Metalsa, S.A.P.I. de C.V. (BBB-/Stable) and Nemak, S.A.B. de C.V. (BBB-/Negative) have investment-grade ratings due to their conservative capital structures, larger scale and wider geographic diversification. However, with the acquisitions of Teksid assets and MWM, Tupy significantly increased its scale and overall diversification, reducing the gap with its Mexican counterparts. Tupy also compares favorably to Nemak in terms of net leverage with net debt to EBITDA of around 1.8x versus Nemak's 2.8x. Key Assumptions - Sales growth of 2% domestic and 2.5% foreign for 2025. Beyond that growth is expected to follow GDP growth of Brazil, US and the EU plus a 1% for organic growth; - EBITDA margins remain above 11% 2025-2027-- Prices increase in line with inflation and benefit from pass-through pricing; - The Brazilian real to U.S. dollar exchange rate to remain between 5.3-5.4 and the Mexican peso to U.S. dollar rate to remain between 18-18.5 between 2025-2027; - Capex intensity of between 4.5% of revenue for 2025-2027; - Company will maintain prudent working capital management; - Dividend payout ratio of 30% of net income. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Further improvement of Tupy's geographic footprint, client diversification, and scale while materially improving FCF; - EBITDA gross leverage below sustained below 2.5x; - EBITDA net leverage consistently below 1.5x; - Maintenance of robust liquidity. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - EBITDA gross leverage sustained above 3x; - EBITDA net leverage consistently above 2x; - Deterioration of robust liquidity. Liquidity and Debt Structure Strong Liquidity: Fitch expects Tupy to maintain strong liquidity during the rating horizon as part of its conservative financial policy. The company reported it ended 3Q24 with close to BRL2.2 billion in cash and cash equivalents and BRL655 million in short-term debt. Tupy recently refinanced a BRL1 billion debenture with new debentures totaling over BRL1.5 billion. This has extended the company's comfortable debt maturity profile with no major maturities until 2029 when BRL790 million for one of its recently issued debentures is due. Tupy's sole international bond amounts to USD375 million, it is due in 2031 and has a fixed coupon of 4.5%. The company also finances itself with local export facilities and through a BNDES credit line. Issuer Profile Tupy is a Tier-1 and Tier-2 global automotive supplier founded in 1938, in Joinville, Santa Catarina (Southern region of Brazil). It currently stands out as one of the world's largest independent manufacturers of high-value-added cast iron structural components, such as engine blocks and cylinder heads. 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 ----------- ------ ----- Tupy Overseas S.A. senior unsecured LT BB+ Affirmed BB+ Tupy S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(bra)Affirmed AAA(bra) =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Deputies OK Draft Law for 2025 State Budget --------------------------------------------------------------- Dominican Today reports that the Chamber of Deputies declared urgent and approved the draft law for the 2025 General State Budget, totaling one billion 681,728 million pesos, in two consecutive readings. Submitted by the Executive Branch, the bill now proceeds to the Senate for review, according to Dominican Today. The legislative process included modifications and a favorable report by the Bicameral Commission, which conducted extensive analysis of the proposal, the report notes. Deputy Francisco Paulino, chair of the Bicameral Commission, emphasized that the budget aligns expenditures and revenues, detailing the allocation for each item, the report relays. He highlighted the government's focus on reducing poverty through targeted investment spending and addressing the needs of the population's most vulnerable segments, the report discloses. The initiative also seeks to promote sustainable economic growth by fostering a supportive environment for productive sectors, the report says. Dominican Today says the Executive Branch justified the budget as a step toward fiscal sustainability and administrative efficiency. It proposes a fiscal deficit of RD$242.869.9 million, equivalent to 3% of GDP, while maintaining efforts to reduce the public deficit, the report relays. This budget marks the beginning of efforts to restructure and rationalize public administration, as announced in September 2024, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. Standard & Poor's credit rating for Dominican Republic was raised to 'BB' in December 2022 with stable outlook. Moody's credit rating for Dominican Republic was last set at Ba3 in August 2023 with the outlook changed to positive. Fitch, in December 2023, affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' and revised the outlook to positive. ============= E C U A D O R ============= REPUBLIC OF ECUADOR: Egan-Jones Retains BB- Sr. Unsecured Ratings ----------------------------------------------------------------- Egan-Jones Ratings Company on November 19, 2024, maintained its 'BB-' foreign currency and local currency senior unsecured ratings on debt issued by Republic of Ecuador. EJR also withdrew the rating on commercial paper issued by the Company. Ecuador is a country straddling the equator on South America's west coast. =========== G U Y A N A =========== GUYANA: Hints at Trade Barriers Against Trinidad and Tobago ----------------------------------------------------------- Trinidad and Tobago Express reports that Guyana has hinted at the possibility of imposing restrictions on Trinidad and Tobago, along with other Caribbean Community (Caricom) countries, if they continue to impose barriers that hinder the export of Guyanese products within the 15-member regional integration grouping. "It's time for reciprocity in many areas. If you don't take our stuff, we're not going to allow free access to your products," Vice-President Bharrat Jagdeo told the Guyana Manufacturing and Services Association (GMSA) Presentation Awards Dinner, according to Trinidad and Tobago Express. His statement was made in response to a concern raised by Lesley Ramlall, a local manufacturer behind the Only Coconuts brand, the report notes. Ramlall told Jagdeo that the company has been unable to export even a single bottle of coconut oil to Trinidad and Tobago, even as its products were being accepted in other Caricom countries and further afield, the report says. Jagdeo, in acknowledging the concern, noted it is a long-standing issue and that such issues must be raised in the public domain to place pressure on countries acting against the cooperative spirit of Caricom, the report discloses. Speaking directly to GMSA president Ramsay Ali, Jagdeo said: "You have to raise it . . . raise the issues. That's how we have to work; we're not going to take this nonsense. They do this a lot. They use phytosanitary restrictions as a trade barrier," the report notes. Phytosanitary restrictions are quarantine and biosecurity measures implemented by countries to help safeguard against the spread of pests or diseases that may be in agricultural products, the report discloses. Meanwhile, Jagdeo has said the government is open to suggestions on helping the local private sector transport their goods from ports in Trinidad and Tobago, where an industrial dispute has resulted in delays in shipments to Guyana, the report says. "We are open to ideas, working with the private sector to get their goods out of Trinidad and Tobago," Jagdeo told his weekly news conference earlier, the report notes. Earlier, the GMSA expressed concern regarding the ongoing industrial action at the Port of Spain port in Trinidad and Tobago, saying it has severely disrupted regional trade and impacted businesses in Guyana, the report relays. In a statement, the GMSA said that the industrial action over payment of salary increases has been persisting for over two months, causing significant delays in the clearance of containers carrying raw materials and time-sensitive goods, the report discloses. "As a result, manufacturers and businesses in Guyana are incurring substantial financial losses, particularly during this critical Christmas season when import volumes are significantly higher. "These delays have also contributed to price increases for consumer goods, including basic necessities, as businesses are forced to navigate higher costs associated with supply chain disruptions," the GMSA said, the report notes. Last month, the Port Authority of Trinidad and Tobago (PATT) said it never wanted to "take this action" as the Industrial Court had ordered port workers, who have been protesting the payment of a 12% wage hike agreed upon in 2015, back to their jobs, the report adds. ============= J A M A I C A ============= NCB FINANCIAL: Chairman Wants Workers Trained in Problem Solving ----------------------------------------------------------------- RJR News reports that Chairman of the NCB Financial Group Michael Lee-Chin is calling for workers