/raid1/www/Hosts/bankrupt/TCRLA_Public/241227.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 27, 2024, Vol. 25, No. 260
Headlines
A R G E N T I N A
ARGENTINA: Economy Expanded Faster Than Expected in October
ARGENTINA: Formal Talks with IMF Over New Deal Have Begins
COMPANIA LATINOAMERICANA: S&P Ups ICR to CCC Following Debt Revamp
B R A Z I L
AZUL SA: Fitch Lowers LongTerm Foreign & Local-Currency IDR to 'C'
C O L O M B I A
COLOMBIA: Surprises With Smaller Rate Cut as Peso Weakens
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Cruise Ship Arrivals Fail to Impact Economy
E L S A L V A D O R
EL SALVADOR: To Expand Access to Home Loans with $50MM IDB Support
J A M A I C A
EVERGLADES FARMS: Long Pond Old Sugar Factory Up for Sale
P E R U
TELEFONICA DEL PERU: Fitch Lowers Long-Term IDR to 'B-'
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Economy Expanded Faster Than Expected in October
-----------------------------------------------------------
Bloomberg News reports that Argentina's economy expanded more than
expected in October, continuing to show signs of recovery after
surpassing growth forecasts in the third quarter too.
According to the report, economic activity rose 0.6% from
September, more than the 0.2% median estimate of economists
surveyed by Bloomberg. From a year ago, activity fell 0.7%,
according to government data published Friday, Dec. 20, says the
report.
Wages in Argentina also grew 4.6% in October from September,
surpassing monthly inflation for the seventh straight month after
price increases wiped out paychecks earlier in the year, the report
notes.
About Argentina
Argentina is a country located mostly in the southern half of
South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
In March 2022, the International Monetary Fund (IMF) approved a
new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authorities an immediate disbursement of an equivalent
of US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of
monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
On Nov. 15, 2024, Fitch Ratings has upgraded Argentina's
Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC'
from 'CC', and its Long-Term Local-Currency IDR to 'CCC' from
'CCC-'. Argentina's upgrade to 'CCC' from 'CC' reflects
developments that have improved Fitch's confidence in the
authorities' ability to make upcoming foreign-currency bond
payments without seeking relief of some sort.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national
scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. S&P said the stable outlook on
the long-term ratings balances the risks posed by pronounced
economic imbalances and other uncertainties with recent progress
in
making fiscal adjustments, reducing inflation, and undertaking
structural reforms to address long-standing microeconomic
weaknesses that have contributed to poor economic performance for
many years that it would likely consider to be distressed.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. upgraded Argentina's Long-Term Foreign and Local
Currency
Issuer Ratings to B (low) from CCC on November 25, 2024. The
trend on all ratings is Stable.
ARGENTINA: Formal Talks with IMF Over New Deal Have Begins
----------------------------------------------------------
Buenos Aires Times reports that the International Monetary Fund
(IMF) and Argentina have formally begun negotiations over a new
loan agreement as the current program draws to a close, a
spokesperson for the international financial institution
confirmed.
"The authorities have formally expressed interest in moving to a
new program, and negotiations are now underway," IMF Communications
Director Julie Kozack said during a press briefing at the Fund's
headquarters in Washington, according to Buenos Aires Times.
The IMF's current 30-month loan agreement with Argentina expires on
December 31, and is worth around US$44 billion, making it the
largest program in the Fund's long history, the report notes.
The Extended Fund Facilities program -- which was signed in March
2022 by the previous government under former president Alberto
Fernandez, who renegotiated a US$57-billion credit-line agreed by
his predecessor Mauricio Macri four years earlier -- has been
adhered to by current President Javier Milei's government, the
report discloses.
However, Kozack announced that Argentina would work towards a new
deal rather than finishing the remaining quarterly reviews, the
report relays.
Asked about the two pending reviews, Kozack explained that "it is
not unusual for the authorities to let an existing arrangement
expire without completing all the reviews while they are
considering moving to a new IMF-supported program," notes the
report.
Talks between Argentina and the IMF gained momentum after a team of
officials from Economy Minister Luis Caputo's portfolio and the
Central Bank travelled to Washington earlier this month to meet
with the Fund's representatives, the report disclsoes.