to be trained in problem solving and critical thinking. This, he argues, will make Jamaica's human capital more productive and competitive, according to RJR News. Mr. Lee-Chin says he will be using the NCB Group Staff Training Centre along with international experts to upskill staff with a view to doubling the group's revenues from the current $25 billion per year, the report notes. As reported in the Troubled Company Reporter-Latin America on Nov. 18, 2024, Fitch Ratings has published NCB Financial Group Limited's (NCBFG) 'B+' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and 'B' Short-Term Foreign and Local Currency IDRs. The Rating Outlook for the Long-Term IDRs is Positive. ======= P E R U ======= COMPANIA DE MINAS: Fitch Hikes LongTerm IDR to 'BB', Outlook Stable ------------------------------------------------------------------- Fitch Ratings has upgraded Compania de Minas Buenaventura S.A.A.'s Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) to 'BB' from 'BB-'. Fitch has also upgraded the rating on the company's $550 million senior unsecured notes due 2026 to 'BB' from 'BB-'. The Rating Outlook is Stable. The upgrade reflects Fitch's expectation of improving production, operational diversification, and low leverage. The ratings are constrained by the company's small scale and high cost profile. Fitch estimates the company's gross and net debt to EBITDA to average 1.3x and 0.3x between 2024 and 2026. Fitch estimates that dividends received from Cerro Verde will comfortably cover debt services through the rating horizon by more than 2.0x on average. Fitch expects Buenaventura to be proactive in refinancing their 2026 bond to avoid market risks. Key Rating Drivers Increasing Operational Scale: Fitch expects a positive impact on scale of production and EBITDA generation from the reintroduction of the Uchucchacua complex in 2024 and the start-up of the San Gabriel mine in 2H25. Fitch anticipates Buenaventura's gold equivalent ounces (GEO) of production will increase to 613koz in 2024, from 566koz in 2023. GEO production will fall to 576koz in 2025 due to the closure of legacy mines before further expanding to 685koz in 2026. Fitch projects the company's EBITDA will jump 44% in 2024 to $574 million before falling to below $470 million and $450 million in 2025 and 2026, respectively, affected by mid-cycle pricing. Cost and Mine Life Improvements: Buenaventura's focus on new major mines is expected to improve its overall cost profile and extend mine life. Management expects San Gabriel's lower production cost, relative to the aging Tambomayo and Orcopampa mines, will improve Buenaventura's consolidated cost position below the 90th percentile of CRU's gold AISC cost curve. Uchucchacua's ramp-up should reduce costs with an expected 35% decrease in costs due to sales over the next four years. The reserve life of major mines, contributing over 80% of EBITDA, will increase to 14 years from the previous level below 10 years. Good Market Position Cerro Verde: Cerro Verde is Peru's second largest copper mine and the sixth largest by capacity worldwide. It is an open pit mine with 30+ years of life that produces more than 430,000 MT of copper annually at the third quartile of AISC curve with $5,234/MT in 2023, according to CRU Group. EBITDA margins are around 45%, and the asset is debt free with low capex. Cerro Verde is a joint venture among Freeport McMoRan (BBB/Stable), Buenaventura and Sumitomo. Lower Reliance on Cerro Verde Dividend: Fitch expects the contribution from Cerro Verde dividends to EBITDA after associates to decrease from an average of 37% (2021-2023) to 32% (2024-2026). This is due to Buenaventura's consolidated EBITDA growth outpacing Cerro Verde's dividend growth, resulting in a stronger financial structure for Buenaventura. Excluding Cerro Verde dividends, gross and net leverage from 2024-2026 at 1.9x and 1.5x, respectively, will keep Buenaventura well-positioned in the 'BB' category. FCF Shifting Positive: Fitch expects EBITDA after dividends (including those paid to non-controlling interests) to peak at $574 million in 2024, before declining to $464 million in 2025 and and $442 million in 2025-2026 under Fitch's conservative price assumptions. Capex is projected at $373 million in 2024 and $354 million in 2025 as San Gabriel construction and ramp-up complete. Dividends are expected to average $23 million annually. FCF after capex and dividends will remain low but slightly positive until 2026, when reduced capex leads to double-digit FCF margins. Low