A central question in negotiations on Argentina's next IMF program
is whether the lender will provide Milei with additional financing
beyond rolling over the US$44-billion burden -- and how much, the
report says. Milei floated US$15 billion as a potential figure
earlier but hasn't referenced the figure recently. Caputo said that
he anticipates fresh funds to be part of the program, the report
notes.
'Impressive Results'
Since Milei took office last December, his government has launched
a sweeping austerity programme aimed at slashing the public deficit
and bringing down inflation, which had reached record levels, the
report says.
Kozack praised the "impressive results" achieved by Milei's
administration, including a "sizeable reduction in inflation,
fiscal surpluses and improved international reserve coverage," the
report relays. She also noted that the "recovery of [economic]
activity and real wages" is "firmly" underway, highlighting
government data published last week that showed the economy exited
recession in the third quarter, returning to growth.
Gross Domestic Product (GDP) grew 3.9 percent in the third quarter
of 2024 compared to the previous quarter, although it fell 2.1
percent year-on-year, according to data from the INDEC national
statistics bureau, the report relates.
This is the first quarterly growth registered after three
consecutive periods of decline, and the first quarterly increase in
GDP since Milei took office, notes Buenos Aires Times.
Although the IMF expects Argentina to end the year with inflation
at an annual rate of 229 percent, it has eased sharply over the
course of the year, falling to a monthly rate of 2.7 percent in
October, according to the authorities, relates the report.
But this macro success has come at a steep cost: authorities
devalued the Argentine peso by 52 percent last December, while more
than 260,000 jobs in the private and public sectors were lost in
just the first few months of Milei's term, the report discloses.
More than half the population now lives below the poverty line,
according to official statistics, marking a sharp increase that
Milei's administration disputes, the report says.
The IMF estimates that Argentina's economy will contract by 3.9
percent this year, before bouncing back to grow by five percent in
2025, the report notes.
"Our team continues to work constructively with the Argentine
authorities to build on the progress made thus far and address
remaining challenges," Kozack said, the report discloses.
Negotiations
If agreed, a new deal would mark the country's 23rd program with
the organisation since 1958 and its third since just 2018, notes
Buenos Aires Times.
The IMF has a poor track record in Argentina after several
agreements over the decades failed to turn around the economy as
one government after another often flouted program targets while
spending the global lender's money, the report recounts.
Milei and Caputo, his top negotiator, have a mixed relationship
with the IMF, according to the report. The President lambasted one
of the Fund's top officials earlier this year, Rodrigo Valdes, who
ultimately chose to step away from negotiations, the report
recalls.
During the first deal in 2018, Caputo disagreed with IMF officials
over currency policy and resigned after a short tenure as Central
Bank chief following a stretch as Argentina's finance minister at
the time, notes the report.
In an interview with The Wall Street Journal published, Milei said
that he is banking on the support of US president-elect Donald
Trump in his quest for new IMF financing, the report notes. "I
think it's very likely [we secure a new deal], because the United
States has discovered that we are a reliable partner," Milei
added.
Back in November, Caputo confirmed in an interview with the local
TN television news channel that the country was informally
discussing a new agreement with the IMF that would "involve new
money," the report relays.
About Argentina
Argentina is a country located mostly in the southern half of
South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
In March 2022, the International Monetary Fund (IMF) approved a
new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authorities an immediate disbursement of an equivalent
of US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of
monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
On Nov. 15, 2024, Fitch Ratings has upgraded Argentina's
Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC'
from 'CC', and its Long-Term Local-Currency IDR to 'CCC' from
'CCC-'. Argentina's upgrade to 'CCC' from 'CC' reflects
developments that have improved Fitch's confidence in the
authorities' ability to make upcoming foreign-currency bond
payments without seeking relief of some sort.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national
scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. S&P said the stable outlook on
the long-term ratings balances the risks posed by pronounced
economic imbalances and other uncertainties with recent progress
in
making fiscal adjustments, reducing inflation, and undertaking
structural reforms to address long-standing microeconomic
weaknesses that have contributed to poor economic performance for
many years that it would likely consider to be distressed.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. upgraded Argentina's Long-Term Foreign and Local
Currency
Issuer Ratings to B (low) from CCC on November 25, 2024. The
trend on all ratings is Stable.
COMPANIA LATINOAMERICANA: S&P Ups ICR to CCC Following Debt Revamp
------------------------------------------------------------------
S&P Global Ratings raised its global scale issuer credit rating on
Argentine conglomerate CLISA–Compania Latinoamericana de
Infraestructura y Servicios S.A. (CLISA) to 'CCC' from 'SD' and our
issue-level rating on its senior notes to 'CCC' from 'D'. At the
same time, S&P revised upward CLISA's stand-alone credit profile
(SACP) to 'ccc+' from 'sd'.
S&P assigned the stable outlook on CLISA, mirroring that on the
sovereign, as the ratings on the company are now capped by its
'CCC' assessment of transfer and convertibility (T&C) for
Argentina.
On Dec. 17, 2024, CLISA announced that 94% of its bondholders
accepted its debt restructuring.
The new terms and conditions of the indenture include a haircut to
the outstanding face value of the notes, reduced interest payments
alleviating cash pressures, and improvements in the debt maturity
profile.
S&P's positive rating action on CLISA reflects the execution of an
amendment to the indenture after the company obtained acceptance of
the consent solicitation.
===========
B R A Z I L
===========
AZUL SA: Fitch Lowers LongTerm Foreign & Local-Currency IDR to 'C'
------------------------------------------------------------------
Fitch Ratings has downgraded Azul S.A.'s Long-Term Foreign and
Local Currency Issuer Default Ratings (IDRs) to 'C' from 'CC', and
National Scale Rating to 'C(bra)' from 'CC(bra)'. Additionally,
Fitch has downgraded Azul Secured Finance LLP's senior secured
notes to 'C' with a Recovery Rating of 'RR4' from 'CC'/'RR4' and
has affirmed Azul Investments LLP's unsecured notes at 'C'/'RR6'.
The downgrades follow Azul's announcement of exchange offers for
existing senior secured first-out notes due 2028 and senior secured
second-out notes due 2029 and 2030 into newly senior secured first-
and second-out notes. Fitch considers this transaction a distressed
debt exchange (DDE) per its criteria. The transaction will not
cause an immediate debt haircut nor a maturity extension but it
will worsen terms with structural subordination for bondholders and
potential phased equitization. Any remaining existing notes
post-exchange will become unsecured obligations.
Key Rating Drivers
Transaction Qualifies as DDE: The transaction will qualify as a DDE
under Fitch's criteria if approved, due to terms deterioration for
bondholders and the involvement of a substantial portion of Azul's
classes of obligors. This deal is part of a broader debt
restructuring plan, including renegotiations with lessors and
original equipment manufacturers (OEMs), and new debt issuance
pending exchange offer. These transactions aim to enhance liquidity
and capital structure, ultimately avoiding future default
payments.
Exchange Offer Overview: Azul has entered a transaction agreement
with an ad hoc group of note holders for existing 2028, 2029, and
2030 secured notes (66.7% participation) and convertible debentures
(95.6%). Supporting bondholders agreed to provide USD150 million in
financing with a 90-day maturity, during which Azul is to meet
conditions for additional superpriority financing. An additional
USD250 million will be disbursed, with a potential USD 100 million
contingent on further cash flow improvements.
The new financing will be issued by Azul Secured Finance II LLP and
guaranteed by Azul and certain of its subsidiaries and will be
secured by: (i) certain receivables generated by, and intellectual
property used in, the Azul Cargo business, (ii) a pledge of certain
financial assets held by Azul, (iii) certain credit and debit card
receivables generated by Azul's passenger airline business, and
(iv) the shared collateral that currently secures the existing
2028, 2029 and 2030 notes.
Restricted Default and Re-Rate: Azul's IDR will likely be
downgraded to Restricted Default (RD) if the proposed transaction
is completed successfully. Fitch will then re-rate the company's
IDRs based on its forecast sustainable capital structure,
liquidity, debt risk profile, and airline industry risks. Once
completed, any remaining existing unsecured bonds will likely be
upgraded to levels below the new IDR due to their lower degree of
credit protection and priority in the capital structure.
Successful Restructuring to Improve Liquidity: Once the proposed
restructuring is fully completed, Azul is expected to add around
USD500 million in new funds. The company is also exploring
additional cash options via a guaranteed local credit line (Fundo
Nacional de Aviação - FNAC) and a potential follow-on issuance.