Leverage: As per Fitch's calculations, Buenaventura's average gross debt for 2024-2026 is $612 million, with net debt averaging $126 million in the same period. The forecast gross and net leverage for 2024-2026 is 1.3x and 0.2x, respectively, down from 2023's Fitch-adjusted gross and net leverage of 1.8 and 1.2x. This improvement is due to higher EBITDA generation from new mines and increased dividends received from high copper prices. Fitch expects the company to fund higher capex needs in 2024 and 2025 with internal cash flows, reducing the need for external financing. Derivation Summary Buenaventura's scale of operations from its direct mines is smaller than diversified peers Penoles (BBB/Stable), Nexa (BBB-/Stable), and Minsur (BBB-/Stable) and gold-focused Endeavour Mining (BB/Stable). Buenaventura's operational scale is much closer to Volcan (B-/Stable) and Hudbay Minerals (BB-/Stable). However, Buenaventura's EBITDA generation is larger due to dividends received from the large-scale mine Cerro Verde. Buenaventura conducts mining operations only in one country (Peru), like Volcan (Peru), Minsur (Peru) or Penoles (Mexico), but unlike Nexa (Peru, Brazil), Hudbay (Peru, Canada) or Endeavour (Western Africa). Buenaventura's mineral diversification is among the highest in the peer group and similar to Penoles. Peer Endeavour Mining is the least diversified, solely focused on gold production. Buenaventura's mine life of 14 years at major mines is comparable to Hudbay and Minsur, which have mine lives of 14 and 13 years, respectively. This compares favorably against Volcan's four-year mine life and Endeavour Mining's 10 years. Fitch expects Buenaventura's gross and net leverage to average 1.3x and 0.3x, respectively over the next three years. This is similar to peers Endeavour Mining (1.0x and 0.4x) and Minsur (1.2x and 0.8x), comparing favorably against other peers Volcan (3.4x and 3.2x) and Nexa (3.1x and 1.8x). Key Assumptions - Gold price at USD2,400/oz, USD2,100/oz, and USD1,800/oz in 2024, 2025, and 2026; - Silver price at USD30.00/oz, USD26.25/oz, and USD22.50/oz in 2024, 2025, and 2026; - Copper price at USD9,100/tonne, USD8,500/tonne, and USD7,500/tonne in 2024, 2025, and 2026; - A 10% decrease in gold sales to 140,000 oz, a 63% increase in silver sales to 15.0 million oz, and unchanged copper sales at 58,000 MT during 2024; - A 37% fall in gold sales to 88,000 oz, considering Fitch's expectation of San Gabriel sales beginning in 2026, a 3% increase in silver sales to 15.5 million oz, and a 2% decrease in copper sales to 57,000 MT during 2025; - A 112% increase in gold sales to 186,000 oz, an 8% increase in silver sales to 16.8 million oz, and a 4% increase in copper sales to 59,000 MT during 2026; - Capex reaches USD373 million in 2024, USD354 million in 2025 and USD118 million in 2026; - Dividends paid of USD28 million in 2024, and USD20 million in 2025 and 2026; - Dividends received from Cerro Verde of USD183 million in 2024, USD157 million in 2025 and USD146 million in 2026. RATING SENSITIVITIES Factors That Could, Individually Or Collectively, Lead To Negative Rating Action/Downgrade - Sustained gross debt/EBITDA levels of more than 2.5x with an unwillingness or inability to deleverage; - Inability to replenish reserves and resources leading to a significantly lower mine life at key operations; - Consistently negative FCF, driving down the company's comfortable liquidity position; - An adverse change in the overall framework toward mining projects in Peru. Factors That Could, Individually Or Collectively, Lead To Positive Rating Action/Upgrade - Decrease in the AISC of the company's gold mines to the high end of second quartile of the cost curve; - Significant increase in operational scale while maintaining reserve life greater than 10 years; - Sustained gross debt/EBITDA levels of less than 1.x; - A positive resolution of the tax liability paid under protest and currently under litigation, obtaining reparations of about USD330 million. Liquidity and Debt Structure Buenaventura maintained an adequate liquidity position through the last few years and recently strengthened its liquidity significantly. Buenaventura ended 3Q24 with $458 million in cash and marketable securities, a 108% increase from YE 2023. The company has $200 million of committed revolving credit facilities that remain undrawn. The company's $675 million of debt comprises a $545 million bond due in 2026, $55 million of loans for El Brocal and a $75 million financing lease related to the Huanza hydro