These efforts carry execution risks, as they depend on market
conditions and are not fully within management's control. Azul's
ability to maintain sound liquidity profile and manageable
refinancing risks in the short to medium term could eventually
enhance its ratings.
Effective Deleveraging Expected by 2026: Azul's leverage is
expected to peak in 2024 and decline during 2025, reaching below
4.5x only by 2026, according to Fitch's estimates. The ongoing
improvements in EBITDA generation are expected to help restore its
credit profile in the medium term. Fitch's base-case scenario
forecasts the company's total and net adjusted leverage/EBITDAR
ratios at around 5.7x and 5.5x, respectively, during 2024, reducing
to 5.0x and 4.7x in 2025, and 4.8x and 4.5x in 2026. Fitch
calculates Azul's total debt at BRL33.9 billion by year-end Dec.
31, 2024.
Above-Average Industry Risks: The airline industry is high-risk
sector due to its cyclical, capital-intensive nature and
vulnerability to external shocks. High fixed costs and fluctuating
demand and fuel prices lead to volatile profits and cash flows.
Latin American airlines face added risks from foreign exchange
fluctuations, with costs in U.S. dollars and revenues in local
currency. Azul is particularly affected, as its operations are
primarily in Brazil, where the BRL is facing meaningful
oscillation.
Derivation Summary
Azul's 'C' rating reflects its exchange offer announcement, deemed
a DDE by Fitch. This occurs amid high refinancing risks and cash
flow pressures. The company holds a strong market position in
Brazil's domestic airline market, serving as the sole airline on
80% of its routes.
Azul has a weaker business and financial position compared to LATAM
Airlines Group S.A (BB-/Positive Outlook), which has a more
diversified business model, significant regional market position,
strong capital structure and robust liquidity position. Azul's
rating is also weaker than Avianca Group International Limited
(B/Stable), mostly reflecting relatively higher leverage ratios,
lower refinancing risks and liquidity profile.
Recovery Analysis
The recovery analysis assumes that Azul would be considered a going
concern in bankruptcy and that the company would be reorganized
rather than liquidated. Fitch has assumed a 10% administrative
claim.
Going Concern Approach: Azul's going concern EBITDA is BRL2.5
billion, which incorporates the low-end expectations of Azul's
EBITDA post-pandemic, adjusted by lease expenses, plus a discount
of 20%. The going concern EBITDA estimate reflects its view of a
sustainable, post-reorganization EBITDA level, on which Fitch bases
the valuation of the company. The enterprise value (EV)/EBITDA
multiple applied is 5.5x, reflecting Azul's strong market position
in the Brazil.
Fitch applies a waterfall analysis to the post-default EV, based on
the relative claims of the debt in the capital structure. The debt
waterfall assumptions consider the company's total debt as of
September 30 2024. These assumptions result in a recovery rate for
the first lien secured bonds within the 'RR1' range and second lien
secured notes within 'RR2' range, but, due to the soft cap of
Brazil at 'RR4', Azul's senior secured are rated at 'C'/'RR4'. For
the unsecured notes, the recovery is in the 'RR6' range, resulting
in a rating of 'C'/'RR6'.
RATING SENSITIVITIES
Factors That Could, Individually Or Collectively, Lead To A
Negative Rating Action/Downgrade
- An uncured payment default on any material financial obligation
would lead to a downgrade of the IDRs to 'RD'.
Factors That Could, Individually Or Collectively, Lead To Positive
Rating Action/Upgrade
- Completion of the proposed exchange offer will lead to a
downgrade of the Long-Term IDRs to 'RD' and then subsequently to an
upgrade to a rating level that reflects the post-DDE credit
profile.
Liquidity and Debt Structure
Azul's short-term maturities totaled BRL6.4 billion (BRL1.6 billion
of financial debt and BRL4.5 billion of leasing obligations) as of
Sept. 30, 2024. Azul's readily available cash, per Fitch's
criteria, declined to BRL1.1 billion from BRL1.9 billion at end of
December 2023. According to Fitch's estimates, Azul would not be
able to generate enough cash flow nor has sufficient liquidity to
fulfil those obligations, without new money.
Total debt was BRL31.6 billion, and primarily consists of BRL14.3
billion of leasing obligations, BRL380 million of cross-border
senior unsecured notes due 2024, BRL176 million due 2026, and
BRL9.7 billion of secured issuances due 2028, 2029 and 2030, BRL2.3
billion of other loans and financing, BRL3.5 billion of lessors
equity/note and BRL1.2 billion of convertible debentures.
Issuer Profile
Azul is one of Brazil's largest local airlines, with significant
presence in the regional market and being the sole player on 82% of
its routes. During 2023, 93% of its revenues were derived from
passengers and 7% from cargo and others.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
AZUL Investments LLP
senior unsecured LT C Affirmed RR6 C
Azul S.A. LT IDR C Downgrade CC
LC LT IDR C Downgrade CC
Natl LT C(bra)Downgrade CC(bra)
Azul Secured
Finance LLP
senior secured LT C Downgrade RR4 CC
Senior Secured
2nd Lien LT C Downgrade RR4 CC
===============
C O L O M B I A
===============
COLOMBIA: Surprises With Smaller Rate Cut as Peso Weakens
---------------------------------------------------------
Bloomberg News reports that Colombia's central bank unexpectedly
slowed its monetary easing campaign as fiscal concerns are
weakening the nation's currency and adding to inflation risks.
The seven-member board voted to lower the benchmark rate to 9.5%,
Governor Leonardo Villar said after their meeting on Dec. 20,
according to the report.
The move was forecast by only one of 30 analysts surveyed by
Bloomberg, the report notes. All the others predicted a cut to
9.25%.
The decision was split, with five board members backing the cut of
25 basis points, one voting for 50 basis points and another for 75
basis points, the report relays.
The central bank said in a statement accompanying its decision that
inflation will continue to converge to the target, "but at a slower
pace than forecast in October, due to pressure from a weaker
currency and its impact on domestic prices," notes Bloomberg News.
As reported in the Troubled Company Reporter on Aug. 7, 2024, Fitch
Ratings has affirmed Colombia's Long-Term Foreign Currency Issuer
Default Rating (IDR) at 'BB+' with a Stable Rating Outlook.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Cruise Ship Arrivals Fail to Impact Economy
---------------------------------------------------------------
Dominican Today reports that the arrival of the fifth cruise ship
at the Port of Cabo Rojo on December 11, 2024, went largely
unnoticed, highlighting growing disillusionment among local
residents. Initially touted as a solution to Pedernales'
long-standing economic stagnation, the cruise ship initiative has
failed to deliver tangible benefits for the community, according to
Dominican Today.
Despite efforts from various entities such as the Government, the
Dominican Port Authority (Apordom), the Ministry of Tourism
(Mitur), the Directorate of Public-Private Partnerships (DGAPP),
and the operating company ITM, residents feel that the promised
investments have not translated into meaningful improvements, the
report notes. The cruise ship, which arrived with vacationers, was
met with indifference by many locals, reflecting the lack of
connection between port activity and the local economy, the report
relays.
The lack of communication and the failure to integrate the cruise
ship arrivals into the region's economic fabric have left the
initiative struggling to make a real impact in Pedernales, a region
that has long faced economic neglect, 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 L S A L V A D O R
=====================
EL SALVADOR: To Expand Access to Home Loans with $50MM IDB Support
------------------------------------------------------------------
The Inter-American Development Bank (IDB) has approved a $50
million loan to help address the housing shortage in El Salvador by
providing mortgage loans for social housing.
According to El Salvador's Multipurpose Household Survey, an
estimated 50.7% of the country's households live in substandard
housing with poor structural and physical conditions. Additionally,
28% of households are overcrowded, affecting the quality of life
and well-being of their members. Programs that offer financing are
thus key to improving housing conditions and promoting
sustainability and climate resilience.
The "Financing Program for Sustainable, Inclusive, Low-Income
Housing," which has been approved by the IDB Board of Executive
Directors, seeks to expand access to loans for purchasing new homes
that have already been built. It targets underserved populations
and promotes sustainable housing that is climate resilient and
built in a way that mitigates emissions. The program's resources
will be channeled through the Fondo Social para la Vivienda
(Low-Income Housing Fund).