power plant. Yearly amortizations of approximately $34 million are not material until the bond maturity in 2026, which Fitch expects will be refinanced in the first half of 2025. Issuer Profile Buenaventura is Peru's largest publicly traded precious metals company and major holder of mining rights in Peru, with over 70 years of mining operations. Along with the exploration, mining and processing of gold and silver, it mines other metals, namely zinc, lead and copper. Criteria Variation Since Fitch updated its "Corporate Rating Criteria" following the implementation of IFRS 16, lease-related debt for mining companies has been reclassified as "other liabilities" and has been excluded from leverage calculations. For Buenaventura, Fitch has treated the financing lease of Huanza, Buenaventura's hydroelectric subsidiary, as financial debt in its leverage calculations, as the company intends to refinance this debt with either a private placement, bank loan or capital markets bond. 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 ----------- ------ ----- Compania de Minas Buenaventura S.A.A. LT IDR BB Upgrade BB- LC LT IDR BB Upgrade BB- senior unsecured LT BB Upgrade BB- ===================== P U E R T O R I C O ===================== PUERTO RICO: Bondholders Accuse Board of Delaying Bankruptcy Exit ----------------------------------------------------------------- Bondholders of the Puerto Rico Electric Power Authority, including GoldenTree Asset Management, LP, Assured Guaranty Inc., and National Public Finance Guarantee Corporation, on December 3, 2024 issued a statement: "On November 13, the United States Court of Appeals for the First Circuit confirmed its June 12 ruling that PREPA's $8 billion plus of revenue bonds are secured by a properly perfected lien on PREPA's past, present and future net revenues. Make no mistake, the bondholders won, and the Financial Oversight and Management Board (the "Board") lost. We expected such a clear vindication of creditor rights to result in good faith negotiations towards a resolution of PREPA's bankruptcy case. Instead, in its recent public statement the Board has made clear that it intends to distort and ignore the clear holdings of the First Circuit's decisions in favor of pursuing more avoidable litigation to the detriment of PREPA and the people of Puerto Rico. "The bondholders have proposed to resolve the PREPA case on terms that will promptly advance the interests of Puerto Rico in having a reliable power system, while ensuring that both electricity charges are fair and affordable and that the bondholders' rights are respected. We have done so even though the Board and PREPA have reneged on three prior settlement agreements. These prior settlements would have already ended the seven year long bankruptcy, helped restore stability to PREPA's operations and finances, and ultimately returned Puerto Rico's proper self-governance. But rather than engaging now, the Board is instead spending more of PREPA's money to chase yet another appellate review of the very same issues the Court has already now decided twice in the bondholders' favor, keep itself in power, and further delay PREPA's exit from bankruptcy. "By choosing to continue to fight and refusing to accept the First Circuit's multiple rulings, PREPA's seven-year bankruptcy case and the Board's tenure in Puerto Rico is further extended; PREPA is deprived of access to the public bond market; and most importantly, PREPA is unable to do what is needed to provide reliable electric power to the people and businesses of Puerto Rico. And all the while, the people of Puerto Rico are forced to bear the burden of paying the Board's high-priced advisors' fees. Such fees exceed $1.5 billion in the aggregate for all Puerto Rico bankruptcy cases, and as a result of the Board's litigation strategy costing more than $50 million per year, now exceed $400 million for PREPA alone. "If the Board had brought PREPA's bankruptcy to a rational conclusion, these amounts would have been sufficient to service over $1.5 billion of new PREPA bonds that could now be providing the people of Puerto Rico what they actually want and really need--a reliable electric power system. "With PREPA under the Board's direction since 2017, seven years have now been lost. Hundreds of millions, if not billions, of dollars have been wasted. What value have the people of Puerto Rico received from the expenditure of such fees? Under the Board's oversight, PREPA has been unable to improve its performance according to industry-accepted