Under this program, households that earn less than four times the
indexed monthly minimum wage qualify for 30 year mortgages of up to
$40,000 for low-income housing. Women and vulnerable populations,
including people with disabilities, workers without formal
employment and families receiving remittances will be given
priority when selecting beneficiaries.
"Through this program, we aim to promote an inclusive and
sustainable housing model that addresses the needs of low-income
Salvadoran families, facilitating their access to mortgage credit
and promoting the enjoyment and ownership of decent housing with
adequate living conditions for this traditionally underserved
population group," said Olga Gómez, IDB representative in El
Salvador. "This initiative reaffirms our commitment to improving
the quality of life for Salvadorans by addressing their most
fundamental needs, while also encouraging the adoption of
environmentally responsible practices, contributing to a fairer and
more sustainable future in El Salvador," she added.
The $50 million IDB loan has a 25-year repayment term, a 5.5-year
grace period and an interest rate based on the Secured Overnight
Financing Rate (SOFR).
=============
J A M A I C A
=============
EVERGLADES FARMS: Long Pond Old Sugar Factory Up for Sale
---------------------------------------------------------
Karena Bennett at Jamaica Observer reports that The Long Pond sugar
factory, a once-thriving hub of Jamaica's sugar industry, has been
put up for sale. The property, located in Trelawny, spans 16.37
hectares (40 acres) and is being marketed as a prime redevelopment
opportunity.
The announcement, made via a public notice on December 15, comes
after years of operational challenges and mounting losses for its
owners, Everglades Farms Limited, according to Jamaica Observer.
The property offers 72,422 square feet of building space, its own
well, and connections to utilities from the Jamaica Public Service
(JPS) and National Water Commission (NWC), the report notes.
The Husseys, owners of Everglades Farms, are pitching the location
as ideal for manufacturing, business process outsourcing (BPO),
housing, or a commercial water operation, but they did not disclose
a price for the property, the report relates.
"The property is fully equipped with a high-capacity well producing
600 gallons per minute, along with connections to Jamaica Public
Service, including a 1 MVA transformer, and the National Water
Commission. It also boasts high-speed Internet access, making it
suitable for a range of modern operations," the notice outlined,
the report says.
Despite its potential, the decision to sell signals a major shift
for Everglades Farms, which has grappled with the property's
tumultuous history since acquiring it during the Government's 2009
divestment of State-owned sugar assets, the report relays. The
Long Pond factory, like much of Jamaica's sugar sector, has
struggled to remain viable amid rising costs, outdated
infrastructure, and declining global competitiveness, the report
discloses.
The Husseys have reportedly invested some $3 billion into
modernising operations at Long Pond. However, inefficiencies and
high production costs continued to undermine the factory's
viability, ultimately forcing its closure in 2017, the report
recalls.
Adding to the complications, the Sugar Company of Jamaica Holdings
Limited (SCJH) reclaimed 98 per cent of the surrounding leased
lands in 2020, leaving Everglades Farms with just 200 hectares, the
report discloses. The reclamation was part of a broader government
strategy to redistribute lands to small farmers and other
stakeholders, but it significantly limited Long Pond's operational
scope and curtailed efforts to revitalise the property, the report
notes.
Over the years, Everglades explored various alternatives to turn
Long Pond into a profitable venture, the report says. Proposals to
integrate the factory into their Hampden Estate rum distillery
operations garnered interest but failed to gain traction, the
report relates. Rumoured plans to pivot towards ethanol production
or co-generation were also left unrealised, the report notes.
Meanwhile, the wider sugar industry has faced steep declines, with
other facilities such as Golden Grove in St Thomas and Monymusk in
Clarendon closing their doors in recent years, the report relays.
The closures reflect systemic issues within the sector, including
high production costs, limited export competitiveness, and changing
market dynamics, the report discloses.
The sale of Long Pond marks a critical juncture for Trelawny's
industrial landscape, the report relays. Once a major player in
Jamaica's sugar economy, the parish has seen its fortunes wane
alongside the industry's decline, the report says. Real estate
analysts note that the property's location -- 15 minutes from
Duncan's and a minute from Clark's Town -- makes it attractive for
redevelopment, the report notes.
Attempts by the Jamaica Observer to contact Everglades Farms for
further details on the decision to sell were unsuccessful, the
report discloses. Calls to the listed contact went unanswered up
to press time, the report adds.
Still, the decision to sell Long Pond appears to signal the end of
a turbulent chapter for the company, the report relays. After
nearly 15 years of ownership characterised by operational halts,
financial losses, and land disputes, the Husseys seem ready to move
on.
=======
P E R U
=======
TELEFONICA DEL PERU: Fitch Lowers Long-Term IDR to 'B-'
-------------------------------------------------------
Fitch Ratings has downgraded Telefonica del Peru S.A.A.'s (TdP)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDR)
to 'B-' from 'B+' and senior unsecured notes to 'B-' with a
Recovery Rating of 'RR4' from 'B+/RR4'. Fitch has placed these
ratings on Rating Watch Negative (RWN) following the downgrades.
The downgrade and RWN reflect heightened refinancing risk with
limited options given the company's upcoming maturity of the first
instalment of its 2027 amortizing notes, amidst continued weak
operating performance and remaining tax liability. While TdP
benefits from its scale as the largest operator in Peru and
diversified service portfolio, the company's negative FCF has
weighed on its financial profile.
Key Rating Drivers
Refinancing Options Limited: The company faces heightened
refinancing risk for its April 2025 installment on its 2027 notes
due to a worsening liquidity situation and persistently weak
operating performance. Fitch expects TdP's FCF to remain negative
in 2025 ahead of its approaching maturities, and while the company
has additional potential options available to support its liquidity
position, headroom is low.
Relatively Weak Profitability, Negative FCF: Fitch expects TdP's
FCF to remain negative throughout the rating horizon. Revenues are
expected to decline around 5% in 2024, continuing a weakening trend
driven primarily by declining fixed RGUs. EBITDA margin is expected
to fall below 6% in 2024, mainly as a result of lower revenues.
In 2025, Fitch expects an acceleration of fiber rollout and
low-single-digit ARPU growth to offset declining HFC and fixed
voice, generating modest low single-digit revenue growth with
EBITDA margins improving modestly to around 7%. Fitch assumes FCF
will continue to be pressured by remaining tax instalment payments
over the rating horizon, associated with the company's long-running
dispute with SUNAT.
Leverage Remains High: Fitch expects net leverage to exceed 5.0x in
2024, mainly resulting from very weak EBITDA levels. Net leverage
is expected to improve modestly in 2025 to around 4.4x on gradually
improving EBITDA trends, but remain elevated over the rating
horizon due to the challenging competitive environment in the
telecom industry in Peru, which Fitch expects will make it
difficult to return to positive FCF.
Strong Diversification: TdP is a well-diversified telecom operator,
with revenues relatively evenly split between fixed (47%) and
mobile service (53%) offerings. The company also benefits from a
strong presence in both B2B and B2C market segments in Peru. Both
its fixed and mobile businesses have experienced significant
competitive pressures as new entrants have heavily disrupted the
market dynamics in recent years.
Linkages with Telefonica S.A.: Fitch rates TdP on a standalone
basis due to the low legal, strategic, and operational incentives
as related to the ultimate parent, Spain's Telefonica S.A. (TEF;
BBB/Stable). TDP represents less than 3% of Telefonica's total
EBITDA. While Telefonica HISPAM has provided significant
shareholder loans, much of which have been equitized, additional
support remains uncertain.
Derivation Summary
TdP has a well-diversified business compared with regional peers,
but its market position and profitability have been weakened as a
result of intense competition in Peru. The financial profile has
deteriorated since 2016, and Fitch expects cash flow to be
pressured further by weak operating performance. In addition,
leverage is likely to be elevated as a result of the tax liability,
which Fitch expects will be funded partially with debt financing.
TdP's business position is roughly in line with sister company
Telefonica Moviles Chile S.A. (TMCH; BBB-/Negative) in terms of
service diversification and market position. TMCH is relatively
stronger financially, while TdP has consistently lost share in both
mobile and fixed, which has weighed heavily on its profitability.
When comparing TdP against regional competitor Empresa Nacional de
Telecomunicaciones S.A. (Entel; BBB-/Stable), Entel has capitalized
on its improved scale in Peru and sustained its strong operational
performance in Chile. TdP's greater fixed-line presence supports
its diversified business position in Peru, although Entel has a
superior financial profile due to the continued strength in its
Chilean operations and improving profitability metrics in Peru.