metrics, enhance its financial transparency, or -- perhaps most disturbingly -- meaningfully access the unprecedented $15 billion in congressional funding aimed at upgrading and hardening the power grid in Puerto Rico. Instead, much of PREPA's infrastructure remains in a state of disrepair, and the people of Puerto Rico continue to suffer the ails of an aged, broken-down power system. PREPA's endless stay in bankruptcy is the common, contributing factor in all these failures. "In contrast, investors who hold over 60% of PREPA's revenue bonds have offered a prompt end to the PREPA bankruptcy premised on five simple points: (1) we will accept 50-year replacement bonds that have virtually no risk of future default; (2) the amount of those bonds would be set on the basis of reasonable up-to-date load and other projections (the Board has failed to update PREPA's fiscal plan since 2023 or even provide updated projections); (3) we would get additional bonds for the shortfall between what we are owed and the amount of the replacement bonds--but these bonds would only get paid from excess cash flow, if there is any, and would be retired in 50 years whether or not the bondholders have been paid anything; (4) we will provide $2.5 billion of new 50-year revenue bond funding to begin paying for the desperately needed repair and improvement of PREPA's electric generation and distribution system; and (5) for the duration of the replacement and new 50-year bonds, electric costs would be set and held at a level the Board has stated would be fair and affordable, subject to being increased only to fund cost over-runs or needed capital expenditures not covered by our new bonds or the $15 billion of FEMA funding (which the Board has failed to utilize). "Unwilling to accept its First Circuit losses, the Board seems intent on extending its stay and control in Puerto Rico and leaving PREPA in bankruptcy indefinitely while manufacturing unprecedented and unsupportable legal arguments and allowing its advisors to continue charging grossly excessive fees. In any normal case, established claims would be respected, and the parties would forge a solution that works for all sides. We have put such a solution forward. Given the Board's refusal to move towards a consensual resolution of PREPA's seven-year bankruptcy case to facilitate the provision of reliable electricity to the people of Puerto Rico, can the Board really claim to be working in good faith to meet the needs of the people of Puerto Rico?" About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States. The chief of state is the President of the United States of America. The head of government is an elected Governor. There are two legislative chambers: the House of Representatives, 51 seats, and the Senate, 27 seats. In 2016, the U.S. Congress passed PROMESA, which, among other things, created the Financial Oversight and Management Board and imposed an automatic stay on creditor lawsuits against the government, which expired May 1, 2017. The members of the oversight board are: (i) Andrew G. Biggs, (ii) Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J. Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii) David A. Skeel Jr. On May 3, 2017, the Commonwealth of Puerto Rico filed a petition for relief under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). The case is pending in the United States District Court for the District of Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's PROMESA petition is available at http://bankrupt.com/misc/17-01578-00001.pdf On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation (COFINA) commenced a case under Title III of PROMESA (D.P.R. Case No. 17-01599). Joint administration has been sought for the Title III cases. On May 21, 2017, two more agencies -- Employees Retirement System of the Government of the Commonwealth of Puerto Rico and Puerto Rico Highways and Transportation Authority (Case Nos. 17-01685 and 17-01686) -- commenced Title III cases. U.S. Chief Justice John Roberts named U.S. District Judge Laura Taylor Swain to preside over the Title III cases. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq., at O'Neill & Borges LLC are onboard as attorneys. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains the case Website https://cases.primeclerk.com/puertorico Jones Day is serving as counsel to certain ERS bondholders. Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General Obligation Bondholders. ********* 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 * * *