Chilean fixed-line-focused telecom operator VTR Finance N.V. (CCC)
has similarly suffered weak operating results in recent years,
resulting from significant competitive pressures, eroding its
margin position in its key fixed broadband segment.
Key Assumptions
- Revenues down ~5% in 2024, before rebounding slightly beginning
in 2025;
- Low single-digit growth in mobile subscribers and growth in
ARPUs;
- Fixed revenues remaining weak in 2024 and 2025, falling to around
PEN2.85 billion in FY25, before growing low-single-digits
thereafter;
- Continued double-digit percentage declines in fixed-line voice
subscribers, broadband subscribers continuing to fall in 2024, with
slight growth in 2025 as FTTH modestly offsets decline in HFC
customers;
- Fixed ARPUs continue to be weak in 2024 due to competitive
pressures, growing in the low single-digit percentage range
thereafter;
- EBITDA margins trough around 5% in 2024, gradually improving to
around 10% over the rating horizon;
- Capital expenditures around 10% of revenues;
- Remaining outstanding tax payments with SUNAT expected to be paid
through an instalment program over the rating horizon;
- Base case assumption is that TdP is able to resolve its
refinancing needs.
Recovery Analysis
Going Concern Recovery Approach
Fitch's undertakes a bespoke recovery analysis for issuers with IDR
of 'B+' and below, per its criteria. The bespoke recovery analysis
assumes TdP would be considered a going concern in bankruptcy and
would be reorganized rather than liquidated. TdP's PEN291 million
going concern EBITDA is based on Fitch's expectation of continued
intense competition in the Peruvian telecommunications market, and
represents current depressed LTM EBITDA levels. The enterprise
value/EBITDA multiple applied is 4.5x; this reflects TdP's
deteriorating operational performance and financial profile despite
its diversified business profile and strong brand recognition.
Fitch applies a waterfall analysis to the post-default enterprise
value based on the relative claims on the debt in the capital
structure. The agency's debt assumptions consider the company's pro
forma total debt at Sept. 30, 2024, adjusted for a subsequent local
repayment and equity support to repay promissory notes. These
assumptions result in a Recovery Rating (RR) for the unsecured
bonds within the 'RR4' range after application of country-specific
consideration for Peru, which, per Fitch's criteria, leads to a
rating in line with the IDR of 'B-'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Inability to improve liquidity position and progress in
refinancing of upcoming debt maturities;
- Continued deterioration of margins and inability to improve FCF;
- Total debt/EBITDA sustained above 6.0x or net debt/EBITDA above
5.5x.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Stabilization of ratings dependent on improved liquidity position
and improvements in operating performance;
- Significant shareholder support from the parent resulting in
improved liquidity would be positive for the rating;
- Sustained neutral or positive FCF generation could lead to
upgrade if liquidity needs are met.
Liquidity and Debt Structure
As of Sept. 30, 2024, TdP had readily available cash of PEN706
million. The company had PEN1.65 billion in short-term debt, with
PEN751 million relating to short-term letters of credit used to pay
the company's upfront SUNAT tax payment in 2024 and which Fitch
expects to be covered by an equitized shareholder loan. Subsequent
to 3Q24, in October 2024, the company repaid a local bond amounting
to PEN135 million.
Projected negative FCF, including the impact of the company's
remaining tax payments, implies that the company will need to
secure external debt financing, assets sales, and/or further
shareholder support in the near term in order to support liquidity
ahead of the company's upcoming first instalment of its 2027 notes
due in April 2025. On the positive side, the company's existing
debt is completely payable in Peruvian soles, limiting
foreign-exchange risk.
Issuer Profile
Telefonica del Peru S.A.A. is the largest integrated telecom
operator in Peru in terms of revenue share. The company provides
mobile and fixed-line telephony, broadband and Pay-TV though its
Movistar brand, as well as IT solution services for corporate
clients.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Telefonica del
Peru, S.A.A. LT IDR B- Downgrade B+
LC LT IDR B- Downgrade B+
senior unsecured LT B- Downgrade RR4 B+
*********
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Chapman, Editors.
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